Companies that change the game can change the world
Photograph The world faces a host of existential crises, including climate change, natural scarcity, income inequality, and poor global health. We call these exponential crises because they are characterized Have you heard enough bad news? There is some good news. The solutions to these exponential crises—or at least components of the solutions—are at hand. And if they are properly harnessed That pattern—the ability of business to solve social problems—is the basis of a research project we have undertaken to gain a systematic understanding of just how this dynamic can play out, and what sums are at stake. And it is clear to us that under certain conditions, business can in fact be the source of great progress and solutions while doing what it does best: innovating, investing, developing compelling products and services, and executing. In short, with the right technology and the right business model, and in working with the right counterparts in the right way, businesses can enable prosperity and health while creating and capturing immense value. The companies that can do this best are what we call the game changers. Game changers address an exponential problem In many areas, as techno-optimists like to point out, we have the tools and resources at our collective disposal to deal with these crises. The world’s land can theoretically produce enough food to eliminate hunger. Putting solar panels on just 22,000 square miles of the US—0.6% of the country’s landmass—could power the entire nation (provided, of course, there are batteries sufficiently large to store electricity for when the sun goes down). The technology tool kit available to us today is far more potent than any before. Artificial intelligence, data analytics, the internet of things, automation, sophisticated collaboration and communication tools—these exponential technologies, which continually fall in price, enable the rapid and economically efficient scaling of powerful solutions. Moore’s Law is a representative construct of how and why these technologies can create far-reaching impact when embedded in the right solution sets. Consider that the iPhone today puts exponentially more computing power in the pocket of a young woman sitting in a café in Jakarta than was in ENIAC, the massive first supercomputer developed in the 1940s.
Technology is just a tool—a powerful one, but a tool nonetheless. In order to really make a difference, to overcome the negative feedback loops of exponential crises and the powerful countervailing anti-scaling forces present, exponential technology has to be married to, and integrated with, an exponential business model. Simply attaching a jet engine to a vehicle won’t ensure that it will fly safely. Technology has to be melded with an effective strategy for development, deployment, innovation, and iteration.
Simply attaching a jet engine to a vehicle won’t ensure that it will fly safely. Technology has to be melded with an effective strategy for development, deployment, innovation, and iteration.
An ecosystem approach
And there’s one more piece of the puzzle. Marrying exponential technologies to exponential business models isn’t alone sufficient. In order to really do their work in the world and create value, game changers have to work within ecosystems, encouraging other investments that make their own products and services more viable and compelling. The onus of, and opportunity for, innovation doesn’t fall on a single party. Rather, much as Apple has done, companies can create opportunities for others to add their own ideas, capabilities, tools, and products and services. In ecosystems, as compared with the typical supply chain model, value is created through opening more channels: Another example of a game changer operating in this mode is likely Tesla. It has sought to solve the exponential problems of climate change and mobility. It has adapted a series of exponential technologies—not just batteries and solar panels, which have made quantum leaps, but AI, autonomous driving, and software. It has created a unique and divergent business model that allows it to scale: direct-to-consumer sales, its own network of “gas” stations, and ancillary businesses in energy storage and home-based solar power. And it works in a vibrant ecosystem. Tesla’s growth has led to massive investments in charging infrastructure, software, and products that optimize electric mobility and renewable energy.
But the power of game changers isn’t limited to computers and mobility. In our research, we have examined companies operating in a variety of industries, including power production, healthcare, chemicals, retail banking, educational technology, and agriculture. Their stories aren’t always neat, but the underlying argument holds across industries. In this article, we take a look at how it can play out in the US sector of the vast global healthcare market.
The healthcare opportunity
US healthcare is the arena in which we have done the most intensive work and modeling. In the United States, the world’s largest economy, healthcare represents about 20% of GDP. Healthcare is plagued Of course, the ability to treat both the symptoms and the causes of the US health crisis exists in many cases. But several classic anti-scalers are present that prevent solutions from rolling out effectively. These include subpar consumer experience and low levels of trust; opacity in price, data, quality, and outcomes; a general resistance to change in a stressed environment; and financial incentives. At the same time, several exponential technologies have applications to this sector, including digitization and the incorporation of AI and automation into the care-delivery process.
All of this means there is a great deal to be gained for all parties if business can solve this societal problem. According to our forecasts, US$1 trillion in financial value is at stake over a five-year period (through 2027) if the healthcare system can move to new, more effective models. For society, we believe there is an opportunity to create a US$200 billion consumer surplus over five years (through 2027) through lower healthcare costs. Such efforts will likely also result in improved experiences and outcomes.
We are starting to see some work in using exponential business models in the US healthcare ecosystem. There are two model types that offer the largest potential for value creation in this scenario: orchestrators and integrators.
Orchestrating better experiences
Orchestrators advocate for consumers and guide them through the healthcare journey, ensuring seamlessness and coordination across a network of care-delivery entities. Orchestrators influence care delivery The value at stake here is immense. Depending on future scenarios (involving the extent to which consumers/funders versus incumbents reshape the industry), orchestrators are expected to garner US$150 billion to US$230 billion of revenue and direct another US$1.2 trillion of revenue (approximately 30% of the total industry) CVS, for example, is making major investments in an omnichannel care-delivery platform centered on what it calls HealthHUBs. Since its 2017 merger with the giant insurer Aetna, CVS has evolved from attempting to sell insurance to trying to get more people into its stores to access products and services. HealthHUBs offer insured customers an in-store meeting with a coach who can lead them through the whole healthcare experience. The value proposition is twofold. First, once a company can start to orchestrate the experience, it can better manage the overall health of an individual—and hence lower medical costs through value. Second, the improved experience drives loyalty and creates greater stickiness. People who have a positive HealthHUB experience will be more likely to fill prescriptions and shop at CVS stores, and continue to stay with Aetna—which covers many of the services there—for their insurance. In this instance, the orchestrator makes money through charging premiums, lowering costs, and getting greater sell-through for the business. CVS wants to function as a front door into the system, directing individuals to where and how they seek care. It is deploying AI and advanced analytics to send consumers to the right places in its pharmacy, retail, and health insurance businesses.
Startups such as Accolade Health, a pure-play orchestrator, represent another approach. Accolade works with self-insured employers, including large organizations such as PwC. It specializes in claims, processing the paperwork and then using the volume of claims it handles to get discounts with big providers. The company also can assign a care advocate to clients’ employees who will effectively orchestrate their healthcare—whether that means finding a dietitian or figuring out how to get reimbursed for a gym membership. Accolade charges a flat rate per person covered and promises to deliver a lower medical cost, passing savings on to the customer. The company connects individuals to a care advocate, who is then informed Although outcome data is limited, orchestrators are beginning to demonstrate efficiency improvements and have proven their ability to capture consumer loyalty. Accolade, for example, boasts an industry-leading Net Promoter Score (70-plus NPS for advocacy leaders).
Orchestrators can harness data and information to provide advice to consumers, and can use the power of consumer decision-making to push industry participants to work within certain specifications. If an orchestrator knows a patient with knee pain already had an MRI on the knee and nothing has changed since that scan, they would recommend that the physician treating the patient use the existing MRI; similarly, they could recommend that the patient have knee-replacement surgery at an outpatient center instead of a hospital. In a world where consumers are increasingly responsible for expenses, this information becomes more powerful. And it forces providers to share quality and cost metrics.
The integration play
Integrators own care delivery across channels and meet consumers’ care needs across their journey. They typically manage a closed, vertically or virtually integrated network that focuses on a specific geography (e.g., Kaiser Permanente in California), disease state (e.g., Omada Health for diabetes), or consumer segment (e.g., Humana for the Medicare market). We expect integrator models to deliver approximately US$1.5 trillion to US$2.2 trillion in revenues of the US$3.6 trillion healthcare industry in 2027. This reflects a 75% increase from present levels, and will make integrators the predominant model of care delivery in the country.
Integrators change the game Integrators can also achieve the incentive alignment and technology integration needed through value-based contracting supported The virtual integration option replicates this approach without a single entity owning the value chain, and instead sets the right financial structure to each transaction in the value chain. In this world, insurers or providers work on capitation payments—that is, they receive a flat rate per person per year for all healthcare spending. As a result, they have incentives to invest in the types of initiatives that have been proven to reduce healthcare utilization, in part In its work with a large provider, PwC has used its proprietary body-simulation technology to help decide whether a US$400 million investment in social determinants of health should go into building urban groceries or improving housing.
Humana focuses on a specific market segment—the vast Medicare population of Americans over the age of 64—and has assembled capabilities geared toward this population. The company has built up middle-office capabilities dealing with care management and utilization management. Because seniors are most likely to trust doctors on healthcare, the company deploys value-based models with primary care physicians to incentivize them to manage the full-care journey for seniors. And because care can often be delivered to seniors more efficiently at home, in 2021, Humana acquired Kindred at Home, a leading player in the home health sector. At roughly the same time, it acquired onehome, which specializes in value-based home health.