Waiting For the Next Wave

The most interesting stories I've seen in the last week -- and this was a week where we celebrated the 50th anniversary of Medicare and Medicaid, and in which new projections suggest national health spending is starting to tick back up --  don't seemingly have anything to do with health care, but with how Microsoft is radically shifting its strategies.  If people in health care don't think there are lessons for them in this, though, well, chalk it up to health care's typical myopia.

First let me recap some of what is going on with Microsoft, then try to tie it back to health care.

Microsoft had some good news and some bad news recently.  On the bright side, it released its new operating system, Microsoft 10, to generally good reviews.  On the not so bright side, Microsoft reported its biggest ever quarterly loss -- an astonishing $3.2b -- as a result of it writing off $7.5b relating to its Nokia acquisition.  Let's parse each of these out.

If you're one of the over 1 billion people using a PC, the Windows 10 release should come as good news, not just for the new features but because Microsoft is giving it away "for free," at least for now. They're not going to charge you to upgrade or try to lure you into buying a new PC preloaded with it.  They're just letting you have it.  For a company which traditionally made its money selling its software -- unlike Apple (devices) or Google (advertising) -- that's a pretty radical change.  And a necessary one.

Microsoft, especially its new CEO Satya Nadella, has finally realized that the world of the PC is dwindling.  It's still big, mind you, and it is still important in many industries and for many tasks, but smartphones and tablets are now the devices of choice, with The Internet of Things waiting in the wings.  Apps and the cloud are encroaching on much of Microsoft's historical domain.  Microsoft is betting big that they need to get Windows 10 out as widely as possible; indeed, 14 million people upgraded in the first 24 hours.

In retrospect, we shouldn't have been so surprised by the Windows 10 move.  Last fall Nadella announced Office would be available free for most mobile devices, trying to keep it relevant in hopes users would be willing to pay for it on their computers.  If they have them.

Microsoft is going to get a mobile version of Windows 10 out this fall, first for its Lumia phones and also for Xbox.  Eventually for Hololens as well.  They've got to get their operating system into the ecosystems people are using, and have that operating system be more consistent across platforms.

That's what makes the Nokia write-off so surprising.  Steve Balmer, Nadella's predecessor as CEO,  had bet big with that acquisition a little over a year ago, hoping that Microsoft could reinvigorate Nokia's fading mobile platform and break the Apple/Android dominance.  Now Nadella says: "We are moving from a strategy to grow a stand-alone phone business to a strategy to grow and create a vibrant Windows ecosystem."

OK, whatever.

Hey, Google failed with its acquisition of Motorola Mobility, selling it off at a loss after less than two years, and Amazon failed with its Fire phone, so you can't blame Microsoft too much for missing the smartphone mark.  And its not like they are getting out of the smartphone business, just trying to find a better defined niche.

They should talk to Blackberry about that tactic.

Horace Dediu, who studies disruptive technologies at the Clayton Christensen Institute, described the Nokia write-down to The New York Times as follows:

If you were talking about any other industry, this would be considered a catastrophe that’s the equivalent to a natural disaster... Most people didn’t believe that such a catastrophe could occur this fast...[Microsoft] just couldn’t imagine that a company that was once as strong and dominant as Nokia could have virtually no value...We tend to think the strong will survive.  But a virus is a very small thing that kills big things.  

I keep wondering what the metaphorical virus is that might kill our existing health care business models.

A few months ago I wrote about how, in contrast with the rampant disruption in the technology sector, the money in health care is pretty much going to the same professions and institutions now as it was in 1960.  They're getting paid a lot more, of course, and they often do vastly more complex things for the money, but I'm not sure any sector outside maybe education looks as unchanged as health care does.  That, to me, is a problem.  That, to me, looks like failure to innovate.

This is an ongoing theme for me.  I want to see what in the "adjacent possible" health care can beg, borrow, or steal to do better for us.  And, honestly, I want innovators that want to wreck the current system more than just get rich from it.

So when I read about how hospitals might ape the health insurers' recent merger mania by following suit, or when I read about the Pentagon choosing to "modernize" their health records by giving the task to old-standby Cerner, or when I read that the new approach of using the immune system to fight cancer is being led by the usual pharma suspects -- no, these are not viruses that are going to disrupt the health care system.  Quite the opposite.

Maybe the virus could be something as simple as moving more of health care to what Malcolm Gladwell, in an interview with Eric Topol, called a "cash economy" in health care (as I suggested in a prior post),  The more services people pay directly for, in theory, the more health care providers will finally treat them as customers and hopefully even compete on value.

Or it could be something that takes us completely by surprise.

It's entirely conceivable that Microsoft's future lies not in Windows and Office, but in Skype, Xbox, and Hololens.  A Microsoft spokesperson told The New York Times: "If you miss the first wave, you have to hang on and then drive or anticipate the next wave. We want to be part of the next wave of disruption."

Who in health care is prepared to ride -- or help create -- that next wave?