I love the news. It provides a daily reminder of the need for business model innovation. Healthcare and food are increasingly interconnected, each offering insight into business model innovation best practices.
Food that expands market share, not our waistlines.
I admire PepsiCo. To make its food healthier, PepsiCo leaders have invested in unusual talent (e.g., a Mayo Clinic endocrinologist and World Health Organization Chronic Health Disease chief) and genuine product innovation. This week the company announced work on a lower-sodium solution to achieve a salty taste in potato chips and other snacks. Last week we learned that PepsiCo will no longer sell high-sugar sodas to PK-12 schools.
My admiration rests in PepsiCo’s leadership evolving their business model’s value promise and advantages in advance of government regulations or new entrants scoring huge market share points by capitalizing on health concerns. PepsiCo knows that industry leaders’ snack and soda business models are not sustainable. After all –
- One out of every three US children (yes, one-third) are overweight or obese, many facing chronic life time diseases.
- “It’s up to the parents” has failed as a strategy to keep kids at healthy weights, much as the War on Drugs has failed to reduce Mexican drug cartels and US drug usage.
- With large deficits and a slow-growth economy, our nation cannot afford the long term cost consequences of our increasingly overweight nation.
Unlike so many other companies, PepsiCo has read not just read the tea leaves correctly, it is using margin from today’s business model to build tomorrow’s model. Food must change, as must our eating and exercise habits. The companies that help Americans solve this challenge will win tomorrow’s market share and talent wars.
Who will gain market share post healthcare reform?
The world has just turned upside down for healthcare insurance companies and healthcare providers. The integrated systems with insurance services, hospitals, physicians and alternate care under one organizational or virtual tent are well positioned to gain considerable market share. So too are the health insurance companies that invested heavily in more friendly customer-service and helping employers and their employees purchase healthcare on value.
My guess is that industry leaders will take one of two approaches. Some insurers will milk the current situation for as long as they can, raising premiums a lot in anticipation of not being able to cut the very sick from their plans or charge higher rates for pre-existing conditions. They’ll stick with a business model based on measuring, pricing and getting rid of risk. On the provider side, some will keep jacking up their “list prices” so as to maintain attractive profits for as long as Medicare and private insurers contract on discounts from list. (It was this approach to pricing which bankrupted many individuals without insurance, as they were charged list prices.)
The smart healthcare insurance and provider organizations will recognize that the winning business models in the future will be based on improving quality of care while reducing its cost. For insurers, this necessitates paying providers on outcomes for chronic and episodic care, not on individual procedures. It requires creating information and incentives for individuals to make healthier choices and making sure the right care happens early and in the lowest cost setting.
Smart providers will look to the retail primary care clinics to see how situation segmentation and the deployment of non-physicians can significantly lower cost of care. They’ll look to other nation’s disruptive models for surgery to see how terrific healthcare can be very low cost once standardization is accepted as a quality-initiative and value-enhancer, rather than as a loss of physician freedom. Smart providers will focus first and foremost on helping their patients achieve and maintain healthy weights, critical to long term health and our nation’s healthcare costs.
What companies do you admire for riding the wave of external trends rather than being knocked overboard by these trends? I sure hope your organization is one of them.
For insight on business model strategy, read my recently released book, Beyond Price.