How Health Care Can Deliver Better Quality at Lower Costs

I know, we are all sick and tired of the health care debate. But, while reading Don Clark's article in the WSJ today titled Chip Pioneer, Genetech Vet Bring High-Tech Sensibility to Medicine, the answer to how improved quality and lower costs will be achieved becomes clearer; and the solution won't be akin to rearranging the proverbial deck furniture on the health care Titanic. Therefore, I thought it worth a brief exploration.

The WSJ article sets forth a unique partnership of people interested in changing a system that does not make sense. You see technologist and former Intel Chairman Andy Grove and the charming and accomplished Susan Desmond-Hellmann , now Chancellor for UCSF, come from two very different industries, high tech and health care, but they see the same problem in how the health care system is broken and are doing something REAL to fix it. Kudos to Don Clark for identifying the two and their efforts.

We see this in industry everywhere. Existing leadership invested in past modalities having little affect on real outcomes because they are not REALLY changing how things are done. Health care is no different. As an example when asked why the system of health care is not driving costs down, Ms. Desmond-Hellman reflects:

There are a number of reasons, but the most important one is that there are no real incentives that drive cost as being a key parameter. If you are in product development, if you are developing new therapies, the most important barrier is Food and Drug Administration approval. The FDA has two metrics for success: safe and effective. Neither of those metrics has anything to do with cost. It's entirely different than every time you get a new iPod—it's got new features and it's cheaper.

She's right and more and more industries must adopt new models in order to have a real impact on the problems they are facing. Andy Grove shared a similar view when explaining why he is involved in doing something about health care:

The problem that actually bothered me is that there are dozens of ways of dealing with cancer in mice or neurological diseases in mice, and none made it across the chasm [to market].

Now UCSF is collaborating with the University of California, Berkeley to offer a two-year master's degree in "translational medicine," the discipline of transferring lab breakthroughs to the marketplace. The MBA-style program, which he helped establish with a $1.5 million donation, will target students from both medical and high-tech fields. Hopefully Mr. Grove's idea of using Silicon Valley-style techniques to speed and improve medical research will pay off.

Again, great article Don. Thanks for sharing it. Watch Susan's address on health care innovation below to learn more.

Fitness Industry Should Pay Attention to Changing Bookstore Biz Model

I am reading Jeff Trachtenberg's article in the WSJ this morning titled "E-Books Rewrite Bookselling". The article includes an important quote from Arthur Klebanoff, who is chief executive of New York-based RosettaBooks LLC, an e-book publisher. Arthur says "It's fair to say that the leadership folks at the major trade publishers didn't believe until very recently that e-books had any economic life in them." The important words here are "VERY recently".

I write and lecture about radical change happening in business today with a particular emphasis on the fitness and wellness industry. What I attempt to share with leaders and organizations is that the rate of change is exponential, not linear as many of us assume. Jeff's article on how the E-Book business is revolutionizing bookselling illustrates the circumstances all business models are facing TODAY. Unfortunately, as with the book business, most industry leadership doesn't understand the true pace of radical change and therefore does not see the disruption coming until its to late. As Jeff explains:

Nowhere is the e-book tidal wave hitting harder than at bricks-and-mortar book retailers. The competitive advantage Barnes & Noble spent decades amassing—offering an enormous selection of more than 150,000 books under one roof—was already under pressure from online booksellers. It evaporated with the recent advent of e-bookstores, where readers can access millions of titles for e-reader devices. Even more problematic for brick-and-mortar retailers is the math if sales of physical books rapidly decrease: Because e-books don't require paper, printing presses, storage space or delivery trucks, they typically sell for less than half the price of a hardcover book. If physical book sales decline precipitously, chain retailers won't have enough revenue to support all their stores.

Barnes and Noble has 1,362 stores, including 719 superstores with 18.8 million square feet of retail space: the equivalent of 13 Yankee Stadiums. That's a lot of fixed cost. As Jeff points out, Borders Group, the nation's second-largest book chain, saw same-store sales decline 14% at its superstores for the quarter ended Jan. 30. Of the 797 B. Dalton Booksellers stores that Barnes & Noble acquired in 1987, only four remain. And the number of independent booksellers continues to fall. As Indigo Books CEO Heather Reisman put it: "The days of filling the shelves and just opening the doors are gone."

Today the fitness industry is in a similar situation. Lots of high fixed costs and looming disruptive innovation. In an industry that loses almost half of its customer base each year, the days of filling a facility with equipment and just opening the doors are quickly coming to an end as well, but does anyone see what's coming? What is most telling, as identified in the WSJ article, was that Barnes and Noble was once a leader in the E-Book industry, investing in NuvoMedia in 1998. In a classic example of a market leader focusing on sustaining innovation as opposed to disruptive, the company abandoned the technology in 2003. B&N could have been the leader in E-books, but they gave up on the vision. Will leaders in the fitness industry make the same mistakes?

Watch and learn how new technologies are creating new innovations in publishing.

Apple on Flash: Hey Steve, "C'mon Man"

Remember Hamlet and the quote, "The lady doth protest too much, methinks"? While in this case it isn't a lady, the question still applies to Apple's CEO.

Steven P. Jobs, posted a 1,700-word letter on Apple’s Web site on Thursday, explaining the company’s decision not to allow the multimedia software Adobe Flash on Apple’s mobile devices, including the iPhone and iPad. The letter titled "Thoughts on Flash" ran the gamut from philosophical issues about the nature of closed platforms to complaints about performance and crashes.Why would Steve go to the trouble of sharing his "diatribe"? Think back to the Hamlet quote.

Let me say this: I enjoy Apple products. I own an iPhone, iPad and a MacBook. I have great respect for the innovations Apple has created. But give me a break Steve - why go to the trouble of writing a long letter of half truths? The reason you don't want Flash to run on your devices is as self serving to your business model as it is in the interest of "open source" philosophies (of all the reasons this was one you should not have mentioned Jobs). Do you think Apple is open source Steve ? "C'mon Man".

In response Adobe CTO Kevin Lynch posted an entry to Adobe's website titled "Moving Forward," in which he underscored the passion people feel about both Apple and Adobe technologies. "We feel confident that were Apple and Adobe to work together as we are with a number of other partners, we could provide a terrific experience with Flash on the iPhone, iPad and iPod touch," Lynch wrote. 

He also sided with Adobe Flash evangelist Lee Brimelow, who had registered his disgust with Apple earlier in the month. Brimlow was upset about a developer agreement from Apple that makes it a violation of terms to use a non-sanctioned development language.

So why the protestation ? Here it is - Jobs is fighting for the survival of Apple and Charlie Stross got it right in his recent post on the "The Real Reason Why Steve Jobs Hates Flash". I strongly suggest you read his post. As Charlie explains, The PC World is coming to an end and Jobs knows this. The App Store and the iTunes Store have taught Steve Jobs that ownership of the sales channel is vital. Even if he's reduced to giving the machines away, as long as he can charge rent for access to data or apps he's got a business model. As hardware commoditizes and margins evaporate, the only way for Apple to remain viable is to own a completely closed system. Adobe threatens that system, hence Steve's protestation.

Next time you see Steve lecturing about open source philosophies, wether you love him or not, you gotta say, "Hey Steve, "C-mon Man".

How Can You Connect With Customers Using Mobile Apps ?

How can you connect with your customers using mobile applications ? A recent WSJ article, "Services Tailor Apps for Small Businesses" written by Riva Richmond shared some important information about using new affordable tools to generate mobile applications. Mobility is surging and customers are increasingly accustomed to having information important to them delivered via their mobile telephones. Mobile Apps can be an effective way to connect with those customers. Here's what the WSJ article had to say:

In general, businesses that rely on repeat customers, like restaurants and retailers, or have intense interaction clients for some period of time, like real-estate brokers and car dealers, are the most likely to benefit from an app, said Greg Sterling, a senior analyst at Opus Research Inc.

"For ongoing, regular contact with customers that are on the go, it makes sense as a promotional or loyalty tool," Mr. Sterling says, since apps enable businesses to send out coupons and event details, including by text message, and customers can easily place orders or contact you for information.

But businesses that are looking primarily to attract new customers, such as doctors, lawyers and contractors, may find an app is a bit of a waste.

So how can you create mobile applications ? Technology is driving the cost of creating and deploying mobile applications down. Services including MobileAppLoader, SwebApps, Mobile Roadie (as shown above) and Kanchoo have emerged to help any sized company create apps. With easy-to-use online templates, much like those used to make low-cost Web sites, a basic iPhone app can take as little as 15 or 20 minutes to make and cost as little as $15 a month in hosting charges.

Hulu's Business Model Dilema

Hulu, yet another example of an industry trying its best to maintain its business model with minmal innovation in the face of a rapidly changing world. "Remember that Woody Allen movie "Take the Money and Run" where Woody's character keeps getting his glasses broken by bullies and finally in one scene when he is confronted again he takes them off himself and smashes them? Well, that's the kind of logic the industry used on Hulu." This according to Joe Flint of the LA Times yesterday morning and Joe's right...But there's more.

As the LA Times reported, Hulu, the popular online site for watching television shows, is preparing to execute the toughest maneuver in digital media: moving from free to pay. The service will begin testing a subscription offering as soon as May 24, according to people with knowledge of the plans.

Under the proposal, Hulu would continue to provide for free the five most recent episodes of shows such as Fox's " Glee," ABC's "Modern Family" and NBC's "Saturday Night Live." But viewers who want to see additional episodes would pay $9.95 a month to access a more comprehensive selection, called Hulu Plus, these people said.

Its important to remember something when you consider Hulu , its owned by a consortium of content creators, News Corp., NBC Universal and Walt Disney Co., who want to preserve the cable and satellite fees that pay for the high cost of TV production. In other words these guys want to make certain they continue to be paid vast sums of money for what they make. They don't want their business model to change; its too profitable. Therein lies a bit of Joe's analogy and therein lies the pickle Hulu is in. They have to control the distribution channel to realize their goals.

According to the LA Times story on the topic "Television executives don't want to suffer the same fate as music industry or newspapers, which saw revenues plummet after users flocked to free access to songs, stories and classified ads online. Already, Hulu fans are decrying the proposal and threatening to turn to Internet pirate sites to watch their favorite shows."

With all of the alternate means of distribution emerging, the days of owning both content creation and its distribution will become harder, without of course sacrificing FAT margins. The existing scheme of content creators owning distribution channels should be discouraged to increase competition and improve quality and diversity. In the end the consumer will decide, no matter the media industry's continued manipulation of the government to protect its interests (watch Lessig). To this point read  the "Economics of Free" and "Kindle vs. Publishers, the Wrong Debate".

The essence is competition and value. Competition for content and the value extracted by organizations who are mainly middle men; intermediaries between creation and the utlimate consumer is coming under attack in all industries. As I wrote in Kindle vs. Publishers, the Wrong Debate, "Its all about economics. In a business where barriers to entry used to be up front costs in promotion, development, distribution and production, new business models have emerged to render the past value of publishers increasingly mute." There is a reason Apple is one of the largest distributors of content in the world now - economics.

Many people believe that "The challenge will be whether Hulu Plus has enough ‘added value' so that consumers perceive that it's worth the price," said Michael McGuire, media analyst with research firm Gartner. While true that is really a near term problem. The challenge for the owners of Hulu is wether they can keep extracting their margins for what they do given the rise of so may distribution and content alternatives ala Netflix and others.