Solving for System Error

We have effectively killed off the independent sphere.

In the lingo of modern strategy, the faster industry and government can start seeing and thinking and creating in biological terms, the better the strategic fit our seeing and thinking and creating become to how the world really works.

In the end bio-logic wins strategic competitions.

In the infinite loop of integration of the made and the born, it comes down to working with a new industrial ecology: whoever is better aggregating interactions and conditions, of understanding and managing emergence and natural flux, is better positioned to sustain continuous advantage over a rival. If we learned anything from "How Covid Crashed The System" (borrowing from the title of David B. Nash, MD, MBA's new book), it should be this: healthcare is the economy, a meta-market around which the entire $100 trillion global economy is linked and flows and depends.

Public health is not separate from economic health.

Labor is not separate from management. Technology is not separate from people. Patient is not separate from family. Healthcare professional is not separate from healthcare consumer. Industry is not separate from government. Man is not separate from nature, the disruptive common sense Yvon Chouinard, founder of Patagonia, used when he transferred ownership of his company to Earth, the "only shareholder" that matters, rather than go public.

There is no “out there” that separates the observer from the observed.

“What’s changed is the world around us is now within us,” Robert Cardillo, director of the National Geospatial-Intelligence Agency, told a Senate Intelligence Committee during a hearing on a new context for military strategy in 2018. “What we used to hold exclusively — because we had capabilities that others didn’t — is now more shared.”

The problem space has changed.

Solving for System Error

Change comes in three wavelengths, says Kevin Kelly, a co-founder of Wired Magazine: There are changes to the game, changes in the rules of the game, and changes in how the rules are changed.

And so what's emerging as the building blocks for strategic success today is a management team who can see, understand and rapidly adapt to what can fairly be described as a total change in context in the landscape for business.

It's legacy thinking -- not technology -- that's maybe the biggest barrier to navigating the transition space to a new era. Leadership teams become kinetically-trapped in outmoded structures, orientations, incentives and schools of thought, doomed to be, always, in defense of whatever business model allowed them to be successful in the first place. Most "digital transformations" reinforce the obsolete.

A flywheel business is one that intentionally manages itself as a 'self-generating market' -- there's no better example than Amazon. Lucas Shaw captures the insight in his lates piece in Bloomberg (Amazon Is the Least Understood Company in Hollywood):

"Amazon has taken a different approach to entertainment than every other major company in Hollywood. It doesn’t fund TV shows to make money from them, at least not on a standalone basis. It uses entertainment to lure you into its ecosystem and market other products….

….Amazon and Apple approach entertainment as aggregators. Their original programming is just one part of a much larger package you are buying from them. This has been key to Apple’s success. Customers who sign up for its bundle of six services (gaming, TV, music, cloud, news and fitness) are far less likely to cancel than people who pay for a service on its own."

It’s about designing ‘stickiness’ and continuous customer engagement, creating new things to send down the slide faster than they can become commoditized. It’s about intentionally making other markets and industries a feature of your ecosystem (“featurizing”).

Which underscores the new rules for creating and competing at a system level:

• “Value” is a flow, not an end state

• Superwinners think in terms of ‘progressive integration’ of markets’

• Make other industries a feature of your economic system

• ‘First party data’ (information a company collects directly from its customers and owns) is a source of innovative power

Market integration (aggregation) has fundamentally changed the plane of competition, belives Ben Thompson from Stratechery : “no longer do distributors compete based upon exclusive supplier relationships, with consumers/users an afterthought. Instead, suppliers can be commoditized leaving consumers/users as a first order priority. By extension, this means that the most important factor determining success is the user experience: the best distributors/aggregators/market-makers win by providing the best experience, which earns them the most consumers/users, which attracts the most suppliers, which enhances the user experience in a virtuous cycle.”

Healthcare is an N-Sided Market

The “market access” problem to solve is market interoperability. Medication adherence technology is a $4B market; patient engagement technology is a $40B market; technology services is a $1.2 trillion market; pharmaceuticals is a $400B market (in the United States); "digital health" technology is a $536B market; medical devices are a $140B market....

...all having data showcasing the functional benefits of their individual pieces.

Execution is shaped by a linear set of assumptions and decisions, all bounded in a narrow operational construct: my market. Everything thinks in isolation. And so the ‘enterprise-wide’ technology roadmap generally excludes a crucial interaction with other enterprises acting as a single organism (“concurrent enterprising”). Which is the essence of ecosystem-centered market strategy.

If the goal is competing with a better outcomes story, then the shift in market vision is from downward pricing pressure on product, to upward pricing possibility for system.

Cohesion happens by sliding markets together in new ways, combining pieces and parts into new systems of health engagement, and then servicing the system to improve its performance over time. The system becomes the value framework. (See "Putting More Value Into Biopharmaceutical Value Assessments" published in Health Affairs last week.) In other words, the value framework becomes the roadmap for market integration.

This is a unique form of “market access innovation” — It yields a step change in the kind and degree of value offered that creates space to sustain a system advantage. Collaboration is elemental to strategic success.

Across domains, where things fall apart is in buying obsolete economic methods and operational concepts -- "efficiency", "margin", "value", "price" -- as the business rules engine governing how and why decisions are made.

A modern strategy works with different economic logic.

It's time for 'the market' and 'the government' to reframe with a new taxonomy and start creating collectively, as one unit, with a new orientation to invention. Until we break the Standard Model of thought and inaction, the structural stalemate, spotty efficacy, horrible experience, and bad EBITDA from a $4 trillion investment will sit at the center of perpetual dysfunction. More to the point, the 'production of health' is the real internal dynamic....the invisible mind behind the invisible hand....that sparks the flywheel to start new economic systems.

Which is how Amazon thinks.

🤘

/ jgs