Daily Archives: March 22, 2012

The New Technology Elite

Coming out in hard-copy form next Tuesday, March 27, The New Technology Elite is the next must-read book on your list (and is already available in The Kindle Store for those of you who want an early start). Vinnie Mirchandani’s latest release on how great companies optimize both technology consumption and production, it is a great follow up to The New Polymath, which chronicled profiles in compound-technology innovations (and which was reviewed here on SI in The New Polymath’s Ten Rules for Success), this book looks at “consumer” (tech) companies that have better technology in-house at a larger scale than most (IT) enterprises. With case studies ranging from the media poster child, Apple, through UPS to Valence Health and Taubman Shopping Centers (yes, shopping centers), it is a fascinating read on how the best product and service companies embrace technology at their core, and utilize it to do whatever they do better, and even innovate upon it in ways that even the big IT shops, who are supposed to be innovating this technology, miss. (For example, UPS had enterprise-ready PDAs [Personal Digital Assistants] long before such technology was generally available in the small business and consumer markets. And, in some ways, they out-innovated shops like Palm and Blackberry.)

The supply chain elite know Apple’s story all too well: optimize the supply chain, optimize the cost, and maximize the profit as the high quality items sell for a premium over competitor’s products. And many of us know about HP’s Quest for a “10 Out of 10” supply chain. And the logistics professionals will know about the decades of technology innovation at UPS, but how many of us know Valence Health, chronicled in Chapter 11?

The US health care system is flawed. As Vinnie astutely points out in Chapter 11 (which is an appropriate location for these factoids as Chapter 11 is a short-form reference to the US Bankruptcy code, and that is the path many traditional health care providers seem to be on), the average cost of health care in the US in 2007 was $7,290 — nearly two and a half times the OECD average of $2,984. And yet, U.S life expectancy, child mortality, and other health metrics are significantly worse than those of other developed countries. Plus, the number of medically uninsured in the US grew 16% from 39.8 Million in 2001 to 46.3 Million in 2008, which left almost 15% of the country uncovered despite record levels of spending. Three of the biggest flaws, according to Stockard (a co-founder of Valence Health) are:

  • Fee-for-service reimbursement
    Providers have no incentive to focus on improving the quality of care to bring costs down as they get paid per service, not per outcome.
  • Lack of population management
    There is no one party responsible for the health of the population as a whole with a focus on keeping people healthy.
  • Inability to measure quality of care
    Lack of comprehensive data across health-care providers and disagreement as to how to measure quality has created a void in measuring the quality of care and outcomes by individual providers.
    There is a lack of evidence as to the impact of different treatment patterns.

To combat some of these issues, Valence Health created an analytics-based product portfolio that provides a turnkey HMO solution capable of administering the financial, actuarial, data analysis, claims payments, customer service, and medical management functions of provider-sponsored health plans across the U.S. This allows groups of doctors and hospitals to come together in a clinical integration practice that allows them to collectively negotiate enhanced reimbursements from healthcare plans, something the FTC won’t allow them to do on their own. This provides a foundation for doctors to negotiate reimbursements based on quality of service and outcomes (instead of having to rely on the quantity of services to reach a profitable reimbursement level). This makes much more sense than a strictly-defined per-service fee as a cured patient will not generate future healthcare costs and is more beneficial to the insurer than a provider who keeps treating the patient indefinitely to cover the costs of having a patient. In addition, the meaningful data that can be pulled from the disparate information systems of various healthcare providers allow these providers to not only define a standard quality of care, but measure it against the benchmark. For the first time, many of these doctors and hospitals can move away from a fee-for-service reimbursement mindset, monitor their population, and measure the quality of care — which is a first step to overcoming many of the flaws of the current U.S. healthcare system. Using technology, Valence Health not only mastered the use of technology in its operations, but disrupted the health-care market.

And this is only one of the many examples of the innovative uses of technology that Vinnie chronicles in his latest tome. Many disrupted and made new markets, when the companies weren’t even looking, and all of them improved operations and customer service. If more companies followed the practices described in this book, maybe it wouldn’t be the case that I’m lamenting that, for the most part, Customer Service Has Gone To Hell in the average organization.

Vinnie starts the book off by quoting Led Zeppelin who always said that this is a song of hope before they performed Stairway to Heaven and it really is a book of hope. It shows that, with dedication and perseverance, companies can use technology to innovate products and operations and take themselves, and their customers, to a new level. Let’s hope that more than a handful of company leaders pick up the book and actually read it — cover to cover — as it is filled with insights well beyond the dozens of deep case studies and hundreds of success story references that it contains.