who wins when industries converge? - oliver wyman...+46.54/–58.50 source: air transport...
TRANSCRIPT
© Oliver Wyman
WHO WINS WHEN INDUSTRIES CONVERGE?
SEPTEMBER 17, 2014
Adrian Slywotzky
Value Migration®
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Value Migration®
$ B
B
$ B
B
US Steel Nucor
US Airways Southwest Airlines
Sears Walmart
Compaq Dell
Motorola Nokia
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
-12
-10
-8
-6
-4
-2
0
2
4
6
8
'71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Net
Pro
fit
(19
95
$B
B)
Source: Air Transport Association of America. +46.54/–58.50
No profit zone: Airline industry example Industry net profit
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Evolving no profit zones
• Airlines
• Consumer electronics
• PCs
• Homeowner’s insurance
• Cars
• Beverage in grocery
• Films
• Agriculture
• Environmental remediation
• Lots of manufacturing
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Are there any evolving
no-profit zones in healthcare?
• 2014?
• 2017?
My Profitability X-ray
Market share –
a very tricky idea
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
0%
5%
10%
15%
0% 10% 20% 30% 40% 50%
Pro
fita
bil
ity
Market share
Chrysler
Ford
GM
Automotive – 1970s
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Automotive – 1990
0%
5%
10%
15%
0% 10% 20% 30% 40%
Chrysler
Ford GM
Pro
fita
bil
ity
Market share
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Automotive – 2002
0%
5%
10%
15%
0% 10% 20% 30%
Chrysler GM
Ford
Pro
fita
bil
ity
Market share
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Automotive – 2008
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
0% 10% 20% 30%
Chrysler
Ford
GM
Pro
fita
bil
ity
Market share
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
My business design
Customer selection
Profit model
Strategic control
Today Next
Scope/alliances
Unique value proposition
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
What happens when
value migrates and
industries collide?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Technology
Media/content/advertising
Telco
Consumer electronics
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Fight with
spouse –
what movie
to see –
“you
decide”
Search
and
search –
what’s
that trailer
I saw?
Go to
store
Pick three Go home Fight
again –
pick one
Forget to
return
Watch Return
five days
later, pay
late fee,
get mad
Before Netflix
Get online;
construct
queue; get
recommendations
Watch Receive
films by
Put in
mailbox to
return
Automatically
receive next
film in queue
Netflix in 1999
Stream content
instantly
Netflix now
What is a hassle map?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
M = F × E
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Data
comparison/
download
problems
Incomplete
information
Many screens
and computers
A la carte
pricing
Multiple
logins
Multiple
connections/
subscriptions
Easy to
manipulate:
access and
downloading
Sleek dual-
screen terminal
Single
comprehensive
platform
With Bloomberg
Without Bloomberg:
Bloomberg’s little box/big box value proposition The financial trading frustration chain: life without/with Bloomberg
© Oliver Wyman | AJS-20140720-AHA-San Diego
The trader’s terminal The physician’s desktop?
• 30,000 functions
• Consistent/comparable data
• Analytical templates
• Creating algorithms
• Patient history
• Predictive modeling
• Best protocols
• Best process
controls/checklists
• Diagnostic algorithm
“I have all I need at my fingertips.” What would the physician say?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Tech market cap (in trillions) , and broader universe
1.9
4.0
2.5
2005 2014
Telco, media,
consumer electronics
6.5
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Retail market cap
0
100
200
300
400
500
600
700
800
900
1000
1994 2014
$200B
$935B
0
100
200
300
400
500
600
700
800
900
1000
Walmart
Amazon
Home Depot
Costco
Lowes Target
Inditex
CVS
Walgreen
IKEA
Macy’s
Ralph Lauren
Other
Walmart
Sears
JCPenney
Kmart
Department Stores
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The Value Universe Expands …
AND value shifts.
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
2000 value 2010 value
$2.6 trillion $1.6 trillion 21 Leaders
$80 billion $1 trillion 11 Cross-chain players
3% 40% Share of value
Value Migration® Four-Chain World
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The key point of the Four-Chain World
• Start with the customer
• Ask:
– Who owns the hassle map of the customer?
– Connect the dots to fix it.
– Who is improving it the most quickly?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
E-book
• “Huge threat to my business”
• “Huge opportunity to create better experience for the customer
“Cool device”
The laws of perception: What do you see?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
What new things will my team have
to learn in the next three years?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Boundary Blurring
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
• Amazon
• Apple
• IBM
• Samsung
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Amazon stock price: 1998 – 2014
$ B
B
2006 2000 2002 2004 2008 1998 2014 $0
$50
$100
$150
$200
$250
$300
$350
$400
2012 2010
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
$ B
B
Apple
Sony
Market capitalization: Sony versus Apple
2007 2001 2003 2005 2009 1999 2011 $
$50
$100
$150
$200
$250
$300
$350
$400
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
IBM stock price: 1978 – 1993
0
20
40
60
80
100
120
140
160
180
1984 1980 1978 1986 1990 1994 1988 1982 1992
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
IBM stock price: 1978 – 2014
$ B
B
2002 1984 1990 1996 2008 1978 2014 $0
50
100
150
200
$250
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Samsung stock price: 1996 – 2014
$ B
B
2006 2000 2002 2004 2008 1996 2014 $0
500
1,000
1,500
2012 2010 1998
$1,750
1,250
750
250
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
X X
Tech
Media
“Different clocks"
The Second Half of the Game
King Kong Godzilla vs.
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Tech
Telco
Media
Consumer
electronics
Tech
Telco
Media
Consumer electronics
Retail
Education
Tech
Financial services
Healthcare
Four chains to eight
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Healthcare convergence
• Cross-chain competition
• Hassle map
• Capacity dislocations
• Compete/collaborate ratio
• Business design
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
12
17
55
70
89
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 2013
Nu
mb
er
of
rou
nd
s
Number of rounds over $2M
7x growth
over 5 years
Source: Crunchbase data referenced at http://techcrunch.com/2014/01/15/vcs-investing-to-
heal-u-s-healthcare/
Note: Healthcare software and apps company early stage funding.
Venture funding of digital health companies
$2,170M
$1,542M
$1,300M
$824M
$329M
$2.2
2.0
1.8
1.6
1.4
1.2
1.0
.8
.6
.4
.2
$0 V
en
ture
fu
nd
ing
($
BB
) 200
9
201
3
201
2
201
1
201
0
Momentum building … Digital health funding growing at nearly 30% per year
Source: Thomson Reuters and Crunchbase for 2008 – 2010 data, Rock Health and
Crunchbase for 2011 – 2013; includes top Rock Health digital health
innovators and selected innovators identified by OW
Note: Only deals >$2M.
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Retail
Q: What is retail?
A: $900 BN looking for growth
Market cap Revenue
Walmart 250 BN 500 BN
CVS 95 BN 100 BN
Walgreen’s 61 BN 70 BN
Kroger 26 BN 90 BN
Rite-Aid 6 BN 25 BN
Target 30 BN 70 BN
~ 480 BN ~ 900 BN
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Retail: Rapid evolution
Diagnostics
Simple
coordination
(with PCPs)
Telehealth
Wellness
programs
distribution
Kiosk/
information
Acute
episodic,
flu shots
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Tech/Telco
“They love hassle maps”
Retail
Healthcare
New sources of competition for value
“They love high costs”
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
No
Coordination of
Care
Hard to fit
patients in
schedule Lack resources
to manage
chronic
illnesses
Doctors Wait weeks
to see
doctor
Too many
patients, too
little time
No time or $ to
talk end of life
Emotionally
attached
Byzantine
billing
More
billing staff
than
nurses
Hard to be
ideal doc
Professional
frustration
Miss
Appointmen
ts
Problems
go
unnoticed
Can’t
Drive
Complicated
referrals
15-20
medications
Patient
Expensive
hospitalization
Multiple
specialists Conflicting
treatments No holistic
care
Emergency?
Call 911
Expensive
co-pays
No end-of-
life plan
Health
Plan
Redundant
treatment
Hard to
find quality
docs
Costly
senior
care
Risk of
adverse
selection
death
spiral
Need to
minimize
costs Staff
focused on
costs, not
prevention Small
margin for
Medicare
patients Denial of
coverage
Even the toughest hassle maps are opportunities U.S. healthcare
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Afghanistan Stability/COIN Dynamics
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Healthcare = Hassle Map Heaven
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
• Ellen
• Dan
• Joe
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
• Impaired quality of life
• Cost: $25,000
+$200/mo for oxygen
Difficulty
breathing,
onset of
edema
Day 7
Steps on
wireless
scale, +3lbs
Day 1
• Quality of life
maintained
• Cost: $600
Fee-for-service
CareMore
Cough up
frothy
sputum
Day 13
CareMore
nurse calls,
makes appt,
sends car
Day 1
Ventilator,
drugs,
cardiac
catheter
Days 14–19
Permanent
damage,
on oxygen
indefinitely?
Day 19+?
Sees NP,
new Rx
Day 1
CareMore Clinic
Call 911 &
emergency
room
Day 14
Hospital
Source: Interview with Alan Hoops, CareMore Senior Medical Officer and CEO respectively, conducted by Adrian Slywotzky and Karl Weber (08/10/2010); Zipprich, Bernard, “Interview with
Dr. Carlos Cowley, cardiologist,” (10/5/2010); 56% figure comes from “Delivering Integrated Patient Care for Seniors,” CareMore (11/2008), p. 35
56% FEWER READMISSIONS
Crisis
passes
Day 7
Fluid
build up
Day 1
Fluid
build up
Day 1
How do we reduce hospitalizations for CHF patients? Illustrative
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Geisinger – Standardization
Recovery
days Consultation
Diagnostic
tests
Pre-op
prep Procedure
90 days
post-op
follow-through
• One invoice/one price
• One point of accountability
• Pro-patient standardization
$112K
$88K
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
27,820
5,739
0
5,000
10,000
15,000
20,000
25,000
30,000
Dec
10
Dec
09
Dec
08
May
13
Dec
12
Dec
11
0
100
200
300
400
500
600
700
Q4 2010 Q4 2011 Q4 2012 Q4 2013
Clinicians
Sites
Note: Clinicians include physicians, physicians’ assistants, and nurse practitioners
Source: http://www.ncqa.org/Portals/0/Public%20Policy/2013%20PDFS/
pcmh%202011%20fact%20sheet.pdf
Source: Leavitt Partners Center for Accountable Care Intelligence
ACO growth
606
NCQA PCMH growth
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The Sound of One Hand Clapping
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
A cascade of capacity dislocations
• Retail General practitioners
• Care teams Hospitals
Specialists
• Care teams Hospitals
(+ Tech + Retail) Specialists
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Industry
profit
margin
Collaboration
should begin
Collaboration
begins
Change the compete/collaborate ratio
soon enough to make a difference
Compete/collaborate: Timing
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Compete
100
90
80
70
60
50
Collaborate
0
10
20
30
40
50
• What is the compete/
collaborate ratio in my
industry today?
• What should be my
compete/collaborate
ratio?
Compete/collaborate: Ratio
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
“Where do we allocate
capital to activities that
give us no differentiation?”
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Tech/Telco
Retail
Healthcare
Collaborations
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
My business design
Customer selection
Profit model
Strategic control
Today Next
Scope/alliances
Unique value proposition
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Business model evolution
Category Design #1 Design #2
IBM’s Watson Technology licensor •“Bloomberg” for health
professionals
iWatch Cool device • iPhone-like health
ecosystem
Care team
Medium-term prevention
(reduced hospitalization,
reduced specialist
usage)
• Invest in biosensors, big
data, Watson, genomics,
coaches to add “20 more
good years”
Hospital Cost-cutting,
consolidation
•Partner with and co-create
smart care teams
Pharmacy Clinic •Clinic + telehealth + health
coaches + care teams
Payor Insurer •Consumer health company
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
• What other important new business models will emerge/
are emerging already?
• How effective are they?
• Which ones do a great job for consumers and investors?
• Which ones would you invest in? And why?
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Tech companies
Hospitals
Care teams
Type
.10
$0.70
.20
Asset intensity
20%
5%
15%
Margins
30%
–
15%
Growth
Business models
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Hybrid
Hospitals
Care teams
Type
.45
$0.70
.20
Asset intensity
10%
5%
15%
Margins
8-10%
–
15%
Growth
Business models
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Who wins?
• Incumbents who pivot in a fast, focused way, and who play
– 30% defense
– 70% offense
• Hassle map fixers
• Newcomers with the BEST new business models
• Those who have mastered the art of collaboration
• The most aggressive exporters
• The CONSUMER
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Strong business models exploit change;
weak business models lose value faster.
E.g. taking advantage of
retail, mobile, telehealth,
Watson, genomics
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The Scarcest Commodity
LEADERSHIP
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Stock prices
Apple
IBM
Amazon
Samsung
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The Scarcest Commodity
LEADERSHIP
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Additional
Background
Material
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The Four-Chain World consumer
Jennifer Stone: 50-year-old, small business owner
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The Four-Chain World consumer
Jennifer Stone: 50-year-old, small business owner
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Bloomberg
Get updated information for stocks
and markets
iXpenseit
Create expense reports
and summaries
Omni Invoice
Generate sales quotes
and customer invoices
OmniFocus
Track tasks by project, place,
person, or date
Streamtime
Track customer information
FileMagnet
Wirelessly transfer files from
desktop computer
iShare
Connect to Microsoft
SharePoint Server
Oracle Business Approvals for Managers
Make intelligent business decisions on the go
Access your professional
network and contacts
iSpreadsheet
Create, edit, and share
spreadsheets
Managing my business
Jennifer Stone: 50-year-old, small business owner
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Starting to manage my health?
RunKeeper
Weight Watchers Mobile
Nike+ Running
WebMD
Map My Run
Healthline
First Aid by
American Red Cross
Kaiser Permanente
Restaurant Nutrition
Fitbit
SparkPeople
ZocDoc
My Pregnancy Today
Healthy Diet & Grocery
Food Scanner
iTriage
Vitals
HealthTap
CVS Caremark
The Eatery
Rite Aid
AARP Magazine
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The tech attack
• Scale
• Momentum
• Critical mass/company
• Consumer relevance
• Silicon speed
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
The
Resource
Pyramid
• A much broader
base for the pyramid
• “Top of license” on
steroids
• Costs significantly
lower
Doctors
Nurses
Behaviorists Medical
Assistants
PCMHs Smart Care Team
Retail
Telehealth
Self-directed consumers
The power of the extended care team Leverage: Adding ultra-low-cost capacity to smart care teams
D
N
B
MA
Prevention
Excellence
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
What will happen to competitive intensity?
• Internal competition
• Cross-chain competition
• Risk of downward spiral
Recall 2.6 1.6
© Oliver Wyman | 20140917-Medifuture-Tampa-AJS.ppt
Who’s at the edge of our radar screen?
New tech
companies
Retailers New/independent
care teams
Major tech
incumbents
• Hospital systems
• Medical groups
• Insurers
• Competitors for value?
• Good ideas?
• Great partners?