Health System Executives: Is Your System The Next Radio Shack?

While that may seem like a silly question to some, is it possible that the health system business model has mimicked some of the same mistakes that caused Radio Shack to fail?

About eight years ago I met with the president or CEO of Radio Shack regarding an email I had sent him to discuss a potential business strategy. I wrote him asking why when every other wireless phone company was giving away phones in order to get the phone contracts Radio Shack was simply selling phones, and signing customers to contracts for other wireless carriers. My pitch to him was that Radio Shack had ceased to be relevant—bet you didn’t know I was prescient, and that to survive the company needed to figure out a way to sell something other than the bits and pieces of hardware, wires and batteries for which their customers paid less than a dollar.  He liked the idea.  Unfortunately, about a week later a story broke saying that he had fudged his resume and his title was changed to ex-CEO.

A list of Radio Shack’s biggest mistakes would fit easily on a Posit-It-Note;

  • It missed the influence the personal computer had on everyone
  • It failed to recognize the importance of the e-commerce
  • It sold a lot of things nobody needed
  • The things people needed they could get elsewhere

Scott Galloway, a professor at NYU’s Stern Business School wrote, “I wouldn’t even call this a failure. I’d call it assisted suicide. It’s amazing it’s taken this long for this company to go out of business.”

So, should health system executives be worried?  I think the answer is yes.  Let’s review the same four failure points;

  • Health systems missed the influence the internet and smart devices are having on everyone. The chief marketing officer of one of the largest children’s hospitals told me the average age of her patient’s parents was twenty-seven.  We agreed that those parents were always using smart devices.  I asked her if she ever saw those parents using smart devices to interact with her hospital.  She said the parents did not use them for her hospital because her hospital did not have anything people could do on a smart device.
  • Health systems failed to recognize the importance of e-commerce. People can purchase and consume dozens of healthcare services from their couches—triage, diagnoses, prescriptions.  And for the services they cannot consume from their couches, they can at least be examined from the couch and schedule an immediate appointment at a convenient clinic during the evening and on weekends.  (N.B. Posting your system’s ED wait time online will not allay this issue.)
  • Health systems offer services most people will either never need or will only need a few times during their lives. While that is a great thing if you are the person who needs it, it is an awful thing if you are a health system trying to stay relevant.
  • The things people needed they could get elsewhere. Vastly more people are consuming healthcare from a place other than a health system, and they are each doing it dozens of times each year. But don’t just take my word for it.  Send a team of your marketing and business development people—I picked them because they may have time on their hands—to the mall, or a ballpark, or a theater and have them survey the first hundred people they meet.  Invite them to ask the following questions:
    • Did you purchase a healthcare service from a health system in the last twelve months
    • How many times did you purchase a healthcare service from some place other than a health system in the past twelve months

If I was a betting person, I would bet the survey would indicate something like the following:

  • At least eighty percent of people surveyed had not been treated by a health system in the last year
  • Of those who had been, almost all of them will have purchased multiple additional healthcare services outside of the health system
  • Of those who did not purchase healthcare from the health system, over half of them will have made ten or more health-related purchases elsewhere.

And those questions asked about “a health system.”  Had the question been asked about your health system, the results would have been much more unfavorable simply because people have a choice of health systems.

So does that spell all doom and gloom?  I don’t think it has to.  A lot of sound business strategy can be gleaned from the work of others.  One of those others, the person whose oracles I have found helpful is Mel Brooks who in Young Frankenstein wrote, “Could be worse; could be raining.”  Therefore, as you look out your windows, if you are not hearing thunder and lightning, you may still have time to turn things to your advantage.

One thought on “Health System Executives: Is Your System The Next Radio Shack?

  1. great article – I agree with the thesis on the increasing irrelevance of the Healthcare providers. I applaud the concept of considering patients as customers and the Healthcare as a business to provide services. I think we have diminished these aspects of the industry as we continue to debate public funding supremacy. Thanks for an intriguing perspective on the issue!


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