Tag Archives: walmart

The Silos Are Coming Down

While I’ve heard many too many empty promises of corporate synergies over the years, I’ve learned that one form of cross-selling really does work: “Do you want fries with that?”

So, I’ve been waiting (and hoping) for insurers to find ways to achieve similar sorts of easy, intuitive crossover sales.

There are already a few combo meal sorts of offerings that show promise — e.g., Tesla bundling auto insurance with its cars, or Comcast selling insurance into homes that are tethered to it via coaxial cable — but my ears really perked up last week when stories surfaced about Walmart forming an insurance agency.

It just makes sense. With 5,000 outlets in the U.S. alone and 265 million customers worldwide, Walmart has a target-rich environment for insurance sales. Many, in fact, are visiting Walmart to pick up pharmaceuticals or to buy other items related to their healthcare, so health insurance is on their minds. Walmart, given its relentless efficiency, could easily develop insurance products that undercut competitors’ prices and would have the credibility with customers to sell boatloads of those products.

In fact, Walmart wouldn’t even have to generate the sorts of profit margins that competitors do, because a tighter relationship with customers on their health needs would bring them into stores more often and let Walmart generate profits on groceries, home goods and all sorts of other products. (Regulators will surely weigh in on what constitutes fair competition.)

Walmart signaled that it will begin with a niche, Medicare Advantage, that plays to its price-sensitive demographic. In fact, through a $4 generic drug program, Walmart often provides pharmaceuticals to customers for less than their Medicare Advantage insurance would charge them, so Walmart has already made inroads.

In research I’ve done with Chunka Mui on major strategic mistakes, the kind of adjacency move that Walmart is making raises red flags, because retailing and health insurance have little in common. But Walmart has done all the right preparation, having spent more than 15 years testing the waters in health care and insurance — hosting insurance agents onsite, setting up joint ventures with insurers, putting clinics in some stores, buying and deploying technology to help customers manage medications, experimenting with telemedicine and much more.

Walmart is also starting small with its agency, advertising for employees and building an internal capability, rather than spending a bunch of money on a splashy acquisition or two. (Sears made that mistake in the early 1980s when it bought Coldwell Banker and Dean Witter, only to be distracted by integration issues and take its eye off the ball in its core business, which it ceded to… Walmart.) So, I see no particular obstacles for Walmart.

In fact, health insurance is such a mess that many customers would love an outsider’s approach, especially if the outsider is, like Walmart, known for being straightforward and inexpensive.

Given the battle to the death between Walmart and Amazon, it’s reasonable to think that Amazon might now accelerate whatever plans it has for health insurance. It might behoove insurers to get ready, and even to go on the offensive, looking for partners outside the industry rather than waiting for them to define an opportunity in insurance.

Insurers won’t be pushing fries and, alas, can’t offer dollar meals or dollar anythings, but there are lots of healthy options that can be offered and sold easily if insurers get creative about how to bundle their products with partners’.

Stay safe.

Paul

P.S. Here are the six articles I’d like to highlight from the past week:

6 Life, Health Trends in the Pandemic

Life and health carriers are responding with new protection products and services.

Reigniting Growth in U.S. Life Insurance

Agile response to COVID-19 bodes well for returning the life insurance sector to long-term growth and wider financial protection in society.

COVID-19 Highlights Gaps, Opportunities

The pandemic and the response to it have highlighted significant gaps in industry offerings that are yet to be resolved.

Another Reason for Insurers to Embrace AI

AI alerts have played and continue to play a critical role in detecting and controlling future outbreaks like COVID-19.

Wildfire Season Off to Perilous Start

Fires can create their own weather: Smoke-infused thunderstorms produce lightning that starts new fires and can lead to fire tornadoes.

Lasting Impact of Plaid’s Innovation

The temptation to try to own all the value at every layer of a solution can be fatal, and is something Plaid brilliantly avoided.

Walmart May Redefine Primary Care

When Catalyst for Payment Reform hosted a webinar that provided a glimpse into Walmart’s healthcare strategy and management plans, Lisa Woods, senior director of U.S. benefits, talked about a new program to simplify and improve healthcare, particularly primary care, for Walmart’s million-plus associates and their families.

She alluded to Walmart’s well established and continuously expanding Centers of Excellence (COE) programs, as well as two new programs. First is a personal healthcare Assistant, powered by healthcare navigation firm Grand Rounds, that helps Walmart associates with billing and appointment issues, finding a quality provider, understanding a diagnosis, coordinating transportation, arranging child care during appointments and addressing other important patient needs.

Walmart has also broadened its telehealth offerings, including for preventive health, chronic care management, urgent care and behavioral health. All video visits have a $4 copay, and associates can book an appointment with a primary care physician within one hour and a behavioral health visit within one week, making services highly accessible. Partners for this program are Doctors on DemandGrand Rounds, and Healthscope Benefits.

Daniel Stein and Matthew Resnick, from physician profiler partner Embold Health, described how their data collection/analytics approach identifies physicians with histories of providing the most appropriate care. In three markets – Northwest Arkansas, Tampa/Orlando and Dallas/Ft. Worth – Walmart’s “Featured Provider” program will connect patients to the high-performing providers that Embold has identified in eight specialties: primary care, cardiology, gastroenterology, endocrinology, obstetrics, oncology, orthopedics and pulmonology. Walmart has been a key partner in the development of Embold Health – Stein, the CEO, Stein is a former Walmart medical director – and its efforts to accurately profile the quality of healthcare delivery at the individual physician level. The health outcomes improvements and savings associated with only using high-performing physicians should be profound.

See also: 11 Ways Amazon Could Transform Care  

The changes that Walmart has announced reflect a laser focus on solving specific problems, like overtreatment and patient difficulty with navigating the system, that plague all primary care programs. The company has been tinkering with and testing different primary care models for a decade or more. As with its COE program, the goals of Walmart’s new healthcare programs are a more refined, disciplined and methodical set of innovations focused on driving better care, a better patient experience and lower cost and that, for the most part, are not yet available to most primary care patients elsewhere in U.S. healthcare.

As a side note, it’s worth recognizing that, in an ideal world, the major health plans – e.g., United, CIGNA, Aetna, Anthem – with many millions of lives covered, would have pioneered these approaches to manage healthcare risk, to improve health outcomes and to reduce cost. The fact that payers haven’t been motivated along these lines is a reflection of the perverse incentives that have driven the U.S. health system for decades, that all patients and purchasers are up against and that have facilitated the kinds of innovations discussed here.

Walmart attacked these problems because it is at risk for its population and its costs. Few employers have the resolve and the resources available to develop key innovations that can move an industry like healthcare forward.

Not surprisingly, Walmart appears to see an opportunity here and has larger plans. Walmart almost certainly believes its healthcare efforts are applicable beyond its own population, and, like HavenKroger and Costco, has staked out a healthcare business strategy. Primary care are logical services to begin with, and Walmart has announced that its pricing will be 30% to 50% below conventional primary care prices. Walmart’s focus on improving experience, health outcomes and cost, combined with its national footprint and deep resource base, could immediately catapult it to the first rank of competitors in this space.

No doubt, Walmart has its eye on providing primary care services to groups as well as individuals. Relationships with health plans would allow the company to share in the savings it generates through the primary care platform and associated programs.

Think about the territory covered here. Walmart intends to:

  • Develop highly price competitive primary care clinics across the country.
  • Offer very low-cost telemedicine that can be a convenient pathway to primary care and other care, streamlining care processes.
  • Implement a personal healthcare assistant that can simplify navigating the healthcare system and expedite a much enhanced patient experience.
  • Connect to the highest-performing local physicians and regional COEs in each specialty, driving appropriate and disrupting inappropriate care and cost, in strong contrast to the inappropriate care and cost patterns that have come to dominate U.S. healthcare.
  • Develop some tie to health plans that would allow the company to benefit from the health outcomes improvements and savings that its management approaches create.

A vigorous primary care campaign by Walmart would undoubtedly threaten traditional primary care models and spur competitive innovation among progressive primary care organizations, especially if the company publicly conveyed a dedicated focus on transparent management of full continuum health outcomes and cost. This would powerfully differentiate Walmart’s primary care efforts from those of competitors like Walgreens and CVS, whose convenience care primary care models are mainly dedicated to maintaining the status quo.

See also: Avoiding Data Breaches in Healthcare  

Walmart’s activities in this space are one signal that the old paradigm in health care is waning and that a new, value-based healthcare market is emerging. It can’t happen soon enough.

How Tech Is Eating the Insurance World

Amazons and Apples and Googles. Oh my…

What do these companies have in common? Devout brand loyalty from the modern consumer coupled with world-leading technology. This poses a massive threat to insurance companies that value ownership of the customer above all else and are seriously lagging on tech. In a post-financial crisis world where financial brands are reflexively distrusted by modern consumers that have incredibly high digital UX standards, technology brands and emerging insurtech startups have a considerable advantage in winning future insurance business.

Amazon, Apple, Google and other tech giants don’t do anything small. It would be foolish for insurers to think that these disruptors will enter the industry to play nice and simply serve as their brokers or lead generators. They have capital in spades, massive captive audiences, piles of valuable data and are perfectly comfortable navigating complicated regulatory landscapes. Insurers like to hide behind this regulatory complexity as a reason to dismiss new market entrants, but this is simply a speed bump for those who want to make insurance a point of focus – not an insurmountable barrier to entry.

The Google Experience

Google dipped its toe in the industry in 2015 with Google Compare and then quickly withdrew in 2016. Insurers like to point to this as the shining example of how technology companies “don’t understand insurance” or how they “underestimate the complexity of the industry.” What they forget (or simply don’t mention) is Google’s core business model – advertising. What is the sixth most expensive word on Google AdWords? Insurance ($48.41 per CLICK!). Who buys that word and drives significant revenue to Google? Insurers. Google’s exit was not the result of execution failure or naivete; it was a consequence of rocking the boat with some of their highest-value advertising customers. The rest of the companies listed above, among countless other tech giants and well-funded startups, do not have that same conflict. Insurers are not immune to disruption from them.

Shifting Consumer Behavior

The modern consumer is a digital native and does not want to speak to people on the phone or fill out piles of paperwork. Consumers want to be offered insurance when it’s top of mind – how they want it, when they want it, from brands they trust, instantly.

One of the biggest problems we see with tech-insurance partnerships is insurers’ insistence on controlling the underwriting and sales process, which creates massive friction with technology companies that offer far superior digital experiences. Consumers don’t want to leave Amazon to start a separate purchasing process on an insurer’s website, and Amazon doesn’t want them to leave its site, either. This is something that is easily solved through API-driven technology systems and programmatic underwriting – words that often give insurers heart palpitations.

See also: What if Amazon Entered Insurance?  

Consumers don’t want to shop around for insurance on quote comparison sites. They don’t want to engage with insurance companies more than necessary or share troves of personal data through an insurance app. They want to purchase insurance when they need it, pay for what they use and never think about it again. Insurance incumbents have responded by building their own apps, offering discounts for more shared data and doubling down on advertisement spending.

Insurance in the Background

Insurance is an important feature, but not always the star product. It’s sold well to the modern consumer either purely digitally or as part of a broader offering – typically at the point of purchase for a non-insurance product or service. That’s an unpleasant thought for insurers that take a tremendous amount of pride in their history, processes and brands. However, letting pride and status quo dictate your business strategy is a good way to get your business killed.

Why not offer homeowners insurance in 15 seconds (not minutes) through fully digital workflow like Kin does? Why not combine cyber protection software and cyber insurance like Paladin Cyber does, so risk is reduced even further in the event of a cyber incident? Why not offer white-labeled SMB insurance to the millions of third-party retailers currently selling on Amazon? Or episodic renter’s coverage directly through Airbnb at the point of booking?

Here are a few reasons why insurers aren’t being more innovative:

  • insurers’ technology simply can’t support seamless distribution through digital platforms
  • insurers/agents/brokers insist on owning the customer
  • insurers don’t want to alienate their traditional distribution network of brokers and agents
  • insurers want full underwriting control through traditional, and often analog, methods
  • insurers don’t want to share data with tech companies but expect tech companies to open their proprietary analytics models to insurers.

This simply will not work.

The Everything Store

Apple already disrupted the warranty space by owning the whole AppleCare stack for themselves. Google has the conflicts discussed earlier. Facebook has the same. As a result, I believe Amazon is the most likely tech giant to make a big splash in the insurance industry as they continue to build their “Everything Store.”

We already see what they’re doing in healthcare, their investment in Acko in India, and rumors about an imminent play in banking. They recently acquired Ring, which has obvious insurance applications, for a reported $1 billion. The writing is on the wall. While I’m not entirely convinced that consumers will search Amazon.com for auto or home insurance, having millions of third-party seller merchants, adding 300,000 in the U.S. in 2017 alone, is a good starting point as far as addressable commercial insurance markets are concerned.

See also: 11 Ways Amazon Could Transform Care  

I am a huge admirer of what Jeff Bezos has built at Amazon, and I’m modeling Boost after what they did in the data storage and hosting space with AWS. It would be foolish for anyone to underestimate the impact a company like Amazon can have on any industry – no matter how old, established or huge the insurance incumbents’ businesses may be. Just ask Barnes & Noble, Walmart, media companies or any grocery store right now.

If India Overcomes Its Inferiority Complex

Walmart’s acquisition of Flipkart has created shockwaves in India, with the realization that the vast majority of its $16 billion price will go to foreign investors, namely Tiger Global, SoftBank, Naspers and Accel Partners. Now Indian investors are kicking themselves for missing out on the largest e-commerce exit ever. But they have no one to blame but themselves: Flipkart tried hard to raise money locally but was ridiculed and turned away, leaving only the foreign giants to rescue it.

This pattern will repeat itself until India’s investors realize that the best opportunities are not in Silicon Valley but at home. Frankly, I sympathize with Flipkart founders Sachin and Binny Bansal because I, too, have seen the Indian inferiority complex at work.

In a talk I gave at INK India in 2014, I predicted that a billion Indians would gain internet connectivity through their smartphones within a few years, and that this would begin to transform the country. Tens of thousands of startups building health sensors, robots, drones and commerce and infrastructure tools and hundreds of thousands of application writers addressing local problems could solve not only India’s problems but those of the world.

See also: India’s Coming of Age in Digital  

I also tried educating the executives of Wipro and Infosys. When they told me of the huge funds they were setting up to invest in Silicon Valley, I warned them that no one there cared for their companies or investments; at best, they would be offered bottom-of-the-barrel deals and be left chasing rainbows. And that is largely what has happened.

I live in Silicon Valley and am a professor, not an investor. I did, however, get involved with one Indian startup, because it had world-changing potential yet was dying on the vine. Indian investors ridiculed the notion that something of such magnitude could emerge from India; all they did was waste the time of the founders.

The company, HealthCubed, develops a compact medical-grade device that provides more than 40 measures and tests, including blood pressure, electrocardiography, blood oxygenation, heart-rate variability, blood sugar, blood hemoglobin and urine protein and is able to diagnose diseases such as HIV AIDS, syphilis, dengue fever and malaria. These are the same tests that labs and hospitals provide — but for less than one hundredth of their cost in the U.S.

Simply having the lab results immediately constitutes a huge benefit in a rural health clinic. Additionally, the data can be immediately uploaded to the cloud, allowing for rapid evaluation by a remote physician. And analysis of the bounty of data thus collected will enable fresh insights into many conditions.

I rarely have a problem getting Indian executives and VCs to return my emails. Yet when I wrote to them about HealthCubed, most didn’t even respond. Ironically, the investors who did respond said the valuation of the company was too high — without even asking what it was.

So I gave up on India and advised HeathCubed CEO Ramanan Laxminarayan to register the company in Delaware and move the intellectual property to the U.S. Then I invested my savings in the company and joined the board. James Doty, MD, a world-renowned neurosurgeon and entrepreneur who founded Stanford University’s Center for Compassion and Altruism Research and Education, did the same. He found the technology to be more advanced and more effective than anything he had ever seen.

Acumen, a New York–based impact investment fund, also invested in the company, as did American moguls Ray Dalio, Ross Perot Jr, Bridget Koch and actress Sela Ward and her VC husband Howard Sherman. One of Silicon Valley’s most respected investors, Raju Reddy, and an alumnus group from BITS Pilani also readily supported the company.

The product is now helping hundreds of thousands of villagers in more than a hundred districts of four states of India, thanks to the Aditya Birla Group. The world’s largest NGO, BRAC, is using it to improve health and create employment in hundreds of villages in Bangladesh. Tens of thousands of Rohingya refugees in United Nations clinics outside the borders of Myammar are being diagnosed with it. And it is now set to roll out in Ghana, Senegal and Nigeria.

See also: What India Can Teach Silicon Valley  

I expect that, by the end of 2019, HealthCubed will have done more than 100 million diagnostic tests; and that eventually products such as this will disrupt the U.S. healthcare system itself and will quickly spread throughout the Americas — and that India’s VCs will have another cause for regret.

That’s not to say Indian entrepreneurs shouldn’t take some of the blame. As Silicon Valley’s Hemant Kanakia said to me in an email: “Part of the problem I have observed while being an investor in Indian startups in the last six years is that Indian entrepreneurs have a short-term outlook; they want to make money and live the lifestyle of the rich. Sachin Bansal had no ambition like founders of China’s Tencent or Baidu have — of conquering the world.”

Yet even Silicon Valley was like this when its ecosystem was in its infancy. I’ll bet that as a generation of founders such as the Bansals achieves great success, they, too, will develop grand ambitions.

India’s Coming of Age in Digital

Walmart’s acquisition of Flipkart demonstrates both Indian e-commerce’s coming of age and a repetition of history.

U.S. giants will spend billions in India because they see huge opportunities, and this will produce a short-term boon for Indian consumers. When the dust settles, though, prices will rise and consumer choices will become more limited than they had been. Foreign companies will mine data and manipulate consumer preferences. They will have once again colonized India’s retail industry.

Protectionism for physical goods and services is usually a bad thing, as it limits the incentive to innovate and evolve, stifling a country’s competitiveness and productivity. India’s protected domestic companies became lethargic, offered substandard products and services at high prices, and hobbled India’s economy.

In a digital economy, though, things are very different. The value resides in the ideas, which spread instantaneously via the internet. Entrepreneurs in one country can easily learn of the innovations and business models of another country and duplicate them.

As core technologies advance, they become faster, smaller and cheaper — and accessible to everyone, everywhere. Startups constantly emerge, putting established players out of business. So, speed and execution are key to business survival and competitiveness.

Valuable competition and innovation can arise from within the domestic economy itself, without having to invite foreign companies to the table.

Technology-based industries, such as retail, electronics and distribution, that require large capital investments handicap the small players, because money provides an unfair advantage to the larger ones.

See also: Copy and Steal: the Silicon Valley Way  

The latter can use capital to put emerging competitors out of business — or to acquire them. It is what U.S. technology giants do as a matter of course.

Amazon, for example, has been losing money, or earning razor-thin margins, for more than two decades. But because it was gaining market share and killing off its brick-and-mortar competition, investors rewarded it with a high stock price.

With this inflated capitalization, Amazon raised money at below-market interest rates and used it to increase its market share. It also acquired dozens of competitors — just as it tried to do with Flipkart.

Having become the dominant player in the U.S. e-commerce industry, Amazon has its eye on India. A company that it left in the dust, Walmart, is desperate not to also lose the Indian market. Both are doing whatever they must to own Indian retail and then split the spoils between them.

That is why controls are desperately needed on this kind of capital dumping. And such controls won’t reduce competition or throttle innovation. As they did in China, they will stimulate competition and, through that, innovation.

Chinese technology companies are now among the most valuable and innovative in the world. In addition to having a valuation that rivals Facebook’s, Tencent’s WeChat e-commerce platform is far more advanced than any rival in the West.

Baidu is building highly advanced artificial intelligence (AI) technologies as well as self-driving cars. And DJI (Dà-Jia ng Innovations) has become a global leader in drone technologies. Had China not imposed controls, these companies may not have survived at all.

It is probably too late to save Indian e-commerce from modern-day East India Company-style colonization. But there are many other industries in which Indian startups can still lead the world.

See also: Too Much Tech Is Ruining Lives

With the exponentially accelerating advances occurring in technologies such as sensors, AI, robotics, medicine and 3D printing, practically every industry is about to be disrupted, and there are opportunities for Indian entrepreneurs to create solutions that benefit India and the rest of the world.

India urgently needs to wake up and protect its entrepreneurs from foreign-capital dumping. And it needs to provide incentives for Indian — and foreign — companies to invest in its startups, just as China did for its own.