Strategy

IBM blogger Jack Mason nudged me this morning to provide some feedback on IBM's perception amongst those of us in health care - and well, I sort of went off on this rabbit trail...

After years of reinforcement (by other large corporations who've tried and left health care) I have to admit that I see IBM as an outsider. Health care exists on the Wonderland side of the looking glass, and non-health care companies tend to think health care is probably a lot like most other markets - it is not. They tend to lack fundamental knowledge of the market and what it takes to be successful. This knowledge gap is reflected in the apparent lack of a business plan - something beyond, "we'll transfer/hire X people, create a division, build some stuff and figure it out." Can you take concepts and models from other industries and apply them to health care? Certainly, if you do so from an internal health care perspective - to do otherwise is to court disaster. Here are some common mistakes:

  • Underestimating product and market development costs and over estimating market adoption rates (AT&T and PACS)
  • Buying a health care company without knowing anything about the market or viability of the acquiree (PPG and E for M)
  • Developing products for which there is a substantial market need, but no reimbursement (most everyone in remote monitoring)

Very few large corporations have come into health care and succeeded; most of those that did (like GE or Tyco), did so through acquisitions. Hewlett Packard was one exception that comes to mind; they did it the hard way, product by product. Success takes bringing in people from health care, actually listening to them, a willingness to fundamental change, and realistic investment and pay-off expectations.

There are lots of companies whose horizontal market products are used in health care, like Cisco and Microsoft. While they invest plenty to support the health care vertical market, you have to provide health care specific solutions to really be a health care company. Marketing efforts like the Clinical Connection Suite are rather like dressing in health care drag.

All this is not to discount the exceptional opportunities present in the current health care market. Many market segments in health care are facing considerable change through commoditization and technology advancements, the merging of traditional markets, and the creation of new markets. Here are 3 hotspots.

  • Medical device connectivity is eyed by both HIT vendors who think they should own the central station market, and medical device vendors who want to extend their central station solutions into HIT applications (think EMR Lite);
  • The point of care market is contested by nurse call, wireless phone, medical device (from beds to pumps to patient monitors) and software companies - given the market's maturity, they must take any growth out of someone else's hide;
  • Remote monitoring is a potentially juicy target coveted by outsiders (see this post about Intel, and this one on a burglar alarm company), implantable vendors (Biotronik, Guidant, Medtronic so far), not to mention remote monitoring startups.

Each of these examples (and there are many more) represent unique situations driven by relative market/product maturity, changes in technology and especially changing market requirements - a strategy that works for one probably won't work in another.

UPDATE: And with this post I've added another post category, strategy. This category will be used to track business and product strategies (or the lack there of) that catch my eye.

UPDATE: Reader "Galt" (a heroic literary character) suggests that vendor's resistance to standards is a significant driver to higher health care costs. Experience in numerous industries has show that standards grow markets at a faster rate, giving winners and even reasonably competent losers a bigger piece of the pie. Unfortunately, health care is not near as dynamic as most other industries; buyers and sellers both are more conservative and parochial. I think resistance to standards is a significant barrier to adoption in health care, and a barrier to cost reduction, but not a major contributor to costs. The radiology PACS market would have never taken off without DICOM (and as it is, it still took 10+ years to reach our current market penetration).

The best way to manage health care costs is to improve quality, outcomes and operating efficiency. For hospitals to realize the same levels of automation as other industries prices must fall - we need the Big C (commoditization). Fortunately, a number of market segments are ripe for commoditization.

UPDATE: In the comments below, Jim Maughan makes some great observations on the many faces and configurations of IBM across the world, with a focus on their past involvement with health care. Check it out.