What’s the Real Transformation Underway in Industry?

DECEMBER 2013 - What’s the Real Transformation Underway in Industry?  Should Knowing the Answer Affect How You Invest or Grow?

It’s too easy to get distracted by intriguing new technologies or platforms.  Big Data.  The Cloud.  Social  Networking.  Who wouldn’t love them?

But do we love the technologies too much, confusing them with the real changes that are transforming some of our most critical industries?  If we focused laser-like on the real changes happening in some of our most important industries like healthcare, energy and education, would it alter where venture capitalists invest or how entrepreneurs build their companies?

HEALTHCARE
For instance, several years ago I studied the dramatic changes in healthcare and how in 2002 Medicare/CMS kicked accountability for outcomes to the forefront by instituting quality and safety measures in hospitals.  As the largest payer for health services with the ability to tie quality of outcomes to reimbursement, Medicare/CMS laid the groundwork for the current overhaul of our health system.  Despite extensive debate about which measures work, the goal should be to improve the health of our population, one by one. 

Insurance companies now talk about outcomes.  They have found that hospitals that have fewer readmissions, and doctors who diagnose and treat illnesses successfully the first time around, also lower costs.  

Companies like Cogito Health are building their businesses on early detection of medical problems.  In Cogito’s case, early detection of depression through monitoring voice signals enables intervention to avoid worse problems (and costs) for the patient down the road.

Teladoc and American Well provide health consults by phone or webcam, averting unnecessary doctor’s office visits.   This ensures quicker diagnosis and treatment while slashing the cost of delivering care. 

These companies and many others like them demonstrate how focus on outcomes in the healthcare industry is improving care and lowering cost, while simultaneously improving patient health.  Shouldn’t every entrepreneur and every investor thoroughly understand how a company improves outcomes before investing in it?

ENERGY         
Some people think that the dramatic change underway in energy is aimed at replacing foreign oil with alternative sources, whether US-drilled wells, or shale gas, or solar, or wind-generation.  Just as dramatic is the quiet movement to improve use of energy whether by installing smarter lighting systems in offices or launching retrofit financing programs.  We’ve long focused on fuel efficiency in cars, and buildings are just as important.  Here are some other examples.

A significant movement is already underway in Connecticut, spearheaded by the Clean Energy Finance and Investment Authority (CEFIA). “As the nation’s first full-scale clean energy finance authority, CEFIA will . . . offer incentives and innovative low-cost financing to encourage homeowners, companies, municipalities, and other institutions to support renewable energy and energy efficiency.” 

Look at how one large property owner cited energy efficiency as a critical outcome for a major retrofit of the Empire State Building.  In Tony Malkin’s interview on Morning Joe (MSNBC) he examined the desired outcomes using many technologies, platforms and tools to achieve it.  Fascinating and impressive, and worth watching. http://video.msnbc.msn.com/morning-joe/42642542#42642542

EDUCATION
Have you seen the interviews on TV asking if a college education is worth it?  With so many graduates not finding jobs, I believe the education industry is ripe for a major overhaul.

According to the Sage Report by McKinsey and Company, only 42% of employers (and 45% of students) feel that graduates are prepared for work while 72% of educators think graduates are prepared.  Are college educators out of touch with what students (their customers) need?  Read the overview at http://www.mckinsey.com/client_service/public_sector/mckinsey_center_for_government/education_to_employment

In a recent meeting at MIT I listened to the concern of professors about how MOOCs (massive open online courses) will affect their roles in educating students.  The prevailing opinion seemed to be that academics need to cast themselves as facilitators to develop critical thinking skills, and to help students use content to accomplish a defined outcome.  This represents a significant shift, underscoring the current belief that students should be able to do something useful with what they learned.  In no way advocating that colleges be turned into trade schools, I am however supportive of making education useful so that graduates can get jobs and employers can hire prospects qualified to do them.

Enter the education-to-employment movement.  Using project-based learning, students learn in the methods in which they will be working.  Innovators leading this revolution call this “outcomes-based education.”  This is an industry that is just beginning to recognize the steep challenges ahead.

IBM has been in the forefront of working with universities like Neumont University to identify the skills required for jobs they need to fill in the future.  In exchange for helping ensure graduates are equipped for employment, IBM commits to hiring a number of them who demonstrate proficiency in the required skills. 

Mayor Rahm Emanuel launched College to Careers (C2C) to ensure Chicagoans are prepared for careers in growing fields and are able to seize the tens of thousands of new job openings over the next decade.  The C2C program forges partnerships between City Colleges and industry leaders to better align City Colleges’ curricula with the demand in growing fields. These partnerships provide City Colleges’ students access to real-world experience via teacher-practitioners, internships and top-notch facilities, and offer City Colleges’ students and graduates a first pass at job opportunities.”

IN SUMMARY
Education joins healthcare and energy as an industry being transformed by a new focus on outcomes and the challenge for academia is just starting.  Intriguing technologies like Big Data, the Cloud, Social Networking and MOOCs will be relied on to implement the change, but the real change is the new focus on outcomes. How will that affect investor and entrepreneurial behavior?

I’ve raised two questions with you and now I’d like to hear what you think.  As an investor, would a clear understanding of the shift to outcomes in a particular industry affect how you invest in the future?  As an entrepreneur or CEO, will clarity about measurable industry outcomes guide how you build, market and sell your products and services?  Should it?  I’d like to hear from you at gail@gailbuergerkerr.com
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ON A PERSONAL NOTE
I work with clients to support their investment and acquisition efforts and to help them grow by engaging with customers to produce better products, more effective marketing and enhanced sales success.  Understanding shifts in industry priorities is important for my work.   If you have ideas and perspectives about how outcomes-focus is transforming investing behavior, or influencing the behaviors of company leaders, I’d like to talk with you about it.  You can reach me at 978-425-9243.

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