Barnes and Noble -- Nook Lessons not yet learned.

Last fall, prior to the commercial availability of Nook, I went on-line and put in my order.  I was happy to learn that it had a strong technology underpinning and I was appreciative of the fact that it was software based and not hardware dependant; making upgrades and adding functionality easier.

I was also pleased to know that Adobe was the major force behind the operating system and that a vast array of PDF files would be at my disposal.   My library would reflect my needs and tastes and I imagined the experience would be like entering a virtual giant bookstore.

Sadly, my experience, thus far, with the B&N Nook has been less than stellar.

Mr. William Lynch, CEO of B&N, should read up on the Beta – VHS duel of the 80’s - just a reminder of the bottom line.   It was not technology that decided the winner; it was the availability of content.  CONTENT rules.  I understand that my tastes should not drive the content acquisition strategy of B&N, but their acquisitions should be broad enough to include my tastes.

Two months ago, after listening to a Charles Rose program, I asked B&N about the possibility of getting a book from Jim Collins “How the Mighty Fail”.   I was told by their crack customer service person that I should to contact, and hound, the publisher of that book for the digital rights.  I did and a few weeks later I was told by a member of Jim Collins’ staff, that he just signed the contract for the digital rights for this book… I am still waiting…

Michael Lewis’  “The Big Short”, currently on the NYT best seller list, cannot be downloaded to the Nook (I checked and it is available for the Kindle).   My intellectual quest is to better understand the process by which companies and the market fail to meet their goals.  In the process, build a framework that I can use in my professional life.

Mr. Lynch better understand that his competition (Jeff Bezos and Steve Jobs) are icons and are not likely to give up easily. The iPad and Jobs’ marketing genius make it is obvious that Mr.  Lynch’s lunch is in serious jeopardy.  I am sure that Jeff Bezos understands that Amazon has far greater competition from in his core business (from the iPad – not the Nook) and will aggressively move to adjust and compete.

Mr. Lynch, here are some unsolicited bits of advice: One-aggressively advertise in a wider range of venues – Take a page from Amazon and the NYT book section.  Two-have a tighter correlation of your bonus structure to the acquisition of content.  

Here’s my 2 cents – people who buy electronic readers are people who enjoy future technology, get energized by new and exciting things and people who are going forward.  They want to read the new and exciting offerings like those listed on the NYT best seller list.  Get on board B&N!

The Clarion Call for Health Care IT

The Perfect Storm

Introduction

The dire Y2K prognostications failed to materialize.  Yet the Y2K fire drill was not without its positive impact.  Enterprises were forced to make decisions between remediation of their current software stack or re-architecting their application infrastructure from ground up to meet SEC compliance.

A retrospective analysis supports the thesis that enterprises that chose to spend their budget re-architecting have had greater success in the intervening years, applying technology to optimize their existing processes.  While the enterprises that chose to spend their budget on the remediation of their existing, and many cases antiquated, application stacks, have over the last 10 years, struggled to adopt or integrate the new technologies into their processes.

I have been on both sides of the equation.

Over the last seven years, I have been working within the health insurance vertical and have witnessed first hand their attempts to adapt and integrate new technology into their rather old software stack from claims processing, eligibility and benefits, with, at best, a small modicum of success.

The costs have been extraordinary.  In many cases marked by half completed and abandoned transformative initiatives.  Any derivative of the word transform is in many cases viewed as a mark of the devil.

Growth in many cases has not been organic; it has been by acquisition.  The ensuing problem of integrating the new systems into the existing framework has been less than exemplar.  In many cases, the half completed integration initiatives litter the landscape.

Complementary to lack of will and clearly focused strategic direction, until recently there has not been any real SAP like ERP software that could handle the spectrum of basic activities and transactions required by a health insurer.

The Coming Storm

There are a number of forces at play that over the next couple of years (2013) will create the ‘perfect storm’ which will mandate – not impose drastic change to the way health insurers are organized; their profit margins; and the possible paths to success.  It is very likely that these forces will produce a significant amount of consolidation (M &A) before the dust is really settled.

The conflating forces: One is the economy.  The idea that the company will absorb most of the cost increases and leave the employee is not a likely scenario. The strongest unions are being forced by global competition to give concessions when it comes to the sharing of health care costs. More and more is being absorbed by the employee. The employee’s ability to absorb the cost is, or has evaporated.

The teachers union is being asked for concessions in NJ. The 30+ percent hike asked by BCBS of CA is not likely to take affect. Those companies operating on the simple principle of passing the cost down the line will soon find their margins squeezed and forced into real internal optimization of resources and infrastructure.

The second conflating force is the mandated health care reform that has become the law of the land. Over the next couple of years, they exert a significant downward draft in the profitability of the insure carriers.  In the first place, their ability to cherry pick their population by screening out pre-existing conditions will not be available to them.  Additionally, they will be mandated to spend 80-85 percent of their revenue in claim payments. Their profit margins will no longer be in the obscene (Goldman Sachs range, a gratuitous but timely slam). The health care insurers will have to learn to find every last bit of efficiency from their operations as do supermarkets which operate at single digit margins.

The third conflating force is the imposition of ICD 10 and EDI 5010 format. Again, these new information structures are due to be in full implementation by 2013.  These are the fundamental information structures that drive the core of the business: Actuarial/underwriting; claims processing and benefits/eligibility.

The three forces come together into a physics singularity by 2013.  This does not leave the industry with a lot of time to come to grip with the new realities and move decisively to become the winners in this new environment.

A proposed solution

There is a softball being tossed to Microsoft and Steve Ballmer.  Will he hit it out of the ballpark and essentially become the ERP of choice for the health care industry or will that opportunity flow to Oracle with its penchant to buy everything in sight or overseas to SAP?

There is a single company that I believe stands well above its competitors and is in the best position to take a commanding market share and leadership in providing an ERP like solution to the health care carrier vertical… The company I am referring to is: Trizetto.

Here is the logic for the above statement.

1. Trizetto product set is based on Dot Net technology. Their existing products address the core functionalities of the health care insurance business. As a matter of fact, some the Blue Cross companies are not only users of their products; they liked it so much, that they have invested in the company.
2. It is a private company. It was taken private by APAX LLC for about 1.7 Billion. For every fund an exit strategy is their means of realizing their return on their investment. Given the cost and a premium; it would be relatively small investment for Microsoft.
3. Microsoft already has a relationship with Trizetto for exchange of information related to MS Personal Health Record (PHR) product (VAULT) which is heavily dependent on ICD and EDI infrastructure.
4. Microsoft does want to be a player in the application stack of major enterprises besides owning the desktop.
5. Based on their sheer size, Jeff Margolis (CEO of Trizetto) should welcome the leverage and resources that Microsoft can bring to bear in terms of making their Facets and QNXT products fully compliant and leverage their marketing pull to integrate the new application into an enterprise’s stack.

In conclusion, I believe that there a lot of cost saving opportunities for the health care carriers to normalize and rationalize their application stack. That can only be done through an ERP type of software. During the 90’s we saw the tremendous group of ERP and SAP in particular. Although the implementation costs and associated horror stories by large manufacturing enterprises cannot be overlooked; the lessons learned and their reduction in operating IT costs at least dampening the growth of the cost cannot be easily dismissed.

The argument that all would be the same and innovation and productivity does not hold water. As manufacturing learned is not the software stack but the efficient management of the stack and innovative processes which are the truly differentiating factors.

I think there is an opportunity here and I welcome your comments.

Welcome to my blog

This will be my means to express my thoughts, concerns about technology, current events and a bit of venting about daily frustrations.