Contributors: Ruchin Kansal and Rajbeer Kaur
To learn more about Ruchin and Rajbeer, click here.
As the digital revolution continues to disrupt existing business models and blur the boundaries between vertical industries, the potential for strategic partnerships to reinvent, disrupt, or defend a market position are like none we’ve seen previously. Strategic partnerships have become an important part of the CEO agenda and will continue to play a vital role in healthcare’s transformation. Ping An in China has already demonstrated the efficacy of the partnership model. In the U.S., Amazon could disrupt healthcare by building a connected healthcare ecosystem, while incumbents, such as CVS Health, can use strategic partnerships to defend their market position.
Figure 1 - Ping An Good Doctor - Connected Health Ecosystem
PING AN: REINVENTION
Ping An has leveraged strategic partnerships to create connected ecosystems in the industries of auto, financial services, real estate, and healthcare. Partners benefit from access to Ping An’s 800 million person customer base, marketing services to drive traffic, enablement of digital business models, and opportunities to expand into adjacent businesses. Ping An’s healthcare ecosystem as illustrated in Figure 1 is an example of how Ping An has used partnerships to reinvent itself and become a dominant player in healthcare. Its health app, “Good Doctor,” has connected hospitals, payers, doctors, drug stores, and diagnostics centers to provide seamless healthcare services, offering both traditional, and digital services. It is a simple app that allows customers to access these services, providing a unified experience. The partnerships Ping An forms are driven by its
overall strategic vision of leveraging
‘Internet’ and ‘artificial intelligence’ to provide affordable, quality care, and offer differentiated services. Today, its health app enjoys the market leader position with 193 million registered users.
Amazon has a user base of 100 million paid Prime members, fueled by its laser focus on ease of use, and fast, hassle-free, and personalized experiences. Healthcare consumers in the U.S. are demanding similar attributes. Amazon has established itself as a viable player across many industries such as retail, logistics, entertainment, and financial services, either through partnerships or investments. It also has a diversified set of healthcare investments to build from and disrupt the U.S. healthcare industry (Figure 2).
Figure 2 - Amazon’s Healthcare Commitment2
Amazon can use partnerships as a lever to build “Amazon Health” by enabling the following:
- SIMPLIFYING CARE – Amazon can partner with healthcare technology firms that provide connected devices, data analytics, and AI capabilities to co-create digital products and services. These primary care services, driven by data from several connected digital sources, provide proactive diagnosis, and preventive care. It could also partner to offer basic healthcare services at its Whole Foods physical stores, thus enabling Amazon to cover the whole spectrum of healthcare – from prevention to diagnosis to management of sickness.
- OPTIMIZING INSURANCE – The Amazon, Berkshire Hathaway, and JPMC (ABC) partnership is targeted at bringing down healthcare costs for the employees of ABC. With more than one million employees as customers, we expect Amazon will come up with a care model with a lower cost structure. This new entity could be a research hub to test innovative prevention and care management models. It can also create a healthcare insurance marketplace and study various care models to develop its own competencies.
- BECOMING A ONE STOP SHOP FOR HEALTHCARE – Eventually, Amazon can provide a connected health ecosystem. It can bring together its healthcare competencies to become a one-stop shop for healthcare across a customer’s health journey – from being healthy, to identifying risks, through treatment, and recovery, and on to wellness. Along this continuum, a unified experience, much different from today’s disjointed array, would be a game changer. Similar to Ping An, it can deploy effective partnerships to connect all offline, and online ecosystem players, including doctors, hospital-systems, diagnostic centers, pharmacies, payers, and rehab facilities.
CVS HEALTH: DEFENSE
Healthcare organizations are struggling with numerous challenges - rising costs, demand for quality care, and the need for speed - pushing them into a zone of “do more with less.” Further, the threat of Amazon’s exploits in healthcare and the associated potential for disruption is real. In this environment an effective defense strategy for an incumbent such as CVS Health can be to create niche ecosystems of partners to offer healthcare services the customer demands. The implications of this defense strategy include:
- BROADENING RETAIL PORTFOLIO Building on its Aetna acquisition, CVS Health can partner with patient-friendly transportation services to drive Aetna’s 22.2 million customers into its 9,800 CVS drugstores – including 1,100 walk-in ‘MinuteClinics’ - to receive care and fill prescriptions. Further, it can access Aetna’s insurance claims data and create customized drug benefit plans for these customers, broadening its retail offerings.
- EXPANDING SERVICES PORTFOLIO CVS can provide a wider range of healthcare services by utilizing its existing competencies and partnerships. It already partners for electronic health record system for its research-driven care programs. In addition, it can partner with ‘digital health’ firms that enable continuous monitoring of patients and offer remote healthcare services. It has just launched a ‘video visit platform’ (telehealth) to offer basic health services in 9 U.S. states, digitally partnering with Teladoc for technology. Finally, it could partner to provide a range of preventive, alternative, wellness, and basic healthcare services at its clinics.
BUILDING SUCCESSFUL PARTNERSHIPS
The three case studies we have explored are examples of how partnerships can be used as a lever to enable the transformation of firms. It is clear that as the markets continue to become more digital and connected ecosystems displace the vertical industry structures of the past, strategic partnerships will become the imperative. To remain competitive, healthcare firms need to leverage partnerships that would enable them to broaden their focus while staying nimble, to define future business models, and to continue to provide viable alternatives to ecosystem players such as Amazon.
However, an effective partnerships strategy needs a framework that factors in the four critical success factors - (1) strategic intent, (2) leadership commitment, (3) robust structure and governance, and (4) embracing failure. It is no more a question of whether to partner but of how to partner. Whatever the strategic aim, the key lies in understanding the implications and following a meticulously planned execution.