The Customer Is Always Right

Since founding Amazon in 1994, he has revolutionized retailing. Now he’s out to transform how we read.

Today’s New York Times has an OpEd piece by Paul O’Neill (http://www.nytimes.com/2009/07/06/opinion/06oneill.html?th&emc=th) that made me sit back and think about looking at problems from multiple points of view. Many of the articles about our “broken” health care system lead off with a statistic about the incredible cost of the system (more than any other country in the world on a basis of percent of GDP) and then launch into expensive, big-picture solutions to consider. And everyone asks “Where will we get the money?”

O’Neill’s article was about the small-picture. Infections, medication errors, patient falls and other preventable problems add up to about a trillion dollars of annual “waste.” And the kicker is that we already know how to reduce every one of these without a massive new program! And here is the kicker in his article: “What policymakers tend to forget is that only the people who do the work can make this happen. Legislation can’t do it, regulation can’t do it, infection-control committees can’t do it, financial incentives and disincentives can’t do it. ….. Where it works, the common denominators are strong leadership and a committed work force.”

And for those of us with a bit of grey hair, this has the ring of déjà vu. When the U.S. auto industry was shocked by the quality of cars coming from the Japanese auto companies we were “shocked” to find out that it was not fancy automation and wiz-bang technology, it was leadership and a dedicated (and trained!) workforce that made the biggest difference.

I’m not saying that we don’t have to proceed with big, system-wide issues; but maybe the first place to start is to fix the problems we already know how to fix. And the solution can be found in the team we already have. But it will take real leadership and that will not to be found in a government program developed by people far removed from the real problems. Improving the health care system or any system often comes down to plain hard work.

Now go visit your boss and demand some real leadership.  The future of your organization is at stake.

I just finished reading an article from the July-August issue of Harvard Business Review that I found  frightening and thought provoking. The article is about Global Competitiveness — but the sub-title is what caught my eye — WHY AMERICA CAN’T MAKE A KINDLE. Although the Kindle was designed in California, the important components are made in China, Taiwan, and South Korea and the entire unit is assembled in China. Consider the major components:

• The battery comes from China  — When America outsourced laptop computers to Asia we gave up on battery technology
• The display comes from Taiwan — We no longer have the expertise because we gave up flat panel LCD manufacturing to Asia.
• The wireless card is made in Korea — the Korean mobile phone industry is more advanced than ours, so the latest advances in wireless technolgy come from there.
• The injection-molded case comes from China — We don’t have much of this capability left inasmuch as we have outsourced most toys, consumer electronics, and computers to Asia.

We have focused on the short-term and “shareholder value” for the past fifteen years or so. But we have neglected to consider the long term sustainability of our manufacturing base. We have deluded ourselves into thinking that we can be a service economy (What !? Selling sub-prime mortgages to one another?) and that only we have “imagination” for the next great thing. I think that both of these assumptions are frightfully weak.

Frankly, I don’t know what to suggest except to say that all of us need to worry about our knowledge base and our collective willingness to mortgage our future for “every day low prices.” That said, there are NO short-term solutions. We need to rebuild our expertise so that we have the competitive advantage here at home to make some of the things we want to buy.

What do you think? Am I being a crabby old man and too narrow-minded or am I right to be worried about our future?

My friend Kay Plantes (see www.Plantescompany.com/blog) and I are working on a new workshop focused on understanding and using business models as a way to grow your business. One of the aspects of any business model is the underlying Profit Model and how it is used to drive strategy. Consider the following:

• Harley Davidson: do they sell a bike or a life style?
• Healthcare: They profit when people are sick. What if they profitted from healthy people?
• Twitter: I know what they do, but what are they selling?
• Panasonic Factory Automation: What if they sold “productivity” instead of equipment?
• Higher Education: They are built on “hours consumed.” What if they billed according to “knowledge in-use?”

Kay and I are interested in your “profit conundrums.” Please add to our list.

My buddy Brad has suggested that I occasionally post something with a little “heft” to it. So, inasmuch as I’m working on a book project to help people become better prepared for the future of healthcare, I thought I’d point out the need for people to be better prepared for the future. Comments, please.

I collected articles and newspaper clipping about the world of healthcare providers. Here’s a sample and thoughts that try to go beyond the simple facts of the story and address the issues of being prepared.

·         “Medicare Won’t Pay Hospitals for Errors,” chicagotribune.com, February 18, 2008. The lay person reads this and says “Darned right!” Healthcare professionals think about the reality of dealing with human bodies and the near impossibility of taking these incidents to zero. A person who takes the time to think about the future wonders about the unintended consequences of this action.

One of the truisms of systems thinking is that all solutions inevitably create a new set of problems. Furthermore, these problems usually show up later and in different places. People prepared for the future have to consider the system of which they are a part and how that system reacts (predictably) to bending and breakpoint forces.

·         “Innovation in health care: An interview with the CEO of the Cleveland Clinic,” McKinsey Quarterly, March, 2008. The article explores an interview with Toby Cosgrove, MD, the CEO of the renowned Cleveland Clinic. In the article Dr. Cosgrove explains the three seismic shifts he sees in health care. The first is prevention; the second is the drive for value for dollars spent; and the third is that healthcare providers are being judged on the patient’s total experience, not just the clinical outcome. In order to address the third shift, he hired a chief experience officer “whose entire responsibility is to look at the hospital experience from the eyes of the patient and to translate that message back to the caregivers.”

Some hospitals have a tax status of “for profit;” others a status of “not-for profit.” But all hospitals are a business that competes for patients. Healthcare providers prepared for the future will consider their “value promise.” Why should patients come to your organization? Transparency of the total experience will only increase in the coming years, especially with the generation who “Googles” everything.

·         “Health Care that Puts a Computer on the Team,” The New York Times, December 27, 2008. The article describes the Marshfield Clinic an early adopter of health information technology and how it is a forerunner of medicine’s “digital future.” Much of the article goes onto explain the advantages of electronic medical records and how the Obama administration sees them as necessary. However, midway in the article it shifts to an examination of “predictive medicine” and the impact that it could have on the health of the population and the reduction of health care costs.

We’ve been down this technology road before and should know to think about the second and third order effects of a new technology. Leaders who are prepared for the future often have a great sense of the past.  The invention of radio did more than replace local singing groups – it enabled changes that ranged from national advertising to Blitzkrieg warfare. Electronic medical records will do more than replace paper records; and predictive medicine is only one of the more obvious effects. Be prepared for the future by learning how to “look across time” and really learn from history.

·         “How to Revive Health-Care Innovation,” Harvard Business School Working Knowledge, March 9, 2009. Clayton Christensen is a respected innovation guru and he has recently set his sights on evaluating the world of health care. He states that business model innovation, one of the three enablers of industry disruption, was common in health care until about thirty years ago. If he’s right, and we think he is, the current ranks of managers and executives are only beginning to feel the pressures of industry-wide disruptive innovation.

Leaders can prepare for the future of changes in their industry by analyzing the changes that other industries have experienced before them. Health care leaders like to remind us that “they don’t make widgets.” True; but human nature is pretty consistent, irrespective of the nature of the work to be accomplished. Do you want to prepare for the future health care innovation? It might not be a bad idea to analyze the reactions of people in industries ranging from automotive to consumer electronics to newspapers. Patterns emerge that might be helpful.

·         “Scalpel, suture and tweet: Surgery in 140 characters,” Chicago Tribune, April 8, 2009. The article explains how a spokesperson for a hospital in a Chicago suburb tracked the progress of an operation and sent “tweets” to a group of “followers.” Why? Because the hospital is experimenting with social networking as a marketing tool. Think this is silly? Questions came in from as far away as Switzerland.

Like it or not, different groups want different styles of communication. In a broader, more connected world, prepared leaders will have to flex to the needs of their stakeholders. Great thinkers always consider multiple points of view and what you see may not be comfortable. Like it or not.

·         “Virtual colonoscopy at center of policy debate,” Los Angeles Times, April 18, 2009. This article presented the pros and cons of paying for virtual colonoscopies and whether or not they are effective and saving money. Toward the end of the article the author explains that some studies have shown it to be pretty good but others “have suggested that it is not as good as detecting some smaller polyps.”

Ask yourself another question: “Is this as good as it will get?” Remember your first “car phone” or bag phone? How fast did they progress? Preparing for the future requires the ability to develop “impact maps” of current technologies and mentally play-out paths of progress. Die hard technologies generally assume the impact of a new technology sooner than it actually happens. But many of us get “surprised” by how fast technology progresses. Learning to assess varying “winds of change” is essential to thinking about the future. And technology is one of the winds affecting health care.

·         “Health care options focus on paying hospitals and doctors for quality, not quantity,” StarTribune.com, April 28, 2009. This was an AP article that gave an overview of the announcement of the Senate Finance Committee as they prepared to go into closed door discussions. In the announcement they quoted Senator Max Baucus, the Finance Chairman: “The key to healthcare reform is delivery system reform – reimbursing providers on the basis of quality, not volume.”  Here are our questions: How would a liberal interpret that sentence? What about a conservative? What about the CEO of a hospital? Without solid critical thinking skills that sentence is wide open to interpretation.

Now is not the time for uninformed opinions. Now is the time to think about the future and preparing for the future requires solid critical thinking skills. A key skill is the ability to ask GREAT questions. What assumptions are being used? What’s the scope of the “delivery system?” How does he define “reform?” He’s presented the problem in terms of a solution. What’s the real problem and what are the root causes of the problem? And on, and on. Preparing for the future requires an understanding of today and that requires more than opinions.

·         “A doctor in your pocket,” The Economist, April 18, 2009. The article explains how cell phones are being used in sub-Saharan Africa and part of Asia. The applications are simple, such as self-reporting and getting messages from a health care provider. However, the power of the story comes at the end when the article mentions the cell phones as part of a “global surveillance system” that can be used for prediction.

We have no data from the future. However, we have been blessed with imaginations. Unfortunately, many adults have disconnected their imagination in search of “the numbers.” Being prepared for the future requires a fertile imagination and adults need to rebuild what they had aplenty as children. Not only can it be done, it has to be done.

Healthcare will account for over 15% of GDP in the coming years.  What do you think they need to do to be prepared?

The April 20, 2009 issue of Business Week lists the twenty-five most innovative companies in the world — and McDonald’s is #19. Surprising? Well, if you equate innovation with end-products, I guess it’s a bit surprising. However, if you think of the scope of innovation as encompassing your entire business model, then it’s not so surprising. It’s a lesson in how leading companies stay in the lead. Sometimes your products are the focus of innovation; sometimes the operation that creates your products is the focus of innovation.

Think about McDonald’s Big Mac for a bit. It’s been around for decades and any tinkering with the product (secret sauce, anyone?) may do as much harm as good. So where’s the room for innovation? How about supply chain? What might it take to keep a winning product affordable to it’s loyal customers?

And here’s another thought regarding innovation — look at the restaurants and the ability of McD’s franchisees to innovate in a lot of little ways. On a cold winter’s morning I really like going out of my way to the neighboring McD’s where the operator has this delightful area with a fireplace and comfortable chairs and dark paneling. That didn’t come from a corporate innovation board, it came from someone who thought about innovating the total customer experience.

Next time you go to McD’s for a burger and fries, look around and think about the innovations that made this American staple such an American staple. Think about their total business model. Now go back to your office and think about “little innovation.” What might you do to make your business an American icon?

We are currently in very tough economic times and here is a basic question. Do you just have to “work harder” or is this a time to pause and rethink your basic business model and your relationship with your customers?

Take a look at Denny’s restaurants. This past Tuesday they gave away 2 million Grand Slam breakfasts. All told, it cost Denny’s about five million dollars to do this. You could be a cynic and call this a gimmick. Or you could think about Denny’s business model and consider the impact that this give-away had on their relationship with their target customers. Some will take it as a freebie; others will see a reason to be loyal to a company that bought them breakfast when they were out of work.

When your customers are hurting do you ignore them or do you see an opportunity to improve your relationshipwith them. Think about it.