China Has a Vision for Health System Strategy. What This Means for the U.S.

We are essentially linear creatures.

Whether this is the native mode of humanity, or whether it is the result of acculturation, is open to question. Western society fosters and rewards linear behavior and performance from kindergarten on. Our educational system teaches and grades on it; our social programs are designed and executed on it; and it drives decisions throughout most government, nongovernment, and commercial settings.

The strategic context for business has changed radically, though, with old patterns of power fracturing along new lines.

Culture itself is passing through a new time, and the journey promises to be more transformative than the industrial revolution at the turn of the century, and the agrarian revolution sparked by the development of agriculture in the Neolithic Age.

Perpetual disruption. It's not just one thing that suddenly has gone off the rails, it's many things simultaneously, interactively and continuously.

We are facing multiple shifting paradigms, deep structural changes that touch the lives of every person, family, community and nation, and it calls for a completely different mode of thinking, a fresh approach to growth and competition defined in 21st-century terms.

"We are entering the twenty-first century with organizations designed during the nineteenth. Improvement or restructuring of existing systems, based on the design of the industrial machine age, does not work anymore." Bela H. Banathy

Cue the new breed for a new age: the imminent IPO of Ping An Good Doctor for perspective on how to use 'big design' thinking to invent a multi-sided market based primarily on interactions (see Ping An Good Doctor Readies $1 Billion Hong Kong IPO); the 'network effects' behind Alibaba's snowballing revenue and earnings, shown in the chart below (see also How Alibaba Draws Everyone In):

And, at the level of a country's grand strategy, China as an example of how to leapfrog legacy systems and entrenched decision-making to offer entirely new ways to address the country's pervasive problems around healthcare access, affordability and quality. Not coincidentally, this is the same set of inter-related problems confounding heath transformation in the United Kingdom ("We've Not Got Enough Beds Or Staff "- NHS Bosses) and the United States (Three Doses of Competition to Reduce the Soaring Cost of Health Care).

Less emerging markets, more emerging themes that are universal.

But rather than try to untangle the vertical and horizontal complexities that shaped its health history, China chose to cut the Gordian Knot. Here's a good read on why that makes sense: Why China Will Capitalize on Groundbreaking Healthcare Solutions Before the West.

Said differently, China is meeting the strategic challenge for reform, policy entrepreneurship, and industry and government leadership by transcending the current environment to achieve structural adjustment and, for business, new growth. They are solving for outcomes-based innovation, at scale.

Kinetically-Trapped

History is replete with examples of changed environments that were recognized too late for an organization to adapt successfully.

The implosion of Toys R Us -- an American institution since 1957 -- serves as a warning for how a CEO's best intentions can fall short. The company fell apart at breakneck speed, despite David Brandon's efforts as chief executive officer of the iconic toy chain to execute a plan to invest in digital infrastructure, which was badly needed to compete with rivals such as Amazon.

But a dinosaur in a fur coat is not a mammal.

"Digital" is an operational concept; what Toys R Us needed was, like China, a transcendent strategy, a way to create an entirely new market and form of customer engagement.

"Most of the executives I talk to are still very much focused on digital largely as a way to do "more of the same," just more efficiently, quickly, cost effectively. But I don't see a lot of evidence of fundamentally stepping back and rethinking, at a basic level, "What business are we really in?" John Hagel III, Co-Chairman at Deloitte Center for the Edge

Disruption is a clash between accelerating curves and our brain's wanting things to be linear. The problem with exponential systems is they catch us by surprise.

About 20 years ago, newspaper executives knew what had to be done to compete successfully in the future, but were afraid to upset the people responsible for the past. It was a lack of courage, not a lack of clarity. 

WPP, the world's biggest advertising group, reported earnings on March 1, 2018, nearly a decade after the last data point in the chart above. WPP "struggled to keep pace with changes in advertising in 2017, with its worse annual sales performance since the financial crisis and a gloomy outlook putting its shares on track for their worst day in 20 years," Reuters reported in its coverage.

Reuters quotes Richard Hunter, head of Markets at Interactive Investor: "The jury is still out as to whether WPP has suffered due to a cyclical change, or wether the landscape is actually structurally different."

It's structurally different.

Strategic Fit to a New Context

As the meltdown in the world's $7 trillion healthcare system moves from link to link, engulfing markets, industries and commercial relationships from which no one seems immune, it reveals the potent networking effect that encompasses economic and technological connectivity.

Complexity is increasing. Diversity is multiplying. Differentiation is exploding. The number of alternative choices is becoming endless.

It is more difficult to analyze, model, predict or control. Permanent fixtures of the world economy are in free fall or have suddenly disappeared, having been unable to rewire their houses in time to save them from crumbling with stunning velocity.

It also highlights a central feature to the future of strategy: the concept of “separation” – between people, between markets, between governments, between countries, between ideas -- is bankrupt. Everything is connected to everything else in complex systems of behavior.

We have effectively killed off the independent sphere.

The new operating environment is characterized by complexity, interactivity, and rapid evolution. It produces more challenges than any one person, business, or government can respond to effectively.

This has two implications. The first is the importance of building collaboration that spans industry environments, spawns novel partnerships, and involves multiple stakeholders. The second is the importance of shaping developments proactively around a new theory for growth.

Competing at a System Level

The shape and texture of most mainstream economic theories reflects a two-sided view of market exchange.

Competition between economic systems takes the form of competition between agents within those systems, not between the systems themselves. The actions of government and the foundations for law, built over centuries, have reseeded the grass for this playing field, and the teams who play on the pitch are assumed to know the rules.

The role of policy is not to participate in the game, but to manage it, to make sure the parts are prevented from destabilising the whole, and the whole is prevented from destabilising the parts.

But the international system in which all businesses and governments now find themselves poses something new entirely.

Legal institutions have not kept pace with technology. Government is realizing that it is not separate from the market. Markets are less two-sided than they are N-sided, involving connections and interactions between networks of buyers and sellers.

The game has clearly changed. "Transformation" should be seen as a transcendent change in the process for creativity.

A Sense of Urgency

According to the Chinese New Year, 2018 is the Year of the Dog. Unlike Western astrology, each sign lasts for a whole year and each year takes the name of an animal whose characteristics color and influence everything that happens for the next 12 months. 

A Chinese myth has it that the Jade Emperor said the order of the animals on the Chinese Zodiac would be decided by the order in which they arrived to his party. Monkey, Rooster and Dog were, at that time, in another country, helping a god defeat evil spirits.

Soon after defeating the evil spirits, they arrived at the same time at the Jade Emperor’s party. Thus the Emperor went by the order they met the god in the other country.

The Dog became eleventh. It had stopped along the way to wash itself in a river.

The Dog’s vulnerability is procrastinate too long and miss opportunity.

/ jgs