Coursework > Week 2: Battle of the Bulge > Video: Battle of Bulge Part 1
- We’re going into the case studies, and we’re going to start with a huge, huge issue.
- So the issue is- how do you deal with the obesity in the United States and actually in many developing countries and Europe as well? So let’s just take a US view.
- The problem is not just a problem of the aesthetics.
- It’s to pick the solutions that are most likely to do good and to do well in dealing with this devastating public health issue.
- So how do you do that? That’s the problem with health care innovation.
- Lots and lots of ideas, but how do you tell the good one from the bad one? So in this course, you’re going to learn three different frameworks that will help you tell the good one from the bad one.
- We’re going to come up at the end with the one that is most likely to do good, in other words, to help society reduce this problem of obesity and to do well, to be a viable business model that can keep doing what it does because it does well as a business, as well as doing good for society.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 2
- What kind is an innovation that’s consumer facing? So in this case of the Battle of the Bulge, clearly Weight Watchers and Jenny Craig, these are consumer facing innovations.
- They reach out to consumers and they say, we’re going to help you.
- In this case, the technology ventures are drugs and the drugs speed up the metabolism or they hasten the passage of food so you don’t digest as much of it.
- So those are two of the three- consumer facing venture, technology facing venture.
- This is what I call an integrator and these are ventures that create economies of scale by building chains of things.
- The purpose of these integrative ventures that integrate and create chains is to provide lower costs.
- The consumer venture says to the consumer, I’m going to help you.
- The technology venture says to the medical care systems, here’s a new technology to deal with this problem.
- The integrator venture says, essentially, to the payers, to the insurance companies and employers, the governments, I can do this cheaper because I’m a chain and I get economies of scale.
- We have three kinds of ventures- consumer, integrator, and technology.
- I want you to classify the following ventures that deal with obesity into one of these categories- only one- and I want you as a group to discuss it.
- Stick is a class of ventures that motivate people to lead better lifestyles using the techniques of what’s called behavioral economics.
- Whole lot of fancy words, but these ventures essentially provide you with the incentives- typically financial, but in the case of stickK, they’re also social- to clean up your act in one way or another.
- So is stickK a consumer venture, an integrator venture, or a technology venture? The key issue in this case is not only what is the most do good and do well kind of venture, but also what about Dean Ornish and his venture? So Dean Ornish is a great cardiologist and he has developed a diet that actually reverses heart disease.
- So we have these three categories and I’ve asked you to classify each of the ventures that I mentioned into one of these three categories.
- So if you have a consumer facing venture, for example, what kind of CEO do you want for that venture? Clearly, you want somebody who is very skilled in reaching consumers, somebody who’s done retailing or lifestyle changes or education, somebody who knows how to reach and motivate consumers.
- What kind of CEO do you want for a technology venture? Do you want somebody who’s great in consumer marketing? I don’t think so.
- So the classification of these ventures into one of these three categories is very important for a number of reasons, and can you tell us which category they fall into? “.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 3
- REGINA HERZLINGER: So Jenny Craig, what is Jenny Craig? Well, it’s a consumer venture.
- There are chains of Jenny Craigs and there are chains of Weight Watchers, but their main mission is to reach consumers and change their behavior.
- They’re not saying we’re low cost, because we’re a chain.
- How about the chain of bariatric surgery centers? To me, that’s clearly an integrator.
- Unlike bariatric surgery in a hospital, which I think is a technology venture, the chain of these bariatric surgery centers, what it does that’s different from just doing bariatric surgery in a hospital is it gets economies of scale out of the chain.
- You put down a bet, and if you lose the bet, the money can go to a charity that you hate.
- You make a bet on the fact that you will do it, all the money you bet goes to the National Rifle Association.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 4
- How well-aligned is Weight Watchers with one of the six factors, which is consumers? Do they like it, or don’t they like it? How well-aligned is Weight Watchers with the financing factor? Is somebody willing to pay for it or not? How well-aligned is Weight Watchers with, what I call, the “structure factor,” which is the status quo? Does the status quo- all of the many stakeholders in the system, do they like Weight Watchers? Are they indifferent to Weight Watchers? Do they actively dislike Weight Watchers? If they dislike it, they’re very powerful.
- What about public policy? How does- the US Congress or state legislators or the US president or the governors, how do they feel about Weight Watchers? What about technology? Is there a technology waiting in the wings that can totally obviate Weight Watchers, and how accountable are they? How much do you believe about Weight Watchers’s ability to actually cause you to lose weight? So for every new venture, step number one, we are going to categorize them into one of three categories.
- What is the best six factors alignment for each one of them, and what is the worst six factors alignment for each one of them? Get together as a group and discuss that question, and then we’ll come back.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 5
- What about bariatric surgery in a hospital? Now, this is really invasive surgery.
- So what’s the best thing about this surgery? There’s terrific evidence that it works- people who lose weight and they keep weight off.
- So on the six factors alignment, bariatric surgery is great on accountability.
- It’s also great in another way, and that is the surgeons who do bariatric surgery, They have to be very skilled.
- This is very complicated surgery, and it requires an experienced, competent surgeon.
- By “guys,” I mean men and women who perform this surgery.
- The best six factors about bariatric surgery is unlike Jenny Craig and Weight Watchers.
- What’s the worst thing about bariatric surgery? The financial six factor.
- Not only is the surgery very expensive, but people who have this surgery, they need to spend about a year in various social and support programs to make sure that they know how to deal with this suddenly greatly reduced digestive tract.
- Bariatric surgery has an unfortunate side effect- great increases in suicides and accidents.
- It may just be a statistical artifact, it may be because the data were collected when bariatric surgery was a relatively new procedure, or it may be that the programs didn’t attend sufficiently to the emotional needs of people who’ve undergone bariatric surgery.
- How about the chain of bariatric surgery centers? Is that just like doing bariatric surgery in a hospital as a venture? No, no.
- It’s an integrator venture, and it’s got a really big negative, and the negative is that the structure will not like it.
- The existing hospitals that perform bariatric surgery- a very lucrative and interesting and research-intense kind of surgery- they don’t want this chain of bariatric centers to take that business away from them.
- So it’s got a really powerful foe in the structure of the hospitals, the general hospitals that do this surgery, and the surgeons who practice there.
- The price for doing this surgery in a chain that has economies of scale is clearly, if they’re competent in doing what they do as integrators, going to be lower than the price of doing it in a one-of facility.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 6
- What about Jenny Craig and Weight Watchers? Well, they’re OK. They are big companies, multi-billion dollar companies, but I don’t see them as the solution to the problem of obesity in the way that bariatric surgery is.
- OK. So we’ve gone through the second step of the analysis, which is the six factor analysis, and how these six factors align or don’t align with the innovation.
- Jenny Craig, Weight Watchers, they’re OK. stickK, it’s OK, but a little more worrisome than Jenny Craig and Weight Watchers because we have no history about it.
- So are we done? No, we’re not done, because just because something aligns with the environment doesn’t mean it’s going to be a successful business.
- Successful business has a lot of components, and we call these components the business model.
- What are the elements of the business that will make it successful or not successful? So our business model elements- we have 10 of them, and this, the third framework, and, I promise you, it’s the last one.
- We’re going to use them this time to analyze the many ventures that claim to deal with obesity.
- Second part is, what am I? Am I an integrator? Am I a technology? Am I a consumer facing venture? Third part is, how well aligned is this venture with the six factors? We’ve done number two and number three for a selection of the obesity solving ventures.
- Number four is, what kind of strategy does this venture have that will enable it to compete? So you can be the best thing since sliced bread, and if you don’t have a viable competitive strategy, you may as well pack your bags up and go home.
- My being first enables me to gain advantage, and that’s my competitive strategy.
- I’m going to learn from your mistakes I’m going to have excellent management.
- These are three different competitive strategies, and if the venture doesn’t have one of them, let’s wave goodbye to that venture.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 7
- REGINA E. HERZLINGER: The fifth part of the business model is, is this venture financially viable? And the question is, what kind of market share does it need to just break even? Break even means that its revenues equal its expenses.
- Just to make no profit, just not to lose any money, how much of the market do I need to have? If you need 90% of the market to break even, well, that’s not a great venture.
- Everybody wants the people who worked with Steve Jobs and Apple or who work with Bill Gates and Microsoft.
- So is that group of people sustainable to keep this venture going? And the fourth issue of sustainability is, how risky is this venture in its financial structure? Eight, managerial, have you got the right people leading this train? So do you have the right CEO for a consumer-facing venture, right CEO and managers for technology venture, right one for an integrator venture? And the last one is, most important, does this venture do good, as well as do well? If it only makes money, forget about it.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 9
- REGINA E. HERZLINGER: So to me, there’s no question.
- There’s no question that the innovation of all of these that is most likely to do good, to really affect morbid obesity and obesity in the US, Europe, developing countries is bariatric surgery.
- It’s a technology venture, sited in a organization, a hospital that’s very focused on commercializing medical technology.
- Whether you like it or not- I certainly don’t like it- it is a winner.
- Weight Watchers, even more of a viable business model.
- Will they do good? We don’t have the data, really, as of now to know if they will or not.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 10
- It’s a fruit and vegetables and grains and nut diet.
- It requires a tremendous amount, 100 to 400 hours a year of learning and support in a hospital setting.
- The consumers may not really love it either, both because it requires so much time and geez, look at the case the state of West Virginia is offering this program.
- Hospital can do bariatric surgery or it can take its space to do Dr. Ornish’s program.
- Sadly, I think the hospital’s going to prefer to do bariatric surgery.
- So can he do anything to fix this problem? Let’s look at the business model issues with Dr. Ornish’s diet.
- It doesn’t require cutting people up and stapling them the way bariatric surgery does.
- Dr. Ornish, who I know and greatly admire, he’s not somebody with a lot of consumer retailing experience.
- Let’s use these frameworks to solve Dr. Ornish’s problems.
Coursework > Week 2: Battle of the Bulge > Video: Battle of the Bulge Part 11
- Dr. Ornish needs to decide whether he’s consumer facing or he’s technology venture.
- If he’s consumer facing, he needs to get to a different CEO- probably somebody who has worked at Weight Watchers or Jenny Craig and understands how to reach consumers with these diets.
- If he partnered up with Jenny Craig and offered food through Jenny Craig, might be a bad idea.
- He’s an academic doctor, maybe the whole idea is too distasteful to him.
- So if he wants to be an academic doctor and pursue the technology venture route, he’s got to make it attractive for hospitals to do this.
- How’s he going to do it? He’s got to raise that price.
- That hospital is hemorrhaging money if they adopt his plan.