April 3, 3018
What headlines in the health insurance industry! It is an industry which has traditionally looked at itself as relatively protected from outsiders. (Remember the concept of “barriers to entry”?) First, Obama Care turned the individual market upside down and may have threatened its very existence. Then, there is massive change is coming or pending due non-insurance firms including CVS, Walmart, JPMorgan Chase, Amazon, Berkshire Hathaway.
Question – did the competitive intelligence teams at the major health insurance companies foresee this sea change and warn their management? I do not know for certain, but having spent time there, I am guessing not. Why?
I think that the health insurance industry, like too many others, erroneously favors experience in the industry over CI experience/training in its CI providers, both inside and out. And that preference for industry specialist over generalist is widespread.
Let me give an example. Some time ago, a head hunter contacted me looking for a candidate to fill a slot in another “health” industry. The client’s detailed specifications required x years of direct CI experience in that industry – only. The client was willing to drop back on time in CI, but not in time in the industry. It was non-negotiable. I told the recruiter that there were not just very few people that met that standard, but in fact there was only one. And that person I knew was soon retiring. I pressed, and soon learned that the headhunter’s client was the very firm where that person worked.
I told the recruiter that I knew of many excellent candidates with extensive CI experience, but their industry experience was in related industries. The recruiter replied that the client was adamant. So, the client ultimately found no one, by ignoring more general experience in favor of specialized industry experience. Over time, the CI unit basically dissolved.
Sometimes generalists have it over specialists. Listen to the late Joseph Campbell, world-renowned expert on myths (and regarded by some as inspiring the Star Wars sagas):
“Specialization tends to limit the field of problems that the specialist is concerned with. Now, the person who isn’t a specialist…sees something over here that he has learned from one specialist, something over there that he has learned from another specialist – and neither of them has considered the problem of what this occurs here and also there. So the generalist…gets into a range of other problems….” 
 Joseph Campbell with Bill Moyers, The Power of Myth, Doubleday, NY, 1988, p. 9
I am a proponent of the “early warning” use of competitive intelligence. However, any early warning program requires an inclusive, rather than selective, definition of competitors and what constitutes potential competitors.
Let’s look at a recent event from the perspective of the health insurance market.
“Two mega-health insurance mergers terminated” .
Would/could early warning pick that up? Almost certainly. Why? Because these transactions involved the 4 dominant players in the group health insurance market. Any/every health insurer should have been watching all 4 of these firms and should have been on top of the legal and financial drivers which might enable/hinder these transactions, probably without much additional research.
What about these two other recent events impacting the same market?
“CVS Health [owners of the pharmacy company] to Acquire Aetna; Combination to Provide Consumers with a Better Experience, Reduced Costs and Improved Access to Health Care Experts in Homes and Communities Across the Country”.
“Amazon, Berkshire Hathaway, JPMorgan Chase to tackle employee health care costs, delivery”.
I doubt that any early warning mechanisms in this market picked these up, for any one or more of several reasons (disclosure, before coming to CI, I previously worked in the health insurance industry):
It is unlikely that most firms in this market have heavily invested in early warning activities because their regulatory structure establish high barriers to entry. Firms regard this as virtually eliminating the entry of new or expansion of existing competitors, at least without some notice from monitoring filings with state regulators.
People move relatively freely from one competitor firm to another, producing an underlying sense that “we sort of know what is probably going on”. That undermines the effort to advance early warning, at least by limiting its focus to the “usual suspects”.
The focus of the industry has been on monitoring the political and regulatory activities at the state and federal level, inducing and supporting a short-term vision of structure and marketing. Short-term stress does not work well with long-term early warning.
The same focus would preclude any early warning system from considering the likelihood that non-insurance firms could/would take steps that might fundamentally change the health insurance industry.
The CI focus in the industry is most often on new products and their marketing, technology acquisitions, and changes in relationships with brokers and agents. Did you see the concept of structural change or existential threat? I didn’t.
Lesson? Come to an early warning system with as few preconceptions as possible. Recall the analogy of the lookout at sea: the lookout surveys all directions (not just on either side), constantly (not only periodically), and for anything that could become a potential threat (not merely any anticipated and identified threat).
 https://www.usatoday.com/story/money/americasmarkets/2018/01/30/amazon-berkshire-hathaway-jpmorgan-chase-tackle-employee-health-care-costs-delivery/1077866001/. This event reportedly caused an immediate 5% drop in the stock prices of major health insurers.