Winning the Right Game | Ron Adner, Ph.D., Tuck School of Business at Dartmouth College

Winning the Right Game | Ron Adner, Ph.D., Tuck School of Business at Dartmouth College

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[Music] washington dc is my home away from home i've worked here for the better part of three decades as a founder entrepreneur policy expert and author probably the longest title um everybody sort of shortened it to onc for san anderson mercifully yeah mercifully i've learned leadership secrets from many health care executives who understand that washington is the largest payer and regulator of health care he said well because you will never get a husband if you do that i began interviewing healthcare leaders many years ago because what better way to learn how they think why they make it to the top and how they remain there think about what was your most challenging engagement healthcare has been the most difficult problem we'll talk about that later are you an innovator or looking for a competitive edge then you're listening to the right conversation competition in today's world is more and more complicated as the distinction between previously separate business sectors becomes blurred we met with professor ron adner to discuss his newest book winning the right game ron analyzes business strategy beginning with the ecosystem within which the business operates businesses need to consider not just products and services they deliver to customers but also structures of interdependence built into their ecosystem we discussed how firms can better prepare for or even cause ecosystem disruption and how different leadership styles are necessary for different settings we dive into the complexities of healthcare innovation and the limits of the words we use ron rounds out the conversation with advice for up-and-coming leaders navigating the modern ecosystems and offering counsel to young innovators on how to bring good ideas to scale well good morning ron and welcome thank you gary it's great to be here we're pleased to have you at the microphone of course you're up in new hampshire today we're down in the washington dc area it's fall time or at least it's close to it are the leaves turning yet in new hampshire it's uh it's it's coming up and i gotta tell you it's beautiful the gary bisbee show as you know ron is about the power of questions for healthcare leaders you're a top-notch strategist professor at the tuck school at dartmouth author and authored of course the wide lens which is just a classic thinking on entrepreneurship and innovation and competition and congratulations winning the right game is the newest entry here just recently published and we're excited to talk to you about that today i'm sure this is going to prove to be absolutely classic thinking about innovation entrepreneurship the ecosystem so let me talk just to ask you a question about yourself first which is how did you become interested in leaders and strategy ron i i got interested in strategy basically by becoming very concerned about what it was that i was about to do um so my my undergraduate training was in engineering and i got into engineering because i was really interested in innovation and very early on i had a sneaking suspicion that there were a lot of bottlenecks to the success of innovation that had nothing to do with engineering and so i i ended up deciding that i needed to understand how to how to see the big picture before diving into any technical piece and that ended up taking me on a journey from engineering to doing a phd at a business school to basically what my career has become which is trying to understand innovation through a strategy lens i have a very tactical question and then we'll get into winning the right game and that is i like to ask all of our author guests how do you come up with your names for your books the wide lens winning the right game those are terrific names how do you do that ron both were really long searches actually it's like the the idea behind each book um was well established in fact many years before the book came out right i do a lot of my thinking experimentation um within you know within my research and research presentations in my classroom you know i'm very very fortunate to have spectacular students who are willing to you know to humor me as i try to develop new ideas um but the search for the title in both cases really it was trying to triangulate on you know how do you how do you encapsulate a message of a book that you understand it before you read it and then it summarizes after um and both essentially i think capture the the essence of each book right wide lens was about how to see the big picture when you innovate and then this new book winning the right game is really about this question of not how do you innovate but how do you compete in a world where innovation and value creation takes on this more composed form within ecosystems and the what the title is actually supposed to evoke winning the right game is this notion that it's it's no longer just about winning i mean you know we're old enough to remember when when jack welch was regarded as the you know the greatest ceo in the world and he had this great book that he wrote called winning and you know in some ways it was that simple right that was good advice just win right do it better than the other guy do it cheaper than the other guy and today's world is more complicated where you know just winning is not enough there are multiple games being played you need to choose your game you need to understand the games being played by other others around you and so this this notion of winning the right game is supposed to evoke the fact that you know you could be winning the wrong game and how do you be careful about your choices and that actually changes our whole approach to strategy in this world well this broader look at the world the term you use is ecosystem can you define that for us ron for those that might not be sure exactly what that means yeah actually i think i think it's a fair question actually do it i offer some formal definitions at the beginning of this book because you cannot be in health care and not be exposed toward eco support ecosystems eight times a day but my contention is that 90 of the time if you took the word ecosystem out of the sentence and replaced it with the word mishmash nothing would really change in that sentence and um and so what it means of course is that people are very concerned about the mishmash in a new way right that we're sensitive to interdependence but it also means that beyond that we don't know what to do with it so the in my work actually this is going back 20 years now um the way i think about ecosystems is that it's not just about interdependence we can talk about that how in fact you know industries are defined by huge amounts of interdependence really what makes the ecosystem construct matter is that it's the structure of interdependence among a multiplicity of partners right that it's there's a multilateral game being played and that the way to think about that structure is to root it in the notion of the new value that you're trying to create right so i actually have a my one sentence definition of what is an ecosystem is that an ecosystem is defined by the structure to which partners interact to deliver a value proposition to the end consumer and if you unpack that you can start thinking about what's changing as i'm trying to deliver a new value proposition and that's how you surface the structure of the ecosystem and it's once you have that idea of structure that you can actually begin to build strategies for alignment for offense for defense etc so structure is at the heart of it so we're thinking about ecosystem and structure now you introduce the term value proposition ron how would you define that so the value proposition is the thing that you're trying to deliver and the reason it's important to highlight is because the value that you're trying to deliver sometimes is just fully dependent on what it is that you do but often it's not right often it's dependent on other participants and so by anchoring the ecosystem in the deliverable at the end you become more sensitive to the other parties that you need to work with or the changes in the way you need to work with those parties in pursuit of one value proposition as opposed to another and so really it's supposed to defocus you from just focusing on your product or your service and thinking about this arrangement of partnerships on what you're going to rely on there's a lot of a lot of discussion and health care about this course the value proposition and that is is the patient receiving affordable care are they happy with their care is it kind of appropriate care does that fit within the context of the value proposition as you outline it yes right i mean it's a very i mean in some ways i think one of the greatest challenges in health care at this moment is that we're having this debate about what is value right and and these different interpretations each in fact requires something new not just of a particular actor let's say the healthcare system but they're demanding a new set of interactions so you know when we talk about value-based healthcare for example right if you at a superficial level it says okay you're moving away from fee for service to delivering some kind of longer version of care and it's usually coupled with some capitated payment so that you're not charging per service you're charging for you know life under coverage if that was all it was it would be pretty straightforward it would be hard but it would be straightforward the issue is as you start peeling away from there suddenly the activities and the partnerships required to support this go way beyond the walls of the hospital right not only do they create new interactions within the hospitals between primary cares and specialists and preventions etc but now you're going out into community suddenly you need to start thinking about incorporating issues around nutrition and access to healthy food and you know there are healthcare systems that have gone into the renovation business right it's cheaper to tear out carpeting in my house than to deal with the consequences of mold on my asthma and so this is this is a totally new structure of relationships and so unpacking those relationships then allows you to create the strategy for how do you deliver the value proposition and by the way when you think about what are the realistic interactions that you can do at scale it also helps you hone in on what's the value proposition you're really trying to get after well let's take that to the next step which is how do you relate ecosystem to value proposition i mean you've kind of talked about that but let me ask that question directly so the the the ecosystem is the structure of interdependence that comes together to deliver that value proposition and there's the there's there's the question of all so what is it that you need to do there's the question of what is it that others need to do but the heart of ecosystem strategy is alignment right so ecosystem strategy is alignment strategies how do you get all these parties not just to show up at the same table but to agree on how they're going to interact right and that's that's the core anybody who's talking about an ecosystem strategy if they're not talking about alignment i think they're they're missing the game right essentially what they're doing is they're focusing on a really shiny goal but they're missing the critical issue of well what's the pathway to get there well of course in healthcare the classic case there is the alignment between physicians and hospitals or the delivery system and there's a lot of a lot of work going on trying to figure out what is the right structure what's the right payment model that would align these two parties this physician decision maker and and the hospital and nursing and all that that entails does that fit into the model that we're talking about here ron it certainly does and the you know in some ways what makes it challenging is that you know there's no one-size-fits-all answer right depending on on who you are as an actor the the levers available to you the resources available to you the existing partnerships you can bring into play vary and so in that regard ecosystem strategies really are much more uh much more customized to a given system than you know the way we usually think about an industry strategy where basically again back to this idea of it was just about winning can you deliver lower cost care can you deliver you know higher quality care now it's how do you define care and you come up with that definition to your point the way you're interacting with different parties including your physicians needs to be rethought right for sure and it's all about the consumer as we think about it and if you think about starbucks let's say you can go to any starbucks presumably in the world and get the same kind of brand of coffee and type of coffee that you want and yet healthcare isn't as focused on a consumer strangely enough at least if you look at the ecosystem treating these patients so that's a huge challenge for health care uh but it sounds like it fits right exactly into the thinking that you have here in the in winning the right game yes and and you know look in in order to deal with this we we need a new set of tools we need a new language to be able to express this variation um and and so that's that's really the effort in the book it's not to tell the reader hey you didn't notice but the world is complicated right that's not news right the challenge is how do you deal with that complexity and you know my my journey in writing the book was really in trying to figure out not just the the the concepts and the frameworks that you know will allow someone to come up with better answers but just as critically this was like a big learning from over the last 10 years is that the the value of these concepts is even more in their role as a language that allows teams to communicate among each other and with their partners than with just the notion of getting to the right answer right i tell this to my students all the time which is if you're in a classroom and you're the only person with the right answer good for you if you're in a meeting room and you're the only person with the right answer you know at best you're just annoying right your job is to bring everybody to the right answer and that requires this language and this new complex challenge requires new language and that's that's really a big part of what this effort was about well we've talked about winning the right game what's an example of a company that's winning the wrong game so chapter one of the book actually is titled winning the wrong game is losing and it uh you know that so from the book the highlight is the the story of kodak which turns out to be one of the most misunderstood failures in you know the modern business canon right everybody says oh kodak went bankrupt because they couldn't do the hard transition from chemical to digital they were stuck in the legacy business etc and you know bad lazy inert management that's what drove him off a cliff and that turns out to be 100 false um and and that falsehood is going to matter both for kodak's legacy but much more importantly for the lessons we try to draw from it so it turns out that kodak starting in 2000 went all in on digital and by the end of the decade had been the number one seller of digital cameras in america they were you know a total contender in selling printers um they they you know even today if you go to a cvs or walgreens you see their digital printing kiosks there right so it became a leading digital printing company so it won that game it did what everybody said they couldn't do but the thing you know they still go bankrupt and the reason is that just as they're mastering digital printing the notion of digital printing itself is replaced by digital viewing right so it's screens that replace paper and suddenly this huge effort to dominate digital printing amounts to nothing right so kodak wins but they win the wrong game and that's the same some ways it's even worse than losing because they did all that hard work right they could have been asleep for 10 years and maybe have you know a greater return to their employees and their shareholders so and it's it's a it's a perfect example of a problem that happens when we start looking at change in the world and focusing at the level of which is how we usually focus the level of technologies the level of activities right so this is what i put under the bucket of you know what i what i now call classic disruption right so you can think about you know kind of the the health care exemplar of classic disruption was minute clinic right basically i look at what you do in an er and i make it you know worse but good enough and as long as it's cheaper that's competitive so that's one kind of threat that you know one sees in the environment that's classic disruption just kind of re reconfiguring how we do the activities if you look at cvs health where now you have okay there's midi clinic but it's coupled with a retail pharmacy that you know 90 of the population is within like eight miles of and you put that in with a giant health insurer and you put that in with a giant pharmacy benefits manager um suddenly you can see that if those are kept as for silos okay no big deal but if they're woven together in the way that uh you know their former ceo mary merlo you know i had this great phrase which is we're going after the retailization of health care right that's a totally different proposition um to make that happen requires a different approach to strategy and by the way to respond to that happening is going to require a very different approach on anybody who feels like they might be put on the defense from that you've talked about the playbook for strategy in the book how do you describe that playbook for strategy ron all right so we the the the the kind of the the playbook starts with how do you understand what an ecosystem is how do you understand the structure and i introduced this new construct this new level of analysis that actually is i think essential for understanding how to interpret these kinds of changes in your world this is something i i call the your value architecture and your value architecture is not about how do you run your activities it's when you think about that value proposition how do you think about what underlies it and essentially this is something that is implicit in most organizations and what happens is usually the way we think about how we create the value proposition just kind of correlates to how we organize our activities and that kind of puts you in a mindset that will only identify these classic disruption threats whereas looking through this lens of of your your elements um allows you to see interactions that go across the vertical you know the the siloed boxes so the first part of the playbook is to really understand how to think about ecosystems and then with that in place there's you know there's it's something you can now talk about well how do you disrupt how do you construct new ecosystems how do you construct new value propositions and how do you see that happening um and then of course there's a question of okay you know if someone is doing that in your space how do you want to respond right so there's a you know there's a chapter on ecosystem offense and then there's a probably even more critical chapter on ecosystem defense where in both cases the route is not just how do you come up with your idea i mean healthcare we're drowning in great ideas right we've been drowning great ideas for 20 years the issue is how do we construct in the case of offense or maintain and reconfigure in the case of defense how do we change these coalitions in order to drive forward this new proposition um next comes the question of timing right i mean we're you know we're living now in hopefully the later stages of our coveted world certainly feels a lot better than a year ago um but you know timing is is timing disruption is not just about how do you not be too late a lot of is how do you not be too early right i mean telehealth has been a a too early proposition for 15 20 years and now you know the conditions have come together and we're in a totally different world so a critical part of this playbook has to do with timing and try to understand that the transition between the old ecosystem the new ecosystem um the next the next part is about how do you pick your roles and then the final part is how do you then pick your leaders and what it is that leaders in these organizations need to do and how does that change in the ecosystem world compared to more traditional world well let's go back to offense and defense what's an example of a company that we might know the name of uh that has done a terrific job on offense or a terrific job on defense one of the examples in the book is about how amazon comes out of really nowhere in 2014 right when amazon is still regarded as a retailer not a tech player and is able to navigate over the course of five six years um to become the central player in the smart home it's really pretty remarkable right i mean they beat google they beat apple they beat microsoft which are these giant ecosystem players um to take over this market and redefine the market right if you think about the the echo and the alexa right we used to have three different markets we used to have a market for voice control we used to have a market for smart home controllers we used to have a market for speakers and amazon came in and post echo those three things don't make sense as separate markets um right that's a totally new construction of ecosystems right it's like you know we used to have a we used to have an industry that was focused on mp3 players and there used to be an industry focused on phones and those are two great industries where people made lots of money and lots of competition happened and then one day somebody combined the two and you look back you're like well why were they ever separate right there's a similar sort of story that is beginning to unfold in health care right it's not clear what the final equilibrium is i'm suspecting going to be multiple versions of this but the notion that you know you do delivery without some kind of insurance right that is becoming a lot it still happens um but it's it's becoming more more more noteworthy right rather than the de facto standard right what it is again this is kind of as we're we're crossing boundaries that's what that's what the reconfiguration of ecosystem looks like and in the beginning it feels like just ecosystem construction but by the time the construction is done it feels a lot like offense if you're not the one who drove this right you feel like you're on the outside what's the unique advantage of established players in this new order you know when people hear the word ecosystem right we immediately jump to silicon valley and all these exciting startups and there's there's a certain uh falsehood to the notion that this ecosystem story is a startup story right so startups are great at imagining the world um but the key to ecosystem success is alignment and the key to alignment is being able to manage partners into a new position the huge advantage that incumbents have is existing partner relationships especially in b2b type settings where trust matters enormously being an incumbent having a history is a huge advantage so the the the you know when when startups win in that space it's because the incumbents can't get out of their own way it's because they can't commit to the realignment that's really necessary it's because their internal systems are misprioritizing what to do for their own internal benefit versus to get their partners in place but an enlightened incumbent has a massive massive advantage in driving ecosystem change um and i would say a coalition of enlightened incumbents is you know an even even higher level of the game well getting back to health care we have very large health systems very large health plans or insurance companies and one huge regulator and payer in the federal government there's a lot you know three really established types of players here how does an innovator crack into that uh whole constellation of these huge companies the good news and the bad news of course is that it's actually we say these are the three elements in the in the healthcare ecosystem but we know there's at least 51 regulators right there's the federal government and then for better or worse each state has its own version of what they think healthcare policy is um we know that insurers are not monolithic and we know that their incentives are changing and we particularly in healthcare right which is this very it's a very different business right you're not selling cars cars are complicated today in a way that they weren't 10 years ago but healthcare you're selling something that is somewhere between a privilege and a right and where that order is itself is being renegotiated and that renegotiation creates complexity but it also creates opportunity for finding new configurations right so if one state is unhelpful in driving telehealth that's not a veto on telehealth right so we're seeing we're seeing different states change their mandates um i actually think that you know the healthcare as a which itself of course from the provider side is not monolithic um has has massively underplayed their influence and their ability to shape alignment in the ecosystem right i mean healthcare systems are you know they're they're they're they're some of the prime employers and whatever geography they're in right that's totally separate from their contribution to community health in the community that they're in um the people who work at healthcare systems tend to participate in you know hugely within their communities and so there are all kinds of levers that can be pulled to put forward a clearer vision and drive alignment whether they're pulled or not is something else and that again i think we're greater clarity and being able to express the strategy will lead to far greater effectiveness ron uh in the book you talk about the ego system trap the ego system trap can you describe that for us please incumbents are advantaged and that they have relationships but they're disadvantaged in that they have some success and the the ego system is what happens so the ecosystem is is this is the structure of interdependence when you define relationships around this value proposition end goal an ego system is what happens when you define those relationship around a central actor you know around yourself and the ego system trap arises when you can't tell the difference between those two things when you think of yourself as the central actor in the ecosystem which is not necessarily a bad thing but if if you allow that to blind you to the need to drive alignment around the value proposition it leads to massive underperformance and huge waste and a lot of time going by without action so you mentioned leaders how do you develop uh and recruit leaders in this new order so usually strategy people don't talk about leadership right not because we don't think leadership is important but because you know we don't have a lot to say other than get better leaders and the aha for me was that when we're in an ecosystem setting that is to say when we're in a setting where we're redrawing connections the kind of leader you need is not a better leader but a different leader right when things are stable what you need is you know an execution-minded leader you want someone who puts their organizations ahead of themselves the sort of thing that we usually celebrate but if you're trying to align others into a new configuration someone who puts their organization ahead of everything else doesn't sound really good to any of these other partners so what you need is not an execution mindset leader you need an alignment mindset and that requires a different way of thinking that requires a different set of trade-offs and quite frankly from a governance perspective it requires an appreciation that the right leader is is sacrificing something in the near term to drive alignment that will create returns in the longer term rather than getting as much as possible for the organization in every in every period and quarter that we're in what about mindset i mean is there a different leadership mindset do you think going forward yes i think it's this is kind of this is the critical difference between an execution mindset and an alignment mindset where the alignment mindset puts partners and the need to get them in place not just the need to shake hands not just the need to uh to to run pilots but to find a way of getting partners into place in a way that will satisfy them into the long term so you can actually scale this is this crucial alignment mindset it's got certain characteristics that i go into in the book um and that i think is is the critical difference it's not a difference of vision it's not a difference of risk taking it's not a difference of investment it's this difference in having an alignment mindset ron this has been a terrific interview winning the right game is going to be a classic for all of us uh interested in entrepreneurism and innovation and leadership um two two last questions if i could we have a number of up-and-coming leaders that uh listen to this show what advice do you have for up and coming leaders i think it's it's it's a great question um because you know we like to tell strategy stories from the perspective of the ceo not everybody is the ceo all at once if you're inside the organization these principles apply in the same way but with a different flavor right so you can't change the organization strategy but you can one try to understand the organization strategy through this lens and that will give you a sense for which pilots which projects that are being started are actually more or less likely to move to scale right i think the the the the biggest challenge in healthcare systems today is we have it's not that we don't have enough new ideas it's we're drowning in ideas and healthcare systems are also really good at launching a lot of ideas and so we're drowning in pilots and a lot of these pilots are actually successful and then most of these pilots are successful pilots that then to go nowhere right if you're early in your career you want to figure out not which is the exciting pilot it's which of these pilots is going to go to scale and the way you want to manage yourself your team manage up manage down is to make sure that you're aligning things in a way that you can actually move beyond the initial success and the exceptional circumstances that surround any pilot to actually move to something bigger uh you know the advice i give is usually you know you put really promising people on a pilot it's getting a lot of attention it's getting a lot of resource so a successful pilot teaches you that something is positive possible to see if something is scalable what you need is your most mediocre people with the kind of neglect they suffer in the day-to-day job and if that works now you know you can scale and so designing the projects that you have have to be you need the exceptional circumstances to get them started but then you really need to think about alignment right up front to make sure that they scale and make impact and that's how you look that's how you make a difference in the world and that's also how you make a difference in your career the follow-up question there is the same question for innovators and i suspect that the answer is probably in the same category but what advice would you have for the innovators ron you know yes it's it's it's in the similar vein of there's so much exciting stuff happening in healthcare and it's very easy for an innovator to get caught up in the shininess of the goal and allow themselves to be a lot fuzzier about the pathway of getting there not their own development pathway but the alignment pathway for bringing things together and i'd say that's probably the maybe one of the most valuable uh tools and constructs in this book is how do you approach driving that alignment um and so i think in some ways for innovators it's even more important than for you know what we'd usually think of as established incumbents because they don't have as many resources to you know to take as many swings before they actually connect and get the ball out of the park ron i enjoyed our conversation thanks very much uh it was terrific as expected and congratulations on winning the right game it's a good one oh thank you gary it's a pleasure it's always a pleasure to see you and i appreciate the chance to share these ideas i'm very excited [Music]

2021-10-15 22:31

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