The healthcare industry is experiencing turbulence, but we are only at the beginning of an era of fundamental change. Fiscal pressures, government oversight and consolidation, combined with an increasing amount of information available to consumers and other factors, are bearing down on healthcare practices, professionals and the manufacturers of healthcare products.
A quarter-century ago the consumer electronics industry faced similar challenges. A rapid marketplace transition necessitated fundamental changes in management practices to ensure the industry's continued growth. My company, Olympus America, has a strong foothold in both industries, and I believe that by studying lessons from the consumer electronics industry, healthcare organizations may benefit and thrive through this era of change.
The first lesson is that healthcare providers and product companies that forge the strongest relationships with each other will be most successful.
In the past 25 years, the balance of power among manufacturers, retailers and consumers in the consumer electronics industry changed. Previously, manufacturers determined pricing, profits and product availability. Retailers banded together to form buying groups, and wielded more power with manufacturers in product development, pricing and, therefore, profits. They also had the closest relationship to the consumer, the ultimate end user. Look at how national consumer electronics retail chains provide services consumers need, including one major retailer's "house calls" for computer support and service.
The healthcare industry today is in a somewhat analogous state, with its emphasis on contracted purchasing through group purchasing organizations and increasingly through integrated delivery networks. Healthcare providers and manufacturers must work together to develop new procedures, products and services that reflect advances in research and technology and respond to educated consumers' demands for advanced care.
Healthcare providers and manufacturers that listen to consumers and anticipate their needs -- and form strong relationships to develop products and services to meet those needs -- will gain market share. In some cases, these needs may extend beyond traditional healthcare into more lifestyle and wellness-oriented products and services. The power of consumer choice will become even more pronounced as we move into an era of health retirement accounts and health savings accounts.
Lesson two: Successful healthcare companies must tailor their field organizations, strategies and product mixes to evolving and fragmented customer needs.
Just as savvy consumer electronics manufacturers and retailers have done for years, smart healthcare product manufacturers must learn to do business through more targeted field sales and service organizations that understand customers' needs and respond on a timely basis.
Product manufacturers must also articulate, package and sell their unique knowledge as services. By relying on product development and sales, they risk having their profit margins squeezed and their products turned into commodities. Just as IBM began packaging and selling its computer knowledge as a consulting service to complement its technology, healthcare product companies must integrate their products with service offerings to help differentiate themselves and deliver value.
A third lesson: Like consumer electronics manufacturers and retailers, today's healthcare organizations and providers must engage in branding aimed at consumers.
When baby boomers began entering the workforce in the 1970s, they brought with them an instant-gratification mentality and considerable disposable income. The consumer electronics industry became a major beneficiary. By investing marketing dollars to raise awareness of their brands, consumer electronics companies have captured a significant share of that disposable income as new personal electronic products enter the markets.
Baby boomers are entering their prime healthcare spending years with the same spending mindset. To thrive, healthcare organizations, including manufacturers, networks, community hospitals and physicians, will need to more actively market their "brand" names to this customer segment. Major healthcare providers such as Mayo Clinic, Partners HealthCare System, Kaiser Permanente, Cleveland Clinic and New York-Presbyterian Hospital are already doing this. In fact, several major healthcare providers are advertising outside of their traditional geographic markets to help build their brands and services.
Strong brand recognition also helped consumer electronics companies respond to the trend toward product ratings and comparisons. In the 1970s, such comparisons became a business and publications began printing product reviews. The healthcare industry is moving toward more outcomes-based measurement of services that help guide consumer decisionmaking -- as well as third-party reimbursement -- regarding the procedures or alternatives to consider, seeking second opinions, or traveling to another facility for care.
As with consumer electronics, healthcare marketing today must be done with the consumer in mind. This will help ensure that rating agencies and the public are aware of a healthcare provider's product and service benefits.
To succeed, healthcare providers and manufacturers will need to work together to tailor products and services to an increasingly demanding, educated and fragmented consumer segment. They will need to design and develop products that support those services in the most high quality, cost-effective ways. And they will need to market directly to consumers, building trust and preference for their brands.
To borrow a consumer electronics analogy, successful players in healthcare will have to take into account "big picture" business dynamics while always keeping the needs of individuals in focus.
F. Mark Gumz is the president and chief operating officer of Olympus America, New York, a maker of both consumer electronics and durable medical equipment.