Delivering Happiness - Book Giveaway

by Gregory VandenBosch

I’ve followed Zappos and their CEO, Tony Hsieh’s blog for quite a while. Recently I read about his latest project, his new book, Delivering Happiness. While researching its release, I read about an opportunity for bloggers to receive an advance copy of his book to review and promote. I applied, was surprisingly approved, and recently read the book.  I’ll be posting my review next week when the book is officially released.  So, stay tuned.

In the meantime, I’m offering the readers of this blog an opportunity to win a copy of Tony's book. And, in keeping with Zappos’ refreshing commitment to deliver ‘WOW’ through service, I was given two extra copies for this purpose. I’ll ship your copy free of charge, with no shipping costs to you. So, two people will receive a free copy of the book next week. Cool, huh?

Here’s what you need to do:

1. Keep doing what you do and read this blog.
2. Write your comments to any of the new or previous posts. Post your comments between now and 12:00 AM on June 11th.
3. The top two people with the most comments on the site between now and 12:00 AM on June 11 will receive their free copy of the book.

12 Ways to Get Off Your Ass and Out of Your Comfort Zone

by Brett Miller


Want to be more creative? Take a step back and look at your daily routine.

If you are like most people you get up about the same time everyday, eat similar things for breakfast each day, take a familiar route to work, have a list of tasks to get done before lunch, eat lunch, get some more work done, head home the way you always do, have some dinner and do your normal evening activities before turning in for the night. Then you get up and do it all again. We are all creatures of habit. There is comfort in this predictability. This is all well and good if you are content with your level of thinking and creativity moving along at the same predictable pace.

If you want to elevate your creative thinking, you need to get off your ass and break out of that comfort zone. To get a new perspective on things you can’t just sit in your “ivory tower” and expect it to come to you in a flash of genius. You need to deliberately get out there and experience new things and meet new people.
Here are 12 routine-breaking things that will give you a new perspective and open your mind to new thinking (kind of a 12-Step Program for unleashing creativity):

1. Take a new form of transportation to work next week.

2. Get out of your normal work environment at least 4 hours each week.

3. Strike up a conversation with a complete stranger.

4. Take a “Radical Sabbatical” with your team and experience something you all have never done together before and share perspectives with each other afterward. This could be an hour, a day or a week together.

5. Set up a monthly lunch with someone outside your department or company and get his or her perspective on a problem you are trying to solve.

6. Ask your family (especially your kids if you have them) to help you solve a problem.

7. Read a magazine, book or blog that you would not normally read.

8. Watch television programs that you would not normally watch.

9. Listen to radio stations or music you would not normally listen to.

10. Take a walk in a park, go to a museum, a zoo or a movie during office hours. (Gasp!)

11. Go shopping (to an actual store, not on the Internet) for something you don’t need or even want. Talk to the salesperson and ask a lot of questions.

12. Eat only things you have never tried before for a week.

So, what are you waiting for? Get up, get out there and become more creative! What else would you add to the list?

Place Bets on Passionate People

by Tony Hsieh

Tony Hsieh is the CEO of Zappos.com, Inc. During the past 10 years, the company has grown from almost no sales to more than $1 billion in annual gross merchandise sales, driven primarily by repeat customers and word of mouth. Below is an excerpt from Tony's forthcoming book that describes the beginning of Zappos.

Nick [Zappos' original founder] summarized his entire pitch in three sentences: "Footwear is a $40 billion industry in the United States, of which catalog sales make up $2 billion. It is likely that e-commerce will continue to grow. And it is likely that people will continue to wear shoes in the foreseeable future."

A few weeks later, Nick contacted us and said that he wanted to set up a lunch meeting. He'd found someone named Fred who worked in the men's shoe department at Nordstrom and was interested in joining the company, but only if the company got funding beyond the small friends-and-family round that Nick had already raised. Nick also asked me what I thought of "Zapos" as the name of for the company, derived from zapatos, which was the Spanish word for "shoes." I told him that he should add another p to it so that people wouldn't mispronounce it and accidentally say ZAY-pos.

And thus, the name Zappos was born.

A few days later, Alfred [Zappos' current CFO and COO] and I met with Nick and Fred at Mel's, a 1950s-themed diner a block away from where we lived. As we talked about the potential of Zappos, I did my best to not let the fact that Fred was a spitting image of Nicolas Cage distract me from the business conversation. Fred was thirty-three years old, tall, and really did look like he could be Nicolas Cage's stunt double.

I ordered the turkey melt, with a side of chicken noodle soup to dip the sandwich in. Fred ordered a turkey burger. Exactly 10 years later, Fred and I would return to Mel's and order the same thing to celebrate our ten-year meeting-versary together.

Nick talked about the progress that the website had made over the past few weeks. They were already getting $2,000 worth of orders a week, and the numbers were growing. They weren't making any money, because anytime an order was placed, Nick would run to the local shoe store, buy the item, and then ship it out to the customer. Nick wanted to put up the website just to prove that people would actually be willing to buy shoes online.

There were literally thousands of different brands in the footwear industry. The real business idea was to eventually form partnerships with hundreds of brands, and have each of the brands provide Zappos with an inventory feed of what was in each of their warehouses. Zappos would take orders from customers on the Internet, then transmit the order to the manufacturer of each brand, which would then ship directly to the Zappos customer.

This was known as a "drop ship" relationship, and although it already existed in many other industries, drop shipping had never been done before in the footwear industry. Nick and Fred were betting that they would be able to convince the brands at the next shoe show to start drop shipping, and then Zappos would not have to own any inventory or worry about running a warehouse.

Fred told us that he'd climbed the corporate ladder at Nordstrom for eight years, just bought a house, and just had his first kid. He knew that joining Zappos would be a big risk, but he was ready to take a leap of faith if Venture Frogs would provide the seed funding for the company.

Alfred and I looked at each other. Nick and Fred were exactly the type of people we were looking to invest in. We didn't know if the shoe idea would work or not, but they were clearly passionate and willing to place big bets, so we were willing to bet on them too.

A week after our seed investment, Fred quit his job at Nordstrom. He was officially a Zappos employee now. He and Nick headed to the shoe show in Las Vegas the very next day.

The Key to Spotting Disruption Before It Happens

by Scott Anthony


The April 15 issue of The Economist published a simple chart that gave me chills. Look at it for a minute. What looks scary to you?

The chart displayed the number of pieces of mail sent by year over the last decade. When you look at the chart, the first thing you probably noticed was the precipitous decline in mail volume over the past few years. Indeed, mail volume has sagged 17 percent since 2006. Even though the postal service has furiously cut staff over that time period, it's still pleading with regulators to allow it to consider additional strategic responses to address the disruption clearly affecting its business.

That's not what scared me though. I found the years from 2000 to 2006 to be particularly frightening, when nothing much was happening in mail volume.

How could a relatively flat line be scary?

It just looked so eerily familiar. Go back and look at what happened to CD sales from 1996 to 2001. Or check out newspaper company revenues from 1996 to 2005. Or Kodak's film sales during the 1990s. Or Blockbuster's revenues in the early part of the 2000s. Or Digital Equipment Corporation's revenues in the 1980s. And on and on and on.

In the early days of transformation, market leaders tend not to feel deep pain. The transformation takes root away from the mainstream, or in a seemingly non-connected market. It's not yet good enough for mainstream markets. Or, the overall increase in consumption acts as a "rising tide" that lifts the boats in the mainstream market. This makes it easy for executives to say, "I get what you are talking about. But my business is healthy! It's all overblown."

It's only after the not-good-enough transformation gets better that a "Big Switch" begins. And when that magic tipping point hits, the switch accelerates rapidly.

The lesson for executives is that it's important to look beyond revenue or basic market share data to determine whether or not a would-be disruption is a legitimate threat. If the U.S. Postal Service had measured its market share of "pieces of communication" (which, it very well might have) it would have noticed sharp share declines even as its revenue was increasing. Similarly, while Digital Equipment Corp. might have felt great that its revenues went up from $3 billion to $11 billion during the 1980s, that growth paled in comparison to the explosive growth in the personal computer market.

Another Big Switch in the offing might be television viewership. I remember an executive from a leading cable broadcaster telling me a couple of years ago, "This YouTube thing is all hype. You add up all the hours ever spent on YouTube, and it's less aggregate time then one night of primetime."

That's correct, and while television ratings have declined over the past few years, they haven't fallen off a cliff. But I have observed my own family's habits shifting. We increasingly watch content on portable devices and our computers. For the most part, this viewing is additive, but you can see the Big Switch coming. I hope that cable executive is looking at share the right way, and responding accordingly.

Spotting transformation requires looking beyond the traditional boundaries of your business. Growing revenues can hide a looming threat that demands your immediate attention.

The Myth Of Consumer-Directed Healthcare

by Elizabeth Boehm


At the heart of every healthcare expenditure is a consumer. This consumer determines whether and where to seek diagnosis, undergo tests, and follow up on the advice and treatment suggestions of medical professionals. Thus consumers have an enormous influence over medical costs. This fact is not lost on health plans, technology vendors, or even policy makers, all of whom have been seeking to enable "consumerism" by giving consumers tools to take more control over their healthcare decisions. But somehow these tools — which include tax-advantaged health savings accounts (HSAs), personal health records (PHRs), and even health coaching and behavior change support programs — never seem to unleash the consumer-driven revolution that proponents promise. For example, Forrester's research shows a decline in consumer engagement in the "consumer-directed health plan" market, even as adoption of health savings accounts increases. And despite pushes by both Google and Microsoft, only about 3% of US online consumers report having an Internet-based PHR.

Why is this? Are consumers incapable of taking charge of their healthcare decisions? Are they still shackled to the legacy of the Marcus Welby-era passive patient paradigm? Not likely. Successful campaigns by patient groups to accelerate market availability of treatments in the AIDS market suggest that motivated and empowered healthcare consumers can and do exist. And they can move mountains.

The real damper on consumerism in healthcare is lack of information. This is the paradox of the healthcare information age — consumers have more access to more medical information than they have ever had before. More than many other industries, the Internet has democratized access to information about health trends, medical data, and information about traditional and alternative health resources. But consumers still lack the basic information they need to make informed health decisions.

Consumer-directed health depends on consumers making cost-benefit decisions and trade-offs regarding their healthcare consumption. That's a difficult proposition. First, determining the benefits of tests and treatments depends on many factors, including evidence of efficacy, consumer preference, and the level of invasiveness or side effects of the treatment. As much as we know about medicine today, what we don't know is at least as vast. Emerging science in genomics, proteomics, and even our basic understanding of disease mechanisms and their comorbid interactions means that clinical knowledge doubles roughly every 18 months.

Surely the benefit side of cost-benefit trade-off decisions are complex enough. The cost side should be easy. But costs are obfuscated by insurers who want to protect their proprietary negotiating tactics and providers who want to be able to make up insurance shortfalls with their cash-paying patients. Try calling up a radiology center to find out what an MRI will cost you versus an x-ray. Most can't tell you until after they've prepared your bill. Similarly with health insurers, ask for your portion of the cost of a course of treatment or piece of durable medical equipment and you'll likely get a series of ranges and contingencies in response.

If the US wants to get serious about consumer-directed healthcare, we have some changes to make:

1. We have to mandate that insurers and medical providers make their costs available to consumers. This isn't impossible. Pioneering efforts by Maine and New Hampshire have made comparative payment data available to consumers online.

2. We have to teach consumers about the consequences of their choices—and make those consequences immediate and personal. Choosing more expensive care has to cost consumers more—especially if its cost can't be justified by a measurable difference in quality.

3. We have to boost consumers' health and health-finance literacy—and hold stakeholders accountable for clear, plain language communication. Credit cards now have to clearly inform consumers of costs and charges, both short and long term. Health insurers should have to do the same.

Ultimately solving the US healthcare crisis is a complex and many-faceted problem. Consumerism can and should be a part of it.

The Intersection of Retail and Healthcare

by Michael Howe


Whatever comes of the reform efforts in Washington, D.C., the focus of the U.S. health care system has already shifted toward a patient-controlled (not just patient-centered) delivery system. WebMD, DestinationRx, and other online resources are creating informed, intelligent, and empowered consumers who are focused on prevention more so than treatment, and who want their providers' practices to reflect that shift.

Of course, people of different generations have vastly different needs, expectations, preferences, and influencers. Members of the Greatest Generation for instance, are focused on compliance, and they expect their health care system to be directive — "What do I need to do, which meds should I take, to get well?" By contrast, members of Generation X want education and would rather take health matters into their own hands — "Give me an otoscope, show me how to use it, and I'll monitor my child's ear infection."

It's not news that consumers are assuming greater control over their own health. But what may be novel to health care companies is their need to take the service principles from consumer-focused organizations — managing customers' expectations and experiences, for instance, and conducting consumer research — and apply them to their operations.

Some consumer companies such as CVS, Procter & Gamble, Cerner, Wal-Mart, and Walgreens are already influencing the way people make their health care decisions — that is, based on the quality of the experience and the providers' efforts to engage them meaningfully. P&G, for example, will begin providing health care services for the first time when it assumes ownership of MDVIP, a concierge network of 350 physicians. Meanwhile, when IT provider Cerner acquires IMC HealthCare, expected mid-year, it will become the operator of 23 workplace clinics for 15 different corporations.

Retail clinics like CVS MinuteClinic, the company I led from 2005 to 2008, are taking over many of the traditional tasks of the private physician's practice, and new technologies (like glucose monitors and other wireless monitors) are facilitating patient mobility and comfort, enabling continuity of care, but requiring far less direct interaction with physicians.

With the complexity of the U.S. health care system, even the most seasoned consumer-focused executives can have a hard time seeing these sorts of opportunities. When I first interviewed to lead CVS MinuteClinic in 2005, I was coming directly from a career in the consumer space with assignments at P&G and PepsiCo. And so while leading MinuteClinic, I applied the critical lessons I learned from my experiences in another service-oriented organization — Arby's. As CEO there, I led a brand turnaround where we focused on improving the quality of the food and customers' in-store experiences. I applied these same principles of "continuous improvement" and "customer engagement" at MinuteClinic, which in three years grew from 19 clinics in two states to 530 clinics in 27 states; and 81 employees to nearly 3,000. We used consumer research to determine people's expectations, and we built our unique delivery platform accordingly.

It all sounds logical, right? Megatrends demand this sort of change. But it's not necessarily an easy leap for health care providers (doctors, employers, and payers) and regulators to make. They don't quite get that patients are moving toward providers that can offer them higher quality of care, better customer service, and innovative ways to receive the health services they need.

Physicians have data in hand suggesting that the quality of their bedside manner is directly correlated to patient outcomes, but still they can't always wrap their heads around the importance of service principles. Payers don't grasp it either. One BC/BS group flat out refused to do business with MinuteClinic until we took unorthodox actions — we provided health care services to BC/BS subscribers at their normal copay levels, and we collected and sent 3,200 postcards from those consumers, proving the power and benefits of this sort of consumer-focused model. Within two weeks of receiving the postcard delivery, BC/BS asked us to become a network provider accepting the mandate of their membership.

Established health care leaders must look outside the industry to understand how to adapt to this new reality. Physicians will no longer be able to act as simple compliance officers — diagnosing diseases, assigning treatments and making sure patients stick to their regimens. Instead, they must become educators, coaches and advisers who cater their services to the unique circumstances and demands of individual patients.

Regulatory reform is also vital to rid the system of reimbursement incentives that prevent providers from using their teams most efficiently. To gain the greatest benefit from health care reform, leaders must eliminate other practices that thwart the delivery of "anytime, anywhere" service, such as the insurance limitations imposed by the individual states, state medical licensure practices, and HIPAA sensitivity around information sharing.

As more and more providers adapt their methods of delivering care to better reflect consumer values and expectations, it will result in the effective, convenient and affordable health care system that we all envision and hope will one day be reality.

A Brief History of Health Insurance and Perspectives on Recent Reform Attempts

By Gregory VandenBosch


Health reform is on the front of nearly every newspaper and the lead on most every newscast. But, based on their coverage so far, all I really know is that the Democrats in Congress are rejoicing and the Republicans are vowing to fight it. So, in an effort to better understand what’s going on today, I thought it would be helpful to get a better idea of what happened in the past. Here’s what I found:

Health insurance in the United States is a relatively new phenomenon. The first insurance plans began during the Civil War (1861-1865). The earliest ones only offered coverage against accidents related from travel by rail or steamboat. However, the plans did pave the way more comprehensive plans covering all illnesses and injuries.

The Massachusetts Health Insurance Company offered the first group health policy selling comprehensive benefits in 1847. In 1929, the first modern group health insurance plan was formed. A group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services in exchange for a monthly fee. Several large life insurance companies entered the health insurance field in the 1930’s and 1940’s as the popularity of health insurance increased. In 1932 non-profit Blue Cross Blue Shield offered the first group health plans. Blue Cross Blue Shield plans were successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross Blue Shield plans.

The Blues, in their early days, charged everyone the same premium, regardless of age, sex, or pre-existing conditions. This was partly because the Blues were quasi-philanthropic organizations and because the Blues were created by hospitals. Therefore, they were mainly interested in signing up potential hospital patients. They were sufficiently benevolent that when Harry Truman proposed a national health-care plan, opponents were able to defeat it by arguing that the nonprofit sector had the problem well in hand. However, as private insurers entered the market they reconfigured premiums by calculating relative risk, and some avoided the riskiest potential customers altogether.

Employee benefit plans proliferated in the 1940’s and 1950’s. Strong unions bargained for better benefit packages, including tax-free, employer-sponsored health insurance. Wartime (1939-1945) wage freezes imposed by the government actually accelerated the spread of group health care. Unable by law to attract workers by paying more, employers instead improved their benefit packages, adding health care.

Government programs to cover health care costs began to expand during the 1950s and 1960s. Disability benefits were included in social security coverage for the first time in 1954. When the government created Medicare and Medicaid programs in 1965, private sources still paid 75 percent of all of the health care costs.

As health-insurance costs rose during the 1970s and 1980s—driven both by improving medical technology and by the growing inefficiencies of the health-care system—health maintenance organizations, which had been around since the beginning, began to proliferate. Like the Blues, HMOs became victims of their own success. Initially they were mainly non-profit, but as the business opportunities grew, many for-profit HMO competitors were created and, eventually they displaced many of the nonprofit HMOs. (12 percent of the market was served by for-profits in 1981; by 1997 that figure was nearly 65 percent.)

Managed care kept cost increases in check for a while during the 1990s, but eventually costs started to rise again. Today most employers are reducing or, in some cases, eliminating health-care benefits for employees

Health care reform was a major concern of the Clinton administration; however, the 1993 Clinton health care plan, developed by a group headed by First Lady Hillary Clinton, was not enacted into law. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) made it easier for workers to keep health insurance coverage when they change jobs or lose a job, and also made use of national data standards for tracking, reporting and protecting personal health information.

During the 2004 presidential election, both the George W. Bush and John Kerry campaigns offered health care proposals. As president, Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act, which included a prescription drug plan for elderly and disabled Americans.

In February 2009, President Barack Obama signed a re-authorization of the State Children's Health Insurance Program, which extended coverage to millions of additional children, and the American Recovery and Reinvestment Act which included funding for computerized medical records and preventive services.

On March 21, 2010, the U.S. House of Representatives passed the Senate version of its health care reform bill. On the 23rd, President Obama signed it into law.

Perspective on Recent Reform Attempts:

The Affordable Care Act—otherwise known as ObamaCare—isn't the first attempt to expand health insurance coverage in America. Before Washington passed the law, a number of states took smaller-scale attempts at the job - each of which proved far more expensive than planned.

As spectacular failures go, it's hard to do worse than Tennessee. This early state attempt to dramatically increase health coverage, dubbed TennCare, started off promisingly. In 1994, the first year of its operation, the system added half a million new individuals to its rolls. Premiums were cheap—just $2.74 per month for people right above the poverty line—and policy makers loved it. The Urban Institute, for example, gave it good marks for "improving coverage of the uninsurable or high-risk individuals with very limited access to private coverage." At its peak, the program covered 1.4 million individuals—nearly a quarter of the state's population and more than any other state's Medicaid program—leaving just 6 percent of the state's population uninsured. But those benefits came at a high price. By 2001, the system's costs were growing faster than the state budget. The drive to increase coverage had not been matched by the drive to control costs. Spending on drug coverage, in particular, had gone out of control: The state topped the nation in prescription drug use, and the program put no cap on how many prescription drugs a patient could receive. The result was that, by 2004, TennCare's drug benefits cost the state more than its entire higher education program. Meanwhile, in 1998, the program was opened to individuals at twice the poverty level, even if they had access to employer-provided insurance. In short, the program's costs were uncontrolled and unsustainable. By 2004, the budget had jumped from $2.6 billion to $6.9 billion, and it accounted for a quarter of the state's appropriations. A McKinsey report projected that the program's costs could hit $12.8 billion by 2008, consuming 36 percent of state appropriations and 91 percent of new state tax revenues. On the question of the system's fiscal sustainability, the report concluded that, even if a number of planned reforms were implemented, the program would simply "not be financially viable." Democratic Gov. Phil Bredesen declared the report "sobering," and, rather than allow the state to face bankruptcy, quickly scaled the state back to a traditional Medicaid model, dropping about 200,000 from the program in a period of about four months. Though the state still calls its Medicaid program TennCare, Bredesen's decision to scale back effectively shut the program down. In 2007, he told the journal Health Affairs, "The idea of TennCare, as it was implemented, failed."

Maine took a different route to expanding coverage, but it also resulted in failure. In 2003, the state started Dirigo Care, which, it was promised, would cover each and every one of the state's 128,000 uninsured by 2009. The program was given a one-time $53 million grant to get things started, but was intended to be eventually self-sustaining. It wasn't. In 2009, the year in which the program was to have successfully covered all of the uninsured, the uninsured rate still hovered around 10 percent—effectively unchanged from when the program began. Taxpayers and insurers, however, had picked up an additional $155 million in unexpected costs—all while the state was wading deeper into massive budget shortfalls and increased debt. The program has not been shut down, but because expected cost-savings did not materialize, it's been all but abandoned. As of September 2009, only 9,600 individuals remained covered through the plan.

Then there is the Massachusetts plan, the model for ObamaCare. The state's health care program has successfully expanded coverage to about 97 percent of the state's population, but the price tag may be more than the state can bear. When the program was signed into law, estimates indicated that the cost of its health insurance subsidies would be about $725 million per year. But by 2008, those projections had been revised. New estimates indicated that the plan was to cost $869 million in 2009 and $880 million in 2010. More recently, the governor's office announced a $294 million shortfall on health care funds, and state health insurance commissioners have warned that, on its current course, the program may be headed for bankruptcy. According to an analysis by the Rand Corporation, "in the absence of policy change, health care spending in Massachusetts is projected to nearly double to $123 billion in 2020, increasing 8 percent faster than the state’s gross domestic product (GDP)." The state's treasurer, a former Democrat who recently split with his party, says that the program has survived only because of federal assistance. Defenders of the program argue that it's not really a budget buster because the state's budget was already in trouble. But for those worried about ObamaCare's potential effects on the federal budget, that's hardly comforting. The Congressional Budget Office (CBO) has warned that, without significant change, the U.S. fiscal situation is "unsustainable," with publicly held debt likely to reach a potentially destabilizing 90 percent of GDP by 2020. The CBO scored ObamaCare as a net reduction in the deficit, but those projections are tremendously uncertain at best. As Alan Greenspan warned last month, if the CBO's estimates are wrong, the consequences could be "severe".