Amazon: The Elephant In The Room
As an innovation junkie, Amazon is the elephant in a whole lot of rooms I find myself in these days. The number and variety of the rooms in which the elephant seems to be hiding in plain sight are remarkable.
Amazon either already impacts or is poised to disrupt many traditional retail industry segments ranging from books to food to consumer tech to prescription drugs. No retail segment is immune. And now Amazon has announced it will aggressively extend its platform more broadly into healthcare sending shudders through the entire industry. Amazon also weighs heavily in public sector economic development discussions with the announcement of two new locations in the DC beltway and NYC for its burgeoning headquarters functions and the devastating local impact of so many lost entry-level jobs as many bricks and mortar retailers either go out of business or downsize due to the growth of online commerce.
It’s beyond me how so many public and private sector leaders have ignored the elephant in the room for so long but one thing is clear, no one can ignore Amazon any longer. The question of what to do about it looms large for every leader. One thing for sure, it’s a good time to be an innovation junkie.
It’s been a retailers dream start to the holiday season this year according to Internet Retailer with total retail sales estimates between Thanksgiving and Cyber Monday of $143.8 billion. On-line sales commanded 15% of total retail sales or $21.6 billion. Amazon is estimated to have sold 29% of the online total for a whopping $6.25 billion. Not bad for five days of work!
Both the online percentage of retail sales and Amazon’s share continue to grow showing no signs of slowing down. Just because in-store retail sales also grew over the Thanksgiving holiday don’t be fooled into thinking traditional retailers are safe. We’re at the top of a long cycle of economic growth and when the next inevitable downturn starts retail is always one of the first industries to take a hit and it always gets hit hard. The transformation of the retail industry to online and mobile is still in its early days and the impact on communities and the retail workforce will accelerate over the next five years.
Amazon isn’t just the elephant in a lot of work-related rooms, the pachyderm has also found its way into my home, literally. Never mind the growing number of packages I trip over on the porch when I get home after work but the other night on the local news I watched a segment of a weekly series called Tuesday’s Child featuring a heartwarming story about a local child available for adoption named Alexa. Every time Alexa’s name was mentioned throughout the segment another less human Alexa in the room piped up making her presence known and reminding me that Amazon really is in the room!
Perhaps the best evidence that the elephant is on the move and can’t be ignored is today’s Amazon healthcare announcement. The healthcare industry has been on emergency Amazon watch for the last several years. Every Amazon announcement has been parsed to handicap the odds that Amazon would try to work its disruptive magic on the heavily regulated healthcare industry. Every comment from Jeff Bezos about Amazon’s healthcare intentions sends industry stocks reeling. To say healthcare institution leaders are nervous is an understatement.
There was no ambiguity in today’s announcement from Amazon about their healthcare industry intentions. Amazon announced the launch of a new healthcare service platform called Comprehend Medical. It’s a predictable platform play by Amazon to stampede aggressively into healthcare.
Comprehend Medical is touted as a healthcare service platform which will aggregate patient EMR data, apply machine learning and artificial intelligence, and then provide institutional health care players and professionals with the information and tools necessary to make better more economic healthcare decisions. And oh yeah, it will also integrate the world’s largest product commerce engine. Incumbent healthcare institutions and companies have good reason to shudder at the sound of the elephant’s footsteps approaching.
Disrupting healthcare won’t be as easy as disrupting bookstores or big-box retailers for Amazon. There are many institutional interests and regulatory moats making it more challenging. As Amazon sees it, our current healthcare system is vulnerable and ripe for disruption. It leaves too many individuals and families behind and delivers a fragmented, confusing, overspecialized, unaffordable, and painful experience for far too many consumers. Healthcare institutions and professionals are too slow to disrupt themselves and to take advantage of new emerging technologies to transform customer experience. Our healthcare system as currently comprised is also unsustainable financially. The elephant likes what it sees with lots of room to forage for value creating opportunities that leverage Amazon’s superpowers.
I am curious to watch how Amazon architects its Comprehend Medical platform and service offerings. I’m concerned about privacy issues, control and use of individual healthcare data and believe that the long-term winning play is more like Apple (focus on consumers) than Microsoft (focus on the institutional market). It will also be interesting to see how Amazon handles the growing public backlash to its market size and influence including the risk of increased regulation or antitrust actions to slow the behemoth down.
It’s always best to recognize the elephant in any room. Ignoring elephants is an unwise strategy in an era where cycles of disruption are shorter placing a premium on reinvention, new business models, experimenting with emerging technologies and transforming customer experience. Everyone loves innovation until it affects them. Today, innovation affects all of us. If we try to ignore it, wait it out, or lean against it we leave ourselves increasingly vulnerable to disruption. The only winning strategy to avoid disruption is to innovate from a position of strength while we still can and not from a position of weakness when it is too late.
We also have to be clear-eyed about the impact of innovation on real people and communities. That doesn’t mean we should block innovation and the promise of leveraging exciting emerging technologies for good, it means that we need to recognize the impact on real people, institutions and communities and enable them to leverage emerging technologies to get better faster and to reinvent themselves in order to stay relevant in a rapidly changing world.