From A to Z: Amazon Playing the Long Game

By Luke Farkas • July 13, 2017

If you’ve kept a keen eye on the unfolding stories in healthcare, you’ve likely seen new, unexpected entrants into the space. Technology behemoths such as Apple, Microsoft, and IBM as well as e-commerce giant, Amazon, are strategically taking advantage of the increasingly consumer-driven healthcare ecosystem. Amazon’s recent activity probably has you tapping your foot or playing with your fidget spinner – which is apparently what all the nervous kids are doing these days.

While Amazon has expressed interest in healthcare since the 1990’s, here’s a list of the major changes Amazon has made recently:

  • Virtual care assistance: Since mid 2016, Amazon has been exploring how to leverage Echo in healthcare – both for provider organizations and for home health.
  • Medical supplies: In its first year, Amazon Business generated $1 billion in sales, with a significant portion coming from healthcare provider organizations.
  • Life sciences and genomics: Amazon Web Services is working with companies involved in life sciences and genomics.
  • Pharmaceuticals: Amazon is making hires that reflect a concerted effort to break into the pharmaceutical market.
  • Healthy living/grocery: Most recently, Amazon announced their $13.4 billion acquisition of Whole Foods.

Before we discuss what we think Amazon is planning, it’s important to understand their history and larger, enterprise strategy.

They think long-term: In his 1997 letter to shareholders, Jeff Bezos, CEO of Amazon, shared his vision for Amazon’s growth, “We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model.”

They’re customer-centric, always: Amazon’s differentiating strategy is relentlessly focused on “Day 1.” Their strategy for avoiding the stasis and irrelevance of Day 2 is to stay customer-centric. Bezos says, “There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.”

They build market position first, profits second: How did Bezos take the e-commerce industry by storm? He designed a lean, hard-working organization that was built to strengthen market positioning first, and gain profits second.  More than that, he built a company that remains relentlessly attentive to consumers with a focus on the future. Amazon may have begun their business by just selling books, but they ensured the purchasing process would be the best experience their customers had.

They’re always thinking about what’s next: In this interview with Walter Isaacson of Vanity Fair, Bezos harps on being future-focused, saying, “You have to always be leaning into the future. If you’re leaning away from the future, the future is going to win every time. Never, ever, ever lean away from the future.”

As Amazon has grown, they’ve leveraged their market leadership and infrastructure in the consumer space to quietly gain the trust necessary to strengthen new ventures. And now, as the largest online retailer, expanding their reach into the healthcare space has less barriers to entry.

Amazon Ecosystem

As a relative healthcare newcomer, Amazon is casting a pretty huge net. Their recent Whole Foods acquisition offers them both a valuable healthy living brand and the brick & mortar real estate that could bring their pharmacy, grocery, and even care delivery aspirations to fruition. If you connect the dots, it seems obvious: Amazon is embarking on a mission to once again become a market leader. By entering from so many adjacent angles, they’re building the necessary latticework to be a market leader in health.

With Amazon establishing their footprint through both traditional and nontraditional healthcare avenues, they seem to believe the future of healthcare will involve less of a barrier between health and care.

What this means for health systems:

Health system executives should pay attention to how Amazon navigates this attempt. Healthcare is a highly regulated, nuanced market, and outsider organizations have a long history of underestimating healthcare’s specific challenges. However, if Amazon is successful, you may find yourself both using Amazon as a vendor, and competing with them for brand equity. Since many health systems are also changing their messaging from “we treat the sick” to “we aid in health,” you may have the opportunity to strategically align your services to complement Amazon’s, or compete against them. In addition to keeping an eye on Amazon from a competitive standpoint, lessons can be learned from them as well. Healthcare is increasingly becoming a consumer-driven industry, thus engagement and experience are becoming imperative. Amazon has undoubtedly delivered in this dimension and health systems would be wise to heed their best practices.

What this means for health technology and services companies:

As Amazon solidifies health applications for the Echo in both the home and provider space, they may continue to advance their technology offerings to automate or augment care operations. Stay keenly aware of Amazon’s pricing strategy – lowering costs to gain market leadership – and ensure that you are custom-building your solutions to fix specific provider problems. Your understanding of healthcare and how the current system works will bode well for your value proposition into the future, regardless of Amazon’s success.

What this means for health plans:

Similar to health systems, health plans are feeling the pressure to innovate and change to address the industry’s increasing consumerization. We’ve seen commercial health plans such as Cigna, Aetna, and others make large investments in marketing campaigns to reach the beneficiary population they want to attract and retain. The consumerization of healthcare, while not perfect, seems here to stay. In response, health plans must develop and execute customer engagement strategies that prioritize the experience their customers receive and not just the one-dimensional delivery of service. Moreover, adopting customer service capabilities – like offering real-time feedback and review mechanisms, articulating a core commitment to the customer, and building a company culture that knows how to listen and respond effectively to customer needs – would prime health plans to succeed in the new ecosystem.

 

Regardless of the role you play in the industry, innovation juggernauts like Amazon can help provide a window into the potential future of healthcare. Whether or not you believe that their model will be successful, it can be game changing to notice these trends, and recognize why Amazon is taking the approach that they are. In the age of healthcare consumerization, outsiders are getting braver: entering the industry with some audacity and skin in the game. Healthcare insiders can benefit from taking a page out of the outsider’s playbook – constantly looking forward, and leveraging sophisticated marketing and communication efforts to create a future-proof brand.

  • Luke Farkas - Headshot

    Luke Farkas

    Deftly assisting our business development efforts with his research and analysis skills, Luke translates research into insights that help frame our strategic approach. He studies industry trends, contributing to thought leadership efforts across all of our service segments. Luke earned a bachelor’s degree in sociology, with a minor in communication from the University of Colorado, where he spent four years competing as a professional triathlete in the Olympic pipeline, living (and training) at the Olympic Training Center.

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