Strategic Fit for the Next Healthcare
The Problem to Solve is Market Fragmentation
Originally published as ‘Strategic Fit for the Next Healthcare’ on February 19, 2020
During a briefing by academics at the London School of Economics as the 2008 financial crisis was reaching its climax, Queen Elizabeth II, whose personal fortune was estimated to have fallen by as much as 25 million pounds, asked the question that was on the minds of many of her subjects: "Why did nobody see it coming?"
The response by her advisors at the time was blunt:
Economics could not give useful service to explain the crisis because current economic theory has established that it cannot predict such crises. As John Kay, one of Britain’s leading economists wrote shortly afterwards, "Faced with such a response, a wise sovereign will seek counsel elsewhere.”
Despite $50 billion a year being spent on "services" – an industry subsystem comprised of all the firms that provide consulting on everything from strategy to technology investments to digital transformation and patient engagement software – healthcare in the United States is stuck in a loop in time. Most everyone thinks they are doing the right thing, yet healthcare as a whole has been in “crisis” mode since the Nixon administration, its output (outcomes and quality) not matching input (investment in technology and advice).
Ultimately, and unsurprisingly, we’re getting the same result: a market disfigured from a half century of relying on outmoded concepts and anchors of meaning to shape policy and innovation.
Americans’ life expectancy is lagging other wealthy countries and falling for the first time on record. It’s a weird dynamic all things considered, one that begs a larger question of system vision in much in the same way that Queen Elizabeth asked of her economic advisors during the meltdown in global banking and finance.
The editorial board of the New York Daily News captured the essence of the problem at the end of last year:
“A deep new dive into the data shows a cancer eating away at the nation. Death rates have of late been rising sharply for young and middle-aged Americans, a phenomenon that has now driven down life expectancy for three consecutive years.
This in the wealthiest nation in the history of the world, the global center of medical innovation and a place that spends far more on health care than any other country. This at a time when other wealthy nations are continuing to see their people get healthier and live longer.
The question we must ask in light of the new research published in the Journal of the American Medical Association is a cry: Why?”
Many of today's health system CEOs have proved unwilling or unable to understand the structural shifts in their market, spend the energy to build to new systems of engagement, or shift their operating models in order to fit the needs of consumers accustomed to rapid, high-quality service in other industries (i.e., the kind of ‘consumer-grade experience’ we get from Amazon).
Writing in Modern Healthcare, senior reporter Harris Meyer articulates the pressure on CEOs to find a modern strategy.
Meyer describes how hospitals, pharmaceutical and medical device companies, and other delivery systems must be "transformed in the coming years into very different-looking organizations whose focus is on [collaborative business models] that keep patient populations healthy in the most cost-effective ways. With healthcare changing rapidly, hospital CEO positions turning over at a high rate, and baby boomer senior executives eyeing retirement, hospitals and health systems realize their next leaders will need a different set of experiences and skills to successfully navigate that new world."
Lest the U.S. health economy suffer from transition failure, innovative strategic leadership needs to work with a new frame of reference and imagination to guide the emergence of a new industry model altogether, one that’s focused on, and rewards, primary prevention and early intervention.
We are in an era that needs a new industrial cortex.
Context Collapse
Systems with high levels of interactive complexity – like banking and health care -- are subject to failures and unintended consequences that seem to come out of nowhere, or that appear unfathomably improbable or impossible to fix. Errors propagate, compounding failures and feedback loops that defy conventional logic and solutions.
The problem is complexity itself.
The thing missing from the conventional perspective is understanding that pieces matter less than the whole, "things" are secondary to experiences. The new business value to extract from healthcare is not from the discrete use of applications or the latest cool tech pilot, but the way these components can meld together to form a new architecture for managing information and curating continuous health engagement.
The concept of “context collapse” was first used to frame and explain the phenomenon of social media when it began taking shape more than fifteen years ago. Nicholas Carr, writing in his blog Rough Type, explains:
“Young scholars like Danah Boyd and Michael Wesch, building on the work of other sociologists and media theorists, argued that networks like Friendster, MySpace, YouTube, and, later, Facebook and Twitter were dissolving the boundaries between social groups that had long shaped personal relations and identities.
Before social media, you spoke to different “audiences” — family members, friends, colleagues, and so forth — in different ways. You modulated your tone of voice, your words, your behavior, and even your appearance to suit whatever social “context” you were in (workplace, home, school, nightclub, etc.) and then readjusted the presentation of yourself when you moved into another context.
On a social network, the theory went, all those different contexts collapsed into a single context.
Whenever you posted a message or a photograph or a video, it could be seen by your friends, your parents, your coworkers, your bosses, and your teachers, not to mention the amorphous mass known as the general public. And, because the post was recorded, it could be seen by future audiences as well as the immediate one. When people realized they could no longer present versions of themselves geared to different audiences — it was all one audience now — they had to grapple with a new sort of identity crisis.
The problem is not a lack of context.
It is context collapse: an infinite number of contexts collapsing upon one another into that single moment of recording. The images, actions, and words captured by the lens at any moment can be transported to anywhere on the planet and preserved (the performer must assume) for all time. The little glass lens becomes the gateway to a black hole sucking all of time and space — virtually all possible contexts —in on itself. The would-be vlogger, now frozen in front of this black hole of contexts, faces a crisis of self-presentation.”
In healthcare, we have effectively killed off the independent sphere: everything is collapsing into one context.
Transformation is Born From a New Narrative
Or to put it another way, the transformational remit for today's health market leaders is the ability to creatively explore and conceptualize a new context for outcomes, quickly assemble the intellectual viewpoint, and then stand-up the new infrastructure -- the nervous system -- to own the space. The only story that matters is the one in which a new system is designed to produce better health.
Outcomes from the new context, not inputs from niche impacts, becomes the axis for competition. Advantage derives from how common sources of information are pieced together and analyzed. You either know things others don’t or interpret what others do in a better way. The shift to make is from data crunching to context crunching.
Which is the role of “digital” in this story.
Its value is almost as a philosophy, more like ‘a digital sixth sense’ comfortable and fluid in the ability to dissolve boundaries, create new context from new aggregations, remove friction and re-configure entire business systems, practically overnight. All market space is fair game, any industry can be repositioned as a commodity in someone else's ecosystem. This is one reason why FedEx is becoming "featurized" by Amazon, California can “think” like a drug company and launch its own prescription-drug label; and why Best Buy gave a 109-slide presentation framing a future for itself in health care that is bigger than in electronics (see: Healthcare May Eventually Become A Bigger Business For Best Buy Than Selling Electronics).
The real disrupters are comfortable searching for landmines with their feet.
Outcomes as a New Axis for Competition
Projections are that designing and managing new models of care that reward outcomes and reduce waste – transitioning an entire economic system from fee-for-service to value-based care -- could lead to $1 trillion of cumulative savings in the United States alone in the coming decade. The challenge is how to conceptualize a new market economy to ensure implementation is sustained at a scale large enough (in terms of money at stake, support given, breadth of providers and patients involved, technology investments and applications) to achieve real impact.
What seems to be missing, in simple terms, is thoughtful action and active thinking to invent a new economic logic. The complex as a whole needs different tools to shape ideas about stakeholder value, investment and productivity.
The production of health is an infinite game – it’s never just one thing, but many things simultaneously and interactively over an extended period of time (think years, not months). A system organized on the production of health is not the same thing as focusing on lowering cost.
Opportunity for strategic transformation in the coming decade will come not just on improving access, quality, and affordability around discrete events, or promoting the technical merits of a product in isolation from its environment, but also on predictive, preventive, and outcome-based care models and reimbursement strategies that advance social and financial inclusion.
Outcomes as an axis for competition is uncharted space where healthcare + life sciences interact as a closed circuit, one context. It may be better understood as a new market form where action and incentive is directed at continuous health engagement and co-evolution to sustain a new care pathway.
New Strategy then becomes a process of market integration, seeking the highest common denominator for the broadest number of stakeholders to cohere on a new care standard – in other words, finding and then balancing a new relationship between value creation and value extraction.
Said differently, the old narrative no longer holds. In the next healthcare, it’s the story at a system level that becomes the locus for “disruption.”
/ jgs
John G. Singer advises business and government on market innovation. He is the founder of Blue Spoon Consulting, a leader in Strategy and Innovation at a System Level. Blue Spoon was the first to apply design thinking to solve complex market access and integration challenges in the pharmaceutical industry.