CVS Health Understands 'Keystone Advantage'
This is How to Start a Big Strategic Rotation
Value is deeply embedded in particular ways of seeing the world.
It’s a fuzzy idea, vague, vogue and vaporous. It’s like ‘kinetic sand’, a type of play sand, also known as magic sand or hydrophobic sand, that is marketed as a play sand for children ($22.49 on Amazon).
And like pretty much all of healthcare content today, it’s devolved into cliché, a word without power positioned at the extreme end of monotonous repetition, more conceptual duct tape holding the PowerPoints together than it is novel economic direction. Like the conjoined twins “digital” and “transformation” riding double on the slow-horse of meaning, it is less strategic vision for framing and formulating big market innovation, but root cause for stagnation and strategic atrophy.
An entire industry is self-producing itself with the fumes of the conceptual past, a conventional lexicon from conventional leadership promoting conventional messaging in a world that has stopped working conventionally. The end result is messaging that is unsurprising, uninspiring and unlikely to deliver much in the ways of “shareholder value” (the narrative coming out of UnitedHealthcare’s shareholder session yesterday), to say nothing of “patient centricity"as a theory for change (for more Blue Spoon thinking on this, see What is "Value" in Healthcare?).
“Value” is also flexible, depending on your perch and frame of experience, perpetually and infinitely rough around the edges, much like the assumptions and definitions used to describe, analyze, forecast and sell the potential of ‘a market’ — case in point: the disintegrating ‘vaccine market’ is in reality a system of markets intertwined and co-dependent, including a $78 billion drug market, a $527 billion retail pharmacy market and a $83 billion telehealth market.
Anjalee Khemlani at Yahoo Finance, in an exclusive yesterday, is reporting that CVS is investing in a $20B plan to modernize US consumer healthcare experience:
“CVS Health is spending $20 billion in the next 10 years to upgrade to a more tech-enabled consumer health experience, a move the company says will help address the friction in America’s troubled healthcare system.
The investment, Yahoo Finance has learned, will not just impact CVS and its vertically integrated businesses, including the pharmacy, health providers, and insurer Aetna. It will also allow competitors and other players in the sector to plug into the CVS system.
CVS's plan builds on an idea that has been a focus of change in the sector for years: interoperability. That's the idea that all different parts of the system talk to each other, ideally through a single patient record, regardless of company brand.
Various administrations have attempted to encourage the industry to do this over the years, and a number of startups have attempted to develop platforms to host such an environment. But all have been unsuccessful for one key reason, said Tilak Mandadi, CVS Health’s chief experience and technology officer:
Companies have been unwilling to shake things up.”
Health happens at a system level, never just one thing, but many things simultaneously and interactively. If you ascribe to this line of reasoning, then the entire global health economy (projected to be $24 trillion by 2040) can logically be seen as contributing to outcomes in some fashion – everything is in the “production boundary” for health. The space of opportunity, then, is for creative leadership to reshape a $24 trillion economy into new systems of health production.
A New Theory of Value
Strategy is about shaping the future in an organized and persistent way.
When it comes to market innovation, as long as the field of play is seen as “drug market” or “pharmacy market”, then the unit of analysis and action will always be bounded within the context of “drug” or “pharmacy”. As long as we regard humanity as separate from nature, understand healthcare and life sciences as distinct industries, treat public health independently from economic health, or think of government as an entity apart from ‘the market’ it regulates, then we shouldn’t be surprised when we fail to build exciting new visions for the future.
The old blueprint rules.
If instead we want economic innovation, a better growth story, a unique narrative with the ability to inspire and persuade and differentiate, then we have to change the primary material conditions for strategy and imagination. We have to start creating with a non-fragmentary worldview, a new connection of elements where the production of health is the organizing idea for competition, a new gravity field around which a new system of markets coheres and evolves as a simultaneous whole.
This happens by positioning yourself as a ‘keystone’ partner in the intentional construction of a new industry ecosystem (or a portfolio of them). Ecosystems are about creating the conditions for “trillions of dollars” in opportunity because they solve a cold network problem: they spark a new “body of work [that] is flexible and open for anybody to integrate into,” quoting NVIDIA founder and CEO Jensen Huang in his COMPUTEX keynote in May.
Which is what CVS Health looks to be doing here.
In healthcare, it's not just one market that drives innovation and determines “value” but an infinite flow of them. If you accept that premise as your jumping-off point, then what follows is this simple idea: real strategic advantage goes to the side with the skills to harness a carnival of markets and manage them as a single economic unit collaborating on shared space for growth.
Health care products and services are also unique from normal consumer goods (say a refrigerator or automobile), which are economically inert – their value is known at purchase: what happens when a pharmaceutical goes “live” and gets used in the real world is often radically different than what happened in controlled clinical trials used for regulatory approval and labeling promotion. This implies experience over an extended period of time (i.e., ‘continuous health engagement’) is a more accurate logical frame to define, describe and negotiate “value”.
“Ecosystems" are a new orbit for competition and creative leadership.
Constructed and managed the right way (the term of art here is ‘assembly rules’), they have the power to reset how a market works; or, like LillyDirect, they have the ‘kinetic potential’ to become a channel themselves, a new center-of-gravity around which entire categories of products and services are drawn into and start rotating. The process knowledge to construct and sustain a new industry ecosystem -- to intentionally position and manage the roadmap to a system advantage -- is a different kind of expertise for brand, creative and technical management.
Get Comfortable with Complexity
The ability to quickly assemble new 'care and service infrastructures' — to invent your own channel — is the ability to dislodge embedded economic systems, to degrade ordisplace control points like ExpressScripts or Epic whose staying power comes from two places: (1) they process the economics of healthcare, and (2) they ‘progressively integrate’ more pieces to process the economics. To lead is to understand commercial strategy through the lens of infrastructure-as-a-service, as the means to create gravitational pull into a new orbit, to invent leverage, to define the rules by which others have to play.
Ecosystem-centered market strategy is a platform shift in health innovation. It’s a unique way to deal with competitive pressure, and stock market pressure. The ambition isn’t producing another technical product to make the “horseless carriage” run more efficiently; it’s inventing ‘the automobile’ as an economic concept around which new markets are born.
“You can’t install complexity,” writes Kevin Kelly, Editor-at Large for Wired Magazine. “[Entrenched systems] are biased against large-scale drastic change. The only way to implement a large new system is to grow it. And the way you grow one is to start with a small network that works, then add more sophisticated nodes and levels to it over time.”
Plato once argued that storytellers rule the world. His great work The Republic is in part an exploration of the nature of leadership and the structure of society. Plato recognized that stories form character, culture and behavior: “Our first business is to supervise the production of stories, and chose only those we think suitable, and reject the rest.”
Today, very little energy is needed to invent tools and technologies (for more Blue Spoon thinking here, see The Exit 9 Problem), but ever-more effort is needed to manage the tornado of innovation and agree on what pattern of transactions to cohere around (i.e., how to position value alignment). The new narrative for big market innovation starts with system entrepreneurship: become a node to comprehensively and creatively bring forth, aggregate and manage the means of health production as an interactive whole.
Fortune Favors the Aggregators
Big stuff happens when you combine things in new ways. Doesn't matter if those things are countries, industries, markets or brands, new leverage and new power is born in the remix, in the space 'in between' the pieces.
The end state is interdependency, a new system.
Which is why CVS Health’s big bet here makes sense to me. This is what a modern strategy looks like.
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/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry ecosystems.