C. Fast company, fast car
5/14/98.
On the day after the repeated nuclear tests in India, I sat in on a meeting that Adrian had with three Harvard Business School alumni. One older man, one young man and one young woman. The young man, Adrian told me, was representing several Indian software companies. They were not exactly venture capitalists, but only in the sense that they did not represent themselves as such. Their interest was clearly marked investment. Adrian confided after the meeting that it was a first for him: the doublespeak, economic and marketing jargon, and futurology so dominated the discussion that Adrian was worried they might never get to the demo ("That would have been a real first"). As it happened, they barely looked at the demo near the end of the meeting. Instead focus was on business strategy.
The HBS people wanted to know who the customers were, who controlled the purchasing decisions, and Amicas' current pricing strategy. Amicas intervenes in a chaotic milieu, one only partially primed for the strategic thinking of HBS people, Adrian tries to explain: "We make a technology. In internet parlance it is an application server with customization for the imaging market. In hospitals there is a dual decision making issue: the money comes from elsewhere (not from within radiology) but the decision to buy is made within the department. 'Sales cycles' depend on budgets. In imaging center chains (e.g. Med Resources, Syncor (Nuclear medicine specialists), other affiliated radiology imaging centers that clinics outsource to) the purchasing decisions depend on IS people to evaluate products. We license by image capacity. For most PACS companies, the prime vendor issue is the person involved in the workstations. Resellers might want to sell on a per-seat basis, but we don't want to do that."
Of course Amicas' pricing model changed over the year I followed them, but it was always a version of this transactional model where the customer could be charged for how many times they used the system (i.e. the number of studies either stored, or sent from one point to another). The transaction is the thing in internet commerce. The Thing. It is the source of value, despite the fact that it is only an exchange of values measured in some other currency. This thingly mystery is what HBS students chase after. The model is similar to that of a service provided a number of times, except that in this case, the service is only to provide a medium, a channel, a background, an infrastructure for some other service or product. The selling point for Adrian, however is a "shrink-wrapped" product: software that works. The fulcrum of pricing is the transaction. Moving information better and faster is the service.
The business plan discussion continues in semi-confusion. Adrian offers the conventional wisdom that when proprietary systems dominated the scene in hospitals, there was no notion that things could be done this way; hardware and software were products. Film was a particularly expensive product that everyone needed. Radiology was a "cost center" not a "revenue center." For years, the RFP process dominated the PACS and IS markets in hospitals. Such was the "reputation mechanism" of the eighties, when procducts were products— the "box business" as he calls it. But today, Adrian suggests, 80% of RFPs never get funded because people are too squeamish about investing in film, and yet they don't understand the big picture that would allow them to see the potential for big money.
The HBS people want to know: "why will I be addicted to this system?" and "Who is providing me with the idea that this is a better solution?" and "Is it a missionary solution?" "If its gonna change my life, its got to be clear." They pose as customers, mock-ups, or mockeries of the people who actually have to figure it out. They repeat the question "how do you addict people" more than once, suggesting that there need not be non-economic value in improved workflow, or that any system is like any other system, but that marketing makes it so. The term "missionary solution" sticks with me, both because it is a striking example of HBS buzz, but also because the quasi-religious notion of proselytization crops up repeatedly in this world. Strange that the default mode of explanation should be the threat of damnation. Make them want it. Madison avenue never felt so wide.
Adrian tries to return to his strategy: selling to ISPs or phone companies or security experts who provide infrastructure to the hospital and provide an easy sales channel, but it appears not to interest them. They ask, "How large a company can you be?" "$3-4 million, perhaps, the PACS/Teleradiolgy market was valued at 1.6billion by 2005 by a March Frost and Sullivan Report." They end by suggesting that Amicas establish an identity as a solution to this problem and throw a lot of money at partnership issues. before they leave, the young man suggests that what Adrian really needs is an elevator pitch. He doesn't explain, but after I think about it for a while, I realize that he means a pitch that one can throw to an executive in the elevator from the top of the building to the bottom.
This kind of meeting and its vocabulary became more and more familiar to Adrian over the year I watched. Venture capitalists, angels, lawyers, and consultants of all stripes started to circle around the company.
Despite their location far from Silicon Valley, the stories and people intersect. Adrian and Sean both seem quite content to avoid the madness of Silicon Valley, but recognize that they would probably get more funding and have more opportunities if they were out there. On the other hand the association with MGH and Harvard certainly does them a world of good as reputations go. Academic credentials still mean something powerful, especially the sexiness of the Harvard Business School which— when it isn't met with cynicism— often means instant access.
It was a strange thing, then, that happened when I tried to participate in this economy of reputations. Adrian and I had talked about Regina Herzlinger's book "Market-driven healthcare" several times, especially the concept of "focussed factories." He had seen Professor Herzlinger, who teaches at Harvard Business School, give a lecture at MGH. He suggested to me that it would be great to set up a meeting with her, and that I should try and set it up because I was a student, and she would be more likely to give a student her time. I agreed, but was confused as to what I should ask for. We decided that I should tell her what I was doing, and ask if she would be interested in talking to Adrian, Barry and myself about the role of technology in focused factories. Arranging the meeting was an absurd adventure. I sent off a message, got an instant reply from Professor Herzlinger's secretary asking for agenda items. I sent off a few vague agenda items, and waited. And waited. About a month later, I sent another message, got a curt apology and instructions to try again in two months when Professor Herzlinger returned. This went on for a year. One whole year. That's four generations of the internet economy. It became apparent that I was the lowest possible priority candidate for a meeting. Each time, I was teased with the promise of a meeting, and then strung along for another month. I explained to Adrian what was happening, and he was as surprised as me that a student would be least likely to get a meeting. He suggested I drop it. But after a year, it had become habit, and I sent off one last, dismissisve missive, explaining that I would simply like to be told if I would never get a meeting, since I didn't enjoy playing the chump. Needless to say, hostility forced a calendar date, which I promptly agreed to. I called Adrian, and he was pleased, it fell on his brithday.
Market-Driven Healthcareis a kind of organizational handbook for the healthcare industry. Whether healthcare should be "driven" by the free market is not in question in the book, but assumed. The book starts from the observation that in the 1980's the US Economy went through a "convenience revolution." Firms learned the value of high-quality service: without so much as a trace of irony in the pages of "Market Driven Healthcare" Herzlinger compares the "focused factory" in healthcare to McDonalds, which she refers to as having an "excellent, consistent product at a relatively low cost." Her praise of the McDonalds French Fry is positively mouthwatering. Either that or payola. The idea behind focussed factories is that healthcare could be more efficiently broken up by procedure and disease. Rather than having every kind of specialist in a hospital to handle any potential problem, they should be clustered in factories that do one thing well. Her example is hernia surgery.
Adrian latched onto this idea precisely because he recognized what was happening to radiological workflow as a result of the internet, or what could happen. An early version of the business plan (when Amicas was selling itself to PACS and radiology companies, before reinvention as an internet company: Amicas.com) captured this knowledge in an diagram:
The image is intended to show first that all of the technical components of radiology will be digital by 2002. Acquisition (CR to replace X-ray, CT, MRI, Ultrasound, etc.), storage (no more warehouses filled with fading x-rays), radiologist display (the large 2K by 2K monitors), Clinician display (the desktop computer— and for Amicas, there is no difference between these two except the monitor, whereas for Agfa, or other PACS systems, they are two different kinds of workstation), integration with multiple sites (the use of internet standards to build virtual private networks that hook the hospitals clinics of a healthcare corporation), integration with legacy HIS and RIS (desiging interfaces to existing systems that allow people to continue using familiar systems, but all therough the interface of the browser).
The "strategic components" are the most interesting, however. All of these components are to be imagined as predictions that will come true if (read when) the internet becomes the infrastructure of radiology. The first indicates that doctors mobility is freed up, allowing data to find doctors wherever they may be, rather than having radiologists cluster in the reading room in the radiology department. It is true that the data could be brought to the doctor in the case of films, but generally, such activity required a sub-network of couriers and film librarians that had limited range and significant time constraints.
The second concerns the result of improved functional imaging technologies, new digital signal processing techniques for viewing images, and the changed workflow of sub-specialized radiologists. The move to functional images changes the role of the radiologist, making the technically savvy sub-specialized radiologist more valuable that what Keith Batchelder referred to as "the memorizers"— radiologists who diagnose by recognizing "bad anatomy"— anatomy that has recognizable traits of some functional problem. Functional imaging provides numbers. The important thing for Adrian's business plan was that this meant that the film workflow would actually now reward organization into 'focused factories'.
The third, fourth and fifth strategic components spell this out. As the internet seeps into organizations and brings more radiologists on-line, the more specialized ones will have access to larger and larger markets of patients needing specific expertise. This, in turn, implies conceivable cost savings for organizations who no longer need to hire a complete range of radiological expertise and functional imaging technology, but can rely, to some extent on remote diagnosis. Thus does technology lower cost, rather than raise them. The end result— or so went Adrian's thinking at the time— being that radiologists would join specialty clinics rather than general hospitals, thus creating focused factories organized around the expertise of functional imaging. Such clinics would be organized by disease or procedure (like heart disease or cancer or hernia surgery) and thus would benefit from increased specialization, while general hospitals would contract with these clinics to identify the patients and send the images and records (and eventually the patient) to them.
I waited at WWHQ— Adrian's house— for Adrian so we could go together to the Business School. I sat on the porch as a man on a cell phone in a flashy sports car sped by, stopped and then reversed in the middle of the street to turn, backwards, onto a side street and into a parking place. The maneuver seemed to derive less from the bravado of a sports car owner than from a typical Boston parking strategy. I ignored it and went back to re-reading parts of Professor Herzlinger's book. Adrian came out of the house on to the porch and said hello. He chatted with people, went back inside, and I talked with other employees who were now having lunch. Adrian suggested we go out for lunch, and his phone rang. I waited while he talked, alternately animated and agitated. Only on the cell phone have I seen Adrian agitated, and only when it involves control over the company. I waited, he talked. There was some discussion of intellectual property rights, and some delicate phrasing about who had more experience in this realm. Eventually he motioned for me to come with him, still on the phone. I followed along. We walked down the steps and across the street, up the sidewalk and stopped in front of the car. The Car. The flashy sports car I had seen the crazy driver park backwards. I flashed back to my previous driving experiences with Adrian in the relative safety of mini-vans and hatchbacks. I couldn't say anything, however, because he was still on the phone, still somewhat agitated. I got into what turned out to be a champagne-colored convertible Corvette, c. 1998. He started the car and I quickly reached for the seatbelt. The next 15 minutes are a little bit hazy, but I do remember thinking that I hadn't yet done much with my life, and that I hadn't called my mother in at least three weeks. The conversation on the cell phone continued until we arrived at the restaurant, darting between traffic and stopping inches behind large slow-moving construction trucks. We dismounted and went into the restaurant to eat. By the time we had ordered, he had managed to disentangle himself from the conversation, and I had managed my heart rate back down to a reasonble level. I was embarrassed at my own wimpiness.
Adrian gave me the latest business plan and we talked about what we would say to Professor Herzlinger. Arian suggested that what he wanted from Professor Herzlinger, ideally, would be to have her be a scientific Advisor for the compnay. I said I would leave that to him, and perhaps try to keep the discussion "academic." We discussed my thesis and the relationship between standards and communities of peoplein healthcare and business. When we returned to the car, I could finally ask him who he had stolen it from. "It was a gift from my father. The beauty of being an only child with a father doing very well in the stock market." He demonstrated its acceleration. "I can really only accelerate for one second in town." I demonstrated hyperventilation. He took curves at full speed, to show how well it handled. My lunch threatened to liberate itself. When we arrived at the Harvard Business School, I said, "Well, you have become the very image of a CEO: fast car, constantly on cell phone, meetings at Harvard Business School, what are you doing with me?" "Yeah, really, where's your 3 million dollar investment!"
We navigated HBS for a while and arrived at Professor Herzlinger's office where she apologized liberally for delaying our meeting. I had worried that this meeting would be awkward, having taken an awkward number of months to get, and coming from a history and anthropology graduate student with few new ideas to share. She dove right in, however, and from there on out it was Adrian and Regina trading names of people and companies back and forth, each plying the other for information, recommendations, listening carefully to assessments of reputation.
Twenty minutes later, the meeting was over and Adrian and I left with a few names. Adrian was particularly excited by something he had learned in this meeting. Something that is still puzzling to me, but clearly clicked with Adrian's business plan for the future. Professor Herzlinger had mentioned that it was the growth in 401K plans that was driving the current economic boom, and that some similar kind of investement scheme for healthcare would provide the only solution to the current system. Under a system such as this, I understood her to say, people with certain diseases or certain needs, would all of a sudden become valuable commodities, rather than costly liabilities because they would represent a certain amount of money available to competing healthcare providers. The system made little sense to me, bypassing, as it seemed to, the problem of who payed for it in the first place. Adrian, however was very excited, and the ride home, of which I remember only a little more than the ride to HBS, he tried to explain how it would work. LIke so much of my experience in this project, such an experience of excitement was enough to convince me, even if it was only partially clear, and potentially unworkable. The excitement was strong, though, as it has been all the way through this project— stronger, in any case, than any aythentic academic desire to understand it— which makes the American persistence of phrases like "Just do it" or "don't think, just do" or "those who can't do, teach" all the more poignant.
Adrian drove us back to WWHQ and we had cake for his birthday.
"From the products point of view, or from the software systems point of view, whats going to happen is that people are going to increasingly focus on transactional networked things. So instead of having to buy your front end and back end from the same people...these things will mix and match happily." (3/9/99)
6/15/99
"Well I've got two of them writing business plans, one of them is Gil, I've got one of them is writing a cover letter to the existing business plan, wants to go run around and pitch it to VCs, I've got an accountant... that certainly counts as a consultant. I've got one lawyer recommending that maybe we should get a part-time CFO, so there's another one, i've got two lawyers, one of them wants to do corporate the other one wants to do intellectual property and that sort of stuff, one woman from Florida who just sent me email over the weekend who's trying to do me favors, a consultant from that point of view, she sent me this Hambrecht and Quist report. I've got another one who works for Concord Consulting group who wants to have lunch. [Laughter] Is that enough?"
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Last Modified 11-Sep-99 9:25 PM ckelty@mit.edu
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