Worth Watching Walmart

What is going on with Walmart and their intense interest in expanding their role in healthcare in response to the full implementation of the Affordable Care Act?  It is widely recognized that periods of intense change are real opportunities for those who adapt to the changes faster and better than their competitors.  Take a look at the recent report in the Huffington Post and see how many different areas Walmart seems to be exploring for new business.  Why would this monstrous enterprise be looking at expanding its retail clinics, including broader primary care coverage?  Why would they be looking at expanding their insurance business, even setting up “exchanges” for small businesses?  Why are they looking at rural and urban areas where there is underserved populations?  If history is any indication it is because Walmart sees huge profit potential.

What specifically does Walmart seem to be looking at?  First, they recognize there will be many more people brought into the healthcare system and many of those currently do not have primary care physicians.  They also have seen all the reports that there will not be enough primary care physicians to provide the coverage anticipated in the ACA.  They also recognize their ability to negotiate with vendors and how that could help them provide competitive offerings in the insurance market.  Where they see the competition staying away, they are moving in.  They understand how to profit in low margin areas.  They recognize how important cost is to people and feel they might be able to transfer all their learnings into the health arena.  Obviously, they already have experienced success in their pharmacies but now it seems like they are going for much more.

It might be worthwhile thinking about Clayton Christensen’s disruptive innovation theory that has been so widely reported over the last several years.  He talks about disrupters moving in on markets at the low price end where established companies don’t seem to mind.  The established companies say there is not much profit there anyway.  Customers may not get all the bells and whistles but the product they get from the disrupters is good enough for what they need.  Once established in the less lucrative markets the disrupters move into the next low profit market and they do this again and again until the established companies are gone and the disrupters dominate.  I am not saying this will automatically happen but it sure seems like Walmart is heading in that direction.

Perhaps the Walmart moves might inspire some thinking from everyone else in the healthcare world.  How are your organizations changing based on the full implementation of the ACA in 2014?  How are marketing strategies and tactics changing?  Are you contracting or expanding your potential customer targets?  Are you still chasing short-term profit margins or are you working to determine how to best sustain your business long-term?  If you want to get a good view of the future take a ride this week out to a Walmart store.  Take a look around and note that there are very few competitors because where they go, they dominate.  Think about how Walmart works with vendors and then think about the balance of power and what that will look like for your margins.  It doesn’t mean you can’t prosper working with Walmart but to do so will require a completely different mindset.

I guess the overarching question is whether or not you are going to watch Walmart and others prosper in the new environment or whether you are going to dive into the competitive fray.  There are huge opportunities on the horizon and disrupters can hardly wait to climb to the top of the healthcare world.  They recognize that the over 17% of GDP we spend on healthcare is not going away.  They also recognize that established companies will be slow to change and therein lies the huge opportunity.  It is going to be a lot of fun transforming healthcare but not if you just watch from the sidelines.

This entry was posted in Uncategorized by admin. Bookmark the permalink.