Step 1: Set Goals and Overcome Organizational Inertia
Shake it up. One approach is to engage the executive team in war-gaming competitive scenarios – from the perspective of another healthcare system, such as a direct competitor or other ecosystem player. While it may not be wise or feasible for your organization to replicate these specific moves, it can be helpful to begin to anticipate how the basis of competition may be shifting, and how disruptors may attack from the side, or above, versus head-on.
For example, consider recent innovation and unexpected disruption in the digital arena. One prominent instance is when global ecommerce juggernaut Alibaba started Alipay back in 2009 and claimed clear leadership in payments with command of over 80 percent of the Chinese market. At the same time, gaming company Tencent created TenPay as a quick and convenient payment service for their WeChat customers. As their WeChat customers grew, it became more convenient for their gaming customers to pay for their assorted needs through TenPay. As of early 2017, TenPay’s share was up to 40 percent, and with their sideways push into the payments market, Alipay’s share fell to 54 percent. Similarly, India is facing a potential similar payments showdown and redux between Paytm (the current Indian payments leader with 300 million users and a $10 billion valuation) versus WhatsApp (the de facto messaging communications go-to platform for over 230 million loyal users in India now venturing into the payment arena, which allegedly is putting Patym on edge).
The key takeaway from these examples: it’s time to work backwards and design a vision with full input from all executive business leaders – with the end-consumer’s needs and experience as the centerpiece. From there, superimpose a timeline and disruption factors from other industries to play out what a radically different cost, consumer experience, and quality outcome could look like – and what it takes to get there.
Discuss with your colleagues questions such as: How would a traditional payer and health system do things differently versus: a national set of payers/providers? Amazon-Berkshire Hathaway-JPMorgan? Walmart/Humana? CVS/Aetna? Uber, Google, or Tesla? What would you have to believe for any one of those players to take hold and do things radically differently? Explore the possibilities of what might happen and how prepared your organization may be when the only constant is addressing consumers’ needs for more affordable care, better quality, better health, and a better experience. This approach does not predict who the winners will necessarily be in the future, but it does provide clarity on the major arcs of change to anticipate what will change the rules of the game moving forward. Despite the uncertainty attached to specific future scenarios, grounding in the new requirements for success allows you to focus on must-dos and areas to invest in more aggressively. From there, define what is uncertain and what “beacons and lighthouses” to keep monitoring to assess whether other less clear changes or disruptions will occur.
Step 2: Paint Your Future and Identify Key Points of Focus (No More ‘One-Size-Fits-All’)
Too much uncertainty and impending change often pushes executive teams toward strategically aligned pilots and concepts. The challenge is that these efforts do not necessarily drive toward a sustainable, scalable new operating model. The key is to decide how your company, with its unique strengths and challenges, will successfully transform or reshape itself in light of others’ moves.
To paint your future and identify key points of focus, consider three things:
- Know your worth. Identify your hidden assets what makes your company special, relative to others. What is it you have that is value-added for customers, consumers, providers, payers, and beyond?
- Focus and strategic control. Someone else’s margin may be your opportunity to create value. Figure out where you’re making your money today. This is not always obvious in many healthcare settings. Health systems don’t typically deploy activity based costing and are also navigating a tricky transition to outcomes based payments versus transaction based payments. Determine where you’ll make money in the future and which segments/offers play to your current and future strengths (while falling below the radar for bigger groups).
- Start with the end in mind. Unleash the dreamer in each of your executives as a team to define what the future business model of your company looks like. What is the market you serve? How do you create value? What gives you strategic differentiation over your customer that protects you from others?
Here’s an exercise to help execute these three tips:
Consider what you’d want to be known for ten years from now. Design the New York Times article featuring your company as an industry leader and explaining why it has succeeded and toppled the competition. Have your team embrace the specifics of what is different and why it works (such as writing the very last chapter of a book about your company), then backtrack to today and what the subsequent “chapters” of milestones might be.
Remain clear on how to prioritize your segments, offerings, investments, and activities throughout this exercise. Be deliberate about which segments/lines of services/offers you may need to cede because of low probability of your success and/or low value and track and monitor your investments, time management, and outcomes accordingly.
Despite the megamerger news and disruptive possibilities, the whole world is not changing overnight. There is still plenty of room to serve specific needs and make progress. For example, despite retail’s hype, online sales account for a reported 10 percent of today’s total retail sales.
Even in places where there are clear massive, established platform plays in retail – such as Amazon – specialized plays have emerged successfully (such as Zappos for shoes and Wayfair for furniture) that solve a specific set of issues for a particular set of customers successfully, and in a way that the large monolithic platform plays cannot deliver (despite the impressive configurability and vast array of merchant partnerships).
Step 3: Test & Learn to “Shrink the Change”
Set the challenge for your team to find tangible, practical ways to start raising the bar. This step centers on changing the culture to embrace more innovation and build new muscle memory and skills, without running the risk of major management distraction. For example, set clear objectives for each of your executives to identify and implement just one initiative that will aim to improve efficiency and experience for your customers, consumers or internal staff by over 10-20 percent. Setting that goal and intention (with clear accountabilities, tracking, and associated incentives) will help rework and rewire the enterprise over time and “shrink the change” required to make it more manageable.
This “test and learn” experimentation (that retailers are pros at) requires acknowledgement that not all innovations tried will work. In fact, many will fail, and that is okay if innovations are stopped at the right time, learnings are clear, and risks are monitored from the outset of the planning process.
Alternatively, consider giving the challenge to improve performance and drive innovation in an adjacent arena. One blinded example is of how a healthcare company was interested in new disruptive innovations, although a total business model pivot on their end was unnecessary. This company began steadily taking 1-2 percent of its profits and allocating them toward developing innovations in adjacent arenas that are not a threat to the current business, but is now leveraging key hidden assets around data and the patient experience. Accountabilities and incentives for the executive team are clear and the size of the change, investment, and focus is material, but not unmanageable.
Step 4: Don’t Go at It Alone
There is no need to build it all yourself, as Rome wasn’t built in day and neither was healthcare. But be wary that it is often a minimum two-year process to bring partners together. The complexity of managing across multiple stakeholders (not to mention the legal challenges alone) is high. These bigger bets are higher risk and therefore pose the need for a portfolio approach that needs to be staffed accordingly.
There is no need to build it all yourself, as Rome wasn’t built in day and neither was healthcare.
Too often in healthcare, these partnership opportunities are viewed as “off the side of the desk” responsibilities for executives, and ultimately the diffused focus gets in the way of faster progress and impact. Bigger bets also present opportunity to get creative on how to build an operating model leveraging best of breed innovators without the encumbrance of deploying the core chassis and operating model of today. (For example, digital health reached a record breaking $5.8 billion in funding last year.)
For really big bets, determine whether starting a new company unencumbered by the constraints of the core business, and yet still strategically linked to the mothership, but with a different leadership team, incentive structure, and economic return requirements, is merited. Examples of success here include Goldman Sachs with their incubation and launch of Marcus for Goldman Sachs, its new low cost, online consumer digital loan platform that brought innovations from Fintech to its traditional business.
By keeping the end-state as your focal point and working in a practical and pragmatic fashion, you will build wins and trust along the way. This momentum then gives you the runway to not just avoid being disrupted but be the change needed to transform the health market.