Healthcare Industry lessons and insights from Microsoft & Apple

Today, in 2011 Microsoft and Apple do not compete in the Personal Computer business. From 1985-2000 the two companies competed in personal computing, and Microsoft was the clear winner because of the positive network effects resulting from Microsoft's opening up at the software and hardware layers, while keeping the operating system closed.

A key learning for the players in the Healthcare Digital Technology space is that innovation and control at only one layer is not enough to disrupt the industry. Just as Microsoft needed to collaborate across layers to develop and deploy the Wintel architecture, which became the standard, emerging Electronic Medical Record providers will need to collaborate across the digital capabilities landscape, cloud providers, software providers, device and hardware providers, in order to establish their own standard.

Hospitals and health providers want the ease of interoperability of a single standard without giving up the negogiating power afforded by options. That a standard will emerge for the Healthcare industry presents a paradox. One the one hand, simplicity and ease of interoperability should result from the commoditization of a single digital standard across capability layers. On the other hand, the companies developing the capabilities seek extraordinary profits as their incentive to create the standard. Regulation is sure to be important in the Healthcare industry as it is in the Digital Technology industry.

In the last 10 years, Apple has exploded in growth and has maintained its brand. One could argue this is due to its decision to tightly control not only the operating system but also the hardware, software, and peripherals. This brand strategy was crucial to Apple's development and launch of its iPhone and iPad, which now account for more value than from its computer business. Apple's success came from it seeing itself as a technology company with digital capabilities within a network, not just a computer company.

Thus, the healthcare players that will emerge and disrupt the industry are not likely to be the encumbents, but recent entrants that add new sources of value. In the future, one Electronic Medical Record provider could control access to heath delivery if it acheives critical mass and generates positive network effects by attracting both the medical professionals and the patients. One could imagine a future where you choose your doctor based upon what system they use.This is why US consumers bought iPods instead of Zunes; because Apple tied the access to content through the iTunes platform. It is also analogous to professionals' choice of computer and OS based upon the software and devices they intended to use. (Cubicle employees were assigned IBM-Wintel machines, while artists purchased Macs)

To conclude, there needs to be strong interaction between and across multiple layers of digital capabilities to enable transformation of the Healthcare industry. Innovation at a single layer is insufficient for disruption. Ownership and control across layers is not necessary, partnership may be sufficient for disruption, but it can also lead to commoditizing your capability, making your competence irrelevant.