by Adam Hartung | Jul 1, 2014 | Current Affairs, Defend & Extend, Leadership, Religion
Yesterday the U.S. Supreme Court ruled in favor of Hobby Lobby and against the U.S. government in a case revolving around health care for employees. I’m a business person, not a lawyer, so to me it was key to understand from a business viewpoint exactly what Hobby Lobby “won.”
It appears Hobby Lobby’s leaders “won” the right to refuse to provide certain kinds of health care to their employees as had been mandated by the Affordable Care Act. The justification primarily being that such health care (all associated with female birth control) violated religious beliefs of the company owners.
As a business person I wondered what the outcome would be if the next case is brought to the court by a business owner who happens to be a Christian Scientist. Would this next company be allowed to eliminate offering vaccines – or maybe health care altogether – because the owners don’t believe in modern medical treatments?
This may sound extreme, and missing the point revolving around the controversy over birth control. But not really. Because the point of business is to legally create solutions for customer needs at a profit. Doing this requires doing a lot of things right in order to attract and retain the right employees, the right suppliers and customers by making all of them extremely happy. I don’t recall Adam Smith, Milton Friedman, Peter Drucker, Edward Demming, John Galbraith or any other historically noted business writer saying the point of business to set the moral compass of its customers, suppliers or employees.
I’m not sure where enforcing the historical religious beliefs of founders or owners plays a role in business. At all. Even if they have the legal right to do so, is it smart business leadership?
Hobby Lobby Store
Hobby Lobby competes in the extraordinarily tough retail market. The ground is littered with failures, and formerly great companies which are struggling such as Sears, KMart, JCPenney, Best Buy, etc. And recently the industry has been rocked with security breaches, reducing customer faith in stalwarts like Target. And profits are being challenged across all brick-and-mortar traditional retailers by on-line companies led by Amazon, who have much lower cost structures.
All the trends in retail bode poorly for Hobby Lobby. Hobby Lobby does almost no business on-line, and even closes its stores on Sunday. Given consumer desires to have what they want, when they want it, unfettered by time or location, a traditional retailer like Hobby Lobby already has its hands full just figuring out how to keep competitors at bay. Customers don’t need much encouragement to skip any particular store in search of easily available products and instant price information across retailers.
Social trends are also very clear in the USA. The great majority of Americans support health care for everyone. Including offering birth control, and all other forms of women’s health needs. This has nothing to do with the Affordable Care Act. Health care, and women’s rights to manage their individual reproductiveness, is something that is clearly a majority viewpoint – and most people think it should be covered by health insurance.
So, given the customer options available, is it smart for any retailer to brag that they are unwilling to offer employees health care? Although not tied to any specific social issues, Wal-Mart has long dealt with customer and employee defections due to policies which reduce employee benefits, such as health care. Is this an issue which is likely to help Hobby Lobby grow?
Is it smart, as Hobby Lobby competes for merchandise from suppliers, negotiates on leases with landlords, seeks new store permits from local governments, recruits employees as buyers, merchandisers, store managers and clerks, and seeks customers who can shop on-line or at competitors to brandish the sword of intolerance on a specific issue which upsets the company owner? And one where this owner is on the opposite side of public opinion?
Long ago a group of retired U.S. military Generals told me that in Vietnam America won every battle, but lost the war. Through overwhelming firepower and manpower, there was no way we would not win any combat mission. But that missed the point. As a result of focusing on the combat, America’s leaders missed the opportunity win “the hearts and minds” of most Vietnamese. In the end America left Vietnam in a rushed abandonment of Saigon, and the North Vietnamese took over all of South Vietnam. Although we did what leaders believed was “right,” and fought each battle to a win, in the end America lost the objective of maintaining a free, independent and democratic Vietnam.
The leaders of Hobby Lobby won this battle. But is this good for the customers, suppliers, communities where stores are located, and employees of Hobby Lobby? Will these constituents continue to support Hobby Lobby, or will they possibly choose alternatives? If in its actions, including legal arguing at the Supreme Court, Hobby Lobby may have preserved what its leaders think is an important legal precedent. But, have their strengthened their business competitiveness so they will be a long-term success?
Perhaps Hobby Lobby might want to listen to the CEO of Chick-fil-A, which suffered a serious media firestorm when it became public their owners donated money to anti-gay organizations. CEO Cathy decided it was best to “just shut up and go sell chicken.” Business is tough enough, loaded with plenty of battles, without looking for fights that are against trends.
by Adam Hartung | Mar 29, 2012 | Current Affairs, Disruptions, Innovation, Leadership, Lock-in, Openness, Transparency
No businessperson thinks the way to solve a business problem is via the courts. And no issue is larger for American business than health care. Despite all the hoopla over the Supreme Court reviews this week, this is a lousy way for America to address an extremely critical area.
The growth of America's economy, and its global competitiveness, has a lot riding on health care costs. Looking at the table, below, it is clear that the U.S. is doing a lousy job at managing what is the fastest growing cost in business (data summarized from 24/7 Wall Street.)
While America is spending about $8,000 per person, the next 9 countries (in per person cost) all are grouped in roughly the $4,000-$5,000 cost — so America is 67-100% more costly than competitors. This affects everything America sells – from tractors to software services – forcing higher prices, or lower margins. And lower margins means less resources for investing in growth!
American health care is limiting the countries overall economic growth capability by consuming dramatically more resources than our competitors. Where American spends 17.4% of GDP (gross domestic product) on health care, our competitors are generally spending only 11-12% of their resources. This means America is "taxing" itself an extra 50% for the same services as our competitive countries. And without demonstrably superior results. That is money which Americans would gain more benefit if spent on infrastructure, R&D, new product development or even global selling!
Americans seem to be fixated on the past. How they used to obtain health care services 50 years ago, and the role of insurance 50 years ago. Looking forward, health care is nothing like it was in 1960. The days of "Dr. Welby, MD" serving a patient's needs are long gone. Now it takes teams of physicians, technicians, nurses, diagnosticians, laboratory analysts and buildings full of equipment to care for patients. And that means America needs a medical delivery system that allows the best use of these resources efficiently and effectively if its citizens are going to be healthier, and move into the life expectancies of competitive countries.
Unfortunately, America seems unwilling to look at its competitors to learn from what they do in order to be more effective. It would seem obvious that policy makers and those delivering health care could all look at the processes in these other 9 countries and ask "what are they doing, how do they do it, and across all 9 what can we see are the best practices?"
By studying the competition we could easily learn not only what is being done better, but how we could improve on those practices to be a world leader (which, clearly, we now are not.) Yet, for the most part those involved in the debate seem adamant to ignore the competition – as if they don't matter. Even though the cost of such blindness is enormous.
Instead, way too much time is spent asking customers what they want. But customers have no idea what health care costs. Either they have insurance, and don't care what specific delivery costs, or they faint dead away when they see the bill for almost any procedure. People just know that health care can be really good, and they want it. To them, the cost is somebody else's problem. That offers no insight for creating an effective yet simultaneously efficient system.
America needs to quit thinking it can gradually evolve toward something better. As Clayton Christensen points out in his book "The Innovator's Prescription: A Disruptive Solution for Health Care" America could implement health care very differently. And, as each year passes America's competitiveness falls further behind – pushing the country closer and closer to no choice but being disruptive in health care implementation. That, or losing its vaunted position as market leader!
Is the "individual mandate" legal? That seems to be arguable. But, it is disruptive. It seems the debate centers more on whether Americans are willing to be disruptive, to do something different, than whether they want to solve the problem. Across a range of possibilities, anything that disrupts the ways of the past seems to be argued to death. That isn't going to solve this big, and growing, problem. Americans must become willing to accept some radical change.
The simple approach would be to look at programs in Oregon, Massachusetts and all the states to see what has worked, and what hasn't worked as well. Instead of judging them in advance, they could be studied to learn. Then America could take on a series of experiments. In isolated locations. Early adopter types could "opt in" on new alternative approaches to payment, and delivery, and see if it makes them happy. And more stories could be promulgated about how alternatives have worked, and why, helping everyone in the country remove their fear of change by seeing the benefits achieved by early leaders.
Health care delivery, and its cost, in America is a big deal. Just like the oil price shocks in the 1970s roiled cost structures and threatened the economy, unmanagable health care delivery and cost threatens the country's economic future. American's surely don't expect a handful of lawyers in black robes to solve the problem.
America needs to learn from its competition, be willing to disrupt past processes and try new approaches that forge a solution which not only delivers better than anyone else (a place where America does seem to still lead) but costs less. If America could be the first on the moon, first to create the PC and first to connect everyone on smartphones this is a problem which can be solved – but not by attorneys or courts!
by Adam Hartung | Apr 12, 2010 | Current Affairs, Openness
Amidst the brouhaha over health care legislation, Harvard Business Review has produced a report "Megatrends in Global Health Care." One interesting statistic is that medical tourism – that's when someone leaves the USA to have a procedure like surgery performed in a foreign country – has risen from 750,000 in 2007 (more than you would have guessed, I bet) to about 1.2million. Yep, people are going outside the USA for health care.
While everybody in the USA is asking "what do you want" for health care, there is a marketplace. To recognize this you have to overcome myopia and think bigger than the U.S. Anyone can have health procedures performed in Germany, France, Canada, Japan, Thailand, Mexico, Brazil, India – etc. Of course you have to pay for it. But in medical tourism instances, it is cheaper to have the care provided offshore, often with extensive after-event recovery assistance, rather than in the USA. Even if you have insurance (which may have declined to cover the procedure because it is so expensive domestically).
While everyone is arguing about healthcare, some violently, it will be the marketplace that will determine what health care we get and how much it will cost. People want good service at a good price, and they don't like "middle men" such as insurers or regulators, making the trade-offs for them. They want options, and they want to know likely expectations, and they want to know the actual cost as well as the therapy cost, medicine cost and impact on work, income and life. Then they want to make an informed decision.
The beauty of medical tourism is it provides a marketplace mechanism for those things to happen. America has great health care, but it is wildly expensive. Multiples of the cost in other countries. If you are uninsured, either you don't' get complete health care or you want someone to jump in and bail you out (like a government agency). If you are insured, quite simply your healthcare is subsidized, and it is dictated to you by the terms of the insurance company – not really much different than a government program just a "privatized" bureaucratic group making the decision. You aren't the payor, someone else is, so as much as you want to be the "customer" you really aren't. In America the golden rule of health care applies "he who pays the gold gets to make the rules" and that would be your payor (which is either your insurance company – with guidelines from your employer – or medicare with government guidelines).
But with medical tourism, you are the customer. Nobody between you and the doctor, facility or other provider. You get to hear options, and make decisions. Gee, what an interesting approach. This is now competition for the extremely expensive American health care industry. If you don't like your drugs, go buy them in Mexico or Canada – why let a bureaucrat scare you into paying 5x or 15x more? If you want a procedure, go get it Paris or Peking. If you need extended therapy, do it at a spa in Thailand. And all of this done at a price that is a fraction of doing it in the USA. Smart providers will soon have to start paying attention, and find ways to compete!
A lot of people want to affix blame for the cost of American health care. As long as there's no marketplace, then I guess blame fixing is what people like to do. But if we instead focus on the competition we can see how rapidly things will change. When a hospital is losing customers to Hyderabad, or a facility in Florence, how long will it keep tinkering with an approach that costs too much and is losing customers? Real change happens when people realize that they can fail if they don't change their old Success Formula.
The best thing about medical tourism is it creates a very real option, and very real competition. If you aren't thinking about it, you should. You would be surprised what you can have done, and at what quality, and the cost. While you don't want to run to Damascus to see your doctor for a sinus infection, when it's time for a knee replacement Nice might just be the place to go. Give it some thought, because your behavior will speak a lot louder than your words when it comes to creating real change in American health care provision and cost.
by Adam Hartung | Aug 19, 2009 | Current Affairs, General, Innovation, Leadership, Openness
"Want to stir up controversy? Bring up health care. Everybody has a
story to tell–something that went wrong, someone left in the cold,
something the government or an insurer failed at. Everybody has an
opinion about all the current proposals too. And everybody has a
solution they'll happily (or angrily) defend all night long."
That's the opening paragraph for my latest article as a columnist for Forbes "Fixing Health Care: It's Time to Experiment". I recommend using White Space projects to let market participants determine a better approach to paying for health care in America. Since businesses pay for most health care, given our largely employer-paid system, the biggest burden is on American business. If we don't develop a better solution that controls cost, America's competitiveness could seriously falter.
Why would we want lawyers to try "designing" a better answer, when we could let all of us participate in solution development if we open up some market tests? What we need from the government is permission to work around existing rules allowing the tests, and some resource commitment to conduct them. America's health delivery system isn't bad – if you have access to it and can afford it. The broken part has to do with access and cost – not the capability of providers to do a decent job. Those are business problems, not health care problems. We aren't talking about "product" problems, we're talking about "distribution" and "pricing" problems. If we use good business practices, especially White Space to foster creativity, we could develop a new and uniquely American solution that is far better than the current accident of history.
Hope you enjoy. And hopefully we'll be able to move from our currently Locked-in, and amazingly expensive, health care payment system to something that meets more people's needs while bringing rationality back to cost.
by Adam Hartung | Jun 18, 2009 | Uncategorized
Yesterday we heard announcements about reforming the federal regulators and the systems they use to manage money and banking, and now the Treasury Secretary is out selling the program to Congress "Geithner Fields Revamp Queries" Marketwatch.com. It's touched off a big debate, as some people think the project has gone too far – and others think it hasn't gone far enough. That's interesting, because most people think something needs to be done so the events of last summer — a near melt-down in the banking system and a near collapse of the monetary system — are not repeated. So we might want to think about what was announced through the lens of The Phoenix Principle to see if we can expect much change.
Bruce Nussbaum is billed as "the innovation guru" on Businessweek.com. He reports "President Obama Failed At Redesigning the Financial System." Interestingly, his biggest complaint is that the President "didn't do what FDR did in the 1930s" and then attributes FDR with significantly Disrupting the government apparatus at the time.
I would agree with that assessment. FDR attacked a bevy of Lock-ins currently then in place. His attacks caused people to reconsider the approach then being used, which had remarkably high unemployment and long bread lines, and opened White Space to try all kinds of programs broadly referred to as "The New Deal." Ronald Reagan 50 years later was similar. He attacked what had become the conventional wisdom of the time, and his Disruption opened White Space which led to the greatest tax code reform ever, as well as significant changes in labor relations and government deregulation of industry. Both are examples of Presidents that first Disrupted, and then used White Space to develop new solutions.
President Obama has not Disrupted. He's definitely whacked the chicken coop a bit, ruffling a lot of feathers, by doing things such as pushing for the firing of GM's Chairman/CEO. But so far, even though he espouses change, his administration hasn't attacked any old Lock-ins. He keeps talking about changes "within the system." As The Phoenix Principle would predict, this sort of approach to change usually aggravates everybody – even your own supporters – and results in little significant change. Perhaps some marginal adjustments, but since the underlying Success Formula is not attacked all the recommendations lie within it – and the Status Quo is largely preserved.
Mr. Nussbaum, in an interview on BusinessWeek.com entitled "What Should A.G. Lafley Do Next?", recommends the President appoint the former head of Proctor & Gamble to be the nations Chief Innovation Officer. Although a novel idea, it won't make any difference. Mr. Nussbaum's consultant-style recommendation is the kind that gets a lot of executives in trouble who end up with lofty goals, but no chance of success. Such a move would put an embarrassing end on Mr. Lafley's career, and be an embarrassment for the President.
The federal government is a series of silo fiefdoms controlled by individual secretaries. Mr. Nussbaum would like Mr. Lafley to use "design theory" to cut across fiefdoms in order to innovate. Mr. Nussbaum gives Mr. Lafley credit for reorganizing P&G this way to success. But, how exactly is someone who works for the President supposed to re-organize the administrative branch of the federal government? Fiefdoms with their own individual mandates, leaders, staff and budgets. Especially without a dramatic Disruption that forces everyone to agree on such a massive reorganization. No commitment from the President will matter when the silo kings are allowed their silos. Probably a lot of recommendations – long the domain of Presidential commissions – that say there should be more cross-departmental work. But without a Disruption, something that rocks the apparatus to its core, there's no hope of this happening.
Despite the President's lofty goals and ambitions, he risks becoming somebody who talks about change – but doesn't accomplish much. This may upset you, or you may be happy, depending upon your point of view. But as a practical matter, should we expect that health care reform will be something radical – like social security and medicare were – or something much less dramatic? The answer is now clear. Lacking Disruptions, and when we look at the financial services reform proposed yesterday, we should expect something that will be an extension of the current system. A bit of tweaking to how things are currently done, but largely the same. Financial system reform left 95% of the players and their products untouched – and focused on small changes to a few institutions and a few products that are identified as central to the problems last summer. We should expect that health care reform would leave 95% of the system and products unchanged as well. Despite whatever rhetoric is extolled from politicians and pundits of either party.
This is not to say that the federal government does not adapt. When attempting to do more of what it has always done better, faster, or cheaper we regularly see that such sustaining innovations are picked up quickly and used effectively. And this was demonstrated this week when we learned that the State Department and other federal agencies were relying substantially on Twitter to receive information from Iran, and communicate with people in Iran.
For years the government apparatus relied on journalists for lots of two-way international communications. This often created a somewhat cozy relationship between very large newspapers with feet on the street in remote and unfriendly locations with people in government. This coziness had the really bad side effect of causing America's enemies to think most journalists were American spies working for the CIA, etc. So what worked for journalists all too often got them jailed and sometimes killed. But this system completely broke down the last 2 years as traditional journalism, and the newspapers, started going broke. The journalists were laid off in droves, and the government lost its primary info feed from offshore.
What's replaced journalists for readers has been a market shift to the internet. People have turned to bloggers, media sites and social networking for information. This dramatic shift has wiped out the profits at newspapers, and shut down a lot of properties. For media companies this represents wholesale change.
But government users quickly adapted. In their effort to Defend & Extend their roles, they became quick users of these sites as well. And when Iran refused to allow traditional journalists outdoors – or even to report on uprisings – the government officials turned to Twitter. And, just like the government used to ask the newspapers for help, they had no trouble asking Twitter – as reported in "U.S. asks Twitter to stay on line because of Iran vote" on MSN.com. And, much like how The Washington Post or The New York Times responded in the past, Twitter obliged. It was a remarkable example of "business as usual" for the government agencies – just done a little faster, better and probably cheaper. And this, of course, reinforced to international leaders their claims that Twitter and social media sites are "tools of the U.S. governement." In what appears "the more things change the more they stay the same" we see how easily the status quo can be reinforced, even amidst a dramatic change for the participants.
There can be reform in any government. There even can be innovation. But obtaining that reform requires
- Someone develop very clear scenarios about the future that describe the need for change
- A recognition that competitors will do better and we'll do worse if we don't change
- A Disruption – an attack on Lock-ins that support the Status Quo
- Using White Space to test new solutions toward which the organization can migrate as pieces are demonstrated successful.
It works. We see it work for individuals, work teams, functional groups, businesses, industries and even for governments – like exemplified by Franklin Roosevelt and Ronald Reagan. FDR did a marvelous job of describing a future at risk if America didn't start working again, otherwise international competitors would take over the country. And Ronald Reagan similarly described a future that would be entirely different (free of inflation and stagnation) if changes were made – and one at risk of its long-term enemy the USSR if changes weren't made. But if you try to shortcut these steps you get only marginal change.
