Configuring Your Journey Through the Healthcare Ecosystem in 2016

It is often said that we are a product of our surroundings and upbringing. Over the past 35 years, I have seen incredible changes to the healthcare/medical device ecosystem. I have had the privilege of spending 60 percent of those years at two world-class OEMs and 40 percent of that time downstream as president of two full-service contract manufacturing companies. Additionally, I’ve been fortunate enough to garner additional insights wearing the lens of a consultant, learning from and helping organizations  “navigate” the ever-changing ecosystem or maze called healthcare. In addition to wonderful roles at great leadership companies, I have been blessed by my association with some of the true leaders of our time, such as Bill George—known for Medtronic’s explosive growth in the ‘80s and ‘90s—who’s “true north” was the patient. To round out my professional upbringing, I have been extremely fortunate to have worked with colleagues who are the best of the best throughout the entire ecosystem globally.

In college (some 35 years ago), there was neither a profession called “supply chain” or “value chain,” nor degrees to match. Therefore, I created a supply chain focus by combining production and operations research (OPER) with Quantitative Business Analysis (QBA) curriculums. Additionally, I became American Production and Inventory Control Society certified in Production and Inventory Management (APICS CPIM certified) to further solidify my understanding.

These columns that I will be authoring do not represent an autobiography. Rather, I feel it’s important to provide my background so you recognize the insights offered will be that of a supply chain/value chain/care chain architect. Navigating the healthcare maze is nothing short of supply chain, value chain, and care chain configuration/architecture with crisp execution.

Supply and value chain are often mentioned interchangeably but shouldn’t be. Supply chain is a subset of value chain while both are a subset of what I refer to as the care chain. When I reference all three, they are the “chain of chains.” In a future column, I will illustrate the differences between them.

Throughout 2016, both in print and online at www.mpomag.com, I look forward to sharing many lessons learned, as well as commenting on leading industry trends, in hopes that these insights can help you navigate the healthcare ecosystem maze. You will quickly discover that I am heavily skewed toward outsourcing, which has led to my enjoyable, 10-year relationship with Medical Product Outsourcing. When configuring the chain of chains, it is not even a question as to the importance of outsourcing. In my opinion, it is one of, if not the single most important configuration decision an organization will make.

While you may oppose some of my positions, we will likely agree that the healthcare ecosystem is an extremely rewarding environment in which to coexist, since its mission is to restore health and patients’ lives. Although this goal can be quite challenging at times, especially post-Obamacare, it is truly a blessing to be a part of it.

I look forward to your comments, questions, and challenges, as it will truly take a village to successfully master the environment in which we find ourselves.

Can We Learn From the Movie ‘Jurassic Park’?
I contend that navigating today’s healthcare environment is similar to navigating Jurassic Park. There are many dangers looming and you must be careful navigating. Incorrectly traversing any portion of the ecosystem can land you in danger, just like with Steven Spielberg’s dinosaur playground. While these dangers may not be prehistoric creatures enjoying you for lunch, the business ramifications of poor decisions made by not correctly navigating the ecosystem can be just as disastrous and expensive.

In the movie, the eccentric entrepreneur John Hammond said he had “spared no expense” in creating Jurassic Park. The ecosystem he developed was the park of prehistoric animals. His value chain configuration to monetize the park was to bring in tourists.
Regardless of how much Hammond spent—“sparing no expense”—the park still failed. Errors were made involving the ecosystem itself, as well as errors in his value chain configuration. Hammond might have wanted to make sure his ecosystem was manageable and in control. Further, ensuring the safety of the tourists might have been an important element in his value chain. Shouldn’t the same be true for our healthcare ecosystem—manageable, in control, and safe?

The Affordable Care Act (ACA) (often referred to as Obamacare) is the new ecosystem within which we must configure our value chains. Depending on where you sit within the ecosystem, you either agree or disagree with elements of it. Personally, there are components that make sense to me. Unfortunately, there are also elements that are misguided, out of control, and unmanageable, like in Jurassic Park. Both the ecosystem itself and its configuration have issues. But instead of taking sides and burning calories as to whether it is a good or bad thing, in 2016, I will simply offer tools, techniques, and experience to help you navigate through our Jurassic Park of healthcare.

Eat or Be Eaten
What is painfully obvious today is that everyone within the ecosystem is attempting to monetize their value chains in the best way they know how. If you spare no expense on incorrect healthcare value chain configurations, regardless of where you sit within that value chain, you will fail. I have seen (and continue to see) entities fail in their configurations. Just like Hammond, they are sparing no expense. Struggling organizations span the ecosystem from academia to congressional representatives to payers to OEMs as well as their downstream suppliers. The good news is that I am also seeing organizations getting it right. It can be done—the cup can be more full than empty if you learn how to fill it up, or in more academic terms, configure it.

The difficulty in today’s ecosystem is that in order for us to be successful collectively, many (but not all) of these chains of chains need to be configured in harmony—and therein lies the problem. It is extremely difficult to harmonize many disparate portions of a complicated global chain of chains. The end result is that many segments of the ecosystem are maximizing their piece at the expense of others. For example, raising taxes on device manufacturers so that those dollars can allegedly be used for a good reason elsewhere is simply squeezing a balloon. The air needs to come from one place and end up in another. Another example is an OEM misusing an electronic portal to create a win/lose proposition, driving suppliers’ margins down to the point where it no longer makes sense to be in business—again, simply squeezing the balloon. Also, suppliers who cut corners to offer better prices are damaging the ecosystem. In more bold verbiage, however we got here, many agree that we’re in an eat-or-be-eaten ecosystem. Ultimately, if a win/win harmonization does not emerge across the chain of chains within the ecosystem, we will all pay the ultimate price and, just as in Jurassic Park, we’ll be eaten. We don’t need to look too far to see what an eat-or-be-eaten mentality can do. Within the automotive industry, this mentality led to bankruptcy and bailouts. We simply cannot allow history to repeat itself in healthcare.

It’s also important to understand that I’m not advocating a social system where all components are controlled and harmonized by one entity such as the U.S. government. On the contrary, I believe that the free enterprise system grounded in capitalism has, can, and will allow healthy competition. Healthy competition makes all of us better. But, how we compete within the free enterprise system will be critical. We must work together as a village where the patient comes first. I have structured many a chain of chains between competitors working together. We can do it if we want to.


A Look Ahead
The following is an introduction to some of the topics and leading trends that will be coming in future months.

• Outsourcing? Really? DUH!: Understanding the make vs. buy proposition is what outsourcing is all about. All other elements mentioned after this support the outsourcing proposition.
• Supply Chain/Value Chain/Care Chain: The care chain begins with a focus on the patient, wherever they may be—home, clinic, or hospital. From there, we configure our value chain. Within the value chain, we configure the supply chain. Once you understand the differences, configuration becomes much easier.
• Oleksy Tier 5: This is a multi-tiered approach to guide you through your chain of chains navigation as well as the crisp execution of that navigation.
• Lens: It is critical that you determine the lens you need to wear to exist within the ecosystem. You will learn how to better understand the Oleksy Enterprise AOE model and recognize how your approach (A) and your offering (O) fits within the environment (E) (or temperament) of the ecosystem.
• Portals: The use of electronic sourcing portals can be very beneficial repositories or detrimental weapons in the sourcing process. Using portals correctly can make or break the chain of chains configuration regardless of where you sit within the chains. This will also have a segment about open book pricing—the good, the bad, and the ugly.
• The Talent Proposition: It goes without saying that having sufficiently trained talent to configure the chain of chains is critical. It is the most important element of the Oleksy Tier 5 model. This column will focus on making sure you have the right talent to address your needs and what attributes to look for. I’ll also explain why so many organizations are looking for supply chain talent to run their companies—see Tim Cook at Apple.
• POP—Power in Partnering: Call it old fashioned, but the only way to secure harmonization within the chain of chains is to instill a sense of partnering. The “I win, you lose” (IWYL) mentality will destroy our ecosystem and must be avoided at all costs. Ask the automotive industry why.
• SCOR: In 1996, I was invited by PRTM (a management consulting subsidiary of accounting firm PricewaterhouseCoopers) and AMR Research Inc. to be one of the founding authors of the Supply Chain Operations Reference (SCOR) model. This year is the 20th birthday of SCOR. What started in small conference rooms in Boston, Mass., is now an ANSI standard. You will learn why SCOR is so important to outsourcing success and why I use it daily
• Thread Management: While undertaking the make vs. buy proposition, you must understand how to map your chain of chains. This column will feature how to do so in today’s ever-changing ecosystem.
• Consolidation Waves: Many consolidations are taking place at the OEM level. What does this mean for their chain of chains as well as the suppliers within those chains? I’ll also discuss consolidation at the supplier level and the ramifications of those occurrences.
• Outsourcing-Offshoring Landed Cost: It is imperative that when configuring the chain of chains, landed cost be considered and not just price. Additionally, price and cost are also differentiated in this segment. Landed cost and price are oftentimes misunderstood or overlooked when evaluating outsourcing to offshore entities.

The risks to society are extremely high. This isn’t an industry that makes automobiles or hammers; this is an industry that is designed to restore people to full health. And those people to whom I am referring are you, me, your spouse, parents, children, grandchildren, and so on. Our very lives depend on successful navigation of the medtech industry. Therefore, it is imperative that we journey into our own Jurassic Park—today’s healthcare ecosystem—with our value chain/supply chain/care chain lens on, tools in hand, and the mentality of a village where we coexist together successfully. Let’s begin the journey.

Welcome…to Jurassic Park! 

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Chris Oleksy is founder and CEO of Oleksy Enterprises and can be reached at [email protected].