The Battle for Healthcare InformationA War Game St. Mary’s Hall, Rm 110 Georgetown University July 16, 2009
War games are a process to examine the near term A war game is a structured strategic exercise to help you anticipate competitive moves before your rivals make them. 1-3 year horizon…you know the players but may not understand their strategies!
Why this event…Why it works? Why this event? War games are typically private, closed-door events run by Fuld & Company for clients that need to make critical, often high-stakes decisions. This public war game allows us to show you our approach and demonstrate how and why a war game is a very effective vehicle for executives who have to make critical decisions Why it works? It “stress tests” strategic reality
Pay for What Works A “Stress Test”? There are over 100 billion reasons why! Healthcare expense hyper growth now pervasive The quality of care being delivered today is increasingly recognized as suboptimal In order for technology to succeed here, we need a learning healthcare system A system in which evidence emerges as a natural by-product of the care delivered Delivering the right care, to the right person, at the right time, for the right price Lots of money on the table for the right solution: A recent Rand Corporation study found that an effective electronic medical records system could eliminate $162 billion in unnecessary expenses from America’s healthcare system.
Payers Pharma and Biotech Diagnostic/Device Patient Providers Technology Providers Government Agencies A Brave New World Of Future PartnersUltimately, it’s about Co-opetition, not Zero Sum!
We Have Come A Long Way Since 1949… “As a time saver, a pneumatic tube system will be included” …for the purpose of distributing histories of patients and other information that might be needed, as well as a means of communication between departments in the teaching institutions. – Dr. Ernest William Bertner, January 30, 1949, first President of Texas Medical Center “Our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy and save lives…So let there be no doubt: health care reform cannot wait, it must not wait and it will not wait another year." - Prepared text of President Obama’s address to Congress, February 24, 2009
Four Nationally Ranked Business Schools Competed The Schools The Judges The Facilitator “Students from Harvard Business School and MIT's Sloan School of Management were recently invited to play a "war game.” The organizer, Fuld & Company….In the real world, the stakes are far higher, but the basic analysis may prove correct…” KDS Consulting
Industry Analysis in your Briefing Book Understand the overall industry picture Let the industry picture lead you to understand the competitors’ likely actions Use your understanding to help your company make better decisions Industry INDUSTRY FORCES TARGET’S ACTIONS
The Industry Gaining An Industry Overview: The Five Forces Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Customers Jockeying for position among current competition Substitute products or services
Porter’s Five Forces Model • What makes one industry more profitable than another? • Why is the market for drug therapies more profitable than the market for truck transport services? • Why is a technology based product like the desktop PC such low profit business? • Within an industry, why are some companies are more profitable than others? • Amgen had a higher rate of return than Wyeth • Only Dell made money selling PCs until 2006; since then Dell hasn’t but HP does • And what is the “healthcare information industry??” • Who are the competitors, suppliers, customers, potential new entrants, and substitutes?
Differentiate Be Low Cost Focus (e.g., geographically or on a market segment) Differing strategies separate participants in the same industry
Drivers At all levels of management and in multiple dimensions Current Strategy How the business is currently competing • Future Strategy • What will the company’s future strategy be? • Product • Place • Price • Position Assumptions Held about itself and about the industry Capabilities Strengths and weaknesses; core competencies Porter Four Corners Analysis – First Look
Assumptions & Blind Spots • All companies have assumptions, some explicit, some hidden from view. • About the competitive arena -- competitors, customers, suppliers, regulators, technology • Corporate myths… • About the company’s own strengths, the validity of its practices, its traditions • Corporate taboos… • Regarding assumptions that are supported at the top • They built strategies partly on the basis of their assumptions
An example... In the ‘60s, Hoffman-LaRoche built itself on the success of Valium. The company had 3 explicit strategic assumptions: • A drug that isn’t going to be a blockbuster isn’t worth our attention • All new products must come from our own labs • There’s nothing to be learning by hiring executives from other drug companies What conditions made these assumptions right for the time, and why did those conditions change? How did Roche respond?
Drivers At all levels of management and in multiple dimensions Current Strategy How the business is currently competing • Future Strategy • What will the company’s future strategy be? • Product • Place • Price • Position Assumptions Held about itself and about the industry Capabilities Strengths and weaknesses; core competencies Porter Four Corners Analysis
Rules for Round 1 • Each team will work on its own. You may email questions to myself or Dr. Alemi for clarification. • The first task for each team is to build a strategy for the company it represents. Start with the company’s drivers, assumptions, current strategy and capabilities. The output should be a Four Corners analysis of the firm, concluding with a 2010-2011 strategy in the market for the healthcare information. • Once you complete the Four Corners analysis, you should be able to answer the following questions: • What will your company’s future strategy be? • What makes you think you can implement it? • What do you think the responses of the other players will be? You will be presenting your analysis to the other teams and the judging panel via a YouTube video, and each of them will have an opportunity to question your analysis, so be prepared to defend it.
Judging Criteria You will be judged by: • Insight • How well do you understand the dynamics of the business and the company you represent? • Accuracy • How well does your proposed future strategy reflect the realities of the company’s drivers, current strategy, resources and assumptions? • Creativity • What intellectual sparks have you generated in creating your company’s future strategy, and in defending your conclusions? • Foresight • How well have you done at thoughtfully looking into the future of the on-line search business?
Rules for Round 2: Disruptive Scenario The facilitators will announce a scenario – “Gore Wins Physics Nobel for Inventing Internet, Sues Google for Royalties” -- and we will provide some realistic details. Your team should focus on what its own strategy will be in response to the scenario we present. Teams are free to negotiate a deal with each other within the constraints of anti-trust rules. You can’t agree to divide up markets or fix prices, but you could agree to acquire or be acquired, or to partner or license your products. Remember that the time is limited, so you can’t spend too much time negotiating, even if you think there’s something to negotiate about. Your team’s output should be a modified market strategy responsive to the change reflected in the scenario. Consider the likely actions of the other players and be prepared to explain what you think they will do in response to your team’s strategy. Be prepared to defend the responses you have crafted.
Some of the Action in April… • Microsoft tries to make a deal with Kaiser. • This happened for real a month later… • With the same result.
And The Winner Is… ? • At the end of the game, we will determine the winner based on the best all around strategy: • Kim Slocum – former corporate strategist at AstraZeneca and incoming HIMSS officer • Brett Davis – IBM Senior Executive in Life Sciences • Wayne Rosenkrans – former corporate strategist at AstraZeneca, Chairman of the Personalized Medicine Coalition, Distinguished Fellow at MIT ?
And The Winner Is… ? • Based on these criteria: • Insight • Accuracy • Creativity • Foresight ? Good luck!