October 14, 2021
Gary Bisbee 0:06
Washington, D.C., is my home away from home. I’ve worked here for the better part of three decades as a founder, entrepreneur, policy expert and author.
Don Rucker 0:10
Probably the longest title. Everybody sort of shortened it to ONC for sanity’s sake.
Gary Bisbee 0:15
I’ve learned leadership secrets from many health care executives who understand that Washington is the largest payer and regulator of health care.
Nancy-Ann DeParle 0:25
She said, well, because you’ll never get a husband if you do that.
Gary Bisbee 0:29
I began interviewing health care leaders many years ago because what better way to learn how they think, why they make it to the top and how they remain there?
Think about, what was your most challenging engagement.
Greg Carpenter 0:40
Health care has been the most difficult problem, as you said.
Gary Bisbee 0:43
We’ll talk about that later.
Are you an innovator or looking for a competitive edge? Then you’re listening to the right conversation. Competition in today’s world is more and more complicated as the distinction between previously separate business sectors become blurred. We met with Professor Ron Abner to discuss his newest book, Winning the Right Game. Ron analyzes business strategy beginning with the ecosystem within which the business operates. Businesses need to consider not just products and services they deliver to customers, but also structures of interdependence built into their ecosystem. We discussed how firms can better prepare for or even cause ecosystem disruption and how different leadership styles are necessary for different settings. We dive into the complexities of healthcare innovation and the limits of the words we use. Ron rounds out the conversation with advice for up-and-coming leaders navigating the modern ecosystems and offering counsel to young innovators on how to bring good ideas to scale.
Good morning, Ron, and welcome.
Ron Adner 1:57
Thank you, Gary, it’s great to be here.
Gary Bisbee 1:59
We’re pleased to have you at the microphone. course you’re up in New Hampshire. Today, we’re down in the Washington DC area, it’s fall time, or at least as close to it are the leaves turning yet in New Hampshire.
Ron Adner 2:12
It’s coming up. And I gotta tell you, it’s beautiful. And today, today’s a good day to be up here.
Gary Bisbee 2:17
One of the prettiest places to be in the fall. The Gary Bisbee Show, as you know, Ron, is about the power questions for healthcare leaders. You’re a top notch strategist, professor at the Tuck School at Dartmouth, author, and author, of course, the wide lens, which is just a classic thinking on entrepreneurship and innovation and competition. And congratulations. Winning The Right Game is the newest entry here just recently published. And we’re excited to talk to you about that today. I’m sure this is going to prove to be absolutely classic thinking about the innovation entrepreneurship ecosystem. So let me ask you a question about yourself first, which is how did you become interested in leaders and strategy?
Ron Adner 3:12
Thanks for that very kind introduction. I got interested in strategy by becoming very concerned about what it was that I was about to do. So my undergraduate training was in engineering, and I got into engineering because I was really interested in innovation. And very early on, I had a sneaking suspicion that there were a lot of bottlenecks to the success of innovation that had nothing to do with engineering. And so I ended up deciding that I needed to understand how to see the big picture before diving into any technical piece. And that ended up taking me on a journey from engineering to a PhD to business school to basically what my career has become, which is trying to understand innovation through a strategy lens.
Gary Bisbee 4:06
I have a very tactical question and then we’ll get into Winning The Right Game and that is, I like to ask all of our author guests How do you come up with your names for your books, the wide lens Winning The Right Game? Those are terrific names. How do you do that, Ron?
Ron Adner 4:22
They were both really long searches, actually. I feel like the idea behind each book was well established. In fact, many years before the book came out. I do a lot of my thinking and experimentation within my research and research presentations in my classroom. I’m very, very fortunate to have spectacular students who are willing to humor me as I try to develop new ideas. The search for the title, in both cases, is trying to triangulate on how to encapsulate a message of a book so you understand it before you read it, and then it summarizes after. Essentially, I think capturing the essence of each book with a wide lens was about how to see the big picture when you innovate. Then this new book, Winning The Right Game, is really about this question of not how do you innovate? But how do you compete in a world where innovation and value creation takes on this more composed form within ecosystems. The idea with that title is actually supposed to evoke “winning the right game” as this notion that it’s, it’s no longer just about winning. We’re old enough to remember when Jack Welch was regarded as the greatest CEO in the world, and he had this great book that he wrote called winning. In some ways, it was that simple. That was good advice: just win. Do it better than the other guy. Do it cheaper than the other guy. Today’s world is more complicated, where just winning is not enough. There are multiple games being played, you need to choose your game, you need to understand the games being played by others around you. This notion of winning the right game is supposed to evoke the fact that you could be winning the wrong game, and how do you be careful about your choices? And that actually changes our whole approach to strategy in this world?
Gary Bisbee 6:19
This broader look at the world, the term you use is “ecosystem.” Can you define that for us, Ron, for those that might not be sure exactly what that means?
Ron Adner 6:30
I offer some formal definitions at the beginning of this book, because you cannot be in healthcare, and not be exposed to the word ecosystems eight times a day. But my contention is that 90% of the time, if you took the word ecosystem out of the sentence, and replaced it with a word mishmash, nothing would really change in that sentence. And, and so what it means, of course, is that people are very concerned about the mishmash in a new way, that we’re sensitive to interdependence. But it also means that beyond that, we don’t know what to do with it. In my work, actually, this is going back 20 years now, the way I think about ecosystems is that it’s not just about interdependence. We can talk about how, in fact, industries are defined by huge amounts of interdependence. What makes the ecosystem construct matter is that it’s the structure of interdependence, among a multiplicity of partners. There’s a multilateral game being played. The way to think about that structure is rooted in the notion of the new value that you’re trying to create. It’s actually about my one sentence definition of what is an ecosystem is that an ecosystem is defined by the structure to which partners interact, to deliver a value proposition to the end consumer. And if you unpack that, you can start thinking about well, what’s changing is I’m trying to deliver a new value proposition. And that’s how you surface the structure of the ecosystem. Once you have that idea of structure, you can actually begin to build strategies for alignment (for offense, for defense, etc). Structure is at the heart of it.
Gary Bisbee 8:17
So we’re thinking about ecosystem and structure. Now you introduce the term “value proposition,” Ron. How would you define that?
Ron Adner 8:25
The value proposition is the thing you’re trying to deliver. It’s important to highlight because the value that you’re trying to deliver, sometimes it’s just fully dependent on what it is that you do. But often, it’s not right. Often it’s dependent on other participants. And so by anchoring the ecosystem in the deliverable at the end, you become more sensitive to the other parties that you need to work with, or the changes in the way you need to work with those parties. In pursuit of one value proposition as opposed to another. And so really, it’s supposed to defocus you from just focusing on your product or your service. And thinking about this arrangement, partnerships on which you’re going to rely.
Gary Bisbee 9:14
There’s a lot of discussion and healthcare about this course, the value proposition, and that is, is the patient receiving affordable care? Are they happy with their care? Is that kind of appropriate care? Does that fit within the context of the value proposition as you outline it?
Ron Adner 9:37
In some ways, one of the greatest challenges in healthcare at this moment is that we’re having this debate about what is value, and these different interpretations. Each, in fact, requires something new not just of a particular actor, let’s say the healthcare system, but they’re demanding a new set of interactions. When we talk about value based health care, for example, if you at a superficial level, it says, “Okay, you’re moving away from fee-for-service to delivering some kind of longer version of care, and it’s usually coupled with some capitated payment so you’re not charging per service you’re charging per life under coverage.” If that was all it was, it would be pretty straightforward. It would be hard, but it would be straightforward. The issue is, as you start peeling away from there, suddenly the activities and the partnerships required to support this go way beyond the walls of the hospital. Not only do they create new interactions within the hospitals between primary cares and specialists and Prevention’s etc, but now you’re going out into the community, suddenly, you need to start thinking about incorporating issues around nutrition and access to healthy food and their healthcare systems that have gone into the renovation business. It’s cheaper to tear out carpeting in my house, than to deal with the consequences of mold on my asthma. This is a totally new structure of relationships. And so unpacking those relationships then allows you to create the strategy for how you deliver the value proposition? And by the way, when you think about what are the realistic interactions that you can do at scale, it also helps you hone in on what’s the value proposition you’re really trying to get after?
Gary Bisbee 11:29
Well, let’s take that to the next step, which is how do you relate ecosystem to value proposition? You’ve kind of talked about that, but let me ask that question directly.
Ron Adner 11:41
The ecosystem is the structure of interdependence that comes together to deliver that value proposition. There’s the question of also, what is it that you need to do? There’s the question of what is it that others need to do? But the heart of ecosystem strategy? Is alignment, much of ecosystem strategy is alignment strategy. How do you get all these parties, not just to show up at the same table, but to agree on how they’re going to interact? That’s the core anybody was talking about ecosystem strategy. If they’re not talking about alignment? I think they’re, they’re missing the game. Essentially, what they’re doing is they’re focusing on a really shiny goal. But they’re missing the critical issue of Well, what’s the pathway to get there?
Gary Bisbee 12:31
Of course, in healthcare, the classic case is the alignment between physicians and hospitals or the delivery system. There’s a lot of work going on trying to figure out the right structure. What’s the right payment model that would align these two parties, this physician decision maker and in the hospital, and nursing and all that that entails? Does that fit into the model that we’re talking about here?
Ron Adner 13:02
It certainly does. In some ways, what makes it challenging is that there’s no one size fits all answer. Depending on who you are as an actor, the levers available to you, the resources available to you, the existing partnerships you can bring into play vary. And so in that regard, ecosystem strategies really are much more much more customized to a given system. Then the way we usually think about an industry strategy, where basically again, back to this idea of it was just about winning, can you deliver lower cost care? Can you deliver higher quality care? Now it’s how do you define care, and you come up with that definition to your point, the way you’re interacting with different parties, including your physicians needs to be rethought.
Gary Bisbee 13:59
It’s all about the consumer, as we think about it. If you think about Starbucks, let’s say you can go to any Starbucks, presumably in the world and get the same kind of branded coffee and type of coffee that you want. And yet healthcare isn’t as focused on a consumer strangely enough, at least if you look at the ecosystem, treating these patients. So that’s a huge challenge for healthcare. But it sounds like it fits exactly into the thinking that you have here and in Winning the Right Game.
Ron Adner 14:36
Yes. In order to deal with this, we need a new set of tools. We need a new language to be able to express this variation, so that’s really the effort in the book. It’s not to tell the reader, “Hey, you didn’t notice, but the world is complicated” That’s not news. The challenge is how do you deal with that complexity and my journey in writing the book was really in trying to figure out not just the concepts and the frameworks that will allow someone to come up with better answers. But just as critically, this was like a big learning for me over the last 10 years is that the value of these concepts is even more in their role as a language that allows teams to communicate among each other and with their partners than with just the notion of getting to the right answer. I tell this to my students all the time, which is if you’re in a classroom, and you’re the only person with the right answer, good for you. If you’re in a meeting room, and you’re the only person with the right answer, at best, you’re just annoying. Your job is to bring everybody to the right answer. And that requires this language. And this new complex challenge requires a new language. That’s a big part of what this effort was about.
Gary Bisbee 15:58
We’ve talked about Winning the Right Game, what’s an example of a company that’s winning the wrong game?
Ron Adner 16:06
Chapter one of the book actually is titled “Winning the Wrong Game Is Losing.” And it’s so from the book, The highlight is the story of Kodak, which turns out to be one of the most misunderstood failures in the modern business canon. Everybody says, oh, Kodak went bankrupt because they couldn’t do the hard transition from chemical to digital, they were stuck in the legacy business, etc. Bad lazy inert management, that’s what drove them off a cliff. And that turns out to be 100% false. And that false wood is going to matter both for Kodak’s legacy, but much more importantly, for the lessons we try to draw from it. So it turns out that Kodak starting 2000, went all in on digital, and by the end of the decade, had been the number one seller of digital cameras in America, they were a total contender in selling printers, they, they they even today, if you go to a CVS or Walgreens, you see there digital printing kiosks there. So it became a leading digital printing company. So it won that game, it did what everybody said they couldn’t do. But the thing is, they still go bankrupt. And the reason is that just as they are mastering digital printing, the notion of digital printing itself is replaced by digital viewing. Screens that replace paper, and suddenly this huge effort to dominate digital printing amounts to nothing. So Kodak wins, but they win the wrong game. And that’s the same, some ways it’s even worse than losing because they did all that hard work. They could have been asleep for 10 years, and maybe have a greater return to their employees and their shoulders. It’s a perfect example of a problem that happens when we start looking at changing the world. And focusing at the level of which is how we usually focus the level of technologies, the level of activities. So this is what I put under the bucket of what I now call classic disruption. The healthcare exemplar of classic disruption was MinuteClinic. Basically I look at what you’re doing in an ER and I make it worse, but good enough, and as long as it’s cheaper, that’s competitive. So that’s one kind of threat that no one sees in the environment. That’s classic disruption. Just kind of reef reconfiguring how we do the activities. If you look at CVS health, we’re now you have, okay, there’s mediclinic. But it’s coupled with a retail pharmacy that 90% of population is within like eight miles of and you put that in with a giant health insurer, and you put that in with a giant Pharmacy Benefits manager, suddenly, you can see that if those are kept this four silos, okay, no big deal. But if they’re woven together in the way that their former CEO, Mary Marlo, this great phrase, which is we’re going after the retail association of healthcare. That’s a totally different proposition. To make that happen requires a different approach to strategy. The way to respond to that happening is going to require a very different approach on anybody who feels like they might be put on the defensive.
Gary Bisbee 19:23
You’ve talked about the playbook for strategy in the book, How do you describe that playbook for strategy run?
Ron Adner 19:31
The playbook starts with how do you understand what an ecosystem is? How do you understand the structure? I introduced this new construct, this new level of analysis that actually is, I think, essential for understanding how to interpret these kinds of changes in your world. This is something I I called your value architecture. And your value architecture is not about how you run your activities. It’s when you think about that value proposition, how do you think about what underlies it? And essentially, this is something that is implicit in most organizations. And what happens is usually the way we think about how we create the value proposition just kind of correlates to how we organize our activities. And that kind of puts you in a mindset that will only identify these classic disruption threats. Whereas looking through this lens of your elements, allows you to see interactions that go across the vertical body that the siloed boxes. So the first part of the playbook is to really understand how to think about ecosystems. And then with that in place, there’s, there’s, it’s, you can now talk about, well, how do you disrupt? How do you construct new ecosystems? How do you construct new value propositions? And how do you see that happening? And then of course, there’s a question, okay, if someone is doing that in your space, how do you want to respond? There’s a chapter on ecosystem offense. And then there’s a probably even more critical chapter on ecosystem defense, where, in both cases, the root is not just how do you come up with your idea? Healthcare, we’re drowning in great ideas. We’ve been running great ideas for 20 years. The issue is how do we construct in the case of offense, or maintain and reconfigure in the case of defense? How do we change these Coalition’s in order to drive forward? This new proposition? That comes from the question of timing. We’re now living in, hopefully, the later stages of our COVID world. Certainly feels a lot better than a year ago, but timing disruption is not just about how do you not be too late? A lot of it is how to not be too early. Telehealth has been a too early proposition for 15, 20 years, and now the conditions have come together, and we’re in a totally different world. So a critical part of this playbook has to do with timing, and try to understand the transition between the old ecosystem and the new ecosystem. The next part is about how you pick your roles? Then the final part is, how do you then pick your leaders? Meaning, what do leaders in these organizations need to do? How does that change in an ecosystem world compared to more traditional work?
Gary Bisbee 22:25
Let’s go back to offensive defense. What’s an example of a company that we might know the name of that has done a terrific job on offense or terrific job on defense.
Ron Adner 22:37
One of the examples in the book is about how Amazon came out of nowhere in 2014. When Amazon is still regarded as a retailer, not a tech player, and is able to navigate over the course of five, six years to become the central player in the smart home. It was really pretty remarkable. They beat Google, they beat Apple, they beat Microsoft, which are these giant ecosystem players. We used to have three different markets, we used to have a market for voice control, we used to have a market for smart home controllers, we used to have a market for speakers, and Amazon came in and post-echo. Those three things don’t make sense as separate markets. That’s a totally new construction of ecosystems. We used to have an industry that was focused on mp3 players. And there used to be an industry focused on phones. And those are two great industries where people made lots of money and lots of competition happened. Then one day somebody combines the two and you look back and you’re like, “Why were they ever separate?” There’s a similar sort of story that is beginning to unfold in healthcare. It’s not clear what the final equilibrium is a suspect going to be multiple versions of this. But the notion that you do delivery without some kind of insurance is becoming a lot, it still happens. It’s becoming more noteworthy rather than the de facto standard. This is kind of as we’re crossing boundaries, that’s what that’s what the reconfiguration ecosystem looks like. And in the beginning, it feels like just ecosystem construction, but by the time the construction is done, it feels a lot like offense. If you’re not the one who drove this, you feel like you’re on the outside.
Gary Bisbee 24:35
What’s the unique advantage of established players in this new order?
Ron Adner 24:40
When people hear the word ecosystem, we immediately jump to Silicon Valley and all these exciting startups. There’s a certain false hood to the notion that this ecosystem story is a startup story. Startups are great at imagining the world But the key to ecosystem success is alignment. And the key to alignment is being able to manage partners into a new position. The huge advantage that incumbents have is existing partner relationships, especially in b2b type settings, where trust matters enormously. Being an incumbent having a history is a huge advantage. So when startups win in that space, it’s because the incumbents can’t get out of their own way. It’s because they can’t commit to the realignment that’s really necessary. It’s because their internal systems are mis prioritizing what to do for their own internal benefit versus to get their partners in place. But an enlightened incumbent has a massive, massive advantage in driving ecosystem change. And I would say a coalition of enlightened incumbents is an even higher level of the game.
Gary Bisbee 26:01
Okay, back to health care. We have very large health systems, very large health plans or insurance companies, and one huge regulator and payer and the federal government. There are three really established types of players here. How does an innovator crack into that whole constellation of these huge companies?
Ron Adner 26:23
The good news, the bad news, of course, is that it’s actually we say these are the three elements in the healthcare ecosystem, but we know there are at least 51 regulators. There’s the federal government, and then for better or worse, each state has its own version of what they think healthcare policy is. We know that insurers are not monolithic and we know that their incentives are changing and we particularly are in healthcare, which is very tough. It’s a very different business. You’re not selling cars, cars are complicated today in a way that they weren’t 10 years ago. But healthcare you’re selling something that is somewhere between a privilege and a right and where that border is, itself is being renegotiated and that renegotiation creates complexity, but it also creates opportunity for finding new configurations. If one state is unhelpful in driving telehealth, that’s not a veto on telehealth. We’re seeing different states change their mandates. I actually think that healthcare—which itself, of course, from the provider side, is not monolithic—has massively underplayed their influence in their ability to shape alignment in the ecosystem. Healthcare systems are, there’s some of the prime employers and whatever geography they’re in. That’s totally separate from their contribution to community health in the community that they’re in. The people who work at healthcare systems tend to participate hugely within their communities. And so there are all kinds of levers that can be pulled to put forward a clear vision and drive alignment, whether they’re pulled or not, is something else. And that again, I think, with greater clarity, and being able to express the strategy will lead to far greater effectiveness.
Gary Bisbee 28:21
Ron, in the book, you talk about the ego system, trap, the ego system trap. Can you describe that for us, please?
Ron Adner 28:29
Yes, incumbents are advantaged in that they have relationships, but they’re disadvantaged in that they have some success. The ecosystem is the structure of interdependence, when you define relationships around this value, proposition and goal, an ecosystem is what happens when you define those relationships around a central actor around yourself. And the ecosystem trap arises when you can’t tell the difference between those two things. When you think of yourself as the central actor in the ecosystem, which is not necessarily a bad thing, but if you allow that to blind you to the need to drive alignment around the value proposition, it leads to massive underperformance and huge waste and a lot of time going by without action.
Gary Bisbee 29:18
You mentioned leaders, how do you develop and recruit leaders in this new order?
Ron Adner 29:25
Usually strategy people don’t talk about leadership? Not because we don’t think leadership is important, but because we don’t have a lot to say other than get better leaders. And the AHA for me was that when we’re in an ecosystem setting, that is to say, when we’re in a setting where we’re redrawing connections, the kind of leader you need is not a better leader, but a different leader. When things are stable, what you need is an execution minded leader, you want someone who puts their organizations ahead of themselves, the sort of thing that we usually celebrate. But if you’re trying to align others into a new configuration, someone who puts their organization ahead of everything else doesn’t sound really good to any of these other partners. So what you need is not an execution mindset leader, you need an alignment mindset. And that requires a different way of thinking that requires a different set of trade offs. And quite frankly, from a governance perspective, it requires an appreciation that the right leader is sacrificing something in the near term to drive alignment that will create returns in the longer term, rather than getting as much as possible for the organization. In every in every period and core that we’re in.
Gary Bisbee 30:52
What about mindset? Is there a different leadership mindset going forward?
Ron Adner 30:57
Yes, I think it’s, this is kind of this is the critical difference between an execution mindset and an alignment mindset. Where the alignment mindset puts partners and the need to get them in place, not just the need to shake hands, not just the need to, to run pilots, but to find a way of getting partners into place in a way that will satisfy them into the long term. So you can actually scale. This is this crucial alignment mindset. And it’s got certain characteristics that I go into in the book. That is the critical difference. It’s not a difference of vision, it’s not a difference of risk taking, it’s not a difference of investment. It’s this difference in having an alignment mindset.
Gary Bisbee 31:40
Ron, this has been a terrific interview. Winning the Right Game is going to be a classic for all of us interested in entrepreneurism and innovation and leadership. Two last questions. We have a number of up-and-coming leaders that listen to this show. What advice do you have for up-and-coming leaders given where things are headed?
Ron Adner 32:05
We like to tell strategy stories from the perspective of the CEO, not everybody is the CEO all at once. If you’re inside the organization, these principles apply in the same way, but with a different flavor. You can’t change the organization strategy. But you can one, try to understand the organization strategy through this lens. That will give you a sense for which projects are being started are actually more or less likely to move to scale. The biggest challenge in healthcare systems today is we have it’s not that we don’t have enough new ideas, it’s that we’re drowning in ideas. And healthcare systems are also really good at launching a lot of ideas. And so we’re drowning in pilots. And a lot of these pilots are actually successful. Then most of these pilots are successful pilots that tend to go nowhere. If you’re early in your career, you want to figure out not which is the exciting pilot, it’s which of these pilots is going to go to scale. And the way you want to manage yourself, your team manage up and manage down is to make sure that you’re aligning things in a way that you can actually move beyond the initial success and the exceptional circumstances that surround any pilot to actually move to something bigger. Usually when you put really promising people on a pilot, it’s getting a lot of attention, it’s getting a lot of resources. A successful pilot teaches you that something is positively possible, to see if something is scalable, what you need is your most mediocre people with the kind of neglect they suffer in the day to day job. If that works, now you can scale. And so designing the projects that you have have to be you need the exceptional circumstances to get them started. But then you really need to think about alignment right upfront, to make sure that they scale and make impact. And that’s how you look. That’s how you make a difference in the world. And that’s also how you make a difference in your career.
Gary Bisbee 34:17
In the follow up question, there is the same question for innovators. I suspect that the answer is probably in the same category, but what advice would you have for innovators?
Ron Adner 34:28
Yes, it’s in a similar vein of there’s so much exciting stuff happening in healthcare. And it’s very easy for an innovator to get caught up in the shiny pneus of the goal and allow themselves to be a lot fuzzier about the pathway of getting there, not their own development pathway, but the alignment pathway for bringing things together. And I’d say that’s probably one of the most valuable tools and constructs in this book is How do you approach driving that alignment? And so I think in some ways for innovators, it’s even more important than for what we usually think of as established incumbents because they don’t have as many resources to, to take as many swings before they actually connect and get the ball out of the park.
Gary Bisbee 35:16
I enjoyed our conversation. Thanks very much. It was terrific as expected, and congratulations on Winning The Right Game. It’s a good one.
Ron Adner 35:25
Thank you, Gary. It’s a pleasure. It’s always a pleasure to see you and I appreciate the chance to share these ideas I’m very excited about.
Gary Bisbee 35:33
New episodes will debut every Thursday. Join me in conversations to gain advice and wisdom from CEOs, presidents, and healthcare experts. Health care leadership is hard work, but it becomes more manageable as we learn from the remarkable lives and careers of our guests. I’ll see you there.