- Digital Disruption
Apple, Google, and Samsung are all vying to win over the health-conscious consumer. Will they manage to disrupt the healthcare business model?
Health is rapidly emerging as the new frontier for disruptive consumer technology. There is little doubt that consumers are hungry to use digital technologies to help manage and improve their health. Experts project that 500 million smartphone users worldwide will be using a healthcare app by 2015, and 50 percent of the more than 3.4 billion smartphone and tablet users will have downloaded mobile health apps by 2018. Clearly, there is high potential in the B2C model of digital health, where consumers are starting to actively manage their health to stay well and keep away from the doctor’s office.
To date, the majority of health apps have been quite basic, with mostly manual input of biometric data and limited ability to integrate and analyze data streams from multiple apps and devices. However, this is all set to change with the entrance of some of the market’s biggest technology and digital players.
Apple recently announced the launch of “HealthKit,” which aims to bring together biometric and other health data into a single platform. Samsung launched Simband, a smart health device that will enable constant biometric monitoring from the consumer’s wrist and real-time feedback on how the body is performing. Samsung is also creating a secure open-data platform to allow developers to download data from any device or digital source, effectively creating a health data powerhouse. Google is launching Google Fit, an open-source Android platform approach to track health and fitness biometric data, compatible with a host of monitoring devices and its own smart watches.
This is lining up to be the next battleground for these giants. The question is, will this wave of digital innovation have the same disruptive impact on healthcare as it has on other industries, undermining the business models of established players but offering unrivaled opportunities for new innovators? And ultimately, will the consumer win?Close
- A.T. Kearney Pharma Supply Chain Panel 2014
Pharma supply chain managers should have complexity reduction, end-to-end inventory management, supply chain segmentation, and greater agility at the top of their agendas.
We asked the participants in the A.T. Kearney 2014 Pharma Supply Chain Panel—more than 30 large global pharmaceutical companies, representing six of the world’s 10 largest companies in the sector—about their supply chain performance and priorities for the year ahead. Our study shows that many pharmaceutical firms have significant potential to improve across the main supply chain areas:
- Customer service levels at the best pharma companies are world-class, at just a shade below the best consumer goods companies. Average levels, however, are 5 percent lower, and even seemingly small service-level differences of just 2 percentage points can translate into 80 percent fewer stock-outs at non-generic prescription drug firms.
- Forecast accuracy is important to keeping inventories low—and production stable. Volatile demand and complex finished goods portfolios can make this a daunting challenge. Several companies (particularly non-generics) seem to have mastered the art, but the average pharmaceutical firm is far from a state of excellence.
- Total inventory at best-in-class consumer goods firms accounts for 70 percent fewer days of sales than at most pharma companies. Even the highest-performing members of our panel have not managed to reduce the gap to fewer than 61 days (that is, about 34 percent).
- Total supply chain costs (as a percentage of COGS) at average performers present a 40 percent difference from the best pharma industry supply chains—which, at around 10 percent, are comparable to those of best-in-class consumer goods companies. Thus, supply chain costs at most pharma companies could be reduced by as much as 7 percentage points.
While our study may have provided participants with concrete evidence of where and by how much they can improve their supply chains, most already have an intuitive sense of the areas that need to be addressed. More than three out of five respondents said that they will initiate or reinforce initiatives to reduce complexity and optimize inventories across the supply chain. Nearly half intend to address supply chain segmentation, and more than two in five will tackle agility. Customer centricity and emerging markets, although not on our panelists’ list of top five priorities for 2014, are two important topics that supply chain organizations in the pharmaceutical industry need to have on their radar screen.
Addressing these topics is challenging indeed, but it is the only way to reach best practices. Industries such as consumer goods have proved that the effort pays off.Close
Leading companies are capitalizing on three basic human needs.
With access to virtually anything anytime, consumers have the power in their fingertips to move through large numbers of offers and, in short order, settle on what suits them best. Businesses and brands are watching in awe, using terms like “disruption” and “challenging times” to describe their new reality—one that is changing fast and giving the word “competition” a whole new meaning. In this context, the quest for consumer engagement is becoming the holy grail of business.
Whether they try to protect store traffic or increase the time consumers spend on their websites, everyone is seeking to engage: more people, more time, more often.
To achieve this, businesses must first understand why consumers are so devoted to digital technology in the first place—this is something much deeper than affordability, accessibility, or simplicity. Simply put, digital technologies have caught fire because they address three core human needs: the need for connection with other humans, the need for self-expression, and the need for exploration. Understanding the human side of the digital revolution will be a key success factor for businesses trying to compete in a digital world.Close
- Mastering Disruptive Change in Manufacturing
A collaborative labor relations strategy can help manufacturers to successfully manage the growing patchwork of stakeholders and union representatives.
Despite increasing automation, human labor remains one of the most important resources in any manufacturing operation. The hype around 3D printing and robotics may be taking up most of the airtime in manufacturing-related discussions, but there are plenty of reasons why management should start paying more attention to interactions with workers.
One reason is that since the financial crisis, unions and workers’ representatives are back in the game. Specialist unions are growing and starting to exercise their muscle, especially in some Asian countries where the creation of smaller unions has been partially prescribed by law. China is also a prime example of where Western-style labor demands have begun to take hold, requiring management teams to develop excellent labor relations capabilities. As all this plays out in the context of skilled labor shortages in many industrialized countries and significantly rising unit labor costs in both developed and low-cost countries, understanding and addressing the forces that drive fluid labor relationships will be just as crucial as thinking through the impact of technology shifts. We recommend that forward-thinking manufacturing executives place four topics at the head of their agenda:
- Establish global labor relations strategies that address workers’ representatives in recently unionized areas.
- Conduct risk assessments and develop contingency plans jointly with all value chain partners to minimize potential disruptions.
- Craft and flawlessly execute creative labor relations and communication strategies that balance the different interests of the company’s numerous employee stakeholder groups.
- Launch collaborative relationships with unions and workers’ representatives based on transparency and open dialogue, as they can open the spectrum of solutions and be a key to sustainable success.
Is your company ready to change its procurement approach and gain competitive advantage?
Procurement is well known for its role as the “hatchet,” slashing costs of goods and services with a little arm-twisting of suppliers as necessary. Yet there is a smarter, more innovative way to cut costs. One that harnesses the power of procurement throughout the product life cycle.
Innovative materials and groundbreaking components are vital ingredients in the products of a range of modern industries from chemicals, oil and gas, and energy to food and high tech. These industries all have something in common—a well-defined product life cycle that moves in stages from product launch, growth, and maturity to ultimate decline.
Leading companies in these industries do two things simultaneously: They focus on today’s realities (product launches, marketing, market share, and margins) while planning for the future by continually exploring new markets, new products, and new business models. This concurrent view requires all parts of the business to be in sync. It won’t work if procurement is merely a buying exercise that is isolated from R&D, marketing, and sales. It won’t work if procurement continues to be tasked with cutting costs. Today, more companies are creating significant, quantifiable value by giving procurement a seat at the strategy table—and creating value at every stage in the product life cycle.Close
Health providers need to focus as much on influencing patients’ beliefs and behaviors as on treating their ailments.
Today, we are squarely in the third age of modern medicine, when the affordability and value of treatments have come to the forefront. So although the pharmaceutical industry is rightly upbeat about many of the innovative medicines coming through in areas such as cancer and hepatitis C, long-term prosperity can only come from exploiting the changing technological and social landscape to create far greater value.
The growth of chronic disease has been largely driven by the behavior and lifestyle choices of an increasingly affluent world. The only way to control the growth is to modify these behaviors. Treatments in the third age will need to become much more holistic and seek to actively involve patients in their own treatment. Interventions will consist of a combination of pharmaceutical, behavioral, nutritional, and digital technologies.
In sum, a far broader view of medical innovation will be required—one that encompasses new technologies based on fields of science that are barely understood or not yet widely accepted as part of the medical paradigm.Close
Success in wealth management is simple: Deliver the high-quality products that your clients need and want.
Times are tough in wealth management in Europe. Revenues fell once again in 2013 due to a range of persistent issues—low interest rates, rolling waves of regulation, more cautious clients, less profitable customized solutions, and digital and multichannel offerings. Today, roughly one in eight wealth managers in Europe loses money every year, forcing major players out of the market and others to consolidate.
Yet for all the troubles, wealth managers have still-untapped sources of value at their disposal. For example, wealth managers that build more collaborative relationships and partnerships—going beyond the traditional boundaries of today’s silo organizations to build a strong client base and solid value propositions—can maximize the value available for themselves and for the entire banking ecosystem.
Wealth managers can tap three sources of value from improving partnerships with adjacent business units: serving the right clients (in the right channels and with the right offers), tapping into the client reservoir of the commercial bank, and strengthening in-house products. This paper offers insights on these three areas.Close
- Mastering Disruptive Change in Manufacturing
With manufacturing technology heading in dramatically new directions, executives need to keep their eyes wide open and be ready for whatever comes.
Stories about new manufacturing technologies and their possible applications are dominating the news. Enabled by intelligent manufacturing systems, technologies such as collaborative robots or 3D printing could potentially transform—or even replace—conventional manufacturing operations and lead to "fab labs" popping up everywhere. As usual with new developments of this magnitude, skeptics will be eager to point out that there’s much more hype than real opportunity, but nobody disputes that these new technologies are worth paying attention to.
With manufacturing technology heading in dramatically new directions, keeping pace with the latest developments is more important than ever. To be successful in the future, manufacturing executives will want to keep the following advice at the top of their minds:
- Continue to actively and systematically scan the new technology frontier, taking advantage of, for example, supplier and customer know-how and industry panels.
- Develop a clear road map to test and adopt the most promising.
- Assess your own operations and prepare them to quickly adopt the new technological direction.
As consumption patterns change, U.S. companies can mitigate the shock of soaring electricity costs in a number of ways.
America’s previously biggest electricity consumers are being overtaken as technological transformations and shifting energy sources continue to be the engines for economic growth. Today’s major wireless providers spend hundreds of millions of dollars on power annually on sending signals to the nation’s mobile devices, while the IT revolution is pointing to Google and Facebook as two of tomorrow’s largest power consumers. Manufacturing is changing as more processes become further automated and add greater value.
While these rapid developments in usage trends have caught many off guard as they grapple to control rising energy costs, players that capitalize on the formidable complexity of the electricity value chain can capture sizable savings. Long-term advantage can be found by first establishing your actual consumption profile and then using that profile to build a procurement strategy that capitalizes on the volatility and uncertainty of the nation’s electricity markets to supply your power needs.Close
New entrants into the banking industry have the opportunity to change the banking industry landscape.
The best challenger banks offer simplicity and service, and create a bond of trust between customer and bank. India, for example, issued two new bank licenses in April, and is hoping to leapfrog the developed world by providing citizens with innovative, transparent, accessible, and simpler customer experiences.
Yet, success for these new banks will not be easy. For every challenger there is a band of traditional banks ready to defend their profits and market share. And while traditional banks and financial institutions are well-known for their failings—unhappy customers, excessively complex products and terms, and inefficient processes—their customer relationships have by and large proven resilient, with annual attrition rates of just 2 to 5 percent across Asia.
Making the leap from challenger to viable competitor will require more than tweaking the status quo and expecting the profits to roll in. It will require transforming the existing banking model.
Offering a better or smarter version of what traditional banks already offer will not be enough to survive in this industry. When advising our clients, we talk in terms of seven ways challenger banks can build competitive advantage.
- Offer solutions, not products.
- Keep it simple.
- Partner up.
- "Pull" customers in.
- Win the war for talent.
- Keep the regulators close.
- Make "CASA" (current account, savings account) your lifeline.
More than half of the 63 countries that have been ranked in the GRDI are no longer in the top 30. This special report examines why.
Since the first Global Retail Development Index, 63 different countries have graced the list of the top 30 developing markets for retail investment. A few have long-standing tenure—China, second in 2014, has consistently rated in the top 10 since 2002. However, more than half are no longer ranked.
This year we analyzed the countries that are no longer ranked in the GRDI and why they fell from the rankings. The list includes Poland and South Korea, which developed into modern retail markets; Bulgaria and Romania, where stalled economic growth delayed retail development; and Algeria and Ukraine, whose social and political unrest unraveled retail growth. In this special report, we look at the common themes that emerge from these countries’ divergent flight paths.Close
Along with the threat posed by a number of trends come new opportunities for U.S. retail banks.
As U.S. retail banks stabilize their balance sheets and navigate an increasingly complex regulatory environment, it is hardly time for them to sit back and take a breather. The uncertain global macroeconomic and geopolitical environments—coupled with the rapid pace of technology evolution and changing customer preferences—are challenging traditional business models. Factor in customers who expect an experience that is more like doing business with Google and Amazon, and pretty soon the business environment is one that retail banks have not faced for decades.
How should banking executives untangle the complex web of interdependent trends that are creating new opportunities but also threatening their business models? What is the best approach to carving out a path into the future informed by these trends?
The answers to both questions lie in painting the likely scenarios for the year 2020 based on an understanding of the trends and the direction of their impact. With this in mind,
A.T. Kearney, in conjunction with its Global Business Policy Council, has developed four possible 2020 scenarios for banks in the United States:
- Storm clouds: The U.S. economy continues on its path of anemic growth with a constant threat of financial system instability.
- Blue skies: The U.S. economy recovers fully and experiences strong growth.
- Flash fires: The global economy rebounds and experiences strong growth across all geographies.
- Dark waters: A second wave of economic slowdown cripples the U.S. economy, led primarily by interest rate rises to address an unexpected surge in inflation.
Designed to sharpen the “strategic lens” with which a banking executive views the external environment when developing business strategies, these scenarios will better equip the U.S. retail banking industry for the future.Close
Indian companies should embrace e-auctions as part of an advanced procurement strategy to increase business efficiency.
Expanding supply bases, an explosion in Internet access, and increased pressure on the bottom line are creating the perfect environment for Indian companies to jump on the e-auction bandwagon. Yet despite the fact that procurement leaders worldwide are already using e-auctions to manage more than 35 percent of spend, many Indian companies have applied them to just a limited number of categories, often because of the perceived complexity involved.
Companies that wish to reap the full benefits of e-auctions first need to figure out where they fit into their overall procurement strategy. But even more essential is to understand and adjust e-auctions’ implementation nuances.
Successful e-auctions hinge on several factors: an outcome-focused plan, solid internal stakeholder buy-in, an optimal portfolio of qualified suppliers, flawless management of live e-auctions, and a strong supporting organization and IT enablement infrastructure.
Based on our experience, companies in India can achieve between 4 and 17 percent savings in categories sourced by e-auctions.Close
As Europe's economic recovery begins, retail banks' success will require smart strategies in distribution, digitization, and cost.
Retail banks will not turn around quickly. Even as Europe’s economic recovery begins, banks hesitate to tackle the massive change ahead. Success will require smart strategies in vital areas—distribution, digitization, and cost efficiency.Close