In many industries, AI has the potential to fundamentally reshape the value chain. Retail is no exception. There are many problems that AI could potentially help solve by:

1. 1. Picking up on changes in consumer demand patterns – on a category, brand and product level. AI can aggregate data from multiple sources to identify patterns and help manage inventory to meet rising demand.
   2. Simulating impact to weigh different strategic initiatives – assessing impact on revenues of different merchandising strategies, promotions, shopper marketing, performance marketing etc.
   3. Enhancing customer relationship/increase cross-selling by predicting the Next Best Purchase – the most likely purchase given patterns from both internal and external data sources brought together
   4. Sharpening targeting through a Personalized Shopping Assistant (in-store and online) assisting with search, best fit, suggestions etc.
   5. Optimizing customer service through dynamic scripts, face and voice recognition, predictive equipment maintenance etc.

However, the real value of AI goes beyond revamping current activities – ultimately, it will be in making entirely new retail models possible, where the very relationship with the consumer is reinvented. A few examples, among many others, could be:

Creating worlds and experiences – beyond transactions
Imagine planning a dinner party. You put in a theme and receive a dinner planned by Gordon Ramsay. As you select recipes, ingredients in the right quantity for your party automatically appear in your shopping cart – and a cooking flow is set for you with videos, instructions and timely reminders. Table settings for your theme dinner are delivered right on time with suggested wine pairings. AI can help create a world of experiences – where value is derived not just from the purchase transaction, but from the experience and interactions that these enable.

Lifestyle ecosystems – beyond the category
Imagine putting in the occasion for your next office party and receiving outfit recommendations, removing the traditional consumer angst of not knowing what to wear. Imagine your style choices then connect you to a community of like-minded aficionados (Recent years have seen the formation of many such lifestyle communities, from cottagecore to farm chic or now momcore that has recently been reinvented). This lifestyle community would bring together an ecosystem of providers, from clubs to sports, leisure and entertainment, supported by a stream of “endless” content. These ecosystems will not just foster a stronger sense of belonging and loyalty – each interaction will enhance the value of interactions to come.

Co-creation: sharing creativity
In the traditional model, consumers are subjects – on the receiving end of the brands’ creativity, branding and advertising. Recently, brands have been exploring reversing that pattern – putting consumers themselves in charge of advertising the brand – from Apple featuring consumers’ photography in its ads to Yeti’s UGC campaign. With the democratization of creativity brought about by AI, this can be taken one step further – with much more ease, consumers will be able to ideate, script, design and even produce an ad – and disseminating it to their networks, creating the sort of viral effects that create exponential growth.

Every retailer knows well that beyond satisfying consumers’ functional needs, there is a large market in meeting consumers’ deeper needs of feeling seen, taking control of their narrative and connecting with others. Through data and matching algorithms, AI can give consumers the ultimate control over their narrative – expressing their values, personality and lifestyle choices. In such an ecosystem, value would be created through much more than transactions – through the interactions that will create data that will ultimately enhance the value of the ecosystem at large.

The ultimate question is how these retail models will lead to new ways to increase value – an increased customer relationship leading to higher loyalty; better targeting to increase spend; and belonging to a community leading to increased frequency. This is when the AI opportunity will become real.

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For too long, the healthcare industry’s silos and dispersed data have created numerous pain points, with problems so large that the prognosis has been poor, at best.

Today, however, the model may be shifting – offering many opportunities. Building on the models put forward by EY (“When the human body is the biggest data platform, who will capture value?”) and elsewhere, the Healthcare 1.0 model was a traditional pipeline value chain, focused on creating blockbuster products and optimizing R&D productivity. Healthcare 2.0 saw the emergence of healthcare networks as consolidation intensified – a model based on Team-based-care and a cross-disciplinary approach. Emerging technologies created more opportunities for scalability and collaboration – but pain points engendered by a fragmented approach remained. Healthcare 3.0 saw a shift towards patient centricity, the emergence of value-based models due to cost pressures, and, as a result, newly diversified portfolios which served different segments of the market, leading in many cases to complex portfolios and brand architectures.

Healthcare 4.0 Takes Shape

Now the pace is accelerating toward Healthcare 4.0 – a future driven by data, collaboration, and new value creation models. In this model, the value creation method is fundamentally changed – it is no longer based on optimizing transactions (e.g. a new drug developed, marketed and sold to providers and end users). Instead, it relies on the power of data to enhance every step of the process so that the value creation model is not based on transactions anymore, but on interactions that generate data and therefore allow the creation of shared value across the ecosystem. This model is what Erich Joachimsthaler calls an Interaction Field.

At its core, an interaction field is dependent on key interactions within the context of the healthcare industry — including, for instance, patients and healthcare providers, exchanging data in the course of these interactions. This is what we call the Nucleus of the interaction field – the first step towards creating an ecosystem.  

An Ecosystem then gets built around this core, which might include health tech companies, medical device manufacturers, pharmaceutical companies, insurance companies, hospital systems, professional associations, and other groups. Beyond that, Market Makers will enable velocity in the field by exerting influence. These could include government agencies, equipment suppliers, educational institutions, and foundations or nonprofit organizations. Over time, as the field expands, it creates more shared value.  

According to EY: “To create value now and in the future, life sciences companies should consider participating in data-centric platforms of care that improve individual health outcomes and reduce costs. In this environment, platforms provide a framework to create future value that is based on individualized outcomes, and is amplified by the ability to connect, combine and share data.”

Going forward, data can be used to both create universal standards of care, and to offer more personalized treatment and help deliver precision medicine – in particular in the context of blockchain and Web3 where data can be controlled not just by institutions but by patients themselves, ultimately breaking the barriers that exist to sharing it. 

Harnessing the power of data produced by interactions across the ecosystem, interaction fields have the ability to address and solve new, emerging or previously unsolved problems. This is because problems of this magnitude require collaboration from players across the ecosystem, enabled by data. No one player, company, technology or system has the ability to tackle these problems on their own.  

McKinsey acknowledges, “Today’s connected health technology landscape includes a wide array of apps and a dispersed set of data sources, but to fully exploit the benefits, the provision of solutions and the collection and application of data need to shift from fragmented ‘silos’ to an integrated ‘ecosystem’ of players.” (“Capturing Value From Connected Health”)

Why Healthcare is Ripe for Disruption by Interaction Fields 

A siloed industry, with disconnected sources of data, leading to a disjointed patient experience, healthcare is ripe for disruption by interaction fields. In research that Vivaldi conducted among health care providers (HCPs), they shared feeling isolated, not just when faced with complex patient cases, but also in adapting to evolving requirements and changing models.  

Scattered patient data, a disconnection from outcomes, and one-size-fits-all treatments — all these factors create the opportunity for a sea change.  

There are several criteria that make an industry particularly well-suited for an interaction field, and healthcare presents a number of these. These criteria were examined in the BCG article “Do You Need a Business Ecosystem?”

1. A high proportion of information to value creation. Traditionally, the diagnostic model relied on unstructured data – the judgment call of an HCP. New technologies and analysis tools – such as AI-guided imaging – require the use of databases where this data can be stored and analyzed, typically dissociated from EHR because patient data needs to be de-identified. In an aggregate form, data allows the extraction of patterns – identifying how a patient condition presents itself, spotting patterns, increasingly with the help of AI – and matching treatment options in a way that allows the measuring and weighing of risk of different courses of action. In turn, pattern identification tools and AI can develop learning effects, optimizing future interactions. More data leads to smarter insights, improved pattern identification, and ultimately better outcomes for patients. As a result, an increasing proportion of value is derived from data rather than assets such as equipment and technology. This is evidenced, for instance, in the imaging market where the value of imaging equipment is increasingly enhanced by AI that guides usage and interpretation. One example among many is GE’s decision to acquire BK medical, providing AI-guided surgery – its largest acquisition in years.  

2. Unpredictability. Healthcare has been undergoing rapid market evolution – and yet there is also substantial inertia across the system. The interplay between these two factors creates unpredictability, another pre-condition of the rise of interaction fields. The swift pace of technology development and adoption creates new opportunities for participants in the healthcare ecosystem, and even accommodates different paces of change.  

3. Malleability. Utilizing healthcare data requires a customizable approach. Ultimately, the opportunity is in defining personalized paths based on patterns identified through aggregated patient data – something that is already being explored in genomics and will be further enabled by AI.  

4. High modularity. A high degree of modularity is an intrinsic characteristic of a fragmented industry – disparate steps of the process that create a disjointed patient experience. An interaction field has the ability to bring together different aspects of care or steps of the value chain – in a network rather than hierarchical model.  

5. Intrinsic need for collaboration. The healthcare ecosystem requires that various participants work together – something that glaringly does not happen today. Systematic issues cannot be resolved by any one entity, but require cooperation from the likes of healthcare providers, hospitals, health tech companies, insurance companies, medical device manufacturers, and patients themselves. Beyond that, further collaboration is needed from educational institutions, equipment suppliers, foundations and nonprofits, government entities and regulatory agencies. 

This model of collaboration can solve complex problems that no single entity could resolve, as well as create new market opportunities and spaces for innovation. Interaction fields are well suited for industries that have a high need for coordinated components. Enhancing collaboration can lead to improved outcomes for patients and better processes. 

Types of Emerging Interaction Fields  

For the various sets of interactions, different types of interaction fields are already emerging. There are four key types that are currently developing: 

1. Real World Data and Health Data Companies: These companies are collaborating to revolutionize how patient data is shared and turned into insights. This data might include electronic health records and doctors’ notes. The Real World Evidence (RWE) Alliance, for instance, is a group of healthcare companies that are working to make real world data and evidence more accessible so that more informed care decisions and regulatory policies are possible. Another company, Datavant, also looks to aggregate vast amounts of patient data to develop smarter insights. Datavant brings fragmented data together across thousands of organizations to create a complete picture of patient health, but, as expected, still has some limitations on access to data.  

2. Personalized and Relevant Solutions: Organizations in this type are leveraging their capabilities and insights to produce smarter patient solutions in real time at a lower cost. For example, Aetion has a platform that analyzes data from real world evidence, which can be used by providers to develop better patient solutions, and during the height of the Covid crisis, helped provide solutions directly to the FDA.

3. Foster Collaboration Amongst Care Teams: This type of interaction field can bring care teams closer together, regardless of geography. The company Owkin is aggregating data to produce insights for drug discovery and development. Through cloud capabilities compliant with patient privacy measures, they are able to work with numerous hospitals, universities, and life science companies to accelerate drug development, optimize clinical trials, and identify patient populations of interest.

4. Foster Collaboration Amongst Patients: With access to aggregated data, patients themselves can connect through online forums or other platforms to discuss conditions and treatments, provide support, and enable others to utilize health systems in a way that delivers more positive patient connections and outcomes. PatientsLikeMe is one such forum. Based on aggregated data, patients are brought together with others who have similar problems or conditions, enabling them to seek solutions in a smarter way, and allowing health systems to get more positive patient connections and outcomes as a result.

5. Sharing Insights with Patients: Analytics are as advanced as ever, and healthcare might allow for providers to have as detailed a look as ever into what may be happening to their bodies and what may be the best course of action to help treat them.  Included Health is an example of a company looking to become a one stop shop in the digital health world to provide these services, as they offer personalized guidance for patients in everyday and urgent care, primary care, behavioral health, and specialty care.  

While the HealthTech market has yet to shake out, large healthcare players are increasingly vying for the interaction field opportunity. Corinne Dive-Reclus, Head of Lab Insights at Roche Information Solutions has said, “With the use of digital healthcare ecosystems, we can, together and right now, innovate to change lives quickly and effectively for all.” And Pfizer’s Chief Digital and Technology Officer, Lidia Fonseca, has referred to health care as a “team sport.”  

To help build health tech innovation pipelines, Novartis introduced the Novartis Biome digital innovation lab, and Merck launched Merck Digital Sciences Studio. Pfizer has been introducing AI-powered tools and apps as part of its Pfizer Digital Companion platform, and has partnered with a robotics company to deliver medications to remote areas via drone. Roche is pursuing a digital ecosystem to better unify data, with the goal of creating more personalized care. And Eli Lilly and Company has been collaborating with technology companies, including Apple, to work on solutions for health diagnoses and management. 

As we move further into this Healthcare 4.0 era, the focus is on data-driven healthcare ecosystems: data, analytics, and insights shared across participants to find, and create, new forms of value. The opportunity for key healthcare players is to assess their role – participate or assume a leading role in shaping the ecosystem. Ultimately, the opportunity is larger than ecosystems within specific areas of healthcare or data aggregation; it is in what is being called the “platform of platforms” or “Interaction Field of Interaction Fields,” bringing together all different ecosystems within healthcare into one meta-ecosystem.  

While it is clear that emerging Interaction Fields will pivot and evolve multiple times, the key questions will be how the future value chain shifts, which players will bring the ecosystem together, and who will be at the center. One can only hope it will ultimately be the patient.

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Kip Meyer, Managing Director, Custom Partnerships at IESE welcomed a packed room of executives at IESE Business School in New York City, inviting them to, “turn off your certainty, turn on your curiosity.”

The event had a unique three-part format: an introduction setting the context for the discussion, a moderated panel of global business leaders, and interactive small group conversations that enabled the participants to explore the implications of business reinvention, facilitated by Professor Mike Rosenberg.

Vivaldi founder and CEO, Erich Joachimsthaler, PhD, opened the door for curiosity with the introduction, highlighting a recent AlixPartners survey of 3,000 CEOs that found 98% saying they need to overhaul their business model within the next three years, but most did not know where to get started. Joachimsthaler also explained the differences between digital transformation and real business reinvention – it is about reinventing the core, not just leveraging technology but also reinventing the entire business model and even the leadership approach.

The expert panel included Krishan Bhatia, President & Chief Business Officer, NBCUniversal; Tara Bustamante, Group SVP, Business Transformation, Warner Bros. Discovery; and Andreas Fibig, former Chairman and CEO of IFF and former President & Chairman of the Board of Management of Bayer Pharmaceutical.

Over the next 90 minutes, some of the thorniest questions facing businesses today were presented by moderators Julia Prats, IESE Professor, and Anne Olderog, Vivaldi Senior Partner.

• How do you know it is time to reinvent you core and what does this imply?
• When do you integrate new technology?
• How do you navigate a changing business model?
• What are the implications for leadership?

The discussion spanned these 4 key areas:

REDEFINING THE CORE

Industry Boundaries Are Shifting

In times of disruption, industry boundaries are not what they used to be. Krishan Bhatia spoke about the example of how we’re seeing increasingly interactive commerce functionality introduced into the media and gaming sectors, as consumers look for shopping experiences that are as simple and engaging as watching their favorite shows. At Warner Bros, the recent success of the game Hogwarts World demonstrated how media franchises can span traditional media and gaming.

Andreas Fibig spoke of entirely shifting industries during his leadership at IFF – from chemistry to biology, from producing ingredients to co-creating entire solutions.

The Core is Not What It Used to Be

While the core of the media industry has always been defined as content – as Tara Bustamante pointed out, the definition of what content is, evolves at the speed of light. Is it content enriched by data that shows its significance and impact? Is it metadata? Is it content co-created by and with consumers, such as on social media? Is it interaction and discussion around its impact? What trusted/quality content was yesterday may not be what it is in the future, as we are headed towards immersive, engaging, interactive content where audiences are invited to participate in various forms (and share data on their preferences in the process).

Similarly, Andreas Fibig spoke of his reinvention of IFF as a CEO – and the move from ingredients to full products that fit consumer needs. An example is the reinvention of animal protein with plant protein in order to supply protein needs of a growing world population – a need that require new textures, flavors and tastes, much beyond enzymes. This move allows the tackling of big, previously unsolved problems – such as world nutrition – and reinventing taste in the process.

TECHNOLOGY

What Comes First – Technology or Consumer Changes

In that age old debate, Krishan Bhatia’s position is that consumer changes force the reinvention – making business reinvention a must. With the growth of streaming alongside linear TV, the advertising model and technology around it is being reinvented, noted Bhatia, who tested the hypotheses that advertising is best when targeted and relevant. NBCU’s One Platform, which Bhatia leads, offers advertising models – and metrics – suited to both streaming and linear TV. He sees an evolution from one standard of measurement that has been the legacy currency for the TV industry to a multi-platform multi-currency measurement giving advertisers more choice. It’s also a far better fit to measure the complexity of how people are consuming content which is increasingly across multiple platforms.

For Tara Bustamante, media and technology cannot be viewed separately anymore – they are intrinsically liked together, especially as predictive analytics allow new consumer experiences to be created, from gaming to shopping or social interactions. As Bustamante said, media and technology are now intertwined — media operates in tandem with technology to create outstanding consumer experiences, supported by data that allows for precision targeting and personalized paths.

“We view everything through the lens of technology,” she shared.

BUSINESS MODEL

The Rise of Ecosystems As a Business Model

As the core is being redefined with support from technology and data, what we monetize today can be very different than yesterday. Yesterday’s model was monetizing content as an asset to be leveraged, in a traditional pipeline value chain model. Today, as Bhatia pointed out, media companies realize that their core asset is the understanding (through data) and relationship (through technology) with consumers. First, this requires a deep understanding of audiences and their preferences and desires on their own terms – rather than simply defining audiences by product preferences (e.g. Action lovers). Second, the foundation of the business model is no longer the transaction (i.e. selling to consumers media that they consume) but a series of interactions that engage consumers across the content they choose to be a part of their lives. These interactions can include gaming, in-media shopping (or InScene Advertising that NBCU has pioneered), content co-creation, etc.

Media companies have an opportunity to redefine themselves as managers/orchestrators of immersive content organized around key media franchises (or in business terms, Interaction Fields, as Erich Joachimsthaler would call these). For the first time, as Bustamante pointed out, media companies are thinking about how to monetize these relationships as opposed to benefit from on-off transactions.

Traditional Value Chains are Pulled Apart

These ecosystems require a broad cooperation from many players across the industry and outside to be effective, as no one player will have the required capabilities. All speakers spoke of collaboration with a wide network of start-ups and other industry players from across the ecosystem. Andreas Fibig spoke of co-creation with customers – a much different model from creating an ingredient and monetizing it by selling it to customers, in a traditional value chain model. The ecosystem model allows forces and capabilities to be pulled together from across the industry to solve big problems.

LEADERSHIP

Curiosity as Core Leadership Competence

Bhatia echoed the need for inquisitiveness – he actively recruits for curiosity as a core competence, since he sees it as a key success factor for leaders in today’s world of complex ecosystems. This makes experience in the industry less relevant than the ability to calculate backwards from the desired outcome. For the ecosystem economy, leaders can be those who can ask the right questions, since nobody has the definitive answers.

In closing the event, IESE Professor Mike Rosenberg drew a further distinction between transformation and business reinvention, rooted in radical shifts in technology and the world. To cope, an ecosystem approach may be called – to push industry boundaries, search for big answers to big questions – and ultimately reinvent your business.

Is your business ready for the future?

This event evolved from a unique partnership between Vivaldi Group, a global leader in business and brand transformation, and IESE Business School, a global leader in management education ranked #3 worldwide (2022 MBA rankings.) Following the success of the event, IESE Business School and Vivaldi plan to partner to host more events together in the future.

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