Change creates lucrative opportunities for innovators who are willing to listen to consumers

By G. Michael Maddock and Raphael Louis Vitón

Insurance experts. Travel experts. Legal experts. Now health care experts.

What do they have in common? They made the now-predictable mistake of believing they knew better than the consumer: “People will always purchase insurance from agents.” “Who would want to buy their travel tickets online?” “What do you mean, people are price sensitive when it comes to legal advice?” “The doctor knows best.”

Worse, they guided the organizations that supported them down a path that led further and further from what consumers really want: a mutually dependent, beneficial relationship.

At critical times in history, business sectors go through radical shifts that are driven by economic, political and consumer forces. We see these shifts as positive because they create opportunities for entrants into markets. These entrants often bring with them revolutionary ideas that change things for the better. Shift happens. Shift is good—and for many in health care, shift is about to hit the fan.

Last month, we wrote about the timely and necessary death of B2B. People told us they liked the article (thank you) but were quick to stress that it couldn’t happen in their industry.

Well, it can and it will. For proof, look no further than an industry in which most people have thrown up their hands and said: “Nothing can be done.” And that is health care.

If we had 5¢ for every time someone proposed health care reform and then nothing happened, we would have a very pleasant second income. While we don’t mean to be cynical, we think that if managed by the current paradigms, the latest proposal—accountable care organizations (ACOs), part of the health care reform legislation passed last year—is going to provide us with an additional, fictional nickel.

Will ACOs Really Reduce Piecework?

An ACO consists of a network of doctors and hospitals that share responsibility for providing care to patients, sort of like a traditional HMO. The potential savings come from keeping people healthy. ACOs will receive bonuses if they keep costs below a specific number while still maintaining quality. The reasoning is simple: Healthy people need fewer tests. Pretty straightforward, right? Wrong. ACOs fly directly in the face of the health care status quo by which doctors get paid for piecework: More tests, procedures or visits equals more money.

We just don’t see ACOs as the magic bullet for health care reform. The key to preventative health care is for all of us to truly understand what we will need to do, beyond exercising and watching what we eat. This requires a massive amount of education, especially for people with chronic conditions, such as high blood pressure, diabetes, heart disease, and so forth. Looking at the latest health care bills, we have not seen anything that says doctors are going to be spending more time with their patients.

We love the idea of health care reform, but we think people are looking in the wrong place. It should come from entrepreneurs, not the government.

We’re reminded of a friend who didn’t like his daughter’s experience at school. He didn’t complain. He decided to start a school. The teachers and principal found out about his plan and told him he was nuts, that he didn’t know anything about building a school, the proper education of children, the complicated civic policies, the labor issues related to teachers, or the technologies that help kids learn. They were absolutely right. But he was an entrepreneur, so he figured it out and a month later had a plan that included poaching the best teachers, finding a superb operator, and listening, truly listening, to local parents. He enrolled them in the process, and they helped build the solution they desperately wanted for their children. They became accountable for their kids’ education.

No. 1: Listen to the Consumer

That was nine years ago. Today his school is the most popular (and profitable) in town. And the entrepreneur? He’s gone on to start two further, unrelated businesses. Like other entrepreneurs, he has a talent for finding organizations that are not good at listening to their customers—and then reinventing the experience.

We are already involved with a number of leaders in health care who are shifting their focus and their ears toward the consumer. They imagine a dramatic, swift and financially rewarding change. (We will keep you posted.)

If you lead a health care organization and want to begin the transition to one that is truly accountable to patients, consider the following questions: How can we offer clear incentives for good health behavior and penalties for bad behavior? How can we manage costs other than by denying or withholding service? How can we help those we have to deny? How would we communicate with our patients if we wanted to learn how to change our service? How do we close the gaps among the payers, providers and patients? (How to truly listen to your customers will be the subject we tackle next time.)

OK, you say: “Maybe health care can be reformed, but our industry is unique.” Hogwash. Think back to the beginning of the article. Travel, insurance and law are all being completely transformed by people who have listened to what customers want—and don’t want—and have offered the appropriate alternative.

We know this will happen in health care and in every other industry. The only question is: Are you ready or are you going to let your answer wait in the lobby? Answer quickly because your customers are about to go looking for a better solution.

G. Michael Maddock is chief executive, and Raphael Louis Vitón is president of Maddock Douglas, an innovation consultancy that helps clients invent, brand and launch new products, services and business models. Maddock is author of the book Brand New: Solving the Innovation Paradox (Wiley, April 2011) and coming in January of 2012, Free the Idea Monkey…to focus on what matters most!

This article originally published in Bloomberg Businessweek

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