Yesterday we wrapped up our 2015 OPEN MINDS Technology & Informatics Institute. The theme of this year’s institute was “strategy” – specifically the influence of technology on strategy. The institute had some great tech strategy sessions (for more, check out Making The Data Work For You, Comprehensivist Vs. Partialist, and We’re Way Past The Jetsons).
But in thinking about how best to conceptualize the likely future impact of disruptive technology on health plans and provider organizations alike, I was struck by the parallels happening now in the retail field – specifically the comparative performance and on-going competition between Walmart and Amazon for retail dominance. The summary version of this clash of the titans is simple – over the past ten years, Amazon has a commanding lead over Walmart in online revenue – $67.9 billion vs. $10 billion. And, what caught public attention was the recent drop in the Walmart stock price.
I view this as the battle between a conventional retailing model and a tech-enabled retailing model. And, I think the lessons for the health and human service field are many – the relative market share of conventional versus tech-enabled health care.
Lesson #1 – Being the “cheap” option isn’t always a sustainable market position. Walmart market positioning has focused on being the “cheapest” retail option. But, it is difficult to be the cheapest forever – especially when you have a lot of new technology coming around the bend. And with a competitor that has far fewer staff and no real estate costs.
Lesson #2 – The widespread availability and use of cheap communication tools makes “out of area” competition a reality. Now, 64% of American adults have a smartphone and 90% have broadband access at home. Walmart has not made significant investments in an online retail platform and that is what more of their customers want – it shows in their sales numbers.
Lesson #3 – Old models die hard, especially when they are successful. Walmart has been so successful with supercenters, they focused their investments there. But, what is desirable and profitable yesterday, isn’t equally desirable and profitable when there are new options.
Lesson #4 – It’s tough to compete with an organization that fully embraces consumer sovereignty, the concept of aligning the profits of the organization with the benefits to the customer. Amazon’s model and focus – “immerse yourself in the voice of the customer” – are tough on competition.
So what does this mean for health and human services? I think much of the field is in the “supercenter” phase of strategy – lots of focus on getting bigger to improve competitiveness through increased purchasing power and reduced administrative costs. The merger mania in health care – among health plans, pharmacies, health systems, and specialty provider organizations – is still at full speed.
But being larger is not the same as developing a new business model. What we don’t have yet in health and human services is movement of the many tech innovations to sustainable tech-enabled consumer service models. We are waiting for the organization that will launch those scalable proofs of concept – the models that will replace our current “supercenters.”
For more the disruptive technology parallels between retailing and health care, check out my closing plenary session, How To Make Technology Work For You: Some Thoughts On Strategic Tech Success. And, if you couldn’t join us in person this week, check out our archived event coverage on Twitter @OpenMindsCircle – #OMTechnology. And stay tuned in the coming weeks as we take an in-depth look at our other sessions from The 2015 OPEN MINDS Technology & Informatics Institute.