With Amazon’s healthcare move, disruption ‘vortex’ picking up speed

If America’s top health insurers weren’t thinking about the threat of disruption much before, they were after the stock market opened on Tuesday, Jan. 30.

Online retail juggernaut Amazon joined with Warren Buffett-owned conglomerate Berkshire Hathaway (owner of COE member NetJets) and banking giant JPMorgan Chase to announce they’re forming an independent health care company to serve their employees in the U.S., according to a report in the New York Times. The companies employ a combined million-plus globally, many of which are stateside.

Even though details on the plan were scant – the trio said the partnership will be focused on creating technological solutions that drive simplicity and lower costs – stock prices for companies like UnitedHealth Group, Aetna, Humana and Cigna took a hit. The Times aptly noted that the “lines that have separated traditionally distinct (healthcare) sectors … are increasingly blurred,” and companies with the scale – and cash – of the Amazon/Berkshire/Chase triumvirate are poised to blur them further.

This latest threat of disruption to the healthcare industry comes after years of similar shake-ups in the technology, entertainment, and retail sectors, among others. Those three, according to a 2015 Cisco report, Digital Vortex, are the most vulnerable through 2020 to the entry of disruptors who can fundamentally change business as usual. Near the bottom of that list in 2015, at least slightly safer: Healthcare and pharmaceuticals.

In just a few years, the game has changed.

Cardinal Health CEO Mike Kaufmann

Count longtime COE member Cardinal Health Inc. among those standing confident as the broader healthcare supply chain faces disruption. Newly named CEO Mike Kaufmann speaking at a conference just weeks ago said the company has the scale, supply chain sophistication and pricing that would make it a formidable incumbent to beat, even for the Amazons of the world.

Amid unprecedented change in the insurance space, companies such as COE member Nationwide are trying to keep a step ahead – and even get in at the investor level on growing disruptive forces. The company this past summer hired a chief innovation officer and announced plans to invest $100 million in startups, saying the move “lays the foundation for the company to lead on businesses and technologies that anticipate future and emerging changes.”

Companies going forward may be defined by their ability to anticipate and react to disruption. At the Center for Operational Excellence, we believe the foundation of that is a culture that values continuous learning, thinking about the best practices that become “next practices.”

At COE’s upcoming Leading Through Excellence summit, April 10-12, we’re driving a conversation about disruption that companies need to start having if they haven’t already done so. That same Cisco report found that 45% of respondents to a large-scale executive survey said digital disruption isn’t a board-level concern. Only 25% said then that they were actively responding by disrupting their own business.

Jeff Loucks, co-author, Digital Vortex

At the summit, we’re thrilled to host one of the authors of the Digital Vortex report and book: Jeff Loucks, now the executive director of Deloitte’s Center for Technology, Media & Telecommunications. Loucks in a featured breakout session on April 11 will be sharing insights from Digital Vortex, helping attendees better understand how and why disruption occurs – an what they can do about it.

Loucks’ presentation is just one of a number of opportunities to better understand disruption and see how some companies are managing to disrupt themselves …

  • On Tuesday, April 10, award-winning innovation researcher Aravind Chandrasekaran leads an interactive workshop designed to help companies manage disruptive innovation through changing market and customer conditions.
  • That afternoon, COE is taking a group of attendees off-site to The Ohio State University Center for Automotive Research. Part of that tour will include an up-close look at how autonomous vehicle technology is poised to change the entire automotive industry.
  • Building off the bird’s-eye view of disruption Loucks offers in his breakout, David Kalman from change consulting company Root Inc. in another session will guide attendees through a discussion about how they can create innovative disruption within their own organizations.
  • A team from Columbus-based insurer and COE member Nationwide will be hosting a presentation and panel discussion on how technology is transforming processes at the organization.
  • Kalyan Sakthivelayutham, VP of Information Technology for DHL Supply Chain, will be offering a look inside how the company is ahead of the curve in introducing technology such as Google Glass and robotics inside its own operations.

These workshops, tours and breakout sessions are a few among more than 40 learning opportunities spread across Leading Through Excellence 2018, which is nearly 80% booked more than two months from the event. Registration for members and non-members is automatically discounted by 5% through Feb. 12, with an additional 5% available for groups of five or more.

To learn more and register, check out our official summit site …

Summer session explores opportunities, risks of digital disruption

Nearly three-quarters of a century into its existence, Safelite Group has reason to act like a market leader – it is one.

The ubiquitous Columbus-based glass repair and replacement services company has a presence in all 50 states, with the capability to serve about 97 percent of U.S. drivers. Even 70 years after its founding, it’s in growth and acquisition mode.

That doesn’t mean, however, that Safelite isn’t keeping an eye out for disruptors waiting in the wings to turn the business on its ear.

“We’re looking over our shoulder,” said Bruce Millard, the company’s vice president of digital and customer innovation. “We’re asking, ‘Who has the velocity to potentially cause us problems?’”

Millard was one of four speakers at the second of two summer sessions focused on top business challenges and co-hosted by the Center for Operational Excellence along with three other centers housed at Fisher College of Business: The Center for Innovation and Entrepreneurship, the National Center for the Middle Market and The Risk Institute. After surveying the state of the “talent war” in July, the centers brought together industry executives and academic experts to offer a mix of exciting developments, sobering realities and paths forward in the rapidly shifting world of data analytics and digital disruption.

Cisco’s Jeremy Aston

In his kickoff keynote, Jeremy Aston of tech communication giant Cisco shared how much — and how little — has changed in how companies are viewing and preparing for the threat of digital disruption. Cisco’s Global Center for Digital Business Transformation in a 2015 survey of nearly 1,000 executives found 15 percent said digital disruption was already occurring in their respective industries. At the same time, a scant one in 250 of those surveyed said digital trends would have a transformative impact on their industry. Fast-forward to a new survey round this year and the shift is staggering: Half of those surveyed said disruption was ongoing, while nearly one in three foresaw a transformative effect.

“Today, we’re under pressure to transform and perform,” said Aston, senior director of the Go to Market and Offer Monetization Office at Cisco.

One statistic that changed little in the two-year span hints at a gap Cisco’s research has found between companies’ awareness and action. In 2015, a quarter of those surveyed said they were “actively responding” to digital disruption. That number rose to just 31 percent this year.

“That is a dangerous game to play,” Aston said.

Drive Capital’s Mark Kvamme

While the media/entertainment trades and Cisco’s own technology products and services niche are easily most vulnerable to disruption, few – if any – parts of the economy are immune to companies born in today’s digital-first world. Speaker Mark Kvamme, a former Ohio economic development official and partner at venture capital investment firm Drive Capital, shared a dynamic portrait of “born digital” companies in Drive’s investment portfolio. One of them, Columbus-based startup CrossChx, has launched an artificial intelligence-enabled tool for the health-care industry that synthesizes and automates high-volume, repetitive tasks — prior authorizations, appointment reminders — outside the scope of patient care. On the analytics front, Columbus-based FactGem — run by Megan Kvamme — is helping companies translate hordes of data from far-flung sources into actionable intelligence.

All these innovations, Kvamme said, point to an unavoidable truth: “The amount of change we’re going to see in the next five to 10 years is going to spin everybody’s heads.”

A world of opportunity, however, also means a world of risk. Professor Dennis Hirsch, who runs the Program on Data and Governance at Ohio State’s Moritz College of Law, closed out the session with a look at the tricky terrain of data analytics in technology, which already has destroyed some players (student data repository InBloom) and led to serious brand damage for others (Uber).

“Big data is a crystal ball,” Hirsch said, “and that means it can be used for good — and for bad.”

As companies move forward, Hirsch said, it’ll be incumbent upon them to establish processes and guiding values that protect customers and treat them fairly. Technology and its innovative uses for data, in fact, are outrunning the law itself.

“The law hasn’t caught up, and to some extent it never will,” Hirsch said. “We need to be asking, ‘What does it mean to be responsible beyond just compliance?’”

A key tool companies can use as they make decisions on these issues, and the broader world of digital transformation, is a decidedly non-technological notion at heart: process. From a legal and ethical perspective, that means establishing them on the front end to mitigate the risks of leveraging big data. From a business agility standpoint, Aston of Cisco said in opening the day, that means having a perspective that extends beyond the flashy innovation itself.

“We have to make thoughtful decisions,” Aston said, “and we can’t just be focused on technological outcomes. What’s the business outcome you need to drive?”