BusinessDay 14 Feb 2018

Wednesday 14 February 2018
24 BUSINESS DAY
Leadership
SHAPING PEOPLE INTO A TEAM
What could Amazon’s approach to health care look like?
It is clear from some of its
recent moves that Amazon.
com sees the 18% of U.S. gross
domestic product dedicated
to health care as fertile ground
for expansion. Consider its decision
to pursue the market for pharmaceutical
distribution, or the recent
announcement that it will be teaming
up with Berkshire Hathaway
and JPMorgan Chase to reduce the
health care spending of the more
than 1 million employees that work
for the three companies.
This latest move has engendered
robust debate. Proponents
liberally term it “disruptive,” seeing
a natural diversification opportunity
for the firm that aspires to
be “earth’s most customer-centric
company.” Meanwhile, skeptics
highlight Amazon’s lack of expertise
in health care, a sector that many
deem resistant to the competitive
forces that characterize the retail
and web services markets in which
Amazon has thrived. Given this state
of affairs, it’s worth thinking about
Amazon’s efforts in a conditional
manner: If Amazon succeeds in
changing health care, how might
it do so? (Disclosure: I own a very
small number of Amazon shares.)
MAKING ROUTINE TRANSAC-
TIONS SEAMLESS AND RELIABLE.
The introduction of Amazon Prime,
which provides two-day delivery
for many Amazon orders for a fixed
annual fee, represented a huge shift
in Amazon’s early business model.
The move eliminated a key barrier
for consumers, who no longer had
to combine many items in a single
order to save on shipping. This
expertise could be used to improve
health care delivery by addressing
the administrative hassles and
scheduling challenges faced by
patients seeking routine services in
a one-stop setting.
The inconveniences associated
with parking, waiting and missing
time at work cause many patients to
either dread the process of receiving
care or to forgo it entirely. Amazon’s
acquisition of Whole Foods
has given it a retail footprint that
could allow it to offer basic health
care services such as those found
at retail clinics operated by CVS
or Walgreens. Amazon’s history of
competing on price for the delivery
of routine products and services will
likely serve it well should it decide
to offer similarly routine — though
hugely important — health care services
such as immunizations, blood
draws and strep throat cultures.
PASSIVE DATA CAPTURE. One of
the most compelling (and, to privacy
advocates, most concerning) aspects
of Amazon is the wealth of data it
can capture about the purchasing
habits of its customers. What’s more,
this data capture is passive and
thus does not require consumers to
enter much, if any, information on
their own. Amazon’s recent move
into cashier-less retailing with its
Amazon Go store in Seattle offers
a glimpse into how the company’s
data-capture capabilities could be
used in the health care industry.
After swiping their phones over
a sensor, customers at Amazon Go
are tracked as they pick up products
or return them to the shelves. As a
result, Amazon knows exactly what’s
in a shopper’s possession when he
or she walks out of the store. The
total shopping bill is automatically
charged to each customer’s Amazon
account.
Similarly, many hospitals are
adopting real-time location systems
to track the movement of people and
equipment throughout their facilities.
These systems can tell an executive
precisely how much time each
of the hospital’s operating rooms or
inpatient beds have been occupied,
or it can inform a provider who is
running behind schedule exactly
how long the next patient has been
waiting. This information can be
helpful in improving the execution
of the complex services provided by
many health facilities.
DATA ANALYTICS. By simplifying
data capture, Amazon frees up
resources to analyze that information
for the purposes of business
intelligence. What are consumers
purchasing and in what combinations?
Which purchase decisions
do consumers appear to labor over
and which do they seem to make
quickly? Turning that lens to health
care data could be a powerful tool,
a point that has not been lost on the
many health care companies building
analytics tools of their own.
Amazon could provide a wealth
of integrated data that links an individual’s
medical record with his
overall purchasing patterns, genetic
information (particularly if Amazon
eventually offers blood draws) and
activity patterns. This type of data
integration is increasingly sought
after by health care delivery systems
that are trying to target care based
on a patient’s specific preferences
or genomic information.
TURNING ITSELF INSIDE OUT.
A final and critical aspect of Amazon’s
expertise is the company’s
willingness to turn itself inside out.
Specifically, Amazon has a knack
for transforming its efforts to solve
its own operational challenges into
future commercial products and
services. Perhaps the most famous
result of this willingness is Amazon’s
cloud computing unit, Amazon Web
Services.
AWS emerged from a 2003 strategic
retreat, during which Amazon
executives noted the challenges that
units at the company faced in having
to “reinvent the infrastructural
wheel” each time they initiated a
new service offering. These execu-
tives agreed that if such issues were
challenging for Amazon, they must
surely be plaguing smaller internet
companies. That realization hatched
AWS as a service offering cloud
computing infrastructure on a “payby-use”
basis.
When AWS was introduced,
Amazon did not necessarily know
which AWS services web developers
— who had previously not
been Amazon customers — would
most need or use. But the beauty
of AWS’ business model was that
Amazon didn’t need to know that.
Rather, AWS let developers decide
which services they wanted to use.
Amazon then watched those usage
patterns and adjusted its offerings
accordingly.
Health care is similar. Amazon
has an internal challenge — managing
the health spending of its
employees — that is shared by many
other companies. Yet Amazon likely
does not have a full “solution” in
mind just yet. Rather, it has hypotheses
to test. By creating a space in
which those ideas can be tested,
Amazon may be able to play a key
role in allocating resources to solutions
that show themselves, over
time, to be promising.
As the debate over Amazon’s
potential to transform health care
continues, it’s important to acknowledge
that the company’s
path forward is marked by many
uncertainties. To the extent that
success in the industry requires a
deep institutional knowledge of
health, medicine and insurance,
Amazon may face an uphill battle.
If, however, the key to success lies
in a greater attention to operational
execution, data analysis and customer
service, Amazon may find a
significant opportunity.
(Robert S. Huckman is the Albert
J. Weatherhead III professor of
business administration at Harvard
Business School and the faculty
chair of the HBS Health Care Initiative.)
c
2017 Harvard Business School Publishing Corp. Distributed by The New York Times Syndicate