Archive for the ‘Healthcare Industry’ Category

Cross sell to grow

In a low growth economy, many companies understand that one of the best way to grow revenues is by selling more goods and services to existing customers.  At the core of this strategy is ‘customer focus’ – providing better solutions to satisfy more customer needs.   Yet, this easier said than done. A variety of factors can combine to scuttle the best designed plans.  Managers can overcome these barriers and be ‘cross sell ready’ by optimizing their organization structure, product portfolio and incentive schemes.

A corporate buzzword for the past decade, CF is a simple idea:  understanding and targeting a customer’s full gamut of needs will enable the delivery of solution value, therefore catalyzing the cross selling of other products. Our clients that have gotten CF right have generated millions of dollars in profitable, new revenue along with higher customer satisfaction scores and lower marketing costs. Though each firm had a unique CF strategy, they all share three important characteristics:  a deep understanding of customer needs across a purchase life cycle; a shift from selling products to marketing solutions and; a focus on relationships versus transactions.

Despite a compelling premise, increasing cross-selling rates is not a slam dunk.  There can be multiple organizational barriers to better performance.  For example, most firms are organized in product, geographic or functional silos making information sharing, collaboration, and joint selling very difficult.  These silos often extend down to the IT systems, restricting visibility into a client’s sales history and requirements. Secondly, compensation schemes and metrics often do not support cross selling versus other goals like client acquisition.  Finally, the culture in many organizations is a barrier to implementing a CF mandate, collaborating or cross selling.

Our consulting experience suggests that the difference between leading cross sellers and under-performers comes down to who can get the 3Cs of organizational alchemy right:

Capabilities

Customer-focused firms have deep knowledgeable of their customers and the capabilities to enable them.  Len Lyons, General Manager of Workplace Medical Corporation a leading occupational health service company, asserts: “We demonstrate to our clients that we’re experts in our field and in theirs. People maintain strong loyalty to someone they trust and for us, this has had the added benefit of significant growth through customer referrals.”   Companies with a strong CF have well-developed people, technology and marketing competencies.  Their workforce features a large coterie of generalist, and team-driven problem solvers who can interact directly with the customer.  Formal corporate education programs and defined career paths cultivate and reinforce these vital individual traits.  Moreover, these firms will have: an advanced CRM and data management systems that deliver a comprehensive view of each customer and prospect’s buying behavior; a long term, relationship-inspired sales approach and; product and R&D teams that are connected directly with buyers and users.

Cooperation

Being internally cooperative (as well as with channel and supply chain partners) is critical to aligning around customer needs and deploying maximum capabilities.  Workplace Medical implemented this shift in two steps.  Says Lyons, “first, we systematically recalibrated our entire organization and marketing strategy from a transaction focus to a solution-driven model. Then, we led our clients through a paradigm shift in the way they perceive the nature and value of our service.”

Customer-focused enterprises encourage and reward cooperation across the organization.  For example, they foster accountability by having all team members measured against key performance indicators like customer satisfaction and cross selling rates.  And, they subordinate departmental metrics to larger, more customer-centric measures.  However, achieving higher levels of cooperation and information sharing will be problematic in low-trust cultures. Many firms will need to undertake change management initiatives to get recalcitrant or skeptical employees (particularly disinclined sales people) to go along.

Coordination

Maximizing cross selling activities requires internal departments as well as channel partners to be strategically and tactically aligned.  High levels of coordination – enabled through supporting technology, regular communication and processes – are needed to share information, efficiently deploy resources and solve multi-faceted customer problems. One way customer-focused companies achieve this is by putting sufficient authority in the hands of an ‘owner’ who is closest to the customer or segment’s requirements – and opportunities. In some of our clients, the leaders needed to dismantle their siloed department-based structures and replace them with multi-functional, autonomous customer-based teams.

Improving a firm’s organizational model to deliver high cross selling rates is not for the impatient or clumsy.  It is part culture change, process redesign and incentive re-engineering.  Furthermore, cross selling efforts need to be consistent with the company’s value proposition and brand image, not to mention the best interests of the client.   Managers should expect to spend at least six months transitioning to a new model while they work through hiccups.   Though the process is time consuming, the rewards are undeniable.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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Drive innovation by unlocking middle management

For many companies across a variety of industries, the rate of product innovation is a major driver of competitiveness and shareholder value.  When high levels of R&D spending and new innovation strategies do not turn into product wins, leaders will naturally question how innovation is spawned, cultivated and commercialized.  While idea generation and marketing are crucial, one important way to increasing innovation may lie with the R&D process itself.  New research on the drug industry from the consultancy Booz & Co. suggests that midlevel managers may hold the key to improving the odds of innovation success.

Despite dramatically rising R&D spending over the past decade, drug companies have little to show for it.    Moreover, increased pharma consolidation has saddled large firms with bloated R&D departments that suffer from cumbersome bureaucracies and diseconomies of scale.  A variety of process, structure and collaboration strategies have been tried to improve R&D productivity – the ratio of R&D inputs to product outputs.  Unfortunately, most of these initiatives have not met expectations.  Not surprisingly, one industry leader dubbed the past 10 years the “lost decade.”

Booz studied R&D productivity in 15 leading academic-based pharmaceutical firms.  The study concluded that breakthrough innovation and problem solving occurs when individual scientists connect their own subject matter expertise to similar work being undertaken by their peers. One example of this was when Albert Einstein credited the discovery of his theory of relativity to his discussions with his peer, the engineer Michele Besso. 

Typically, organizations attempt to generate rich scientific interactions by executive decree, through traditional networking activities or by changes in their management systems, such as new measurement tools or reward schemes. Unfortunately, these strategies often fail to meet expectations, for a variety of reasons.  For example, in large companies the R&D leaders who set priorities and control resources are often too far away from the action:  the most creative scientists; high potential opportunities in technology adjacencies and; the mechanisms that generate deep and regular collaboration. Furthermore, even the most cutting-edge innovation strategies will suffer if the people implementing and managing them can not (or do not) exert the right kind of leadership.  I’ve witnessed these subtle organizational barriers in such diverse industries as consumer goods, software, telecom, aerospace and healthcare.

According to Booze, firms should focus on elevating the performance of middle managers in order to trigger serendipity-based innovation.  This key group has the mandate and ability to identify, connect and manage the crucial interactions between scientists, product developers and customers.  Business leaders can optimize middle management performance through a variety of measures, such as:     

Enable and empower midlevel leaders

  • Remove overlapping roles and responsibilities to avoid duplication and political strife while ensuring key activities are being executed;
  • Ensure senior, middle and project managers have the appropriate authority and autonomy to avoid decision making paralysis;

Optimize information rights and collaboration

Enhance the function

Improving middle management productivity is a tall order for any organization, but especially for those in dynamic, knowledge-intensive sectors. To be successful, senior leaders will need to adopt an innovation approach that combines talent management, organizational design and cultural tweaking.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Mobile health care: Its (almost) here

Are we at the tipping point for widespread adoption of mobile health care solutions?  Device usability, power and ubiquity have improved immensely. Mobile networks now cover virtually all of the globe.  And, social networking sites are now a driving force in community-building for tens of millions of people.  Yet, this would not be the first time that expectations have exceeded what is technically and behaviorally possible in the short term.   

Wireless health care delivers major benefits to the 3 Ps: patients, providers and payers.  It speeds diagnosis and treatment, extends services to under-served regions and saves doctors’ and nurses’ time, all compelling factors for over-burdened, expensive health care systems which must cope with aging populations. Mobile health care has many appealing applications for major disease areas like heart disease and diabetes in terms of treatment compliance, remote diagnostics and community-building.

The Economist magazine recently published an excellent overview on the latest developments in wireless health care.  Below are some of  the highlights.  The market-research firm Kalorama Information estimates that the US market for wireless health care devices and services will be $9.6B in 2012, up from $2.7B in 2007. Importantly, significant players like GE, Sprint and Virgin have begun entering the market bringing new applications, scale and credibility. Already,  Apple offers thousands of health-related applications in their App Store.

Mobile health care can already claim successes, particularly in the emerging world.  For example, Medicall Home, a Mexican firm that provides medical consultations by mobile phone, has signed up millions of customers. Some applications have been so successful in the developing world that they are now being adopted in the rich world too. Voxiva, an American firm that has set up mobile health systems in Rwanda and Peru, is helping launch Text4Baby, a public-health campaign to educate pregnant mothers (they receive free text messages with medical advice).  T4B will soon become the biggest deployment in the world.  Virgin HealthMiles is using online social networks to enable friends and family to encourage (or nag) patients electronically on weight loss and exercise.  Thousands of patients already participate in Facebook communities to seek medical support and information.

Fully leveraging these new solutions will not be easy. Firstly, wireless health care will require a standardized Electronic Health Record that can be shared by all health care providers. This remains to be created.  Technical issues continue to hamper system reliability and device inter-operability on existing 3G networks.  To reduce risks (and legal exposure), all devices will need to seamlessly, privately and securely operate on all networks with 99.9% or better reliability.  While tremendous strides have been made with wireless devices, they will still need to demonstrate better performance in terms of usability and battery life in order to support health care applications.  

Like the adoption of other technologies, the human element looms large.  Patients – particularly the elderly, the largest consumers of health care – will need to embrace new technologies and make the necessary behavioral changes to use them. Furthermore, their health care providers will also need to be wired, compliant and integrated through standardized EHRs.  Given that up to 25% of all physician offices in some geographies are not connected to the web, ensuring close to 100% compliance will take time.  Finally, though technology exists to ensure patient security and privacy, additional safeguards will have to be developed to keep personal information safe.

Given its real and measurable benefits to multiple stakeholders, mobile health care is poised for growth.  As soon as the technical, standards and human issues are sorted out, a broader roll out can be expected.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Can Pharmacies Save Healthcare?

Dialysis, aisle four. This reality may not be as far-fetched as it sounds.

The delivery of healthcare must change if payers are to cope with rising costs and patients are to access quality services in an easy and timely fashion.  One way to achieve this is to allow Pharmacies to offer more healthcare services.  According to Booz & Co., a consultancy, Drugstores are well positioned to play a critical role in efficiently providing basic healthcare services to a wide number of people.

The macro trends are positive. Patients are demanding greater choice, more information and increased access to care. Large retailers like Walmart, CVS and Walgreens are already tweaking their retail models beyond just offering aggressive dispensing discounts.   Finally, Canadian and U.S. governments are targeting innovations  like electronic medical records and new service models to deliver meaningful cost reduction and improvements in patient care. 

The Drugstore channel has innate advantages relative to traditional healthcare suppliers like physicians, clinics and hospitals. For example, Pharmacies are ubiquitous (each US citizen lives within 2.36 miles of a drug store); Pharmacists are highly trusted (they are among the most trusted healthcare providers); Drugstores are very convenient (most are in plazas/malls with lots of free parking) and; most major drugstore retailers enjoy a lower cost footprint (e.g., minimal fixed costs, low union penetration) than other providers like hospitals.   Most recently, Pharmacies have played an important role in providing cost-effective immunizations, whereas 85 percent of physicians found immunization reimbursements inadequate.

Most importantly, the Pharmacy channel can improve patient care for millions of people.  Pharmacists can leverage strong customer relationships to improve treatment compliance and counselling. Moreover, drugstores can serve as a single source for many healthcare needs, minimizing the time lag between diagnosis and treatment. 

Delivering new healthcare services represents a game-changing opportunity for smart, agile Pharmacies to increase customer share of wallet, build brand equity & loyalty and improve operating efficiencies.  Can they do it?

Important challenges stand in the way of implementation and profits.  For example, there are: regulatory impediments (limiting the types of services pharmacies can provide); incompatible IT systems that prevents integration; old store formats that complicate implementation and; cultural/staff issues that hinder change and prevent stakeholder collaboration.  As an example, pharmacists may be reluctant to alienate prescribing physicians who may view drugstores as new competition.  All of these issues will have to be addressed before pharmacies can enter the business.

What could a new retail model look like?  It all depends on what patient/consumer segments are targeted.  For example, retailers can focus on delivering critical services to the chronically ill (e.g., diabetes management) or they concentrate on maintenance programs for healthy or at-risk customers (e.g., wellness programs).  Drugstores are already experimenting with in-store clinics, wellness programs, health screenings, and disease management services.  In one notable program, the city of Asheville, N.C., has been using local pharmacists to provide free counseling to diabetes patients, generating substantial savings and health improvement.  Additional pilot programs will be needed to identify the high potential/low risk service offerings.  As well, Pharmacies can leverage useful learnings from other retailers (e.g., Apple, Loblaw) on how to combine disparate service offerings under one roof.

Given compelling advantages, it is likely that Pharmacies will play a significant role in future healthcare delivery.  The big question is: what will the business model look like and how will it ultimately benefit patients and payers.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Pharmaceutical Firms: Heal Thyself

Pharma executives have a lot to fret about these days.  Blockbuster drugs like Lipitor and Prozac representing $130B in revenue will soon come off patent.  Even though new drugs cost up to $1B to develop and market, there are no home runs in the launch queue that can easily close the gap.  Furthermore, tighter guidelines around marketing and educational practices are making it difficult to introduce new – too often me-too – drugs. As a result, the traditional pharma business model is increasingly being seen as broken.  David Blumberg, leader of KPMG’s pharmaceutical industry practice has said, “There’s a recognition that current models have a lower rate of return than they used to,” A recent newsletter from the Wharton Business School has some interesting thoughts on the challenges and possible fixes for the pharmaceutical industry:

Diversify drug portfolios

Pharma companies are moving beyond blockbuster drug strategies to include smaller patient populations and more specialized ailments.  One quick way to build the product portfolio is through drug licensing and marketing partnerships with IP-rich yet cash-poor firms.  For example, Pfizer recently licensed the worldwide rights to a treatment for Gaucher’s disease, a rare disease affecting thousands (not millions) of patients, from a small Israeli company. 

Extend R&D outsourcing and collaboration

Given its high cost and modest success rate, big pharma R&D is beginning to change. Breaking with historical practice, Eli Lilly now allows outside contractors to test the company’s most promising molecules.  GlaxoSmithKline has decided to let its smaller biotech partners do more of its early-stage development work.  GSK has also taken the additional step of using the venture capital model to allocate investment funding; GSK scientists now must pitch their ideas to panels of company executives and external  experts to secure project funding.

Improve M&A and partnering capabilities

If partnering is expected to propel future R&D and marketing success, drug companies need to improve two key capabilities.  First, firms need to adopt M&A best-practices in identifying, evaluating and engaging high-potential, synergistic equity partners.  These competencies can be crucial to securing first-mover advantage for key IP that best addresses product and R&D gaps.  Part of this approach could involve placing several small equity bets on early stage companies in order to secure early exposure into promising science.  Furthermore, to enter new markets, protect existing market shares and leverage scale economies, big pharma firms should pursue more ownership of complementary generic drug manufacturers.  Secondly, more partnerships will require pharma companies to get better at integrating and working with smaller or dissimilar companies who often bring very different operating styles and business requirements. 

Change the research paradigm

Today, billions of research dollars are targeting a host of big market diseases including Alzheimer’s and Cancer.  However, it may all be for naught as a historically-successful research model may not be suitable for some of these disease’s scientific challenges.  According to Daniel Hoffman, an industry consultant, “It’s questionable whether the scientific paradigm of medicinal chemistry that has resulted in huge successes in areas like cardiovascular drugs can be as productive in the future.”  To address these challenging illnesses, a new R&D paradigm will be needed to find, germinate and leverage critical IP and processes wherever it is found globally. 

Although many pundits contend it will be difficult to develop meaningfully better drugs than the current blockbusters, some firms still believe that concentrating on well-understood science offers the best return vs risk trade-off as compared to big market drug R&D.   Specifically, Novartis AG has abandoned a “big market” disease strategy in favor of ailments where the science is well understood, thereby improving the chances of finding treatments that work.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Is it Time for Your Firm to Go on a Data Diet?

In the effort to better target profitable customers and enable 1:1 marketing, companies have been collecting and managing as much customer information as they can get their hands on.  Many industries & leaders, such as credit cards (Capital One), retail (Amazon) and consumer goods (Dell) have built strong franchises through data-driven marketing. Although collecting as much data as possible makes sense for some firms, it doesn’t for others.  Hoarding reams of information comes with significant direct and indirect cost as well as missed business opportunity. My experience along with a published study out of the Wharton School of Business can shed some light on the challenges associated with over-zealous data collection.

Bytes may be small and easy to collect but they could also be costly and tough to use.  While storage costs have been declining, the price tag of managing this information has been on the rise in terms of  needed labor, training and application software (for analytics, security and data cleaning). Furthermore, operating costs (maintenance, energy and infrastructure) required to support the data warehouse has also been increasing.   Not surprisingly, keeping lots of data increases the liklihood that marketers will want to use it through costly and potentially wasteful consumer programs.   

In general, the more data you amass the greater the chance of a security beach.  These breaches can be an expensive proposition with significant brand risk.  According to the Ponemon Institute, a group that researches and consults on privacy & information security issues, each 2008 data breach is estimated to cost $202 per compromised record. The research also found that breeches may cause companies to lose sizable numbers of customers.  For example, two firms in healthcare and financial services lost 6.5% and 5.5% of their customers, respectively, after security breeches.

In many large enterprises, collecting and utilizing voluminous amounts of data is a challenge due to: the sheer volume of information gathered (particulary via sophisticated CRM systems); the presence of different IT systems that reduce integration; “siloed” business units that do not effectively collaborate and; a lack of data accuracy and standards that create complexity.  Moreover, cultural and competitive factors often come into play. Specifically, managers often feel the need to become data pack rats because they can or because their competitors do.  All of these issues combine to reduce marketing program effectiveness by extending execution time, reducing tactical flexibility and increasing program complexity.     

For many companies, “less data is more.” How can your firm start a data diet?

1.     Keep only the data that is needed for forecasting and execution

  • Cull old, unused and irrelevant data 
  • If possible, store information in a more usable and leaner format like a histogram

2.     Collect only what is strategic to your business

  • Amass what is directly linked to the key business drivers and metrics
  • Be realistic. For example, if you don’t need to do 1:1 marketing, you don’t need to keep individual customer information
  • Understand the costs & benefits of the data you are accumulating

3.     Adopt a cross-organizational approach to data collection and management

  • Set and adhere to data standards around file formats, business rules and security
  • Connect IT resources, people and processes with your marketing requirements

Clearly, hoarding data with little business benefit and lots of risk does not make sense.  How much information you collect will depend on the organization but the decision inevitably will boil down to the value and usability of the data versus the cost and risk of keeping it. 

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Finding the First Mouth in Word-of-Mouth Marketing

Word-of-mouth marketing such as viral or buzz initiatives are in vogue these days thanks to the popularity of social media networks and the ubiquity of wireless device.  Word-of-mouth techniques are about getting customers and key influencers to spread the word about a new product through their social or professional networks. This type of marketing has generated significant interest within industries that leverage the power of customer referrals such consumer goods, hospitality and software services as well as more recent applications in the pharmaceuticals, gaming and movie businesses.

There is one problem: marketers often don’t know what works, what doesn’t work and how can you define a ROI.  Trial and error has been the standard approach but a new study is providing hard evidence to aid in program design. New research from the Wharton School of Business explored the effectiveness of typical word-of-mouth advertising for new drug prescriptions in some key markets  Researchers tracked how prescriptions of a new drug spread from one physician to another, depending on who talked to whom and referred patients to whom.  The researchers mapped the connections to understand social/professional relationships and referral patterns as well as  identifying and measuring the role of key influencers or “seeders.”

The study’s key conclusion was that typical word-of-mouth targeting against self-selected key influencers or those who had the most connections may not be as effective as previously thought.  Instead, program success or failure is often dependent on finding the best “seeders” who typically fly below the radar.  These people are well-connected and respected evangelizers existing at the hub of social networks, who will embrace a product and promote it widely among the people they know.  

As evidence, the researchers found that the entire network actually divided into two sub-networks split by ethnicity.  One physician, number 184, who was way down the Key Opinion Leader (KOL) list in terms of number of connections and public prestige, ended up being the key connector linking both networks.  Without the connecting power and informal status of physician 184, a pharma marketer would have not have been able to drive the maximum effectiveness and efficiency of a word-of-mouth marketing program in the total market. 

Other study findings should influence strategy and program design:

  1. Product word-of-mouth effects can and do happen over social networks.
  2. Target networks and seeders come in many sizes and shapes based on a variety of socio-economic and psycho-graphic criteria.  One important factor in identifying the best “seeders” is how their peers perceive them, as opposed to how people self report their status (a common way of identifying KOLs).
  3. Of specific interest to pharma marketers, the most influential person may not be the most visible KOL but rather one that carries significant yet informal prestige and connectedness among their peers.
  4. Word-of-mouth effects can impact opinion leaders as well as followers, in contrast to what is often believed (that only followers are affected by social influence).

Clearly more research is needed that links word-of-mouth flows to actual marketing programs and ultimately to measurable purchase behaviours.  However, this Wharton research is a start and should provide some evidence-based principles to improve viral or buzz marketing planning and design.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Will Deceptive Marketing Cripple Pharma Brands?

Recent events suggest so.  Last month, pharmaceutical giant Pfizer agreed to pay $2.3 billion (the largest settlement ever levied against a US firm) to settle civil and criminal allegations that it violated federal rules governing drug sales and marketing for its pain-killer Bextra plus three other medications.  And the financial fallout will likely continue according to a paper recently published in the Journal of Marketing.  This study examined the financial implications of deceptive marketing on a drug company’s value.  The paper, “Regulatory Exposure of Deceptive Marketing and Its Impact on Firm Value,” analyzed the decline in shareholder value experienced by drug companies that have been the target of deceptive marketing citations by the U.S. Food and Drug Administration.   Specifically, the study identified a variety of deceptive marketing practices targeted at consumers and physicians, including 1) unsubstantiated superiority and effectiveness claims;  2) omitted risk information and 3) illegal marketing programs.

The study concludes that the identification and publication of deceptive marketing practices could result in a drop of 1% in a company’s market value, which translates into $86M of value destruction for a median-sized firm within the study sample.  These declines are in addition to any penalties leveled by the government or courts. In the case of Pfizer (whose market capitalization was nearly $98 billion in June 2009), a 1% drop in market value would equal  about $1 billion, above and beyond the agreed settlement.

Unfortunately, the Pfizer case is not the only example of deceptive marketing hurting a company’s share performance.  The paper reviewed 170 FDA letters citing inappropriate marketing practices, including promotion of drugs for so-called “off-label” uses-conditions for which the product was not officially approved by the FDA. One of the most famous and egregious examples of this was Merck’s marketing of Vioxx, which resulted in a multi-billion dollar balance sheet hit for the company.

Even if we accept these firms were acting ethically, there could still be many reasons why deceptive marketing occurs.  For example, there could be reduced marketing flexibility due to regulations; a product may not be superior to competition or; the product may generate a lower than expected value proposition (or higher risks) for patients.  To be fair, a number of internal and external factors generate powerful incentives to push marketing boundaries and to maintain inertia around hidebound marketing processes.  Yet, given the substantial risks, business practices will need to change. For example:

  1. Increase the efficacy hurdle rates for new products – stipulate that each new product must deliver better efficacy or lower risk versus alternatives;
  2. Refocus marketing spend towards increasing consumer and physician value – Compared to passive programs like advertising and promotion, some marketing initiatives like education and support programs could promote products and improve patient/physician satisfaction.
  3. Review how marketing is delivered through the organization – A typical drug marketer often comes up through sales with a sales-driven bias as well as little experience with branding, risk management and messaging.
  4. Improve risk management – Pharma companies should consider studying the lessons of other brand-sensitive industries like Financial Services to better understand the brand impact of marketing programs.

For further information on our services and work, please visit http://www.quantaconsulting.com

Second Life, Club Penguin – Do You Have a Virtual World Strategy?

Second Life and Club Penguin are two of the largest emerging business platforms known as virtual worlds.   These 3D online environments are places where people socialize and transact using personalized avatars – a computer user’s representation of himself/herself or alter ego.

Virtual worlds are now prime time. Today, there are over 100 different virtual worlds operating globally, many targeted at specific segments. Although numbers are difficult to verify, Second Life has over 15 million adult members worldwide; over 10 million children and teenagers regularly visit the Club Penguin and Habbo Hotel sites. According to the San Francisco Business News, US virtual goods transactions will total $400-$600 million in 2009, up from only $25-$50 million in 2007. The total 2009 global market for virtual goods is estimated to be $5.5 billion, with the majority of this coming from Asia.  This is only the beginning. Industry giants, Facebook and Apple, are testing virtual business apps to run on their existing social networking and wireless platforms.

Many large businesses are already marketing and transacting with their virtual consumers using virtual currencies.  IBM, Thomson, BMW and others have invested millions of dollars to buy Second Life “Islands” (read: presence or shelf space) to market their Avatar and Island-focused offerings.  So far, consumer activity has  primarily been around the purchases of goods to enhance their Avatars and Islands.  However, the V-Business possibilities are endless, some of which are germinating today: 

Better, Cheaper Learning and Training

The power of a 3D environment enables firms to interact with students and employees through a “real” hands-on experience at a substantially lower cost.  These activities could include virtual conferences, training sessions and product demos.

Deeper Consumers Conservations

Avatar-based interactions allow firms to engage users in sensitive, anonymous and rich conversations about their needs; the quality of these conversations are often unachievable using traditional market research techniques. 

Expanded Sales & Marketing Channels

Without the physical limitations of the real world, 3D virtual worlds enable a potent host of V-Business interactions, including rapid testing of: new offerings, store formats and pricing schemes.  As well, virtual worlds improve the opportunity for brand differentiation by enabling new business models around customer service, community building and image development.

As in the early days of the Internet, virtual worlds mix huge potential with deployment challenges and brand risk.  Just ask Google whose 2008 Lively virtual world execution is considered a flop.  Attaining first mover advantage is important but getting the execution right matters more.

For more information on our services and work, please visit the Quanta Consulting Inc., web site.

Obama’s Health Care IT Stimulus…20% Inspiration, 80% Perspiration

As part of ARRA, Obama’s health care IT stimulus package is slated to dole out approximately $40B in new spending and incentives over the next few years.  These funds are targetted at accelerating the adoption of electronic medical records (EMR) in paper-based and siloed health care environments.  The promise of EMR includes significant cost savings, increased operating efficiencies and improved clinical outcomes.     

Obama’s package is merely the tip of the iceberg.  According to McKinsey, up to $170B in new EMR hardware and software spending is forecasted over the next decade, with hospitals accounting for approximately 75% of the total.  Importantly, the Obama package introduces Medicare/Medicaid claw backs for providers that do not meet certain EMP adoption goals by 2015.  This combination of spending and penalties could be a boon for EMR buyers and vendors.  However, much work needs to be done to realize value.

 Hospitals and Physicians

EMR will eventually benefit health care providers but the road will be bumpy.  Providers will have to recraft traditional policies and processes to accommodate the new technology.  As well, stimulus spending will not cover ongoing (and likely large) operating expenses including training, integration and support which we have to be funded from somewhere.  Finally, significant thought, investment and change management will be needed to fully leverage the potential for EMR-enabled next generation health care models (e.g., online diagnosis and treatment of simple conditions), which could dramatically reduce cost and improve the quality and speed of health care delivery.  

Providers may be wise to review some of the lessons from the 1990s IT boon.  During this period, project time-to-measurable-value was often longer than expected because buyers were not ready or able to rapidly incorporate the new technologies and sellers were not experienced enough to effectively deploy them.

Software Vendors & Consultancies

The next decade could be a bonanza for these players.  However, firms will need to (or continue to) get things right to maximize share.  For example, they will need to deeply understand the technological and organizational needs of clients and stakeholders.  Moreover, these companies will have to assemble a winning product/service mix and partnership ecosystem that differentiates them in what will be a crowded marketplace.  Finally, firms will need to align their delivery model to available capabilities, resources and skills, not a simple task in a people-dependant, highly-regulated industry. Given the challenges of infrastructure heterogeneity, a lack of standards and the immaturity of EMR technology, vendors and consultancies will need to quickly move down the experience curve to reduce their business risk and build competencies.

Hopefully, Obama’s package will be the impetus to finally take medical records online. However, it will require more than money for many health care players to make EMR work and to realize its huge potential.

For more information on our services and work, please visit www.quantaconsulting.com