What the digital economy has been doing so far is eliminating unnecessary costs, creating great efficiencies and increasing productivity.
The sectors most affected to date include music, newspapers, entertainment, retail, broadcasting and advertising and in all these sectors the cost of products to the end-user has decreased significantly. A UK study in 2010 revealed that households with internet access were saving £75 a month, simply by having a tool to shop around for the best products and services – and this has certainly increased to a significant degree since then.
Industries that are on the verge of being added to these transformational processes include banking, energy, film and healthcare – all massive industries that have high margins and little competition. Up until now there has not been a great need to increase further efficiencies in these industries as it is in their interest to keep their costs relatively high, in order to create barriers of entry for others who might want to try to get a piece of the action. They are also successfully using often very complex regulations to protect their traditional businesses.
However, technology is going to change these sectors as well. Of course the best thing to do would be to take proactive action, rather than trying to fight rearguard battles to protect the crumbling old models. In general the digital economy increases capacity and allows for greater volume. It opens up product and service innovations as well as new e-markets. However it is very difficult for industries to cannibalise their old models in order to create a path ahead into the digital economy.
One of the most inefficient sectors in the world is healthcare, and at the same time this is the largest industry on the planet. It is also a key reason many governments are experiencing budget problems, because of the ever-increasing costs within this sector. To a very large extent these costs relate to the silo mentality within the industry – there is little standardisation in all aspects.
The sector is ripe for an e-health revolution. InAustraliaalone 1300 deaths a year are attributed to bureaucratic failure. A more efficient and effective health sector is good for the patient, good for the doctor, good for the hospital, and ultimately good for society as a whole and the economy that needs to support all of this.
In the past the industry in general, and the health insurers in particular, have not felt the need to respond strategically to the rapidly developing digital economy. Through industry consolidation health insurers have become large bureaucracies – they have increased in size through consolidation, but have largely failed to look at innovation and at what the opportunities are within the scope of the sector. As mentioned above, they are also supported by complex regulations. The sector is extremely egocentric – every little group operates its own fiefdom, with little or no interest in strategically and effectively cooperating with other groups within the sector. They have a vested interest in keeping their ivory towers closed to others and in keeping the system as non-transparent as possible, which allows them to keep their fees and costs high.
This behaviour is also very evident in their IT activities. There are few standards and each group will often have its own proprietary-based IT systems and software developments.
Back to the health insurers …..
As a result of their consolidation and economies of scale approach, insurance products are nowadays largely seen by their customers as utilities. Access to the internet has also made it much easier for people to compare packages, and third-party applications are already available to make these comparisons even easier. The high costs of medical insurance is also increasing political pressure to ensure that switching costs between insurers are lowered, which will make churning the products even more attractive.
At the same time we see an enormous appetite among healthcare customers for personalised advice, second opinions, more information and, in general, more control over their personal health situation. This offers enormous opportunities for innovations and new revenue streams for all involved in the industry; and the health insurance companies can play a leadership role in this. Either the industry gets its act together and becomes more flexible, more transparent and more innovative – or others will step in. Companies such as Microsoft, Google and even Facebook are all looking at this sector. BuddeComm estimates that healthcare services could take up as much as 25% of all services available over the next generation broadband networks infrastructure.
Video-based consultancy, tele-medicine and aged care monitoring are all seen as enormous growth sectors and many organisations, including telecom operators and IT providers, are investigating how they can best become an integral part of this industry and not just a technology provider. The telcos are eager to clip the tickets on the e-health superhighway.
One only has to go online to see the plethora of companies that are already involved in the many aspects of healthcare, medicine, illness and disease information, dietary services, personal health training, and so on. However the most significant problem here is that most customers (patients) do not have access to their own health records in order to personalise their searches, requests or purchases. And, also, most would prefer to do this within their current relationships with their GPs, community health workers, specialists, etc.
For a decade or more electronic health record systems have been discussed in all of the developed countries. Yet the structures as outlined above have led to strong opposition (procrastination) from within the sectors and very few countries have succeeded in breaking through the powerful healthcare lobby to move ahead.Denmarkand nowAustraliaare among the leaders here.
It is not difficult to understand the enormous progress that can be made in this sector once powerful analytics can be used to electronically link together data from the patient, their records and that of the healthcare system. The internet of things (M2M) will furthermore link patient-based healthcare devices directly to this system to provide a real-time service for those people who need close monitoring. The vertically-integrated Amazon service is often cited as an example for the healthcare sector, showing what can be done if diverse elements are brought together, the correct data is collected, and powerful analytic tools are unleashed to provide the best personalised advice, information and outcomes for all involved.
The current structure makes none of the above possible because of uncoordinated (technological) strategies, a scattershot approach and a culture aimed at protecting the old systems and opposing moves towards a transformation process..
Of course this is not a black and white story and there are organisations that are making an effort, and at least have their house in order internally. But this sector can only fully embrace the social and economic benefits if the entire sector moves forward.
And that means government leadership.
This is one of the greatest problems the world is facing, and not just in healthcare. A lack of true leadership that steps above party politics and populist 8-second grabs for the TV news.
On the positive side, this is something that the customers want. They understand the value of e-health and, led by the babyboomers, they are demanding better healthcare services – ones that enable them to be in charge of their own healthcare.
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