What Business Are You Really In?
By: Patrick Jordan, MBA, MA | October 02, 2014
There was a great Harvard Business Review article from 1960 called "Marketing Myopia" in which Theodore Levitt said every industry was once a growth industry. Staying there required answering the question of what business the industry was really in, which is deceptively obvious. He talked about the demise of railroad companies at the turn of the 20th century when — contrary to expectation — passenger and freight demand grew, not shrunk. He claimed that railroad companies were "railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented." That failure of recognition allowed other industries like auto, trucking, and aviation enter the railroad market and address the broader problem of transportation.
One doesn't need to look too far back in history to see other companies go the same way. Kodak thought they were in the film business, not the photography business; then came Nikon and Canon. BlackBerry thought they were in the smartphone business, not the content and communication business; then came Apple. Blockbuster thought they were in the video rental business, not the entertainment distribution business; then came Netflix.
Healthcare's customer looks quite different today than a decade ago. Health reform and efforts to reduce the cost of care will accelerate the rate of change from product orientation to customer orientation. Biopharmaceutical companies, payers, providers and patients are becoming much more interconnected and interdependent in the endeavor to discover new treatments, assess their economic and clinical impact, and engage in complementary activities to maintain health.
The transformation from product to customer orientation is literal in biopharmaceutical companies with initiatives to work "beyond the pill." Vree Health, an independent but fully owned subsidiary of Merck, provides post-discharge services to Griffin Hospital in Derby, CT, to reduce re-admissions and improve hospital efficiency. Providers are also making this transformation, as evidenced by the Cleveland Clinic partnering with Canyon Ranch, the upscale spa resort, to address the wellness market. Pharmacies, which could be most subject to the risks of product orientation, are changing their business model, as exemplified by CVS purchasing Minute Clinic to address patient care.
Healthcare's new customer makes the question about the business we’re in an interesting one with a lot of opportunity.