Each Monday I post the next section of my 2001 book, which was originally called (by the publisher) Hoover’s Vision but which I have now retitled The Art of Enterprise. I have posted over half of it already; click on the “Monday” column to see all the prior sections. The entire book can be downloaded as a PDF for $10 at http://www.scribd.com/doc/25085990/The-Art-of-Enterprise-by-Gary-Hoover-January-2010
35 Two Boom Industries: Health and Travel
The Healthcare Industry
Retailing is huge and growing relatively slowly. Healthcare, by contrast, is huge and growing fast. There may be no industry with more exciting prospects, both in the aging “first world” and in the increasingly wealthy “rest of the world.”
Healthcare, like other industries, is best understood by considering its fullest scope: medical care, drug stores, hospitals, pharmaceutical companies, over-the-counter drug makers, nutritional supplement makers, natural foods stores, health insurance companies – everything from massage to Medicare, from webMD to World Gym.
This key industry will continue to be fraught with challenges in a period of change. Not just change, but accelerating change. Gene therapies will be incredibly effective but may be incredibly costly. As of 1997, our $379 billion hospital industry was 90% non-profit and 10% for-profit, a ratio that is bound to keep changing. HMO’s which seemed like such a brilliant idea when first devised are now under great pressure.
Healthcare is another industry that needs to take a fresh end-to-end approach. Everyone knows that health is linked to exercise and nutrition, and today more and more evidence indicates that spiritual and mental well-being also play an important role in physical health. But on the business side – the transactions – all of these disciplines remain compartmentalized. Only Walgreen’s knows all the pills we are taking. It’s time this changed. In the future, “wellness” and “prevention” will not be sideshows or buzzwords, they will be at the heart of healthcare.
Successful participants in the healthcare industry will have to increase their awareness of the whole customer. It’s ironic: no profession is more committed to human well-being than medicine, yet medicine may also be the profession with the lowest levels of service. We’ve all heard stories about people waiting months to see a specialist, about X-ray mix-ups, about surgeons operating on the wrong leg. I heard a well-known actor say that his doctor had told him that he had terminal cancer – on the phone! Medicine is an industry that desperately needs to learn the art of service – to learn to focus on what it feels like to be a customer.
Partly in reaction to the low levels of service in healthcare, people are taking matters into their own hands. As more people attain higher levels of education, fewer people feel the need to rely on doctors as health information gatekeepers. More and more people are seeking out second opinions – sometimes from another physician, often from a book, a patients’ support group, or a website. Consumer-oriented ads for prescription drugs and new treatments fill the airwaves. Little by little, the professionals’ healthcare monopoly is crumbling.
These trends have their dangers. Snake oil salesmen will take advantage of the uninformed and the desperate. Millions of people, each with their own unique body chemistry, will take hundreds of pills, resulting in billions of untested combinations. Aspirin, the first wonder drug, was introduced in 1899, but it has taken 100 years to discover all its effects – good and bad. Lawyers will do well. There will be dramatic growth in “vanity medicine’ – surgical procedures and other treatments people undergo not out of medical necessity but in order to feel good or to look good, or even simply because everyone else is doing it.
This changing environment will present huge opportunities for healthcare enterprises to differentiate themselves. Some will strive to become known above all for their integrity. In a world where healthcare consumers are inundated with advice good and bad, those who provide unbiased, independent, reliable information will become key linchpins in the system. Computer buyers have Ziff-Davis and PC Magazine; auto buyers have Consumer Reports and J.D. Powers. Who can patients turn to for advice? Powerful brands in this field could be built by groups like the American Medical Association, respected institutions like the Mayo Clinic, publications like the Physicians’ Desk Reference, and personalities like alternative medicine authority Andrew Weil or radio host Dean Edell.
Like the financial services industry, the healthcare industry is very early in its evolution. One hundred years from now, it’s likely to have changed beyond recognition. But some of today’s enterprises may still be at the top of the pack. Will yours be one of them?
Another industry whose prospects are enhanced by the aging of the baby boom is travel. As usual, I define this industry as broadly as possible, including travel books and videos, travel gear and luggage, airlines, state parks, cruise ships, hotels, tour operators, and theme parks. Other industries from restaurants and museums to Broadway theatres and convention centers are also potential beneficiaries of the coming boom in tourism. On a global scale, aircraft makers and high-speed rail operators have great upside potential. Even the auto industry, often seen as a mature business, will ship huge numbers of units to customers in emerging nations, due in part to the upsurge in travel.
As the baby boom ages, they will have more time and more money. In many cases, their desires for material goods will become sated and they will increasingly turn to experiences. From sailing to the symphony, from trekking to doubling down, more money will go into “capturing the moment.” This will occur at many income levels and all over the globe. While we have historically thought of travel as a single part of the economy, every little niche will grow, especially if smart enterprises pave the way.
For example, I believe one could start a successful enterprise of significant size specializing in hunting, fishing, camping, and golf trips. Such a business might operate through bricks-and-mortar storefronts or online – probably both. Likewise, there is potential in religious and spiritual travel (reviving the ancient tradition of the pilgrimage), classical music travel, rock music travel, baseball travel, auto racing travel, gardening travel, health travel, history travel, and about every other type of travel you can imagine.
Another opportunity is the potential of business travel, which has barely been tapped today. You read that right. I’m not talking about traditional business travel, which involves traveling somewhere to negotiate a deal, attend a convention, or sit in a business seminar. I’m talking about business travel designed to broaden, deepen, and enrich your understanding of human behavior and its economic consequences. Think about hanging out at Venice Beach (as Nokia engineers did) to observe people skateboarding, sunbathing, and flirting, in search of ideas about how wireless technology could enhance the experience. Or visiting the souks (traditional marketplaces) of Syria in search of ideas for more exciting retailing. Or taking a behind-the-scenes tour of O’Hare Airport or Disney World to learn how to effectively manage a complex business.
Travel is best understood if it is seen as a combination of many things – a way to escape, a way to learn, a way to enjoy. A form of education and entertainment. I guess you can tell from the earlier chapters on geography that I believe that travel is a fundamental part of any education. A bachelor’s degree handed to someone who has never been out of state doesn’t mean much.
Now the bad news: most of the travel industry is not prepared to take advantage of the opportunities that lie ahead. Let’s start with one key component, the airlines, a key ingredient.
The airlines today take a lot of flack, especially for their delayed, overcrowded flights and their surly service. They don’t get the credit they deserve for doing the fundamentals amazingly well. Inflation-adjusted air fares are lower today than forty years ago. Despite crowded skies and runways, flying is safer than ever. The US airline system is carrying dramatically increased numbers of people, with little support from the infrastructure provided by government agencies (few new runways, few new airports, inadequate traffic control systems). I’d rather be on a flight that is late and safe than one that is on time and landing too close to the previous flight.
Airline service quality is a mixed bag. I fly about one hundred times a year, all over the world, on many airlines. In my experience, the European and Asian carriers, Southwest, Continental, and a few other airlines give service that ranges from above average to outstanding. Unfortunately, some of the big US carriers, notably United, Delta, Northwest, and USAir, are notoriously poor in this area. These companies also tend to overcharge their customers in non-competitive markets or on last-minute reservations. Some in the industry call it dynamic pricing, others call it yield management. I call it gouging.
However, I believe that competitive forces, if allowed to play out, will force these companies to improve. My major criticism of the airline business relates not to service but to the lack of personality and the weak branding that characterize most carriers. Wake up from a nap on a typical flight and tell me which airline you are on. Chances are good that you won’t be able to tell. The seatbacks, the aisle widths, the color schemes are all alike. So are the snacks, the in-flight catalogs and magazines, the entertainment.
The two most successful airlines in the world, Southwest and Singapore, have achieved their success by differentiating themselves – Southwest at the mass end of the market, with few frills and short hops, Singapore at the high-service, long-distance end. Both earn consistently high ratings from travelers and are very profitable. But most of the other carriers are undifferentiated. In this field of look-alikes, it wouldn’t take much to really stand out from the crowd. Possibilities might include:
My point is that an idea, any idea, that separates your company from the others can go a long way in an industry that is generally lacking in initiative and personality. But of course, safe, on-time travel must remain the highest priority.
The Lodging Business
Lodging is a huge industry, with over $100 billion a year in revenue in the US alone. As global tourism booms, the future looks great. Many nations are just beginning to develop their “inn-frastructure.” But if the airlines are largely undifferentiated, the hotels and motels aren’t much better. Wake up from a deep snooze at a Hyatt, a Hilton, a Marriott, or a Sheraton – where are you? Can you tell the difference between Motel 6 and Super 8, or between a Holiday Inn and a Ramada?
Most of these organizations are very competent. In my experience, it is rare to show up and be told, “No, we don’t have a reservation on file for you.” It is rare to get food poisoning. It is rare to have a fire in the middle of the night. The hotel industry does a great job, as long as you define that job traditionally. But when you look at the upside potential, they have barely scratched the surface.
For example, how many hotels or motels offer such options as the following?
You may be saying, “I stayed in a Four Seasons (or a Ritz-Carlton) last year, and they had these things.” Maybe so, but what about the less expensive hotels? The average American home has more of these things than most $100 hotel rooms. Office Depot sells inexpensive office chairs by the tens of thousands that are better than those found at most hotel desks.
The lodging industry offers relatively little segmentation except on the basis of price. That is, we have cheap places and expensive places, but we don’t have inns for older people, inns for travelers with toddlers, inns for sports junkies, inns for people with pets, or inns for gadget freaks. I was recently searching for a hotel for a very tall person, and not one hotel website listed “king-size beds” as a searchable field.
If airlines allow you to select a window seat or an aisle seat, first class or coach, couldn’t a 200-room hotel or motel give you multiple options on the style or amenities of your room? Why not a Michael Graves room or a Laura Ashley room? Why not a rooms for seniors or rooms for parents with toddlers?
Hotels are, in a sense, in the architecture business. They have physical facilities that many people spend a lot of time in: not only bedrooms but many public areas, from lobbies and restaurants to meeting rooms, ballrooms, and shops. But how many of today’s new hotels and motels are going to win architecture awards? Industry leaders thought in those terms generations ago, when they built the Palace in San Francisco and the Waldorf-Astoria in New York – hotels that are still turning nice profits. If the average new American home can be reasonably attractive to the eye, why can’t the average new Best Western?
I make a lot of speeches in hotel ballrooms, and I find that the average junior college classroom is better prepared for meetings than many of our fanciest hotels. The college is likely to have theatre-style seating and a built-in, up-to-date screen and projector. At the fancy hotel, outdated A/V equipment is rented by the day and placed in rooms that were not built for conferences or seminars.
Perhaps the biggest indictment of the lodging industry is its inability to break the tradition of the noon checkout. The largest inns run housekeeping operations from early in the day through the evening, but even so a 2 p.m. checkout usually requires a battle with the front desk. The poor road warrior who gets off a redeye flight and checks in to his hotel room at 2 a.m. only to depart at 7 a.m. for his next meeting pays the same as someone staying a full 24 hours. There should be other options.
I raise these many issues only to underscore the industry’s huge potential for innovation. There are some signs of change. Bed-and-breakfast inns offer great variety and originality. The W Hotels are trying new things. Ian Schrager operates a group of hotels, including New York’s Hudson and Paramount, that are each unique and interesting. Club Quarters gives guests many checkout options, puts an excellent desk in each room, and even provides a dictionary and other reference books. Austin’s San Jose Hotel, a remodeled 50s motel, combines great architecture with CD players and VCRs in each room, supported by a music and movie library at the front desk. The hotels operated by Disney, like the Grand Floridian at Disney World, offer an experience that would be hard to equal in most major cities. Most impressive of all, San Francisco’s Kimpton Group, which now has facilities as far east as Chicago, operates extremely original hotels, each unique, some in restored buildings like Chicago’s wonderful Burnham.
These examples, representing only a tiny percentage of America’s lodging industry today, point the way toward the future.
As the travel industry grows dramatically in this century, we’ll see whole new companies begun, and old ones remodeled, to offer customers new and more interesting choices. Business battles will not be won via mergers and cost controls alone. They will increasingly be won through differentiation, showmanship, entertainment, visual design, a sense of history, and skillful catering to market segments.
Is your enterprise truly innovative, or, like today’s hotel chains, just functionally competent? Which of the ideas we’ve explored above has a parallel in your business?