Healthcare's changing landscape – Part I
It’s a foregone conclusion that healthcare will be dramatically different in ten years or less. All the pieces are in place for a broad disruption of the industry. These include a market that promotes lobbying over compelling value, consumer dissatisfaction with the industry, increasing competition from consumer health-technologies and a tech savvy, value centered customer base. Healthcare customers (patients) and the consumer health-tech industry will be the beneficiaries of this seismic shift.
The Apple Watch4 can capture and analyze data for signs of Atrial Fibrillation
Consumer health-care technologies and services are ideal for the social media age. They are inexpensive to develop and distribute, are user configurable, and don’t need large infrastructures. More importantly, consumer health companies compete based on free market factors like convenience, price, performance and compelling value. In consumer healthcare, companies lobby customers, not politicians. Competitors in this market pay close attention to user feedback. One and two-stars user ratings can destroy new products and applications, so developers are quick to respond. This level of awareness, agility and response is rare in the healthcare industry.
I demonstrated Apple’s iWatch 4 health and safety features to a doctor-surgeon friend. We also watched Apple’s videos and discussed the next generation of health monitoring wearable devices (wearables). He commented that it will soon be like carrying an intensive care monitoring station on your wrist. This digital transformation heralds the disruption of the healthcare industry’s strategic position as more convenient, less expensive substitutes emerge for many of its basic services. To respond the industry will need more than technology. As Columbia’s David Rogers describes it in The Digital Transformation Playbook: “Digital transformation is not about technology – it is about strategy and new ways of thinking. Transforming for the digital age requires your business to upgrade its strategic mindset much more than its IT infrastructure.”
The changing strategic landscape
The healthcare industry is different in having a captive audience – we all get sick. Political pressures, private and government insurance (Medicare), and legislative intrusions like the Affordable Care Act have shaped its business and revenue models. These factors have also distorted its relationship with patients, who give high marks to their medical care and low marks to the business of medicine. Patients express high frustration with the costs of hospitalization, medicines, insurance premiums, and deductibles. The industry has thrived despite this contradiction because its strategic environment is characterized by high barriers to entry, limited substitution, low pricing pressures, and disempowered consumers. Emerging consumer health technologies are eroding these strategic advantages.
Products like the iWatch 4 are extending the reach of consumer health-care (lowering barriers to entry), introducing alternatives to basic services (greater substitution), and lowering costs (pricing pressures). Next generations of consumer wearables will monitor blood glucose, signs of sepsis, hypertension, respiration and oxygen saturation (SPO2). Advanced analytics and artificial intelligence technologies will make sense of the sea of data and deliver easy to understand information to mobile consumer and medical apps. This revolution will similarly encourage innovative consumer health services, strategies, revenue and business models.
Summary and implications
Innovative technologies rarely disrupt established businesses and industries with one blow. Disruption is a process, not an event. Instead, they enable new entrants to offer alternatives with more compelling value propositions to narrower. Incumbents who can’t compete on price or other compelling value often exit those segments in response to falling profit margins. The process repeats, driving once dominant companies out more segments and sometimes out of business. It’s an inherent part of the destructive-creative churning process of free markets.
Healthcare is different from other industries in that many of its services require large infrastructures and expertly trained medical personnel. These factors created multiple high barriers to the traditional disruptive cycle described above. There are, however, other disruptive processes that new technologies are introducing, including early detection, continuous monitoring, and active prevention. These will shift demands from complex medical treatments to simpler health and healthcare support services. That’s the subject of our next post in this series.
 Joseph Mccarthy, Seven in ten maintain negative view of American healthcare system, January 14, 2019, Gallop, https://news.gallup.com/poll/245873/seven-maintain-negative-view-healthcare-system.aspx?utm_source=alert&utm_medium=email&utm_content=morelink&utm_campaign=syndication
 David Rogers, The digital transformation playbook: rethink your business for the digital age, Kindle Edition, Location 34, 2016, Columbia University Press.
 Michael E. Porter, How competitive forces shape strategy, March 1979, Harvard Business Review, https://hbr.org/1979/03/how-competitive-forces-shape-strategy
 Clayton Christensen, Disruptive Innovation, http://claytonchristensen.com/key-concepts/