Newsroom

Buggy Whips, Steam Engines and Health Care: The Challenge of Staying Relevant

05/23/18

Category:

By:

Tom Robertson, Executive Director, Vizient Research Institute

In 1960, the Harvard Business Review published a landmark article by Theodore Levitt entitled, “Marketing Myopia,” in which Dr. Levitt posed a defining question to American executives: What business are you really in? The article cited the failure by the railroads to recognize themselves as being in the transportation business, thereby enabling competitors from outside of the railroad industry to meet consumer needs with automobiles and airplanes.

In 1979, while I was a graduate student at the University of Chicago reading Levitt’s article, George Steiner published a strategic planning thesis suggesting that buggy whip manufacturers in 1904 might still exist had they viewed themselves as being in the carriage starter business. The strategic shortcoming that both authors warn against is a nearsighted preoccupation with current products and services rather than a broader and more responsive role in meeting customer needs. It’s tempting to conclude that a broader definition of one’s business is inherently safer strategically. After all, had the railroads preemptively developed automobiles and airplanes, they may have occupied a loftier perch in what came to be the more widely defined transportation industry.

At first glance, the enthusiasm for the population health movement, and the frequency with which mission statements have been amended to replace “health care” with “health,” might appear to align with the musings of Levitt and Steiner; but before moving too far along the ‘wider is better’ continuum, a bit of caution may be in order.

Largely in response to federal policies which themselves are rooted in unproven 40-year-old theories, medical providers have been encouraged to envision themselves as being in the business of delivering health rather than health care. Fueling the enthusiasm for this shift in mission is its intuitive appeal. Taking responsibility for anything and everything even tangentially related to the well-being of a large population of people soothes an existential fear shared by most medical providers: disruption of their traditional flow of patients.

Strategic initiatives designed to increase patient access, loyalty and trust – in effect, encouraging patients to align with a given set of providers even before any needs arise – have the potential to reinforce traditional referral patterns and protect market share. Such market alignment strategies increasingly fall under the expanding tent of population health. A more literal interpretation of the shift from delivering health care to the delivery of general well-being, however, is a slippery slope for organizations with limited capital and finite management resources and capacity.

The notion that physicians and hospitals are in the business of providing health rather than health care – or of assuming the role of insurer – may appear on its surface to mirror the widening of the railroads’ lens to view themselves as being in the transportation business. A closer look, however, suggests that the two examples are not at all alike.

The U.S. spends far more on health care – whether measured in per capita nominal spending or as a percentage of gross domestic product (GDP) – than do other Organization for Economic Cooperation and Development (OECD) countries. Interestingly, however, when considering the total expenditures for health care services and social services combined, the U.S. falls in the middle of the pack among its OECD peers. The difference is the proportion of combined spending that goes to health care providers in the U.S.

In the OECD, for every dollar spent on health care, about two dollars are spent on social services. In the U.S., for every dollar spent on health care, only 55 cents is spent on social services. A wide range of social determinants impact the health and well-being of a population, including education, poverty, nutrition and crime. Health care providers can be forgiven for stepping into the social services void in an attempt to close the gap, but it is not clear that asking them to do so represents the right tool for the job. Physicians, nurses and other specialized health care providers may not be the most efficient or even the most effective solutions for education, housing, transportation and other social infrastructure shortfalls that affect health and well-being.

A more direct connection between Levitt’s “Marketing Myopia” and health care providers is the view that doctors and hospitals are in the business of curing disease and restoring function, and when curing or restoration is not an option, of comforting. The danger of nearsightedness is in seeing ourselves as being in the hospital business, or the surgery business or even the cardiovascular disease business. All of these categories are vulnerable to disruption, just as the railroad business was disrupted.

Widening the lens, as advocated by Levitt, would suggest that the medical community expand its view to encompass the curing of illnesses and restoration of normal function, wherever and however those goals are best achieved, and the provision of comfort to patients for whom a cure or restoration is not possible. To leapfrog all the way to the provision of wellness, the delivery of which is dependent on a wide array of expertise, resources and economics not naturally embedded in a health system or of serving as an insurer, risks distraction from our core business and siphons limited capital from what patients really need and for which they are willing to pay.

In a June 28, 2012 Bain and Company article entitled “The Focused Company,” a number of business cases were described in which large and successful companies lost their focus, introduced enormous complexity into their operations and suffered serious consequences. The article serves as a useful counterweight to the idea that broadening one’s mission is inherently beneficial. Bain contrasted companies that attempted to invest in every element of their business with focused companies that identify and strengthen core businesses – those involving capabilities and assets that distinguish the company from its competitors.

Focused companies know their core customers and design their businesses around those customers’ needs. In his widely acclaimed book, Good to Great, Jim Collins maintains “… if you cannot be the best in the world at your core business, then your core business absolutely cannot form the basis of a great company.” The challenge in articulating a mission is to avoid being so narrow as to invite obsolescence while resisting the temptation for so much breadth that you lose your focus on the core. For physicians and hospitals, that core – what they can be best at in the world – is curing, restoring and comforting. If forced to reduce the definition of the core to a single word, the medical community is more precisely in the business of healing than of health.

A Boston millionaire in the early 1900s condemned his heirs to poverty when he stipulated in his will that his entire estate be forever invested entirely in electric streetcar securities. As emerging technology shifts an increasing share of inpatient services to ambulatory settings and gene therapies replace a lifetime of infusion treatments, there are lessons to be learned from Levitt’s warnings back in 1960. Equally dangerous, however, is the risk of losing focus on which consumer needs we are entrusted to serve, and in which core elements we can bring unmatched value. The airlines cannot sell tickets to people who do not want to travel, and the railroads could never have run locomotives on gravel roads.

About the author and the Vizient Research Institute™. As executive director of the Vizient Research Institute, Tom Robertson and his team have conducted strategic research on clinical enterprise challenges for 20 years. The groundbreaking work at the Vizient Research Institute drives exceptional member value using a systematic, integrated approach. The investigations quickly uncover practical, tested results that lead to measurable improvement in clinical and economic performance.

Related Materials