The Empire Strikes Back

It seems deeply ironic that a week after I wrote about how even giant companies eventually get surpassed, I'm writing about the resurgence of one such giant, Microsoft.  Last week Microsoft won back the title of world's most valuable company (as measured by market cap), passing Apple.  Apple had that distinction since 2012; Microsoft hasn't had it since 2002.

Admittedly, Microsoft was only able to pass Apple because a recent tech stock downturn dropped Apple from its record trillion dollar valuation, and, as of this writing, Apple has pulled back in front again, but the fact that it is a race again says a lot about Microsoft.

The moral of the story may be that big can stay big, but not by sticking to the same things or doing them in the same way.  Healthcare, pay attention.

CEO Satya Nadella is helping Microsoft fight back.  Credit: Business Insider

Apple was always the cool kid (especially post-iPods), while Microsoft was the nerd.  Apple was the charismatic Steve Jobs; Microsoft was Bill Gates, the King Geek himself.  Apple was elegant, integrated hardware/software, Microsoft was all-too-often kudgy software.

Google "Tech Big 4" and you'll most likely get Alphabet, Amazon, Apple, and Facebook.  Wall Street tends to focus on the stocks of FAANG -- Facebook, Amazon, Apple, Netflix, Google (Alphabet).  People in healthcare and in tech like to speculate endlessly about what Amazon, Apple, and Alphabet might do in healthcare (Prime Health, anyone?). 

Microsoft often seems like an afterthought, if thought of at all.

It's true that Microsoft has had its share of blunders.  It was famously late to the Internet; even now, its browser has less than a 3% market share.  It failed with its phone. then blundered even worse with its acquisition of Nokia.   Or there were failed products like Zune, Vista, MSN Watch, and Microsoft Bob, to name a few.

Still, once Satya Nadella became CEO in 2014, things have changed.  Its stock has tripled under his leadership.  Its cloud business is a strong second to Amazon.  Office has gone from a licensing model to a more attractive-to-investors subscription model (Office 365).  Its Xbox line is a $10b business, is growing rapidly, and an area in which Microsoft will continue to invest "aggressively."

It now makes its own hardware -- the Surface line of PCs, laptops, and tablets (which, by the way, started under prior CEO Steve Ballmer) -- that have generated largely position, sometimes rave reviews.  Surface is now a billion dollar business.

Microsoft has also made some key acquisitions, such as open source leader GitHub this year, business networking site Linkedin in 2016, and video game Minecraft in 2014.  Mr. Nadella preaches: "We need to be insatiable in our desire to learn from the outside and bring that learning into Microsoft."  

Meanwhile, its foray into virtual reality/augmented reality -- Hololens -- hasn't necessarily generated a lot of revenue yet, but it has generated a lot of buzz, including a just-announced $480 million contract with the U.S. Army.  More benignly, Hololens is also being used to guide surgeons. build cars, and train medical students (see video below):

As two of the Hololens examples illustrate, Microsoft is paying a lot of attention to health.  HealthVault, the personal health record it introduced over a decade ago, never quite gained traction, and Microsoft shut down its HealthVault Insights app earlier this year, although the platform itself remains.  

More significantly, in 2017 Microsoft launched Healthcare NExT, which it described as:

a new initiative to dramatically transform health care, will deeply integrate greenfield research and health technology product development, as well as establish a new model at Microsoft for strategic health industry partnerships

Healthcare NExT -- which is now just Microsoft Healthcare -- is betting big on the use of artificial intelligence (AI), through its Microsoft AI in Health Partner Alliance. and cloud computing.  One of their current areas of focus is using "executable biology," such as to combat cancer. 

Their collaborations include the Fred Hutchinson Cancer Center, St. Jude Children's Research Hospital, Adaptive Biotechnologies, the University of Pittsburgh Medical Center, and the British Columbia Cancer Agency in Canada.

Peter Lee, the head of the unit, described to Medscape his approach:

But when you think about doing that, the first question you ask yourself is, 'What right do we have to exist in healthcare at all?' And it's not uncommon for big companies to do that with maybe even some arrogance. So it's important to be grounded, and I would put it this way and ask the question, if Microsoft disappeared today, what potential would be lost for the healthcare world?

Good questions for any company thinking of getting into healthcare -- and for ones in it now.

Microsoft could have coasted along for a long time on Windows and Office, but they didn't.  They weren't even under Mr. Gates (Xbox) and Mr. Ballmer (Skype).  But its bets are really starting to pay off under Mr. Nadella. 

For tech or other companies thinking of getting into healthcare, I'd advise that they think long and hard about Dr. Lee's rubric: if you didn't get in healthcare, what potential would be lost?  E.g., would healthcare really miss what you might bring?  If you aren't sure, or if it is strictly a revenue grab, please -- stay away. 

For companies already in healthcare, I'd advise that they learn from Microsoft's own story: it's not enough to double down on what you are already doing.  You have to be willing to take risks, place some big bets, in areas that are not in your traditional areas of competency.  Some of them may -- no, will -- fail, but you have to try nonetheless.  The sure bet is that your future is probably not going to be defined by what you are doing today. 

If Microsoft can successfully reinvent itself, maybe there is hope for healthcare organizations as well.