Try Reality II

T H E F U T U R E WA I T S FOR NO ONE:

what will be our reality?

steve garguilo Johnson + Johnson

A DISC US SION OF T H E F U T U R E O F H E A LT H C A R E

Every great company has its moment of truth, and ours is now.

Where we must look to Our Credo and ask ourselves if we are doing enough of the right work in the right way to meet the healthcare needs of our society in the future. That in spite of our 130-year legacy of delivering standard-setting healthcare products and services that are known for their safety, quality, and trust, this is no longer enough.

We must do more, do better, and do differently. The world outside is speeding up, specializing, and socializing at scale, and it is incumbent upon us—with our collective insights, resources, and courage—to do more than operate within the status quo. We must become the chief sense-makers, irreverent rule-breakers, and creative visionaries for our industry. In other words, we must step into the unknown and lead.

The global healthcare industry is experiencing a sea change as it struggles to incorporate the costs of breakthrough science and technology, absorb the financial burden of the chronically ill and the aging, and keep quality healthcare affordable and accessible to all. The system has reached a tipping point where the new needs cannot be solved with old thinking. Inefficient, opaque, and complicated, the healthcare system is ripe for a reset, and in need of bold, brave, trusted leadership to envision the collective path forward that leaves no constituent out.

We have an opportunity to co-create the future of human health. To rethink the needs of stakeholders across the system, and transform the 1

standards of quality, cost, delivery, and outcomes. Broadly positioned across geographic markets, business segments, customers, and caregivers, we have more than an opportunity, we have an urgent responsibility, to make sense of the forces transforming our world today in order to provide quality care that is affordable and accessible tomorrow—and there is no other company better positioned to see the future and serve the societies of our world.

Living Our Credo in the future requires us to redesign the rules, relationships, rewards, and resources that have been instrumental in our ability to create value for our stakeholders through scale, reach, brand, and price—the primary levers of a commodity-based, transactional economy. But these are not the levers that will sustain our growth in what has become the human economy where value is driven by experiences and relationships.

Living Our Credo in the human economy requires us to do more than double-down on our commitment to safety, quality, and trust—we must also commit to speed, community, and a culture of creativity. And we must do it all with a deep understanding of what it takes to compete and win in a world that has fundamentally changed: w e

m u s t e m b r ac e t h e n e w r u l e s o f

where new value belongs to those who master the ability to create meaningful experiences and assemble communities, and even the most beloved brands and scientifically-advanced products are little more than commodities that compete on price. va l u e c r e at i o n

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w e m u s t e m b r ac e t h e n e w m i n d s e t o f o u r

where our fiercest competitors are radically empathic rebels and rule-breakers, intent on breaking up what they believe is a bloated, bureaucratic healthcare system that costs more and delivers less. competitors

w e m u s t e m b r ac e t h e n e w n e e d s o f

& c a r e g i v e r s where personal health data is transforming relationships between patients, consumers, practitioners, and places, drawing new lines of trust, and creating new sources of proprietary insight. customers

w e m u s t e m b r ac e t h e n e w r o l e o f s c i e n c e

& t e c h n o l o g y where the convergence of scientific discovery and technical capability are fundamentally restructuring the ecosystem of care, creating new global regulatory challenges, and elevating ethical debates about the future of humanity, intellectual property (IP) rights, and fair, transparent pricing. w e m u s t e m b r ac e t h e n e w d e m a n d s o f wo r k , wo r k e r s ,

& wo r k s pac e s where the best people are looking for more than a cookie-cutter career path— they want meaningful work in a stimulating environment that rallies around the new currency of creative ingenuity, valuegenerating ideas, and 100% ownership and execution.

These are the major forces disrupting our world, and the longer we maintain the status quo, the faster we fall behind.

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Let us cultivate a collective creative force that elevates gamechanging ideas and promotes an urgent bias toward action:

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where we develop radical empathy toward every stakeholder in the system and generate ideas and solutions that transform their lives

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where we value productivity over effort, assume full responsibility for our ideas, contributions, and experience, and refuse to settle for mediocrity or add to the heap of half-hearted, half-started projects along the way

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where we rally around the best, most transformative, value-generating ideas—no matter their origin— mobilizing our collective resources and clearing a path to market

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where our work is more than a job or a paycheck—it’s a means of self-expression and a source of deep, lifegiving satisfaction

If we don’t claim our rightful place in a future that is rapidly being reshaped by the forces at work today, we risk the same fate of other oncegreat, legendary companies that sought comfort in the familiar rather than challenging themselves to rise up, look beyond the status quo, and step into the unknown.

The future waits for no one.

What will be Our Reality?

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THE

FI V E FORCES R E S H A PI NG O U R WO R L D

what will be our reality?

F O RC E # 1

T H E N E W RU L E S O F VA L U E C R E AT I O N

New value is no longer the privileged domain of those who guard the gates of capital, shelf space, production, or IP. Nor does it depend on brand loyalty, brand love, or exclusivity. In fact, the new rules of value creation have little to do with products at all, and everything to do with experiences—moments that create deep human connection, confidence, and control.

The future value in healthcare belongs to those who are first to dream up and design relevant experiences, assemble deeply committed communities, and integrate the two at scale for the people in the system who need them most: ·

patients whose treatment is determined not by what they need, but by what they can afford

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consumers fed up with the increasing costs of even the most basic care, and the bureaucratic hurdles they must go through to get it

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caregivers whose treatment protocols are restricted by profit-focused insurance providers, limiting their ability to deliver high quality, compassionate care 6

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institutions immobilized by the escalating costs of the latest life-saving science and technology, and the limits of public and private reimbursement

The value-creation strategy that has served us in the past—amassing a strategic mix of healthcare companies to gain economic synergies, scale, and bargaining power with customers and suppliers—is not the valuecreation strategy that will win in the future. The human economy is driven by more than margin, it’s driven by connection, transparency, and convenience. In other words, relationships and experiences.

We live in a world where insights, ideas, and information are the new assets, and networks of relationships are the new IP. Where the rules and tools of new value have changed, and technology is the great enabler and equalizer—replacing costly relationships and inefficient processes with apps and scripts; democratizing access to risk-free capital for the rule-breakers and visionaries pursuing big ideas; and redefining the balance of power, influence, and control over personal health records, diagnostics, and decision-making.

What will be Our Reality?

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UNLIMITED RESOURCES

In 2015, Pebble Time, a smartwatch maker in Palo Alto, California, sought $500K on the Kickstarter crowdfunding platform for its next generation product. After only 49 minutes, it raised $1 million, and ultimately closed its campaign with $20,338,986 (4,067% of goal), proving that where there is a great idea, the money will follow.1, 2 UNLIMITED WORKFORCE

In only five years, Uber’s market cap of $68 billion makes it the fifth largest auto company in the world, with one giant difference. Rather than manufacturing or selling automobiles, it has created a transportation network that matches ride givers with ride hailers facilitated by a ride-hailing smartphone app and a network of more than 160,000 self-employed drivers.3, 4 UNLIMITED INVENTORY

The sharing economy is changing the way we relate to our possessions and to each other, creating opportunities to exploit material excess and idleness in pursuit of new value. Since its founding in 2008, Airbnb has amassed more than 1.5 million “hotel” listings from homeowners in 34,000 cities and 190 countries, making it the largest, most extensive hotel network in the world.5, 6

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What can we learn from crowdsourcing to concentrate our collective resources around our best ideas, rather than thinly investing across the many?

Instead of organizing our ideas, skills, and resources around shared technologies, business segments, and distribution systems, what would happen if we organized ourselves around the entire human experience— from conception to birth to aging?

For 130 years we’ve profited as a products company.

What would have to change if we thought of ourselves less as a products company and more as a “technology” or “experience” company?

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F O RC E # 2

THE NEW MINDSET OF OUR COMPETITORS

We no longer compete with established businesses and brands that perpetuate a healthcare ecosystem that does not work. We’re now playing with independent outsiders unencumbered by tradition—individuals and corporations who are fed up with an opaque system that favors slowmoving incumbents perpetuating the status quo, and does little to solve the most urgent problems of rising costs and declining outcomes.

In each of our businesses we face the fiercest kind of competitor: bold, impatient, and fearless. In other words, unstoppable. They will risk their reputation, torpedo their career, and suffer public failure and humiliation—all for an idea. They’re placing game-changing bets and fusing science and technology to disrupt ecosystems, transform products into experiences, and convert customers into advocates, and they view failure not as an end, but as a beginning. These are radically empathic leaders and visionaries who hold themselves to a higher standard on price, value, outcomes, and impact, and they are driven by their overwhelming desire to disrupt the status quo.

Our new competitor doesn’t believe in incremental gains—because small change is not what the world needs. They’re investing in lasting

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legacies where the only win that matters is complete transformation of the entire healthcare system. Their success will improve outcomes, reduce costs, inform policy, and ultimately redistribute wealth across the system, putting it back into the pockets that matter most—consumers and patients. They’re not satisfied with merely enhancing lives, they must transform them—forcing everyone else to play their game.

What will be Our Reality?

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NO EXPERIENCE REQUIRED

Under Armour Founder Kevin Plank is motivated by more than money.

As a former collegiate football player (a walk-on, no less), he’s motivated by winning. With a $9B market cap for his athletic wear brand, he is aggressively broadening his game into digital health, becoming the second most active acquirer in 2015, spending $710M on MapMyFitness, MyFitnessPal, and Endomondo.7, 8 NO SHELF-SPACE REQUIRED

When veteran entrepreneurs and dermatologists Katie Rodan and Kathy Fields were frustrated with lackluster growth in high-end department stores for their flagship skincare brand, Rodan + Fields, they took sales into their own hands. In 2008, they bought back the brand from Estée Lauder, created “the modern house call,” and turned 75,000 brand advocates into consultants.9, 10 NO ON-RAMP REQUIRED

Since 2014, Nestlé SA has aggressively transformed itself from a global consumer food products company to a global consumer healthcare company with a proven arsenal of high margin, recession-proof products consumers desire. In just two years, they’ve acquired the U.S. and Canadian distribution rights to Valeant’s skin fillers, the global distribution rights to Proactiv’s top-selling acne management system, and the remaining distribution rights to Galderma, maker of dermatological treatments for skin disorders including acne, rosacea, and psoriasis.11,12 12

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As long as we think in terms of products and SKUs, we limit the scope of what we might do. What is the larger story of our most beloved brands and what big bets should we be making to create more value?

Traditionally, we have viewed the people who buy our products as customers.

What would change and what new opportunities might we create if we also saw them as collaborators, counselors, or consultants?

We’ve successfully exited businesses when the fundamentals were at odds with our strategic core and long-term financial viability. How might we reframe our existing assets and eco-system to enter new businesses that lock in new avenues for growth?

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F O RC E # 3

THE NEW NEEDS OF CUSTOMERS & CAREGIVERS

The sky rocketing costs of healthcare, driven by advancements in science and technology, an “over-nourished” population suffering from obesity and other preventable chronic conditions, and an aging population that is living longer and stronger than ever, has reached an economic tipping point for consumers, patients, and caregivers. Together, they’re fueling a movement toward preventive care, personal health accountability, and “smarter” living.

Faced with an ever-increasing financial burden, individuals and institutions are desperately seeking new ways to reduce the costs of healthcare, and they’re doing it by bringing together personal health data and devices to develop healthy living habits, anticipate and prevent disease, increase compliance, and localize the primary site of counsel and care.

This information-rich, insights-driven approach to healthcare enables our society to shift away from its dependence on treating chronic conditions and genetic predispositions after they’ve surfaced, toward an ongoing process of monitoring, prevention, and early detection.

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Access to data and proprietary insights is the single most important driver of competitive advantage in the information-rich healthcare ecosystem of the future, and whoever has a share of the human code— the genetic and behavioral data that will inform products, programs, services, systems, and experiences—will be in the best position to reverseengineer a global healthcare ecosystem designed around the financial profits of treatment over the humanitarian gifts of cure.

What will be Our Reality?

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PERSONAL HEALTH SPACES

In 2014, CVS placed a $2 billion bet, pulling all tobacco-related products from its shelves and branding itself a healthcare company.

Since then it has expanded its drugstore centers to offer healthcare services administered by nurse practitioners, finally giving Americans the convenience of a “corner clinic” that other countries have modeled for decades.13, 14 PERSONAL HEALTH INSIGHTS

While fitness apps started as a way to track calorie burn and consumption, they’ve quickly become a source of valuable diagnostic data in the lab and the ER. On two separate occasions, Fitbit’s Charge HR and Apple’s Watch have provided historical heartbeat data for their owners, helping their doctors diagnose irregular heartbeats that led to life-saving measures. And in one case, an increasing heartbeat helped Fitbit diagnose a pregnancy.15, 16, 17 PERSONAL HEALTH COUNSELORS

With the ease, affordability, and accessibility of genetic testing services like 23 and Me becoming more prevalent, there is a growing need for qualified counselors to work with patients who opt in to learn about their risk of passing on a genetic disease, or their likelihood of manifesting it, and managing their options along the way. Today there are only 4,000 counselors, or 1 for every 80,000 Americans.18

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We’ve long partnered with hospitals and surgical centers to offer the best tools, techniques, and training. What are we doing to partner with retail clinics and the growing population of caregivers— traditional and holistic—to offer patients and consumers the care, convenience, and affordability they seek?

As fitness apps become an integral accessory in our lives, not just for exercise but throughout the day, consumers are creating a database of information that can be mined to save their own life. How can we help these technology makers further close the loop between patients, consumers, clinics, and caregivers?

As lifelong supporters and educators of health practitioners, from nurses, to surgeons, to doctors, nobody is better positioned or more trusted to develop the skills and protocols needed to handle what can be some of the most difficult, life-changing conversations. How might we use our knowledge and skill to fill this gap?

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F O RC E # 4

T H E N E W RO L E O F S C I E N C E & T E C H N O L O GY

We’ve spent decades becoming the trusted source in products that treat and restore the human body—consumer goods, pharmaceuticals, surgical tools, and medical devices—commanding premium prices for our legacy brands and institutional relationships.

The healthcare companies of the future focus less on restoration and more on prevention and augmentation, and they look more like the technology companies of today. They may be science-based, but they are technology-driven and enabled, allowing them to innovate faster, bypass traditional regulatory scrutiny, and dramatically reduce, or redistribute, the costs of diagnostics and care. And while their scientific breakthroughs have demystified the human body and pathology of disease, they’ve also unleashed a flood of new political and ethical dilemmas and debates regarding patent rights, pricing, and the limits of human engineering.

Never has the global healthcare industry been in greater need of a trusted voice and rock-solid leadership that can temporarily set aside corporate self-interest to do the right thinking, campaigning,

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and decision-making for the world, working across all constituencies to establish human-centered standards for safety, quality, and trust in an environment that is often subject to fantasy, fiction, uncertainty, and fear.

What will be Our Reality?

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INCREASING SUBSTITUTES

Developed through early adaptations of the inkjet printer in 1984, 3D printing processes that use material instead of ink are transforming product design and manufacturing with open-source schematics, inexpensive prototypes, made-to-measure surgical tools, and fully-functioning jaws, knees, and hands—all for a fraction of today’s cost. As an example, a 3D-printed prosthetic hand costs only $20-50 vs. $50,000.19, 20 INCREASING DEBATE & CONTROVERSY

CRISPR, or “clustered regularly interspaced short palindromic repeats,” is a simple mechanism for editing DNA in a variety of cells. And while it makes lab-testing and simulations faster and more affordable for even the most obscure diseases, it also opens the floodgates for a wide range of ethical dilemmas surrounding patent rights, affordable access, and use.21 INCREASING PRECISION

Nanotechnology—or science carried out on a scale of one-billionth of a meter—is finding its way into everything from advanced medicine to manufacturing. Among its many promises are highly targeted treatments, cures, personalized medicines, post-surgery protocols, and self-healing materials that are changing the cost, quality, and site of care through ingestible and injectable nano carriers.22, 23

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3D printing is expanding the market for prosthetics by making them more affordable, especially for the economically disadvantaged and growing children.

What will be the impact of 3D printing on our current businesses, and how might we embrace this new technology to meet the needs of this forgotten market?

With the discovery of CRISPR, genome editing is more precise and less costly than ever, making it possible to eradicate disease or design an embryo. Where are the limits of genetic manipulation, and where is our trusted voice in the debate?

Personalized medicine that improves and saves lives is no longer a fantasy from the future—it is here today. What will be the role of traditional treatments and medicines in the context of nano-cures?

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F O RC E # 5

THE NEW DEMANDS OF WO R K , WO R K E R S , & WO R K S PAC E S

The new workers are imaginative and resilient problem-solvers who treat every work experience as an opportunity to hone their craft, broaden their knowledge, build relationships, and assert their brand.

They view work as a creative expression of their talent and desire, and as a vehicle for building their skills and portfolios, expanding their network, positioning themselves for the next great gig.

These are independent, confident, and competent self-starters who are driven to quickly make a difference. Experts at creating vision, mobilizing resources, and collaborating across physical and virtual spaces, they seek opportunities with like-minded companies and communities who share their cause and their aversion toward burdensome rules, restrictions, and bureaucracy.

As technologies allow work to happen any size, any time, any place, long-term careers are morphing into short-term gigs, and loyalties are shifting away from individual leaders and companies toward project teams and opportunities that maximize personal growth and engagement.

The war for talent will be won by those companies that rethink their approach to traditional career paths, curriculum, and reward systems

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based on long-term performance and loyalty. The talent magnets of the future will reinvent their recruiting and retention methods, prioritizing purpose, culture, and community, while also optimizing the raw talent and intrinsic desire of every individual.

What will be Our Reality?

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THE NEED FOR CREATIVITY & CONNECTION

Creativity is the fuel for innovation, yet only 25% of people surveyed believe they are living up to their creative potential. Tapping into that vast source of knowledge, insights, and Aha! moments is the holy grail of leadership, yet it’s a mystery to many. Part art, part science, it requires a culture focused on community, small wins, and meaningful work, and a process that activates both sides of the brain.24, 25, 26 THE NEED FOR FLEXIBILITY, FREEDOM, & CONTROL

According to a survey conducted by Elance-oDesk in 2014, there are 53 million freelancers in America—or 34% of the working population.

Fueled by mobile technology and the information economy, this large and growing talent base opts in to work on their terms where they value short-term flexibility, freedom, and control over long-term careers and commitments.27 THE NEED FOR PRIVACY & PLAY

Worker productivity is not just a function of having the right culture, coaching, or tools, it’s also a function of having the right mix of workspace and work norms that foster individual thinking as well as open collaboration. The most productive employees are happy employees whose workspace allows them to manage distractions, take breaks when needed, work where they want, and avoid interruptions.28

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If creativity is the new coveted currency, what must we change in our work methods, incentive plans, and organizational structures to inspire everyone to follow their curiosity, take more risks, and generate a lot more ideas?

The information economy has created a new kind of worker who thrives on shortterm, high-impact engagements. How can we create a culture and structure that makes room for, and brings out the best in, the careerminded professional and the gig-minded freelancer?

Who needs another study to tell us what we all have experienced to be true? How might we accelerate the transformation of our workspaces in a way that favors collaboration, while still preserving moments of quiet?

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SOURCES 1.

“Fastest projects to reach 1 million USD in crowdfunding on Kickstarter,” Statista.com, June 2015

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“The 10 Most Funded Kickstarter Campaigns Ever,” Entrepreneur.com, December 2015

3.

“At $68 Billion Valuation, Uber Will Be Bigger Than GM, Ford, and Honda,” Forbes.com, December 2015

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“The Numbers Behind Uber’s Exploding Driver Force,” Forbes.com, May 2015

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“Airbnb Grows to a Million Rooms, and Hotel Rivals Are Quiet, for Now,” NYTimes.com, May 11, 2015

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Airbnb company profile, www.fastcompany.com, sourced June 27, 2016

7.

“Can Under Armour Score with Wearable Fitness Tech?” Fortune.com, January 2016

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“Digital Health Exits Slowed Down in 2015, But Saw 5 IPOs,” CBinsights.com, January 2016

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“Three startups that want to steal Avon’s look,” Fortune.com, May 2015

10. “Skin Care Company Rodan & Fields Pursuing a Sale,” WSJ.com, February 2015 11. “Nestle buys Valeant skincare rights for $1.4 billion,” Fortune.com, May 2014 12. “Nestle Forms Alliance With Bieber’s Fave Acne Cure Proactiv,” Bloomberg.com, March 2016 13. “Here’s How the 2 Biggest Players in the Battle of the Drugstores Stack Up Head-toHead: Walgreens and CVS look to become healthcare providers,” Adweek.com, March 2016 14. “The Undeniable Convenience and Reliability of Retail Health Clinics,” Upshot, The New York Times, April 12, 2016 15. “Apple Watch Saves Man’s Life,” Forbes.com, March 2016 16. “This Dude’s Fitness Tracker May Have Just Saved His Life,” Gizmodo, April 2016 17. “Husband and wife never expected their Fitbit would tell them this...,” CNN.com, February 2016 18. “More People Seek Genetic Testing, But There Aren’t Enough Counselors,” NPR.com, April 2016

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19. “Hand of a Superhero — 3-D Printing Prosthetic Hands That Are Anything but Ordinary,” New York Times, February 16, 2015 20. “3D Printing Revolutionized the Medical Device Industry — and is Revolutionizing Yours. What will you do?” Gartner Blog Network, October 15, 2014 21. “Easy DNA Editing Will Remake the World. Buckle Up.” Wired Magazine, August 2015 22. “This Tiny Robot Team Could Help Stop the No. 1 Killer in America,” Fortune.com, January 12, 2016 23. “Why There Aren’t Yet Nanobot Doctors,” TheAtlantic.com, August 6, 2015 24. “State of Create Study — Global Benchmark Study on Attitudes and Beliefs about Creativity at Work, School, or Home” http://www.adobe.com/aboutadobe/ pressroom/pdfs/Adobe_State_of_Create_Global_Benchmark_Study.pdf, April 2012 25. “The Power of Small Wins,” Harvard Business Review, May 2011 26. “The Science Of Great Ideas—How to Train Your Creative Brain,” Fast Company, December 3, 2013 27. “The Biggest Workplace and Career Predictions for 2015,” TIME, December 30, 2015 28. “Balancing ‘We’ and ‘Me’: The Best Collaborative Spaces Also Support Solitude,” Harvard Business Review, October 2014

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“Why be difficult when with a little effort you can be impossible?”

—general robert wood johnson