More from Ken
When people didn’t return video rentals on time, Blockbuster saw that behavior from the perspective of a movie-rental company—as a problem to be fixed with late fees and changes to the rental period.
Netflix looked at that behavior from the point of view of the consumer—as evidence that people wanted a different, more flexible approach to home entertainment. Netflix used new technology to create a whole new kind of home-entertainment company. Blockbuster remained a movie-rental company until it was too late to change.
Opportunities for disruption are easy to see in hindsight, but extremely hard to see in the moment. Few companies have the curiosity, receptivity, and fearlessness to translate an observation about consumer behavior into a conclusion that a well-established company should change its core business. Yet those are the core capabilities required of companies seeking to stay ahead of disruption in the Internet economy.
Curiosity is a key reason that Intuit, maker of QuickBooks and TurboTax, has been able to disrupt itself and continue to grow over its 34-year history while other personal-software companies have disappeared.
Early in the company’s history, when it only made personal-finance software, employees noticed that half of consumers were using the product at their offices. At first, Intuit assumed people were doing their home accounting at the office. Finally, curiosity broke through, and further investigation revealed that the customers were using the product to run small businesses. This observation about consumer behavior led to a small-business product that now has 80 percent market share and constitutes half of Intuit’s revenue.
For Intuit, curiosity means seeing through the customer’s eyes, rather than through the company’s eyes. A recent profile in Fortune said that Intuit conducts 10,000 hours of home visits each year. Employees are trained not to ask questions during these visits, but instead just to observe how people use Intuit’s products. Questions inevitably betray the hidden biases of the questioner, while observation of actual behavior can get closer to the truth.
Ford’s new CEO, Jim Hackett, is another believer in putting a deep customer understanding at the center of business and design decisions. “Investing now in the understanding of use is the gift that will keep on giving,” Hackett said in an October 2017 presentation to investors.
Hackett demonstrates serious receptivity to how changing consumer behavior, along with autonomous and electric vehicle technology, could radically change the role of Ford.
Ford’s new vision statement shows this receptivity. It begins by stating that “freedom of movement drives human progress,” linking that belief first to creating “great cars and trucks” and now to becoming “the world’s most trusted mobility company, designing smart vehicles for a smart world.”
Hackett recognizes something he calls the “perversity law,” which means that “to stay competitive, businesses often have to give up the things that made them great in the first place,” according to a piece in The New York Times Magazine. Ford is not yet giving up on cars and trucks, or on its design and manufacturing expertise. However, it sees a future in which “there are many more choices for where we play and how we win,” according to Hackett’s investor presentation, including such heady ideas as “fully autonomous SAE Level 4 capable vehicles” and a “crowd-sourced dynamically routed shuttle service.”
Curious about consumer needs and new technology, and receptive to their profound implications, leading companies are fearless about acting on those implications.
Intuit recently became an open platform that encourages collaboration with outside app developers, including competitors. Although this radical change has the potential to draw business away from Intuit, the company’s leaders believe that this counter-intuitive move places Intuit in the contemporary software ecosystem, providing more users with more options, and strengthening customer loyalty.
On a much larger scale, Ford is making big investments to position the company in many different roles: creating the software for self-driving cars that may or may not be manufactured by Ford, owning a transportation platform, and designing and manufacturing its own electric, autonomous vehicles. Ford has invested more than $4 billion in this effort, much of that in acquisition of startup companies. “Fearless” is a 114-year-old company relying on a one-year-old startup to develop the software for a self-driving car that could make or break the company’s future.
Fresh Eyes for Healthcare
As new competitors from startups to behemoths train their eyes on the $3 trillion healthcare industry, hospital and health system executives are challenged—like Intuit and Ford—to hone their curiosity, receptivity, and fearlessness.
Curiosity. Healthcare relies largely on surveys and selected utilization data to understand how consumers use their services. However, these tools present a view that is framed by the legacy business model. Gene Woods, President and CEO of Carolinas HealthCare System, recently noted that nine out of 10 patient encounters at the system take place outside its walls. These could be visits to the website, phone calls, emails, virtual visits, or community events. Woods asks, “What do we know about these encounters? Who and where are they? How do people access us and what do they want? We’re asking these questions, and this mindset is causing us to shift our investment portfolio.” This is the kind of curiosity health systems need to have. We need to develop methods to see more directly into consumer behavior in relationship to individuals’ health needs—to see through the consumers’ eyes rather than through our legacy viewpoint.
Receptivity. We need to be open to new roles for our organizations, roles that may result in very different kinds of organizations in the future. Just as CVS Health recast itself from a pharmacy chain to a healthcare company, hospitals and health systems need to consider whether their role is limited to caring for patients or is something broader, given the breadth of consumers’ health and healthcare experiences. Several years ago, Intermountain Healthcare changed its mission to “Helping people live the healthiest lives possible.” The mission is receptive to the many ways an organization can encourage health, and it presents health as something open to different definitions by different participants.
Fearlessness. Any change in role flies in the face of the status quo, involves uncertainty about outcomes, and in many disruptive scenarios could result in reduced revenues in the short term as organizations prepare for the long term. All of these factors are likely to make staff members, executives, and board members anything from uncomfortable to outright resistant. However, based on a strong financial plan, organizations need to start placing bets on new roles and capabilities. UPMC in Pennsylvania recently invested $2 billion in three specialty “digital hospitals of the future,” which will be designed in collaboration with Microsoft. UPMC’s announcement says that these hospitals will “radically change healthcare as we know it.”
Savoring the Surprise
Imagine Amazon CEO Jeff Bezos sitting in his office one day when an employee came in and said, “We have a ton of server capacity, and we’re really good at managing it. Why don’t we start selling cloud services?”
Instead of replying, “We’re an online retailer, not a cloud services company,” Bezos launched a new line of business that today earns almost $10 billion per year and constitutes more than half of Amazon’s annual operating income.
Bezos was doing what Intuit executives call “savoring the surprise.” Instead of questioning or resisting the information, instead of trying to protect the status quo, he and other successful executives welcome new insights and eagerly explore their implications for the business, even if that means radical change. It is a crucial part of the regular self-disruption that makes for an effective business in the Internet economy.
Looking at healthcare through fresh eyes will yield many surprises for hospital executives—surprises about the way consumers interact with the broader healthcare system, and what changes in the patient experience would create meaningful engagement. Being open to these changes, and acting fearlessly to make them happen, are the keys to disrupting your own organization before others do that job for you.