Competing and Winning Using AI in Healthcare

I keep finding disruptive AI that solves healthcare marketers’ problems and delivers real ROI in the solutions. But the companies offering them have only 1 or 2 healthcare clients because the healthcare execs are unaware of them. And their existing clients would like it to remain that way, because soon, companies that do not have AI in their centre will be unable to compete.

When creating a strategy, all companies should define the use cases and ROI of the AI they plan to use that will give them a competitive advantage – now. Rather than relying on traditional business processes operated by workers, managers, process engineers, supervisors, or customer service representatives, the value we get from companies with AI at the centre is served up by algorithms.

Competitive Advantage

And, when all companies are using AI, the key competitive advantage will be data. Roche spent $1.9 billion acquiring FlatIron Health due to the enormous oncology databases they have. This is what all companies should be thinking about after they get their strategy in place and know how they are delivering value with AI both now and moving forward: Where are they going to find the data that will give them a competitive advantage, and how are they going to put AI firmly in the centre of the company?

In a lecture on how AI was used during Covid-19, I gave the example of how Ant Financial, part of the Alibaba group, use AI to process healthcare claims at record speed for the hospitals. Ant Financial is built on AI — as are all the Alibaba companies.

Ant Financial Versus Paypal

It’s fascinating comparing the results of Ant Financial and their Alipay (their core mobile payment platform) to that of PayPal. Alipay was essentially the PayPal equivalent for the Alibaba platform (which is like a Chinese Amazon). They both had revenues of $17 billion in 2019. But when you look at their market caps, Ant is at $300 billion and PayPal is at $250 billion. Ant Financial has over a billion customers, PayPal has 286 million. So apart from PayPal charging a lot more, the other big difference is the age of these two companies. In 2019 Ant Financial was 5 years old and PayPal was 21 years old. How did Ant become so successful so fast?

Well, for a start, PayPal doesn’t have AI at their centre. They do transactions. And while they have been adding AI, Ant has AI at its core. This has allowed Ant Financial to analyse the data, which it uses to diversify by creating a large number of business lines, from consumer lending to money market funds to health insurance to credit rating services, and even online gaming for reducing carbon footprint.

Is AI Only for Tech Companies like Google and Amazon and Uber?

Many companies have AI at their centre including Amazon, Google, Uber, AirBnB and Spotify to name a few obvious ones. However, did you know that many non-tech companies are now also transitioning to become more AI centred? These include traditional companies such as Walmart, Target, Comcast and even McDonalds (who spent $300m on AI in 2019).

Where Does Healthcare Fit In?

Every company, especially healthcare companies, need to revamp themselves to put AI firmly in the centre to revolutionize everything from operations to strategy and even competition.

Having as dedicated AI factory in your company changes everything. You can operationalize the end-to-end AI lifecycle to achieve AI at scale and at speed. Just as a traditional factory creates physical products at speed and at scale, an AI factory delivers AI solutions for the company at speed and at scale. It allows the combination of data, people, process and tech to move beyond experimental pilots and deliver AI to drive business value.

It’s why Google can run millions of ads and Uber can successfully manage millions of rides each day, how prices are set on Amazon, and even how X rays are interpreted at Zebra Medical. In each case, the AI takes the data; automatically synthesizes it; calculates predictions, insights and likely outcomes; and makes a decision automatically.

When companies have AI at their centre, they can identify things other companies just don’t see, which yields impressive growth and rewards. Moderna created their vaccine from scratch in 42 days, and as their CEO said, “We are an AI company who just happen to be in biology.”

However, most healthcare companies are a little slower to adapt. Not having a team with the right skills, understanding AI and the benefits and uses of AI, and being able to define the data scope and quality required to achieve business goals are the main inhibitors.

But AI doesn’t have to be super sophisticated to bring about significant changes in results. And these can be incorporated into businesses rapidly. Even incorporating regular AI will quickly deliver strong ROI results if strategically planned properly.

The impact on competitors not using it at their centre is devastating. Consider what happened to Barnes and Noble and traditional bookstores when Amazon arrived on the scene, and traditional banks when Ant Financial came, or even Blockbuster when Netflix changed the model. Traditional players who do not begin incorporating AI successfully in their centre will eventually be swallowed up or die.

So, how should a traditional healthcare company proceed?

This is going to require more than rebuilding tech infrastructures, data pipelines and experimentation. Companies need an entire re-planning of the organization and its operating model.
For many years, pharma companies competed on medical breakthroughs. They still do. But if done traditionally, these take many decades to discover, develop and bring to market. Contrast that with Moderna whose record is 42 takes from deciding to find a molecule to getting it into clinical trials. They did it with AI.

The traditional pharma model is in danger already. As it stands, many areas within pharma are in silos that do not communicate with each other. Silos are the enemy of AI powered growth. Ant Financial doesn’t have them. Google doesn’t have them. Nor should you.

Let’s examine the overall picture for pharma.

Our value was our drugs. We discovered, developed, manufactured, marketed and sold drugs that treated all manners of illness, from annoying to life threatening. This was an expensive process, and with all the difficulties in the environment, we needed to ensure we used our available funds effectively.

Clinical trials represented an enormous cost in the process, so when CROs (such as Covance and Parexel) sprang up, pharma companies jumped at the opportunity to outsource. This was still costly, but the infrastructure around them was variable and, therefore, pharma was able to save money overall.

Then pharma companies outsourced R&D, then discovery, and then manufacturing, distribution, sales and marketing. There are thousands of companies that do just about everything the pharma companies need.

These days pharma companies are more like project managers, overseeing everyone else doing their old roles. Nothing is left to handle in house. In fact, 30% of drugs on the market come from other companies that sold the license to them.

A Word of Warning

The above scenario reminds me of Dell. If you’re not familiar with the tale, Dell was a leader in the computer market when Asus (full name ASUSTeK Computer Inc), a Taiwanese company that manufactured circuits for their PCs, proposed producing the motherboards as well for 20% less. Seeing an opportunity to cut costs, Dell agreed. Later Asus came back with a similar proposal for taking over assembly. Next came supply chain management. This continued until Asus was controlling everything but the brand.

So when Asus entered the market on its own, they had a more affordable computer that was basically identical to Dell. Asus is currently the 5th largest PC vendor in the world (from 2014 data). In essence, Dell had trained, funded and created its new competitor, which was originally a little company just helping out the ‘big boys’ with small components.

The results for Dell were disastrous, nearly putting them out of business. It was a hard lesson, and one that pharma companies don’t seem to be learning. There’s nothing to stop expanding CROs from doing the same thing as Asus. Indeed, Covance has grown its capabilities beyond a clinical trial company and is now a drug development company with services for every stage of drug development.

The outsourcing of everything has brought down the barriers to entry. There are thousands of drug discovery outfits, and across much of the entire pharma chain, most can be outsourced to thousands of players.

The years of outsourcing and cost-cutting leave pharma companies vulnerable to all this new competition. The approach made sense at the time; however, AI is changing the game, not only in the speed to market as in the Moderna example (42 days compared with a minimum of a decade for the same achievement from a traditional pharma process), but in every other aspect as well.

Think Laterally

In 2009, Eularis did a consulting project for a Japanese Pharma company that was setting up a virtual operation for Europe. It was entirely possible – and compliant – with an in-house team of less than 10 people and everything else outsourced. And there are more outsourcing options today than there were then. They were well ahead of the game as that was more than a decade ago.

If companies can weave AI into everything and entirely reimagine and rebuild their companies, they will be well positioned as the 21st Century progresses. But now we have Google as a pharma company, researching and developing their own drugs. And Amazon is seriously looking at that space, as well. I fear pharma companies that make arbitrary random AI pilots without rethinking the entire organization may have their days numbered.