Sorry For Sounding Like a Broken Record…but Our Industry is Nearing a Transformational Change | Deloitte US has been saved
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For people who grew up in the 1970s and ’80s, rifling through album racks at the local record store was one of life’s great pleasures. Over the past 20+ years, most of the record-store chains (Tower Records, Sam Goody, Musicland) that once flourished in or near shopping malls across the country—as well as the majority of independent shops—have all but vanished.1 It’s not because these businesses were poorly run. It’s because many of them invested in the future without understanding the profound impact of emerging technologies, outside innovators, and what consumers really wanted.
Health care appears to be following a similar trajectory. Transformational technologies (e.g., artificial intelligence, quantum computing, cloud storage, augmented and virtual reality), an explosion of minable data, tech-savvy companies from outside the industry, and empowered consumers armed with actionable data are among the forces that will likely define the future of health. We don’t expect these forces will cause incremental changes over the next 20 years. We expect they will fundamentally change health.
Broadly speaking, most health care stakeholders tend to have confidence in the immediate future. However, they tend to struggle when it comes to making decisions based on what their industry might look like 20 years from now. In the music industry, streaming services made the music cheaper, extremely accessible, and more convenient for consumers, which has led to higher rates of consumption. This digital disruption caused revenues to plummet for the record industry—from a peak of $21.5 billion in 2000 to $6.9 billion 15 years later (see chart below).2 At the same time, consumers gained access to infinitely more music choices, which they can buy and play through a phone at a fraction of the cost.
Remixing the classic five
Over the past 100 years or so, the health care industry has evolved through regulation, culture, technology, and happenstance. It can be broken into five silos that we have dubbed the classic five: health plans, health care providers, pharmaceutical companies, medical technology manufacturers, and government/regulators. Twenty years from now, we expect the value in the health sector will likely be measured by the health and well-being of people, rather than being defined by these five silos. While the classic five—and the health industry overall—will likely look much different in 2040, existing stakeholders could continue to thrive. Here’s how we expect each member of the classic five could be affected:
What will today’s decisions look like in 20 years?
In a 1994 promotional video, Tower Records founder Russ Solomon acknowledged that emerging technology would someday allow people to “beam” music into their homes.3 But he predicted this change would occur in the far-off future. “As far as your CD collection—and our CD inventory, for that matter—it’s going to be around for a long, long time, believe me,” he asserted. Tower declared bankruptcy 12 years later—after taking on significant debt to expand globally. If the company had a more accurate vision of the future, it might not have focused on its brick-and-mortar footprint.
How should health stakeholders prepare for a future that is 20 years away?
In 2040, what will health stakeholders think when they look back on the decisions that were made in 2019? We can’t say for sure, but we are certain that the future of health will be here sooner than you think.
PS—for more on the impact of the future of health on the “classic five,” check out our on-demand webcast here.
1. Can record shops avoid extinction?, BBC News, April 15, 2011 (https://www.bbc.com/news/entertainment-arts-13067160); Best Buy closing 50-60 Sam Goody retail stores in malls, Louisville Business First, September 6, 2002
2. Visualizing 40 Years of Music Industry Sales, Visual Capitalist, October 6, 2018 (https://www.visualcapitalist.com/music-industry-sales/)
3. Russ Solomon, Tower Records founder who created a mecca for music lovers, dies at 92, Washington Post, March 5, 2018; The Life and Death of Tower Records, Revisited, North Bay Public Media, October 20, 2015.
Neal Batra is a principal in Deloitte’s Life Sciences and Health Care practice focused on business model and commercial operating model innovation, redesign, and transformation. He heads Deloitte’s Life Sciences Strategy & Analytics practice, leading the way on next-gen enterprise/functional evolution by connecting strategic choice with analytics and technology. Batra has more than 15 years of experience advising health care organizations across the ecosystem on critical strategic challenges, including leading businesses in biotech, medtech, health insurance, and retail health care. Batra is the coauthor of Deloitte’s provocative Future of health point-of-view, speculating on the health care ecosystem in 2040 and the business models and capabilities that will matter most. Batra lives in the Tribeca neighborhood in New York City. He holds an MBA from London Business School and a BBA from the College of William and Mary.
Mike, a principal in Deloitte Consulting LLP, is the national sector leader for Deloitte’s Life Sciences practice. In this role, he leads a multi-disciplinary team who serves clients in the pharmaceutical, biotechnology, medical technology, and consumer health care segments through consulting, advisory, audit, and tax services. Mike is responsible for the overall strategic direction of the life sciences practice as well as its go-to-market strategies and resources. He also serves in the role as life sciences consulting leader. With 20 years of experience dedicated to the life sciences sector, Mike has demonstrated exceptional leadership and practice development. He has led tech and information management teams as well as services at some of our largest biopharmaceutical and medical technology clients, helping them with the definition and implementation of technology and business strategies, related organizational and business alignment. His client work has been presented as examples of leading practices at prominent industry conferences.