Executive Briefing | by Alsten Tauro | April 22, 2015
A couple of years ago, OPEN MINDS took a close look at the work of Dr. Jason Hwang, the coauthor of The Innovator’s Prescription: A Disruptive Solution for Health Care, and the challenges of planning strategy in a time of industry disruption (see The Disruption Of Strategy and Implementing Strategy With Rapid Innovation In Mind). The lesson from that coverage? When new knowledge or new technologies decentralizes expertise or information, disruptive innovation occurs. We are seeing that next step in this disruptive innovation come to pass with application program interfaces (APIs).
If you don’t know what APIs are, this is going to sound technical – APIs are sets of programming instructions for accessing software applications, allowing third party organizations to design their own software interface based on the functions and data available through the API. Basically, think about the apps on your smartphone that can; pull in data from Amazon, allow you to upload and print your photos at Walgreens, or get detailed directions using Google maps.
The key is, the app you are using probably isn’t provided by Amazon, Walgreens, or Google – but the API is, providing a third-party app developer the data to build innovative services, without having to reinvent the whole online system.
And where once this ability was rarified to only the most technical of organizations, it’s now the basis for a lot of software-to-software communications. The question is, why is this strategically important to health care organizations? Because, APIs allow tech firms to expand their product portfolios with new applications that are newer, more innovative, and cheaper, and that give provider organizations the opportunity to “monetize” their intellectual property (for example, consumer service protocols).
A great example of this in practice was in the recent briefing, Robot + Watson = ?. By using APIs, IBM has opened access to Watson, and the Japanese firm SoftBank is connecting its empathy robot Pepper to Watson, possibly creating a new and innovative service (it remains to be seen if this attempt has been successful).
While the API opportunity is top of mind for most tech companies, thinking about getting leverage from intellectual property (without actual service delivery) is new for management teams of service provider organizations and care management organizations. For management teams interested in going down that strategic path, the way to do this according to a McKinsey & Company contribution to Forbes (see Ready For APIs? Three Steps To Unlock The Data Economy’s Most Promising Channel), is to develop a strategy that can “determine the type of access, the fee model to generate revenue, and the API standards to adopt.”
This means that organizations looking to develop an API (provide data), need a strategic plan to; identify where in your data system the data will be supplied from; identify how much that data is worth; identify how much your organization will charge for its use (e.g. usage-based payments such as volume pricing, commissions, or subscriptions); and identify other market players that will either be competition for your data, or potential partners. If on the other hand you are looking to utilize another organization’s API for your innovative development, you need to identify how much data is currently available in your market, and how much you will pay for that data.
For more, join the OPEN MINDS team on June 17 for the session Digital Medicine In U.S. Health Care: Payers Who Are Making It Work, with Elizabeth A. Holden, Program Director, Commercial Products, UPMC Health Plan; Terri Cox Glassen, RN, MN, Director, Clinical Program Development, Cigna; and Michael Manocchia, Ph.D., Director & Senior Scientist, Cigna Analytics, at the 2015 OPEN MINDS Strategy & Innovation Institute.