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Will the Amazon news matter to healthcare leaders?

Amit Bhagat

Last week, Amazon, Berkshire Hathaway, and JP Morgan announced they would form their own health care company to cut healthcare costs and improve services for their employees in the United States. The trio of companies hope to address what they see as inefficiencies in the health care market and the unsustainable rising costs of healthcare. Unsurprisingly, this news had an immediate impact on healthcare stocks. Market value of Express Scripts, CVS Health, Anthem and other leading healthcare companies promptly took a hit. For many health care industry leaders, this should serve as a wake-up call to accelerate change in their business models.

A Recipe for Disruption
Often, newcomers are able to look at an industry with a clean slate. That can come with the ability to shake up long established trends and a willingness to try something new or unusual. This can lead to the kind of disruption that makes existing market leaders irrelevant. Today’s health care leaders are challenged with managing the current business model and at the same time trying to innovate. It’s hard to do both simultaneously because running the current business pulls oxygen away from efforts to innovate.

Additionally, health care leaders face the constant conflict that accompanies big change—often having to accept a reduction in existing revenue without a clear path for potential growth in alternative revenue streams. The result is a widespread preference for incremental change at a speed that makes it difficult to enact the meaningful change necessary to remain competitive. It’s a scenario tailor-made for disruption.

Netflix v. Blockbuster
The origin story of Netflix serves as perfect example. Frustrated by the existing home video-on-demand model, they flipped the existing fee-based model for an Amazon-like strategy focused on subscriptions. The industry leader at the time, Blockbuster Video, was slow to react to the new disrupter. Numerous opportunities to remain competitive were available, but they resisted any changes that would likely lower their in-store sales. By pursuing an attempt to return to the previous status quo, their fear of cannibalizing their own revenue prohibited innovation and led to their downfall. As today’s industry leader, Netflix remains committed to innovation, keeping ahead of the competition with new revenue streams and an openness to change.

The Time is Now
The health care landscape is ripe for new entries into the market and last week’s announcement is a clear sign that disruption is coming. Being satisfied with the status quo is not a sustainable model for longevity. Leaders should be constantly looking for ways to innovate and adapt to market changes. Successful change often needs to start on a clean sheet of paper, bringing in new viewpoints and ideas, and positioning your company to be able to adapt quickly to changes in the industry. I believe that healthcare leaders have to accelerate action now if they want to survive.

Transform or die - The cost of healthcare is out of control and is causing significant heartburn for employers, government and individuals (healthcare costs are currently 18% of our GDP). As a country, we can’t afford for healthcare costs to stay the same rate or rise. If the current healthcare companies don’t act in solving this problem, disrupters will enter with new solutions and there is a risk that existing healthcare payors and providers may not be able to survive if they don’t transform their business. Just think about the impact the Amazon news has had on Premera Blue Cross – their existing Third Party Administrator. Premera is at risk of losing significant business from Amazon and may have to lay people off. This is the harsh reality of today’s environment – if we don’t act somebody else will…

Align people and organization: with a sense of urgency - The Amazon news is a great opportunity to create or renew a compelling reason to act, and act now. Galvanize people by sharing this news with a sense of urgency to get your peers and organization onboard. Company-wide transformation requires all hands on deck. That means engagement with executives, middle management and frontline staff. A heightened level of urgency will help managers and frontline people continue to look for opportunities that can make our healthcare ecosystem better as a whole.

Create Think Days - Instead of people running the company, it’s more often a company running the people. Everyone is extremely busy attending meetings and managing the existing business with little or no time to think. With this news, now is the time to accelerate action. Move away from suggestion boxes to a more focused call for ideas to solve a particular problem. “Think Days” for idea generation are a great strategy for generating ideas and developing the plans to move them through the organization.

Failure is an option -  Generating a large number of ideas and then trying them out quickly to see what works and what doesn’t is going to be critical. Of course, we have been taught that failure is not an option. Instead, we should recognize that failure is an option and understand that learning from our failures helps us get better. That recognition takes away the pressure of only trying when we know we are certain that we are going to be successful.

Start Today
Healthcare leaders need to continue to face the reality of disrupters entering the market and to accelerate their own actions to transform healthcare. After all, making the most of the circumstances is what life is all about. Are you up for the challenge? Are you committed to fighting for reducing the cost of care? Contact us to get started.