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The Vitality Institute: Investing In Prevention – A National Imperetive

Vitality absolutely smash it across the board…

  • Investment
  • Leadership
  • Market Creation
  • Developing Health Metrics
  • Everything…!

Must get on to these guys…..

PDF: Vitality_Recommendations2014_Report

PDF: InvestingInPrevention_Slides

Presentation: https://goto.webcasts.com/viewer/event.jsp?ei=1034543 (email: blackfriar@gmail.com)

 

From Forbes: http://www.forbes.com/sites/brucejapsen/2014/06/18/how-corporate-america-could-save-300-billion-by-measuring-health-like-financial-performance/

Bruce Japsen, Contributor

I write about health care and policies from the president’s hometown

How Corporate America Could Save $300 Billion By Measuring Health Like Financial Performance

The U.S. could save more than $300 billion annually if employers adopted strategies that promoted health, prevention of chronic disease and measured progress of “working-age” individuals like they did their financial performance, according to a new report.

The analysis, developed by some well-known public health advocates brought together and funded by The Vitality Institute, said employers could save $217 billion to $303 billion annually, or 5 to 7 percent of total U.S. annual health spending by 2023, by adopting strategies to help Americans head off “non-communicable” diseases like cancer, diabetes, cardiovascular and respiratory issues as well as mental health.

To improve, the report’s authors say companies should be reporting health metrics like BMI and other employee health statuses just like they regularly report earnings and how an increasing number of companies report sustainability. Corporations should be required to integrate health metrics into their annual reporting by 2025, the Vitality Institute said. A link to the entire report and its recommendations is here. 

“Companies should consider the health of their employees as one of their greatest assets,” said Derek Yach, executive director of the Vitality Institute, a New York-based organization funded by South Africa’s largest health insurance company, Discovery Limited.

Those involved in the report say its recommendations come at a time the Affordable Care Act and employers emphasize wellness as a way to improve quality and reduce costs.

“Healthy workers are more productive, resulting in improved financial performance,” Yach said. “We’re calling on corporations to take accountability and start reporting health metrics in their financial and sustainability reports.  We believe this will positively impact the health of both employees and the corporate bottom line.”

The Institute brought together a commission linked here that includes some executives from the health care industry and others who work in academia and business. Commissioners came from Microsoft (MSFT);  the Robert Wood Johnson Foundation; drug and medical device giant Johnson & Johnson (JNJ); health insurer Humana (HUM); and the U.S. Department of Health and Humana Services.

The Vitality Institute said up to 80 percent of non-communicable diseases can be prevented through existing “evidence-based methods” and its report encourages the nation’s policymakers and legislative leaders to increase federal spending on prevention science at least 10 percent by 2017.

“Preventable chronic diseases such as lung cancer, diabetes and heart disease are forcing large numbers of people to exit the workforce prematurely due to their own poor health or to care for sick relatives,” said William Rosenzweig, chair of the Vitality Institute Commission and an executive at Physic Ventures, which invests in health and sustainability projects. “Yet private employers spend less than two percent of their total health budgets on prevention.  This trend will stifle America’s economic growth for decades to come unless health is embraced as a core value in society.”

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Google Ventures – moving medicine out of the dark ages

Duke story about direct monkey brain implants that allow the control of more than two arms.

Great take on dealing with lagging regulation:

“You shouldn’t ignore the laws. But if you worry as an investor about, “Oh, you shouldn’t invest in any personal genomics companies because there’s a lot of regulations that need to be updated.” Well, you won’t do anything innovative.”

So yes, absolutely, the regulations need to catch up with reality. I think as the outcomes of the science with Foundation Medicine, 23andMe, etc., start to become important to people and to patients, people will demand that change. And that’s how it happens.

http://recode.net/2014/06/21/google-ventures-bill-maris-on-moving-medicine-out-of-the-dark-ages/

 

Google Ventures’ Bill Maris on Moving Medicine Out of the Dark Ages

June 21, 2014, 7:00 AM PDT

By James Temple

Google Ventures made health startups a sizable part of its portfolio from the earliest days, even as other investors avoided the space in recent years.

Venture capital funding for the life sciences sector dropped by $5 billion from 2008 to 2012 and was basically flat last year, according to market reports. But the search giant’s venture arm, established in 2009, has steadily plugged money into companies throughout the space, including: 23andMe, Adimab, DNANexus, Doctor on Demand, Foundation Medicine,Flatiron Health, iPierian, One Medical Group, Predilytics, Rani Therapeutics, SynapDx and Transcriptic.

Some of the bets have started to pay off. Foundation Medicine raised $100 million in an initial public offering in 2013. Earlier this year, Bristol-Myers Squibb bought portfolio company iPierian in a deal that could be worth up to $725 million.

The focus on the space at least in part reflects the background of Google Ventures’Managing Partner Bill Maris. He studied neuroscience at Middlebury College and neurobiology at Duke University. In his early career, he was the health care portfolio manager at Swedish investment firm Investor AB.

Maris also took a lead role in the creation of Calico late last year, a Google-backed company focused on delaying aging and the diseases that come with it. (Google has declined to discuss the company, which is run by Genentech Chairman Arthur Levinson.)

“Medicine needs to come out of the dark ages now.”

Bill Maris, managing partner, Google Ventures

Google Ventures generally isn’t taking the old biotech route, betting on companies somewhere along the winding path of developing drugs that may — but probably won’t — someday earn Food and Drug Administration approval. Rather, the firm is focused on companies leveraging the increasingly powerful capacities of computer science, including big data, cloud processing and genomic sequencing, to improve diagnostics or treatments.

In the second part of my two-part interview, which has been edited for space and clarity, Maris discusses the promise of these tools for medicine as well as what’s still standing in the way.

Re/code: Looking through your health-care investments, there’s 23andMe, DNA Nexus, Foundation Medicine, Flatiron. To the degree there’s a common theme, it seems these are all big data plays, using a lot of information and smart algorithms to make advancements in medical research or hit upon more effective treatments. Is that part of your investment philosophy?

Maris: I used to be a health-care investor a long time ago in the public markets. One thing I learned that we tried to apply here is that investing in small molecules, trying to invest in the next treatment, there’s an element of gambling to that.

I’m glad that people started those companies and I’m glad that they have people who specialize in investing in them. But that’s not our specialty, because you have to build a portfolio to make a success overall.

What we try to put into our practice is “invest in what we know,” which is where health care meets technology. In some sense, almost all companies these days need to be big data companies.

Bill Maris, managing director, Google Ventures

Especially when you get around genomics or, like Flatiron, looking for insights across vast amounts of oncology data. These are by definition big data companies that couldn’t have existed 10 or 15 years ago.

Take Foundation Medicine. The tools didn’t exist to actually genotype quickly the way that we can today, and in 10 years it will be even more advanced. So by necessity the companies we’re investing in are in that space, because that’s the forefront.

Clinicians treating patients based on “if you present with these symptoms, I’m going to treat you based on the knowledge in my head?” Those days are either disappearing or will soon disappear, I hope. We can get much better outcomes from people if we understand the genetic basis of the exact cancer that they have, what interventions might be most effective against it, what’s worked in the past and what hasn’t. I think that’s where the future of health care is.

So yes, lots of these are big data companies, in that sense. But that’s a catchphrase, they’re more than that. They’re data-informed companies that are trying to build businesses that are commercially important and, in this case, relevant to patients. That means they’ll get better outcomes, you’ll live longer and be healthier.

Medicine needs to come out of the Dark Ages now.

There is a unique challenge when it comes to data and medicine. Either you have a lot of information that is stored away in paper filing cabinets in doctors’ offices, or you’ve got companies that did studies decades ago that might be of use but they’re either not digitized or they’re holding on to them as intellectual property. So while there’s this great potential, it’s actually really hard to get at it. Can you talk a bit about what needs to happen technologically?

Of course it’s difficult. If it were easy it would be done by now, there would be nothing remarkable about what Nat [Turner] and Zach [Weinberg] are doing at Flatiron. The fact that it’s difficult is what makes it something an entrepreneur needs to tackle — and this isn’t unique, right?

All the information in the world has been pretty dispersed, but Google’s mission has been to organize it and make it universally accessible. That’s kind of a crazy mission and they’re doing okay at it. It takes people with a vision to say, “We’re going to try to organize this and make it accessible to people.” When we do those things, good things will result from that.

Maybe it takes a generation, because doctors will start using the system. Or maybe it just takes one big push, where we’re just going to go into clinicians’ offices and help them get all the data organized and put into electronic formats. Once you’ve done it one time you can gain an infinite number of insights to help your patients, so there’s a good motivation to do that.

Organizing healthcare information is a daunting task, but it is not an impossible task. We’ve had people walk on the moon. This is a lot more doable.

I want to ask about 23andMe. We’ve seen a handful of companies in that space that have closed or haven’t gone anywhere, and 23andMe obviously hit a big wall with the FDA last year.

I don’t know what you’re talking about.

Yeah, I read it somewhere. But that was a big part of their business, can you talk about what their ongoing prospects are and what direction they could steer in?

Yeah, as I understand it, the heredity product is still available and we see big businesses being built there, like Ancestry.com and others.

At the same time, their vision is bigger than that. They’re at an impasse with the FDA right now, but no one has thrown up their hands. Communication is ongoing, they’re trying to work that out, we’re dedicated to trying to resolve that roadblock. And we think it’s a product that is of value to people, so they can look at and understand their own genomic information.

I think the company’s prospects are great, I’ve known [co-founder] Anne [Wojcicki] for almost 20 years now, and she’s nothing if not focused, dedicated and motivated. She’s a believer in this. I think the company has been a little bit ahead of its time.

It’s inevitable that everyone will eventually be genetically sequenced because it’s going to be really important to their health care, to understanding their future and what they’re at risk for. If you believe that, then you believe that there’s probably a big business to be built here because someone has to deliver that information.

So we have a lot of faith in the team.

Taking that case — and given that health care and medical research is moving in this digital direction — do you think there are some regulatory shifts that need to take place?

I think the laws need to catch up with science and reality, and the law is never good at that. It’s always slow.

I mean, look at the patent office. I just saw a patent that Smucker’s has for a peanut butter and jelly sandwich. It’s sort of crazy.

Look at Uber and its regulatory challenges, taxi and limousine commissions trying to stop Uber. When you sit with my job — which is a really fun job to do, kind of a judge at a science fair — it’s really important to look at the technology and how it might benefit people, and not worry about the bureaucracies that might try to impede that.

At the end of the day, what always happens is, the right products for society and the people get out there.

You shouldn’t ignore the laws. But if you worry as an investor about, “Oh, you shouldn’t invest in any personal genomics companies because there’s a lot of regulations that need to be updated.” Well, you won’t do anything innovative.

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Bill Maris, the Man Behind Google Ventures, Wants to Redefine Silicon Valley Economics

By , Jun 20, 2014, 7:30 AM PDT

 

So yes, absolutely, the regulations need to catch up with reality. I think as the outcomes of the science with Foundation Medicine, 23andMe, etc., start to become important to people and to patients, people will demand that change. And that’s how it happens.

You studied neuroscience and neurobiology. What are some exciting developments you’re seeing in your own area?

I also think we’re just coming out of these Dark Ages in neuroscience. The forefront of neuroscience is (he points to parts of his head), “Well, this is the learning area, this is memory, this is where the right arm is controlled.” That’s not really how the brain works, it’s this cloud-based understanding.

I forget which neuroscientist said this, but you essentially have a Jennifer Aniston neuron. There are certain pathways in your brain that remember who that is. The more you fill up your brain with those things, the more neurons get used up.

So we’re getting closer to a point, and there are some folks at MIT working on this and other places as well, to really understanding the wiring of the brain. What makes it a whole, what causes consciousness. It’s not just that these cloudy regions all talk to each other.

You can’t do anything without a map. Until you can diagnose something you can never cure it, you can’t understand it. It’s hard to get from here to there without a map. So the first thing to do is to build a model.

When you can map an entire human brain, then you can really understand how it all works.

We don’t even know if everything gets recorded in your brain and your brain is just really good at controlling noise, where it’s just filtering out a bunch of things that you don’t need to think about because you’d just be overloaded. So there are these fundamental questions of neuroscience we just now have the tools to understand.

It’s so far behind, it’s so underfunded, in a way. We as a people and a country spend a lot of money on a lot of things. But we all walk around with this thing in our head and we have no understanding of how it actually works.

Machine-brain interfaces are a way to understand that. There’s a guy at Duke named Miguel Nicolelis, who I worked with and who comes out here every once in a while. He does work where he implants electrodes into brains and he’s now got monkeys who can move cursors on a screen [with virtual arms] and they get a reward of orange juice. Then he thought, “Well, why is the monkey just limited to one [virtual arm]? Maybe I could teach them to move three at once, or four.”

What we are learning from that is, well, we have two legs and two arms, but your brain is actually capable of operating four or six of them if you had them. There’s so much potential.

Here’s what the monkey saw in that experiment:

business, complex adaptive systems, entrepreneurship, health market quality, healthcare, policy, politics, quotes & aphorisms

Relman Obit: the medical-industrial complex

RelmanOnHealthcare

http://t.co/g9LnZnM5ta

“Many people think that doctors make their recommendations from a basis of scientific certainty, that the facts are very clear and there’s only one way to diagnose or treat an illness,” he told the review. “In reality, that’s not always the case. Many things are a matter of conjecture, tradition, convenience, habit. In this gray area, where the facts are not clear and one has to make certain assumptions, it is unfortunately very easy to do things primarily because they are economically attractive.”

Dr. Arnold Relman, Medical Editor and Health System Critic, Dies at 91

By 

Dr. Arnold S. Relman in 1979 at The New England Journal of Medicine. He led it for 23 years.Associated Press
Dr. Arnold S. Relman, who abandoned the study of philosophy to rise to the top of the medical profession as a researcher, administrator and longtime editor of The New England Journal of Medicine, which became a platform for his early and influential attacks on the profit-driven health care system, died at his home in Cambridge, Mass., on Tuesday, his 91st birthday.

His wife, Dr. Marcia Angell, said the cause wasmelanoma.

Dr. Relman and Dr. Angell filled top editorial posts at the journal for almost a quarter-century, becoming “American medicine’s royal couple,” as the physician and journalist Abigail Zuger wrote in The New York Times in 2012.

The couple shared a George Polk Award, one of journalism’s highest prizes, for an article in 2002 in The New Republic that documented how drug companies invest far more in advertising and lobbying than in research and development.

His extended critique of the medical system was just one facet of a long and accomplished career. Dr. Relman was president of the American Federation for Clinical Research, the American Society of Clinical Investigation and the Association of American Physicians — the only person to hold all three positions. He taught and did research at Boston University, the University of Pennsylvania, Oxford and Harvard, where he was professor emeritus of medicine and social medicine.

Early in his career, he did pioneering research on kidney function.

He was also editor of The Journal of Clinical Investigation, a bible in its field, and he wrote hundreds of articles, for both professional journals and general-interest publications. Days before he died, Dr. Relman received the galleys of his final article, a review of a book on health care spending for The New York Review of Books, to which he was a frequent contributor.

In a provocative essay in the New England journal on Oct. 23, 1980, Dr. Relman, the editor in chief, issued the clarion call that would resound through his career, assailing the American health care system as caring more about making money than curing the sick. He called it a “new medical-industrial complex” — a deliberate analogy to President Dwight D. Eisenhower’s warning about a “military-industrial complex.”

His targets were not the old-line drug companies and medical-equipment suppliers, but rather a new generation of health care and medical services — profit-driven hospitals and nursing homes, diagnostic laboratories, home-care services, kidney dialysis centers and other businesses that made up a multibillion-dollar industry.

“The private health care industry is primarily interested in selling services that are profitable, but patients are interested only in services that they need,” he wrote. In an editorial, The Times said he had “raised a timely warning.”

In 2012, asked how his prediction had turned out, Dr. Relman said medical profiteering had become even worse than he could have imagined.

His prescription was a single taxpayer-supported insurance system, likeMedicare, to replace hundreds of private, high-overhead insurance companies, which he called “parasites.” To control costs, he advocated that doctors be paid a salary rather than a fee for each service performed.

Dr. Relman recognized that his recommendations for repairing the health care system might be politically impossible, but he insisted that it was imperative to keep trying. Though he said he was glad that the health care law signed by President Obama in 2010 enabled more people to get insurance, he saw the legislation as a partial reform at best.

The health care system, he said, was in need of a more aggressive solution to fundamental problems, which he had discussed, somewhat philosophically, in an interview with Technology Review in 1989.

“Many people think that doctors make their recommendations from a basis of scientific certainty, that the facts are very clear and there’s only one way to diagnose or treat an illness,” he told the review. “In reality, that’s not always the case. Many things are a matter of conjecture, tradition, convenience, habit. In this gray area, where the facts are not clear and one has to make certain assumptions, it is unfortunately very easy to do things primarily because they are economically attractive.”

Dr. Relman edited The New England Journal of Medicine from 1977 to 1991. Founded in 1812, it is the oldest continuously published medical journal in the world, reaching more than 600,000 readers a week. Dr. Angell was the editor in 1999 and 2000.

When he took the journal’s helm, interest in health news was booming, and newspapers and magazines competed to be first in reporting new developments. One policy he instituted was to ask general-interest publications not to disclose a forthcoming article in advance, a request almost always honored, albeit sometimes grudgingly.

He also began requiring authors to disclose any financial arrangements that could affect their judgment in writing about the medical field, including consultancies and stock ownership.

Dr. Relman and Dr. Angell met when she was a third-year student and he was a professor at Boston University School of Medicine. They published a paper on kidney disease together in The New England Journal of Medicine, then did not see each other for years.

After he became the journal’s editor, he asked her to come on board as an editor, which she did, abandoning her career as a pathologist. They began living together in 1994 — both were divorced by then — and married in 2009.

They became the ultimate medical power couple, not least because they were gatekeepers for one of the world’s most prestigious medical journals. Their outspoken views further distinguished them.

“Some have dismissed the pair as medical Don Quixotes, comically deluded figures tilting at benign features of the landscape,” Dr. Zuger wrote in The Times. “Others consider them first responders in what has become a battle for the soul of American medicine.”

Arnold Seymour Relman was born on June 17, 1923, in Queens (in an elevator, according to Dr. Angell) and grew up in the Far Rockaway neighborhood. His father was a businessman and avid reader who inspired his son’s love of philosophy. His mother nicknamed him Buddy, and friends called him Bud the rest of his life.

He skipped grades in school and graduated at 19 from Cornell with a degree in philosophy, but he chose not to pursue the field because it “seemed sort of too arcane,” his wife said. He earned a medical degree from the Columbia University College of Physicians and Surgeons at 22. His first marriage was to Harriet M. Vitkin.

In addition to Dr. Angell, he is survived by his sons, David and John, and a daughter, Margaret R. Batten, all from his first marriage; his stepdaughters, Dr. Lara Goitein and Elizabeth Goitein; six granddaughters; and four stepgrandsons.

Last June, Dr. Relman fell down a flight of stairs and cracked his skull, broke three vertebrae in his neck and broke more bones in his face. When he reached the emergency room, surgeons cut his neck to connect a breathing tube. His heart stopped three times.

“Technically, I died,” he told The Boston Globe.

He went on to write an article about his experience for The New York Review of Books, offering the unusual perspective of both a patient and a doctor.

“It’s both good and bad to be a doctor and to be old and sick,” he told The Globe.

“You learn to make the most of it,” he added. “Schopenhauer, the German philosopher, said life is slow death. Doctors learn to accept that as part of life. Although we consider death to be our enemy, it’s something we know very well, and that we deal with all the time, and we know that we are no different. My body is just another body.”

Correction: June 23, 2014 
An earlier version of this obituary misstated where Dr. Relman and his wife, Dr. Marcia Angell, met. They met when she was a student and he was a professor at Boston University School of Medicine, not Harvard Medical School. Because of an editing error, the earlier version also misstated the dates of Dr. Relman’s tenure as editor of The New England Journal of Medicine. He held the post from 1977 to 1991, not from 1977 to 2000. (Dr. Angell was editor in 1999 and 2000.)

A version of this article appears in print on June 22, 2014, on page A23 of the New York edition with the headline: Dr. Arnold Relman, 91, Outspoken Medical Editor, Dies. Order Reprints|Today’s Paper|Subscribe

business, complex adaptive systems, data saving lives, entrepreneurship, health market quality, healthcare, management and leadership, policy, rapid learning health systems

McKinsey: Feeding consumer decisions…

Will be useful to plug this into our health market quality explorations…

PDF: Digitizing the consumer decision journey McKinsey

http://www.mckinsey.com/Insights/Marketing_Sales/Digitizing_the_consumer_decision_journey?cid=DigitalEdge-eml-alt-mip-mck-oth-1406

Digitizing the consumer decision journey

In a world where physical and virtual environments are rapidly converging, companies need to meet customer needs anytime, anywhere. Here’s how.

June 2014 | byEdwin van Bommel, David Edelman, and Kelly Ungerman

Many of the executives we speak with in banking, retail, and other sectors are still struggling to devise the perfect cross-channel experiences for their customers—experiences that take advantage of digitization to provide customers with targeted, just-in-time product or service information in an effective and seamless way.

Video

How consumer behavior keeps changing

McKinsey’s David Edelman explains how purchasing decisions are made in a digital world.

This quest for marketing perfection is not in vain—during the next five years or so, we’re likely to see a radical integration of the consumer experience across physical and virtual environments. Already, the consumer decision journey has been altered by the ubiquity of big data, the Internet of Things, and advances in web coding and design.1 Customers now have endless online and off-line options for researching and buying new products and services, all at their fingertips 24/7. Under this scenario, digital channels no longer just represent “a cheaper way” to interact with customers; they are critical for executing promotions, stimulating sales, and increasing market share. By 2016, the web will influence more than half of all retail transactions, representing a potential sales opportunity of almost $2 trillion.2

Companies can be lulled into thinking they’re already doing everything right. Most know how to think through customer search needs or have ramped up their use of social media. Some are even “engineering” advocacy—creating easy, automatic ways for consumers to post reviews or otherwise characterize their engagement with a brand.

Yet tools and standards are changing faster than companies can react. Customers will soon be able to search for products by image, voice, and gesture; automatically participate in others’ transactions; and find new opportunities via devices that augment their reality (think Google Glass). How companies engage customers in these digital channels matters profoundly—not just because of the immediate opportunities to convert interest to sales but because two-thirds of the decisions customers make are informed by the quality of their experiences all along their journey, according to research by our colleagues.3

To keep up with rapid technology cycles and improve their multiplatform marketing efforts, companies need to take a different approach to managing the consumer decision journey—one that embraces the speed that digitization brings and focuses on capabilities in three areas:

  • Discover. Many of the executives we’ve spoken with admit they are still more facile with data capture than data crunching. Companies must apply advanced analytics to the large amount of structured and unstructured data at their disposal to gain a 360-degree view of their customers. Their engagement strategies should be based on an empirical analysis of customers’ recent behaviors and past experiences with the company, as well as the signals embedded in customers’ mobile or social-media data.
  • Design. Consumers now have much more control over where they will focus their attention, so companies need to craft a compelling customer experience in which all interactions are expressly tailored to a customer’s stage in his or her decision journey.
  • Deliver. “Always on” marketing programs, in which companies engage with customers in exactly the right way at any contact point along the journey, require agile teams of experts in analytics and information technologies, marketing, and experience design. These cross-functional teams need strong collaborative and communication skills and a relentless commitment to iterative testing, learning, and scaling—at a pace that many companies may find challenging.

Let’s consider what an optimized cross-channel experience could look like when companies target improved capabilities in these three areas.

A new normal …

Imagine that a couple has just bought its first home and is now looking to purchase a washer and a dryer. Mike and Linda start their journey by visiting several big-box retailers’ websites. At one store’s site, they identify three models they are interested in and save them to a “wish list.” Because space in their starter home is limited—and because it is a relatively big purchase in their eyes—they decide they need to see the items in person.

Under an optimized cross-channel experience, the couple could find the nearest physical outlet on the retailer’s website, get directions using Google Maps, and drive over to view the desired products. Even before they walk through the doors, a transmitter mounted at the retailer’s entrance identifies Mike and Linda and sends a push alert to their cell phones welcoming them and providing them with personalized offers and recommendations based on their history with the store. In this case, they receive quick links to the wish list they created, as well as updated specs and prices for the washers and dryers that they had shown interest in (captured in their click trails on the store’s website). Additionally, they receive notification of a sale—“15 percent off selected brand appliances, today only”—that applies to two of the items they had added to their wish list.

When they tap on the wish list, the app provides a store map directing Mike and Linda to the appliances section and a “call button” to speak with an expert. They meet with the salesperson, ask some questions, take some measurements, and close in on a particular model and brand of washer and dryer. Because the store employs sophisticated tagging technologies, information about the washer and dryer has automatically been synced with other applications on the couple’s mobile phones—they can scan reviews using their Consumer Reports app, text their parents for advice, ask Facebook friends to weigh in on the purchase, and compare the retailer’s prices against others. Mike and Linda can also take advantage of a “virtual designer” function on the retailer’s mobile app that, with the entry of just a few key pieces of information about room size and decor, allows them to preview how the washer and dryer might look in their home.

All the input is favorable, so the couple decides to take advantage of the 15 percent offer and buy the appliances. They use Mike’s “smartwatch” to authenticate payment. They walk out of the store with a date and time for delivery; a week later, on the designated day, they receive confirmation that a truck is in their area and that they will be texted within a half hour of arrival time—no need to cancel other plans just to wait for the washer and dryer to arrive. Three weeks after that, the couple gets a message from the retailer with offers for other appliances and home-improvement services tailored toward first-year home owners. And the cycle begins again.

… requires new capabilities

As this example makes clear, the forces enabling consumers to expect real-time engagement are unstoppable. Across the entire customer journey, every touchpoint is a brand experience and an opportunity to engage the consumer—and digital touchpoints just keep multiplying. To maximize digital channels, companies need to focus on improving their “3-D” capabilities.

Discover: Build an analytic engine

Even in this era of big data and widespread digitization of customer information, some companies still lack a 360-degree view of the people who buy their products and services. They typically measure the performance of direct sales activities such as product pitches and encourage downloads using “last-action attribution” analyses, which assess campaigns in isolation rather than in the context of the entire cross-channel consumer decision journey. Usually these data will have been stored in disparate locations and legacy systems rather than in a central server. Complicating matters further is the range and quantity of unstructured data out there—information about consumers’ behaviors and preferences that is, for instance, captured in online reviews and social-media posts. In our experience, this type of data is usually the least understood and therefore the least utilized by companies.

To get the full customer portrait rather than just a series of snapshots, companies need a central data mart that combines all the contacts a customer has with a brand: basic consumer data plus information about transactions, browsing history, and customer-service interactions (for an illustrative example of how companies can lose potential customers by failing to optimize digital channels, see exhibit). Tools like Clickfox and Teradata can help marketers gather these data and begin to pinpoint opportunities to engage more effectively with consumers across the decision journey. This collection effort requires input from people across multiple functions—a complex undertaking, to be sure, but the payoff can be big. Our work in this area suggests that the growth rate of earnings before interest, tax, depreciation, and amortization of grocers that focus on customer analytics is 11 percent, compared with just 3 percent on average for their main competitors. For big-box retailers, the difference is 10 percent compared with 2 percent.4

Exhibit

Failure to optimize digital channels may result in underperformance.

With a comprehensive data set in hand, companies can undertake the sort of quick-hit “shop diagnostics” that many tell us is lacking in their marketing and e-commerce programs. Using analytic applications such as SAS and R, and by applying various algorithms and models to longitudinal data, companies can better model the cost of their marketing efforts, find the most effective journey patterns, spot potential dropout points, and identify new customer segments. Based on its analysis of click-through behaviors, for instance, one regional retailer saw that a particular set of customers preferred digital shopping over physical and always read e-mail on Saturdays, and so the retailer altered its e-mail campaign to send this cohort online offers only on Saturdays.

Additionally, by using business-process software and services from vendors such as Adobe Systems, ExactTarget, Pegasystems, and Responsys, companies can identify in real time the basic “triggers” for what individual customers need and value—regardless of the product or service—and personalize their approach when making cross- or up-sell offers. They can also use these tools to generate automated reports that track customer trends and key performance indicators. For instance, the regional retailer’s analytics suggested that two of the customers who read their e-mail only on Saturdays were in the midst of a career change; both had revised their profiles on LinkedIn within the past three days. Based on its analytics efforts, the company was able to create targeted offers for each—one received information about laptop bags (based on her previous purchases) while the other received information about suits (based on his previous purchases).

Already, the companies employing these types of advanced analytics have seen significantly improved click-through rates and higher conversion rates (between three and ten times the average). Additionally, McKinsey analysis shows that using data to make better marketing decisions can increase marketing productivity by between 15 and 20 percent—that’s as much as $200 billion given the average annual global marketing spend of $1 trillion.5

Design: Create frictionless experiences

Careful orchestration of the consumer decision journey is incredibly complex given the varying expectations, messages, and capabilities associated with each channel. According to published reports, 48 percent of US consumers believe companies need to do a better job of integrating their online and off-line experiences. There is a premium for getting this right. One major bank unlocked more than $300 million in additional margins by making better use of digital channels. It tapped into underutilized customer data and delivered targeted marketing messages at various points in the purchase-decision process. The bank used the data, plus various personalization and testing tools, to inform changes in marketing campaigns for certain product lines; every next step for every customer was progressively tailored to help the customer take the best action.

Digital natives such as Amazon, eBay, and Google have been leading the pack in resetting consumers’ expectations for cross-channel convenience. (Think of eBay’s Now mobile app, which provides one-touch ordering from any of eBay’s retail partners and same-day delivery in some US cities, or Amazon’s recent incorporation of a help button in the company’s latest-generation Kindle Fire tablet, linking users to a live help-desk representative.) These players have perfected the ability to test new user experiences and constantly evolve their offers—often for segments of one.

This lean, start-up approach might sound counterintuitive to large, entrenched marketing organizations in which decisions are made at a snail’s pace, but test-and-learn methods can help companies decide how best to optimize (and customize) critical design attributes of the consumer decision journey at various points along the way. In the appliances example discussed earlier, the retailer’s customer analytics allowed it to design an experience for the couple that was completely customized to their context—from their initial online searches to their physical and virtual interactions at the store and to their follow-up with the company postpurchase. Rather than push what could be construed as intrusive (even creepy) messaging, the retailer provided Mike and Linda with the most useful information at every point in their decision journey and offered the easiest possible path to purchase and delivery.

To create similarly frictionless experiences, some companies have created 24/7 digital “window shops” to test product ideas and customer interactions and collect rapid feedback without the need for additional labor or inventory. Several companies that offer inherently complex products or services have incorporated “gaming” elements into their experiences—tweaking the navigation, content architecture, and visual presentation to allow consumers to trade off and test various options and prices associated with a product before making a decision. One financial-services firm redesigned its mobile app for collecting credit-card applications to incorporate the customer context. Previously it had a one-size-fits-all interface; in the redesigned version, various elements of the mobile app’s interface—such as pricing, stage of process, and designated credit limits—are dynamically generated based on existing customer information. And the app’s page layout and navigation are rendered simply, allowing for easy completion within just a few clicks. The result has been a significant uptick in online applications.

Deliver: Build a more agile organization

In our experience, too many companies are afraid to launch “good enough” campaigns—ones that are continually refined as customers’ purchase behaviors and stated preferences change. Under the direction of conservative senior leaders, teams tend to launch campaigns that take too long to get off the ground and end up revealing few new insights. Instead, they must be willing to conduct lots of small-scale experiments with cloud or proxy website services to pilot new designs and prove their value for investment.

These types of agile, data-driven activities must be supported by an organization that has the right people, tools, and processes. Many companies will have some of the talent required, but not all, and executives will inevitably face resistance when it comes to introducing lean tools and techniques into their sales, marketing, and IT processes. The most successful omnichannel marketers we’ve seen have established centers of excellence in both analytics and digital marketing, and they practice end-to-end management of microcampaigns. Their campaign-building processes typically include systematic calendaring, brainstorming, and evaluation sessions to allow for one-week and two-week turnaround times. And roles and responsibilities are clearly defined. Far from creating a rigid, hierarchical process, this model frees up individuals to iterate quickly—what is sometimes called “failing fast forward” in the world of high tech.

At one bank, for instance, business-unit leaders gather each month to talk about their progress in improving different consumer journeys. As new products and campaigns are launched, the team places a laminated card illustrating the journey at the center of the conference-room table and discusses its assumptions about the flow of the experience for different segments and about how the various functional groups need to contribute: Where does customer data need to be captured and reused later? How will the design of the campaign flow from mass media to social media and then on to the website? What is the follow-up experience once a customer sets up an account? The team has also appointed dedicated mobile and social-media executives to become evangelists for strengthening the omnichannel experience, helping business units raise their game along a range of consumer interactions. The company’s first wave of fixes and new programs generated tens of millions of dollars in the first six months, and the team expects it to continue scaling beyond $100 million in added annual margins.

Building an agile marketing organization will take time, of course. Companies should start by assembling a “scrum team” that will bring the right people together to test, learn, and scale. The team should incorporate cross-functional perspectives (marketing, e-commerce, IT, channel management, finance, and legal), and its members must adopt a war-room mentality—for instance, making tough calls about which campaigns are working and which aren’t, and which messages should take priority for which segments; launching new tests every week rather than every six months; and mustering the IT and design resources to create content for every possible type of interaction.

Companies likely will need to hire people with skills that differ from the ones they rely on now. Some organizations have developed innovative, venture capital–like strategies for finding and recruiting the people they need. Staples, for instance, has built an e-commerce innovation center in Cambridge, Massachusetts, to better recruit technology talent from nearby Harvard University and MIT, and it recently bought conversion-marketing start-up Runa to act as a talent hub on the West Coast.

New types of information systems may also be required. The best technology solutions will vary according to a company’s starting point and objectives. Generally, though, companies will get the best results from tools that enable large-scale data management and the integration of databases; the generation of next-best-action and other types of advanced analyses; and simpler campaign testing, execution, and metrics.

Companies need to make strategic decisions about the best pathways to build customer value. Many cite digital as one of their top three priorities in this regard, but few have taken the time to measure the level of digital maturity their organization has achieved. A company’s digital quotient (DQ) is a function of how well defined its long-term digital strategy is, its effectiveness in implementing that strategy, and the strength of its organizational infrastructure and information technologies. The companies that incorporate the notion of DQ into their short list of performance metrics can more effectively monitor their progress across the digital capabilities we’ve outlined here, enabling more targeted investments and accelerated rates of digital growth.

Indeed, the companies that ultimately succeed in omnichannel marketing and sales will likely resemble tech companies and, interestingly, publishers—effectively using big data and digital touchpoints to drive growth and reduce costs, while producing and managing a variety of content (catalogs, coupons, web pages, mobile apps, and user-generated content) in real time across multiple platforms to create breakthrough customer experiences. This means rethinking the analytics that inform their segmentation strategies, the flow of the experiences they design, and the way they set up their internal operations for faster iteration and delivery of service.

About the authors

Edwin van Bommel is a principal in McKinsey’s Amsterdam office, David Edelman is a principal in the Boston office, and Kelly Ungerman is a principal in the Dallas office. They are leaders in McKinsey’s revenue enhancement through digital (RED) initiative, which redesigns the consumer decision journey to encompass all commercial levers, across all channels and touchpoints, thereby creating growth in revenue and profits.

business, complex adaptive systems, data saving lives, health market quality, healthcare, healthy habits, musings, nutrition, policy, politics, quantified self, quotes & aphorisms, rapid learning health systems

The Hospital of the Future is not a Hospital

Great insights into where capital is being invested in US healthcare…

http://www.healthleadersmedia.com/print/LED-305089/The-Hospital-of-the-Future-is-Not-a-Hospital

The Hospital of the Future is Not a Hospital

Philip Betbeze, for HealthLeaders Media , May 30, 2014

Pursuing expensive inpatient volume in the traditional sense is a strategic dead end. Any new construction undertaken by hospitals and health systems should be based on adaptability, patient flow, and efficiency gains—not bed count.

I’ve spent a good deal of time the past several weeks interviewing senior healthcare leaders for my story in the May issue of HealthLeaders magazine about the hospital of the future. But in truth, that headline might be a bit of a tease.

As it turns out, the hospital of the future doesn’t look much like a hospital at all. Instead, it’s a cohesive amalgamation of plenty of outpatient modalities that represent growth in healthcare. Inpatient care, increasingly, represents stagnation and shrinkage, in the business sense.

In the past, a story about the hospital of the future has meant investigating healthcare organizations’ access to capital, and their ability to fund expensive new patient bed towers with all-private rooms and top technologies, in a race to grab volume from competitors.

Under that operating scenario, the sky was the limit, in terms of what organizations were willing to do to attract volume.

That calculus has changed drastically.

In a recent survey on healthcare design trends conducted by Minneapolis-based Mortenson Construction, 95% of the healthcare organizations surveyed said most of the projects they are undertaking are predominantly ambulatory in nature.

“If, in theory, the [Patient Protection and Affordable Care Act] has now got 7 million people engaged in healthcare insurance who didn’t have that previously, the inrush of patients will be outpatient-based,” says Larry Arndt, general manager of healthcare in the company’s Chicago offices. “What’s not needed is bed space or heavy procedural space.”

A Strategic Dead End
The PPACA, employers, and commercial health plans have made clear that pursuing expensive inpatient volume in the traditional sense is a strategic dead end. That doesn’t mean new patient towers won’t go up, but it does mean their construction will be based on adaptability, patient flow, and efficiency gains, not bed count.

As few as five to seven years ago, says Arndt, a healthcare leadership team would take a capital improvement project through a planning and programming phase in which they followed a traditional approach. The team would utilize widely standardized metrics and program their building based on what they’re doing now, with no consideration of the future, Arndt says.

By contrast, within the last five years, more leaders have been embracing the concept of lean operational improvement.

In order to be competitive in a limited amount of reimbursements, they have had to become more efficient. So instead of the traditional approach of programming new construction based on how the organization operates today, instead, it attempts to map out its current patient flows and discover how to become more efficient. Only then will the team look at how to build around that improved and more efficient model.

Indeed, a whopping 22% of respondents to Mortenson’s February survey said they were “doing nothing” construction-related right now, and only 5% were planning for a traditional replacement hospital.

Instead, a majority said they are focusing new construction on building clinics that can feature just about any outpatient modality except surgery, Arndt says.

Healthcare Shifts to Outside
They’re focusing on combining dialysis, radiology and other treatments that can be provided in one location. And they’re funneling more of their capital budget to items that are outside the realm of new construction, like home health and what Arndt calls e-home healthcare—in other words, technological solutions that help patients access their caregivers outside of any facility.

“Our customer understands that healthcare is moving more toward healthcare outside a facility,” says Arndt. “That means more money is being invested in health information technology. Also, you see more constellation or satellite projects, for example, a small 15,000-20,000 square-foot clinic in a neighborhood. That allows patients to travel a shorter distance to a less congested environment, but yet allows connection to the bigger facility if needed.”

Modular construction is a trend that Arndt sees developing quickly. It’s in the process of designing a clinic for a client that will feature modular walls, to make it more flexible for the changes in care protocols that are assured, but that healthcare’s leaders aren’t sure how will ultimately affect their competitive offerings.

In one clinic, doctors want to be able to meet with patients in groups, for example. Modular walls mean physicians can occasionally meet with groups of patients instead of individually, or vice-versa. Their space is less limiting.

“The clinic can adapt,” says Arndt.

Prefabricating buildings is also gaining steam in healthcare, he says.

“Money is being invested much more wisely than it has been in the past,” he says. “For the design/construction field, we have to be more lean too.”

Part of that lean attitude means offering customers 3-D modeling that starts with design partners, such as the people who will be staffing the building, to optimize work flow.

Adapting Takes Time
“We can prefab things we couldn’t years ago,” he says. An example might be a bathroom “pod” that can be built offsite and installed on site. Full exam rooms can be prepared the same way, and models can be constructed to test care protocols with the team that will be working there.

Arndt’s customers, he says, can be categorized two ways. Either they’re thinking broadly about adapting to the future without knowing exactly what it’s going to bring, or they’re standing idly on the sideline until they understand better how the PPACA and other drastic changes in how healthcare is provided and paid for will affect their bottom lines.

Neither approach is necessarily better than the other, but waiting just puts off the action that needs to be taken. It can be a prudent approach, but even in healthcare, what works can change quickly. Designing, building, and adapting still takes time.

Don’t wait too long.

Philip Betbeze is senior leadership editor with HealthLeaders Media. 

business, entrepreneurship

Restaurants bite back with Dimmi

not sure I’m comfortable with this…

http://www.goodfood.com.au/good-food/food-news/when-restaurants-google-customers-20140601-zruc0.html

When restaurants google customers

  • June 1, 2014 – 9:48PM
Stevan Premutico, chief executive officer of dimmi.com.au

Stevan Premutico, chief executive officer of dimmi.com.auPhoto: Louise Kennerley
Inga Ting

Inga Ting

Are you a cheap tipper? A fussy eater who sends meals back to the kitchen? Whether you’re a dining dream or nightmare (and let’s be honest, the worst customers are probably the last to admit it), the internet age means for better or worse, now more than ever, your reputation precedes you.

When a diner walks into a restaurant these days, there’s a good chance the maitre d’ knows more about them than they realise, says Stevan Premutico, chief executive officer of online reservation website dimmi.com.au.

“What they look like, their job, their title, where they live, their social connections, any special celebrations and whether they are an avid foodie are all key things,” he says.

Last laugh: Restaurateur Darran Smith (pictured here, second from left, in 2009) always researches his guests.

Last laugh: Restaurateur Darran Smith (pictured here, second from left, in 2009) always researches his guests.Photo: Domino Postiglione

“It’s all part of getting to know your customers.”

Keeping notes on customers is hardly new. But as social media continues to knock gaping holes in the divide between personal and public, restaurants that bother to do their research are reaping bigger rewards for their efforts.

Shared online reservation systems like Dimmi’s ResDiary, as well as social media sites liked LinkedIn and good old Google searches, can be a double-edged sword. Systems can be used to track dining ‘performance’ – how much you ordered, whether you tipped well, how pleasantly you treated staff or whether you continued to camp out at the table long after you’d finished dessert.

The five most common pieces of information restaurants share, Premutico says, are customers’ food and wine preferences, notable habits (e.g. likes to have a drink at the bar before being seated), seating preferences (corner booth, window seat), allergies and – last but certainly not least – if the customer is a good or bad tipper.

But the Dimmi system goes even further, allowing restaurants to codify diners with attributes such as wine connoisseur, adventure eaters, quick eaters (good for table turnover) or friends of the chef or owner.

On the flip side are codes for loud talkers, frequent no-shows or PIAs – pain-in-the-ass customers with excessive demands.

Other tidbits restaurants note include postcode (you can infer a lot from four digits, Premutico says), whether someone is an ‘upgrader’ (diners who go for the works, like coffee and cognac) and, controversially, whether or not the diner is good-looking (some places may seat a diner differently based on their looks, Premutico says).

Restaurateur Darran Smith, who has worked in the industry for 20 years at venues including Icebergs Dining Room and Bar, the Hilton’s Glass restaurant and Hemmesphere at the Establishment hotel, says he always researches his guests.

“Whether it’s politicians or movie stars, lawyers or whatnot, I do my research,” Smith says.

“I remember Owen Wilson was coming in and finding out he really likes tequila so I made sure the bar was stocked up with tequila … It paid off.”

It’s the little things, which a restaurant can do without the customer even realising, that can make a good experience great or an excellent venue exceptional, he says.

Improved customer service and that personalised dining experience is the ultimate goal, restaurants say. And of course there are mutual benefits. (Smith recalls another experience when he discovered via Google that an Icebergs diner had sold his company the day before. “He came in and spent $5000,” he says.)

But Smith also admits that restaurants sometimes use online reservation systems to prepare themselves for the “one per cent” of customers who “just hate life”.

“With Dimmi, you do some research and you know they only like sitting at a particular table or they only like their salad with the dressing on the side,” he says.

“You know that if you go outside a certain circle they … will just be the worst customer in the world.”

Premutico says the practice is entirely justified. It’s a competitive industry and every bit of intelligence counts – whether you’re in front of the cash register or behind it.

“A customer that is rude, obnoxious, complains and doesn’t tip should be noted. A diner who appreciates the food concept, respects the staff, dines often and leaves tips should be given the better tables and taken care of more.”

As for the impact on customers, perhaps diners will learn to mind their Ps and Qs so as not to be labelled PIAs. After all, restaurants have been riding the rollercoaster of social media and user-generated ratings for years, Premutico says.

“This passes some of the power back to restaurants,” he says.

“Diners will behave better, tip better, treat staff better. It will help improve the industry and may help the diner get that all important upgrade next time.”

business, management and leadership

Geraldine: Hacking Management

 

http://www.abc.net.au/radionational/programs/saturdayextra/reinventing-management/5489320

Reinventing management

Saturday 31 May 2014 7:45AM
ManagementIMAGE: (SALMAT.COM GOOGLE IMAGES CREATIVE COMMONS)

Business innovation expert Gary Hamel has been in Australia this week to speak at the World Business Forum in Sydney.

His message to business is to innovate well by harnessing the creative capacity of all employees, not just those in management positions.

Guests

Gary Hamel
Visiting Professor of Strategic and International Management, London Business School

Further Information

Management Innovation eXchange

Credits

Presenter
Geraldine Doogue
Producer
Jackie May

 

business, entrepreneurship, management and leadership

McKinsey: The seven habits of highly effective digital enterprises

 

  1. Be unreasonably aspirational
  2. Acquire capabilities
  3. Ring fence and cultivate talent
  4. Challenge everything
  5. Be quick and data driven
  6. Follow the money
  7. Be obsessed with the customer

PDF: The seven habits of highly effective digital enterprises

Article

The seven habits of highly effective digital enterprises

To stay competitive, companies must stop experimenting with digital and commit to transforming themselves into full digital businesses. Here are seven habits that successful digital enterprises share.

May 2014 | by’Tunde Olanrewaju, Kate Smaje, and Paul Willmott

The age of experimentation with digital is over. In an often bleak landscape of slow economic recovery, digital continues to show healthy growth. E-commerce is growing at double-digit rates in the United States and most European countries, and it is booming across Asia. To take advantage of this momentum, companies need to move beyond experiments with digital and transform themselves into digital businesses. Yet many companies are stumbling as they try to turn their digital agendas into new business and operating models. The reason, we believe, is that digital transformation is uniquely challenging, touching every function and business unit while also demanding the rapid development of new skills and investments that are very different from business as usual. To succeed, management teams need to move beyond vague statements of intent and focus on “hard wiring” digital into their organization’s structures, processes, systems, and incentives.

There is no blueprint for success, but there are plenty of examples that offer insights into the approaches and actions of a successful digital transformation. By studying dozens of these successes—looking beyond the usual suspects—we discovered that highly effective digital enterprises share these seven habits.

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1. Be unreasonably aspirational

Leadership teams must be prepared to think quite differently about how a digital business operates. Digital leaders set aspirations that, on the surface, seem unreasonable. Being “unreasonable” is a way to jar an organization into seeing digital as a business that creates value, not as a channel that drives activities. Some companies frame their targets by measures such as growth or market share through digital channels. Others set targets for cost reduction based on the cost structures of new digital competitors. Either way, if your targets aren’t making the majority of your company feel nervous, you probably aren’t aiming high enough.

When Angela Ahrendts became CEO of Burberry in 2006, she took over a stalling business whose brand had become tarnished. But she saw what no one else could: that a high-end fashion retailer could remake itself as a digital brand. Taking personal control of the digital agenda, she oversaw a series of groundbreaking initiatives, including a website (ArtoftheTrench.com) that featured customers as models, a more robust e-commerce catalog that matched the company’s in-store inventory, and the digitization of retail stores through features such as radio-frequency identification tags. During Ahrendts’s tenure, revenues tripled. (Apple hired Ahrendts last October to head its retail business.)

Netflix was another brand with an unreasonably aspirational vision. It had built a successful online DVD rental business, but leadership saw that the future of the industry would be in video streaming, not physical media. The management team saw how quickly broadband technology was evolving and made a strategic bet that placed it at the forefront of a surge in real-time entertainment. As the video-streaming market took off, Netflix quickly captured nearly a third of downstream video traffic. By the end of 2013, Netflix had more than 40 million streaming subscribers.

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2. Acquire capabilities

The skills required for digital transformation probably can’t be groomed entirely from within. Leadership teams must be realistic about the collective ability of their existing workforce. Leading companies frequently look to other industries to attract digital talent, because they understand that emphasizing skills over experience when hiring new talent is vital to success, at least in the early stages of transformation. The best people in digital product management or user-experience design may not work in your industry. Hire them anyway.

Tesco, the UK grocery retailer, made three significant digital acquisitions over a two-year span: blinkbox, a video-streaming service; We7, a digital music store; and Mobcast, an e-book platform. The acquisitions enabled Tesco to quickly build up the skills it needed to move into digital media. In the United States, Verizon followed a similar path with strategic acquisitions that immediately bolstered its expertise in telematics (Hughes Telematics in 2012) and cloud services (CloudSwitch in 2011), two markets that are growing at a rapid pace.

This “acqui-hire” approach is not the only option. But we have observed that significant lateral hiring is required in the early stages of a transformation to create a pool of talent deep enough to execute against an ambitious digital agenda and plant the seeds for a new culture.

3. ‘Ring fence’ and cultivate talent

A bank or retailer that acquires a five-person mobile-development firm and places it in the middle of its existing web operations is more likely to lose the team than to assimilate it. Digital talent must be nurtured differently, with its own working patterns, sandbox, and tools. After a few false starts, Wal-Mart Stores learned that “ring fencing” its digital talent was the only way to ensure rapid improvements. Four years ago, the retail giant’s online business was lagging. It was late to the e-commerce market as executives protected their booming physical-retail business. When it did step into the digital space, talent was disbursed throughout the business. Its $5 billion in online sales in 2011 paled next to Amazon’s $48 billion.

In 2011, however, Wal-Mart established @WalmartLabs, an “idea incubator,” as part of its growing e-commerce division in Silicon Valley—far removed from the company’s Bentonville, Arkansas, headquarters. The group’s innovations, including a unified company-wide e-commerce platform, helped Wal-Mart increase online revenues by 30 percent in 2013, outpacing Amazon’s rate of growth.

Wal-Mart took ring fencing to the extreme, turning its e-commerce business into a separate vertical with its own profit and loss. This approach won’t work for every incumbent, and even when it does, it is not necessarily a long-term solution. Thus Telefónica this year recombined with the core business Telefónica Digital, a separate business unit created in 2011 to nurture and strengthen its portfolio of digital initiatives. To deliver in an omnichannel world, where customers expect seamless integration of digital and analog channels, seamless internal integration should be the end goal.

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4. Challenge everything

The leaders of incumbent companies must aggressively challenge the status quo rather than accepting historical norms. Look at how everything is done, including the products and services you offer and the market segments you address, and ask “Why?” Assume there is an unknown start-up asking the exact same question as it plots to disrupt your business. It is no coincidence that many textbook cases of companies redefining themselves come from Silicon Valley, the epicenter of digital disruption. Think of Apple’s transformation from struggling computer maker into (among other things) the world’s largest music retailer, or eBay’s transition from online bazaar to global e-commerce platform.

Digital leaders examine all aspects of their business—both customer-facing and back-office systems and processes, up and down the supply chain—for digitally driven innovation. In 2007, car-rental company Hertz started to deploy self-service kiosks similar to those used by airlines for flight check-in. In 2011, it leapfrogged airlines by moving to dual-screen kiosks—one screen to select rental options via touch screen, a second screen at eye level to communicate with a customer agent using real-time video.

We see digital leaders thinking expansively about partnerships to deliver new value-added experiences and services. This can mean alliances that span industry sectors, such as the Energy@home partnership among Electrolux, Enel, Indesit, and Telecom Italia to create a communications platform for smart devices and domestic appliances.

5. Be quick and data driven

Rapid decision making is critical in a dynamic digital environment. Twelve-month product-release cycles are a relic. Organizations need to move to a cycle of continuous delivery and improvement, adopting methods such as agile development and “live beta,” supported by big data analytics, to increase the pace of innovation. Continuous improvement requires continuous experimentation, along with a process for quickly responding to bits of information.

Integrating data sources into a single system that is accessible to everyone in the organization will improve the “clock speed” for innovation. P&G, for example, created a single analytics portal, called the Decision Cockpit, which provides up-to-date sales data across brands, products, and regions to more than 50,000 employees globally. The portal, which emphasizes projections over historical data, lets teams quickly identify issues, such as declining market share, and take steps to address the problems.

U.S. Xpress, a US transportation company, collects data in real time from tens of thousands of sources, including in-vehicle sensors and geospatial systems. Using Apache Hadoop, an open-source tool set for data analysis, and real-time business-intelligence tools, U.S. Xpress has been able to extract game-changing insights about its fleet operations. For example, looking at the fuel consumption of idling vehicles led to changes that saved the company more than $20 million in fuel consumption in the first year alone.

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6. Follow the money

Many organizations focus their digital investments on customer-facing solutions. But they can extract just as much value, if not more, from investing in back-office functions that drive operational efficiencies. A digital transformation is more than just finding new revenue streams; it’s also about creating value by reducing the costs of doing business.

Investments in digital should not be spread haphazardly across the organization under the halo of experimentation. A variety of frequent testing is critical, but teams must quickly zero in on the digital investments that create the most value—and then double down.

Often, great value is found in optimizing back-office functions. At Starbucks, one of the leaders in customer-experience innovation, just 35 of 100 active IT projects in 2013 were focused on customer- or partner-facing initiatives. One-third of these projects were devoted to improving efficiency and productivity away from the retail stores, and one-third focused on improving resilience and security. In manufacturing, P&G collaborated with the Los Alamos National Laboratory to create statistical methods to streamline processes and increase uptime at its factories, saving more than $1 billion a year.

7. Be obsessed with the customer

Rising customer expectations continue to push businesses to improve the customer experience across all channels. Excellence in one channel is no longer sufficient; customers expect the same frictionless experience in a retail store as they do when shopping online, and vice versa. Moreover, they are less accepting of bad experiences; one survey found that 89 percent of consumers began doing business with a competitor following a poor customer experience. On the flip side, 86 percent said they were willing to pay more for a better customer experience.1

A healthy obsession with improving the customer experience is the foundation of any digital transformation. No enterprise is perfect, but leadership teams should aspire to fix every error or bad experience. Processes that enable companies to capture and learn from every customer interaction—positive or negative—help them to regularly test assumptions about how customers are using digital and constantly fine-tune the experience.

This mind-set is what enables companies to go beyond what’s normal and into the extraordinary. If online retailer Zappos is out of stock on a product, it will help you find the item from a competitor. Little wonder that 75 percent of its orders come from repeat customers.

Leaders of successful digital businesses know that it’s not enough to develop just one or two of these habits. The real innovators will learn to excel at all seven of them. Doing so requires a radically different mind-set and operating approach.

About the authors

’Tunde Olanrewaju and Kate Smaje are principals in McKinsey’s London office, where Paul Willmottis a director.

business, management and leadership

McKinsey: Characteristics of high-performing boards

Reasonable review of board activities, aspirations and impact…

PDF: High-performing_boards_Whats_on_their_agenda

http://www.mckinsey.com/insights/strategy/High-performing_boards_whats_on_their_agenda

High-performing boards: What’s on their agenda?

Directors report that they have a greater impact as they move beyond the basics.

April 2014 | byChinta Bhagat and Conor Kehoe

Five or so years after the financial crisis, the pressure on boards and directors to raise their game remains acute. A recent survey of more than 770 directors from public and private companies across industries around the world and from nonprofit organizations suggests that some are responding more energetically than others.1 The survey revealed dramatic differences in how directors allocated their time among boardroom activities and, most tellingly, in the respondents’ view of the effectiveness of their boards. More than one in four of the directors assessed their impact as moderate or lower, while others reported having a high impact across board functions. So what marks the agenda of a high-performing board?

A hierarchy of practices

Our research suggests that the distinction between higher and lower impact turns on the breadth of the issues directors tackle and on the time dedicated to them. We drilled down to detailed board practices across the functions to which directors devote much of their attention: strategy, compliance, and M&A, as well as performance, risk, and talent management. It appears that boards progress through a hierarchy of practices that’s analogous to Maslow’s hierarchy of needs.2Directors who report having a low to moderate impact said that their boards undertake “the basics” of ensuring compliance, reviewing financial reports, and assessing portfolio diversification, depending on the function. Directors reporting that their boards have a higher impact undertake these activities, as well, but add a series of other practices in every function.

In the area of strategy, for example, this means becoming more forward looking. Boards with a moderate impact incorporate trends and respond to changing conditions. More involved boards analyze what drives value, debate alternative strategies, and evaluate the allocation of resources. At the highest level, boards look inward and aspire to more “meta” practices—deliberating about their own processes, for example—to remove biases from decisions (Exhibit 1).

Exhibit 1

Boards appear to progress through a hierarchy of practices, with high-impact boards often employing more rigorous practices.

 

We observed a similar hierarchy across other board functions. In performance management, for instance, many boards start with a basic review of financial metrics. More involved boards add regular performance discussions with the CEO, and boards at still higher levels of engagement analyze leading indicators and aspire to review robust nonfinancial metrics. In the areas of risk, M&A, and talent management boards follow comparable progressions. (For more, see “Building a forward-looking board.”)

A greater time commitment

Working at a high level takes discipline—and time. Directors who believe that their activities have a greater impact report spending significantly more time on these activities, on average, than those who serve on lower-impact boards. We found that directors reporting that they had a very high impact worked for their boards about 40 days a year, while those who said that their impact was moderate or lower averaged only 19.3 Higher- and lower-impact directors spend the same amount of time on compliance-related activities: about four days a year. By contrast, higher-impact board members invest an extra eight workdays a year on strategy. They also spend about three extra workdays on each of the following: performance management, M&A, organizational health, and risk management (Exhibit 2).

Exhibit 2

Board members with very high impact invested eight extra workdays a year on strategy.

The data suggest that less engaged boards correctly identify the next step up in the hierarchy but underestimate the time it would take to meet this aspiration. When low- to moderate-impact directors are asked how much time they ideally should spend on their duties, they suggested increasing the number of days to 27, from 19. While spending more time can never assure a high impact (see sidebar, “What surveys can and can’t tell us”), even very high-impact directors would increase their commitment to 45 days, from 40.

 

Sidebar

What surveys can and can’t tell us

 

A final implication of our survey is that CEOs need not fear that a more engaged board may constrain their prerogative to set a company’s direction. Highly committed boards are not spending the extra time supplanting management’s role in developing strategic options. Rather, they are building a better understanding of their companies and industries, while helping senior teams to stress-test strategies and then reallocate resources to support them. Some CEOs find that task to be lonely and difficult when they face internal “barons” who protect their fiefs. In short, engaged boards can still be supportive of management. And the directors serving on them, our research suggests, are not only more effective but also more satisfied with their work.

About the authors

Chinta Bhagat is a principal in McKinsey’s Singapore office, and Conor Kehoe is a director in the London office.

The authors would like to acknowledge the contributions of Frithjof Lund and Eric Matson to the development of this article.

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Saturday Extra (Norman Swan): Retail Wars // Big Data Play

Robert Gottleibsen on Woolies vs Coles retail strategy, including commentary on Wollies big data play

http://www.abc.net.au/radionational/programs/saturdayextra/supermarket-wars/5397006

Retail wars

Saturday 3 May 2014 7:50AM
Creative: Generic online shopping (Thinkstock: Ablestock.com)IMAGE: CREATIVE: GENERIC ONLINE SHOPPING (THINKSTOCK: ABLESTOCK.COM)

The supermarket giants Coles and Woolworths have reported sales results that put them virtually neck and neck in the war for our trolleys and our wallets.

The battle for supremacy has been going on for five years, with Coles taking the lead since it was acquired by the Wesfarmers group in 2007.

But even with the retailers drawing closer in terms of results, there are some stark differences in business strategy that are being played out.