Six Key References for 2005

From my perspective, of the hundreds of articles published this year that directly relate to our collaborative efforts in the last quarter of 2005 trying to acquire multiple royalty-generating patent licenses for DIS(SM) Co., the six key ones at both local and national levels are the following:

1. Gingrich sees R.I. as Springboard for Nationwide Healthcare Reform (Providence Journal 12/17/05)
2. R.I. Doc Groups Team Up for EMRs (HIT Strategist 12/6/05)
3. HIMSS’ HIT Interoperability Project Dashboard (HIT World 12/22/05)
4. Six Keys to Building New Markets by Unleashing Disruptive Innovation (Harvard Business Review 3/10/03)
5. GuideWorks: Comcast’s $250 million On-screen TV Program Search Technology (Wall Street Journal 10/13/05)
6. In High Definition DVD Format Split, Paramount Goes Two Ways (NY Times 10/3/05

Gingrich sees R.I. as springboard for nationwide health-care reform
The former House speaker says the nation's smallest state is a perfect place to be a model for saving lives and costs.

01:00 AM EST on Saturday, December 17, 2005

BY G. WAYNE MILLERJournal Staff Writer

PROVIDENCE -- America must remake its convoluted and inefficient system of health care or countless lives will continue to be lost and billions of dollars will continue to be wasted, Newt Gingrich, former Republican House speaker, said yesterday."It's literally a matter of life and death," Gingrich said.

That was the grim assessment at a morning-long bipartisan conference of government, business and civic leaders at the Rhode Island School of Design. But there's a silver lining, Gingrich and other officials agreed: With its small size and growing consensus that inaction is unconscionable, Rhode Island has the rare chance to serve as a national model for change. "There's a real opportunity here not just for business but the entire community," Gingrich said to the news media after the conference. "We can have a more effective and less expensive system."

Yesterday's session was organized by Governor Carcieri and Rep. Patrick J. Kennedy, who was busy in Washington with end-of-year business but sent a videotape outlining his views.

Also attending were Lt. Gov. Charles J. Fogarty and some 40 heads of business, including Alfred J. Verrecchia, president and CEO of Hasbro, and Howard G. Sutton, publisher of The Providence Journal. Rhode Island School of Design president Roger Mandle, a participant, welcomed the conferees to the school's Museum of Art.

Gingrich, who was speaker of the House from 1995 to 1999, has made what he calls "transformation" of the nation's health care his new cause. Gingrich is the founder of the Center for Health Transformation -- a role that belies the hard-bitten image of his days in Washington. He took up the health-care crusade, he told The Journal, because he wants to save lives and money -- and he believes that change is feasible, if difficult.

Gingrich told conferees that true reform must be built on a triad of changes:

1. Prevention and "wellness" programs, so that people remain healthier longer, thus reducing -- or never needing -- high-cost treatments. As an example, he pointed to childhood obesity, which predisposes many youngsters to diabetes, a potentially deadly and often costly disease. Said Carcieri: "We've got a 'sick-care' system, not a health-care system." The governor in October launched a series of initiatives to improve the health of all state residents.
2. State-of-the-art information technology, to bring together all of a person's records in one digitized, easily accessible source. Too often now, records are scattered among various doctors, hospitals and providers -- none of whom readily communicate, to the detriment of all. Gingrich compared health information to FedEx, the Atlanta-based shipper whose automated tracking system revolutionized the delivery business. "We know more about where a package will be in a few days than we do about our health care," Gingrich said.
3. "Individual-centered" care, which would allow consumers to be better informed. Thus "empowered," Gingrich maintained, consumers could make more knowledgeable decisions, thereby bettering their health. Although he does not advocate a government-run universal health-care program likeCanada's, which is frequently criticized as delay-plagued, Gingrich says that all of America's nearly 300 million people should have coverage, from private or public sources, or a mix of the two.
   

Carcieri gave business leaders three charges:

1. enroll every employee in a wellness program;
2. participate in the recently established CEO Council of the Rhode Island Business Group on Health; and
3. support, with money and participation, the Rhode Island Quality Institute, a nonprofit health-care study group formed by former Attorney General Sheldon Whitehouse.

"This is the number-one policy issue in the country," Carcieri said. "My goal is to make Rhode Island the model for the nation for health care."

According to Gingrich, health-care costs represent about 15 percent of the nation's domestic economic output, making change an enormous challenge. "When you're trying to move 15 percent of the economy," he said, "it's a big project."That makes starting in Rhode Island sensible, Gingrich said. "It's about the right size for everyone to talk as a community."

Although the news media was not invited to yesterday's conference, officials answered questions and provided copies of the documents that were presented.

Visit Gingrich's Center for Health Transformation at http://www.healthtransformation.net/
G. Wayne Miller can be contacted at gwmiller@projo.com
Story Online at:

http://www.projo.com/news/content/projo_20051217_health17.22199054.html

Rhode Island doc groups team up for EMRs
Health IT Strategist: Beyond the Headlines
Written by By Joseph Conn Story originally published December 6, 2005

Four physician organizations in Rhode Island have formed a for-profit corporation to promote a deceptively simple solution to some of the knottiest healthcare IT problems facing physicians today: selecting an electronic medical records system, getting EMRs in the hands of outpatient physicians at an affordable price and finding a way to make the installed EMRs interoperable with each other and local hospitals.

The company, Electronic Health Records of Rhode Island (EHRRI)corporated on Oct. 17, 2005, according to the Rhode Island secretary of state's office.

"The dream here is to have every doc in the state on one IT system," said Mark Jacobs, physician chairman of EHRRI's board of directors. The company is completing negotiations with a single EMR system vendor that Jacobs says will be identified in a week or so.

There are 4,091 physicians in Rhode Island, according to the American Medical Association's data book. The four founding groups or EHRRI account for about 1,400 of them. Jacobs also is the president and chief executive officer of Coastal Medical, Inc., an 80-physician, multi-specialty medical group based in Providence that is one of the four EHRRI founding physician organizations.

The other member groups are Lifespan/Physicians Professional Services Organization based in Providence with about 800 physicians; the physician-hospital organizations at Women and Infants Hospital in Providence and Kent County Memorial Hospital in Warwick, which are part of the Care New England integrated healthcare system and have about 400 physicians; and Thundermist Health Center, a two-facility community health center in Woonsocket with 20 physicians.

Jacobs said he is in negotiations with a candidate to become the company CEO. The new executive should be on the job in January 2006. Rollout of the first EMRs will begin in 2006.

"I think we're looking at 125 docs in year one," said Jacobs, adding that while the estimate of first-year physician adoption "is conservative, it's conservative for a good reason. The learning curve is steep. We're obviously going to learn from the early adopters. But I think there is going to be a cascade effect here."

First in line:
Jacobs, who uses an e-prescribing system, but not an EMR, said he is going to be one of EHRRI's first customers. He was a member of an advisory committee of the not-for-profit Rhode Island Quality Institute that set up a statewide e-prescribing initiative with software vendor SureScripts. While the institute is not a partner in EHRRI, he credits it with being "a good convener" that brought the founding groups together.

Coastal started looking at EMR systems to buy about 14 months ago, Jacobs said, but 10 months ago it joined the collaborative that led to the formation of EHRRI. The Office of the National Coordinator for Health Information Technology in September contracted with the Certification Commission for Healthcare Information Technology to come up with a vetting process for EMR systems, but by pooling their expertise, Jacobs says the doctors at EHRRI already have done what the commission will do and what few physicians would have the time or the desire to do on their own.

"I've seen, personally, demos on a dozen products," Jacobs said. "The company itself has seen in-depth demos on a half a dozen products. We narrowed them down to three finalists and then narrowed it down to one.
"The last three electronic health-record systems were all very good. Where one of them fell down very badly was (its) practice management system. It was just very weak. Where the two more robust systems differed was price and the IT platform itself."
In addition to gaining price leverage, a large group purchase will shrink the problem of developing interfaces between physician EMRs and the IT systems in the state's 11 acute-care hospitals.

ASP model:
According to Jacobs, EHRRI will offer both a stand-alone EMR to physicians who are married to their existing electronic practice management systems, as well their vendor's suite of both systems (i.e an integrated EMR/PMS).

EHRRI also will offer the EMR in an application service provider, or ASP, model, in which, for a monthly fee, physicians can buy the software, maintenance and data storage provided via a central server and data connection.

Initially, the IT vendor EHRRI selects will supply most of the installation services and software support, but EHRRI will begin to take over those functions as the new company gets off the ground in mid-2006, he says.

Jacobs says the company is not yet disclosing price points on the EMR and practice management systems because it is trying to negotiate with the state's major payers and medical malpractice insurance providers for subsidies that will lower prices to physicians.

Cedric Priebe, MD, chief medical information officer at Care New England, is not a board member of EHRRI, but considers himself to be "a spiritual founder" of the physician-led effort. Priebe has served as a physician-executive in IT at IDX, Allscripts and McKesson before coming to Care New England in 2004. He said he likes the idea of a physician-centric approach to solving their own IT adoption problems, particularly in Rhode Island, where the vast majority of physicians practice in groups of three or fewer. Various IT studies have pointed to low EMR adoption rates in small groups.

"I've seen lots of different relationships between competing hospitals and physician organizations and this is really unique," Priebe says. "If we can prove this can be done here in the small doc market, it will be a message that if you decrease the number of options out there, you can do more with interoperability. There are several vendors out there who could do this well."

What do you think? Write us with your comments at hitsdaily@crain.com.


HIMSS HIT Dashboard Tracks Interoperability Projects:

By Neil Versel, HITWorld contributing editor December 22, 2005:

A new Web portal is tracking more than 500 health-IT interoperability projects across America in an attempt to inform policy-makers, healthcare executives, and technology vendors, organizers say.

The HIT Dashboard, a joint project between the Health Information and Management Systems Society (HIMSS) and the Center for Health Information and Decision Systems (CHIDS) at the University of Maryland's Robert H. Smith School of Business, went online this month.

(See: http://www.hitdashboard.com)

"We saw that there was a lot of cataloguing activities going on, but nothing really comprehensive," explains David Clark, director of integration and interoperability for HIMSS."It's good for both state legislatures and governors to know what's going on in their states," Clark says.

The HIT Dashboard tracks projects in seven categories:
1. Grants from the federal Agency for Healthcare Research and Quality (AHRQ);
2. the Doctor's Office Quality-Information Technology (DOQ-IT) program;
3. the Medicare Health Support program;
4. regional health information organizations (RHIOs);
5. health information exchanges (HIEs);
6. the Bridges to Excellence initiative; and
7. private health-IT projects.

Essentially, RHIOs are the umbrella organizations for coordinating and managing data exchange, while HIEs (or “HIXs”) represent the actual technical infrastructure for moving information, according to Clark. Some constituencies have taken the two terms to be synonymous, he says.

The first posting of data, based on more than a year of research, is current through September, according to Clark, and the information will be updated quarterly. HIMSS is preparing a second posting now.

Although Clark promises that the second release will be "more robust," he says that the effort does attempt the virtually impossible task of listing every project underway across the country. "There is a new RHIO starting up practically every day," he says. "It's more meant to be an information resource on what those projects are doing and where they are at," Clark explains.

There are three iterations of the database,
1. one for the public that simply shows project icons on a U.S. map,
2. one for HIMSS members that gives project name and location, and
3. a subscription version that offers access to all available data on each project.

So far, HIMSS has just a handful of paying members. "It seems like the pharma and life sciences companies are quickest on the uptake," Clark says.

A4 Addition:

In other RHIO-related news, A4 Health Systems (Cary, N.C.) claims to have the first EMR to give physicians access to lab results, radiology reports, and transcribed encounter notes from a regional clinical messaging system.

A4's HealthMatics EMR now allows physicians to pull electronic, patient-specific data from at least 17 hospitals in Ohio, Kentucky, and Indiana and insert the information directly into a patient's electronic record, via HealthBridge, a budding data-exchange network in the greater Cincinnati area, the company says.

Six Keys to Building New Markets by Unleashing Disruptive Innovation
Harvard Business School Publishing: Date: Mar 10, 2003
by Clayton M. Christensen, Michael E. Raynor, and Scott D. Anthony

"All Innovative ideas start out as half-baked propositions."
"Managers must be patient for growth but impatient for profitability."---Clayton M. Christensen, Michael E. Raynor, and Scott D. Anthony

Managers know they need growth to survive—but innovation isn't easy. In this Harvard Management Update article, HBS professor Clayton Christensen and co-authors detail the six keys to creating new-growth businesses.

Managers today have a problem. They know their companies must grow. But growth is hard, especially given today's economic environment where investment capital is difficult to come by and firms are reluctant to take risks. Managers know innovation is the ticket to successful growth. But they just can't seem to get innovation right.

When companies keep improving their existing products and services to meet their best customers' needs, they eventually run into the "innovator's dilemma." By doing everything right, they create opportunities for new companies to take their markets away. Established companies historically have struggled when trying to create new markets. Success seems fleeting and unpredictable.

Recent research indicates these problems are systemic. Most companies that are started fail. Of those that succeed, most cannot sustain robust growth for more than a few years. Companies need a way to unlock the process of innovation and create innovation-driven growth businesses again and again. How can managers increase the probability that their decisions will lead to success? Now more than ever, managers need robust theories—statements of what causes what, why, and in what situation—to guide their decision making around innovation.

Managers typically grow impatient when we tell them this. "Theory?" they say. "That sounds like theoretical. That sounds like impractical." But theory is eminently practical. Managers are the world's most voracious consumers of theory. Every plan a manager makes, every action a manager takes, is based on some implicit understanding of what causes what and why.The problem is, managers all too frequently use a one-size-fits-all theory. But the ground beneath them inevitably shifts. Strategies that worked so wonderfully in the past no longer suffice.

Drawing on the work of a number of thoughtful researchers as well as our own work, we are exploring a set of theories that can help managers respond to the ever-changing circumstances in which they find themselves. Specifically, these six lessons will help managers make the right decisions to successfully build new-growth businesses.

1. Disruptive innovations spur growth. Companies have two basic options when they seek to build new-growth businesses. They can try to take an existing market from an entrenched competitor with sustaining innovations. Or they can try to take on a competitor with disruptive innovations that either create new markets or take root among an incumbent's worst customers. Our research overwhelmingly suggests that companies should seek out growth based on disruption.

Sustaining innovations, whether they involve incremental refinements or radical breakthroughs, improve the performance of established products and services along the dimensions that mainstream customers in major markets historically have valued. Examples: a microprocessor that enables personal computers to operate faster and a battery that lets laptop computers operate longer.

Companies march along a performance trajectory by introducing successive sustaining innovations—first to remain competitive in the short term. But, as noted in The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press, 1997), firms innovate faster than our lives change to adopt those innovations, creating opportunities for disruptive innovations. Although sustaining innovations move firms along the traditional performance trajectory, disruptive ones establish an entirely new performance trajectory.

Disruptive innovations often initially result in worse performance compared with established products and services in mainstream markets. But disruptive innovations have other benefits. They are often cheaper, simpler, smaller, and more convenient to use.
Consider the small off-road motorcycles introduced by Honda in the 1960s, Apple's first personal computer, and Intuit's QuickBooks accounting software. These innovations all initially underperformed the mainstream offerings. But they brought a different value proposition to a new market context that did not need all of the raw performance offered by the incumbent.

They all created massive growth; to flip Joseph Schumpeter's famous phrase, creative destruction, on its head, this is creative creation. After taking root in a simple, undemanding application, disruptive innovations inexorably get better until they change the game, relegating previously dominant firms to the sidelines in often stunning fashion.

Incumbents almost always win battles of sustaining innovations. Their superior resources and well-honed processes are almost insurmountable strengths. Incumbents, however, almost always lose battles where the attacker has a legitimate disruptive innovation. To create a new-growth business, companies—established incumbents and start-ups alike—must be on the right side of the disruptive process by launching their own disruptive attacks.

2. Disruptive businesses either create new markets or take the low end of an established market.
There are two distinct types of disruptive innovations. The first type creates a new market by targeting nonconsumers, the second competes in the low end of an established market.

In a new-market disruption, attackers take root in a new "plane" of competition or a new context of use outside of an existing market. Consumers historically locked out of a market because they lacked the skills or wealth welcome a relatively simple product that allows them to get done what they had always wanted to get done. These markets typically start out small and ill defined. They don't meet the growth needs of large companies. And the incumbent feels no pain at first. Because it creates new consumption, the disruptor's growth doesn't affect the incumbent's core business. But as the innovation improves, it begins to pull customers away from the incumbent. And the incumbent doesn't have the ability to play in this new game.

Transistors were a disruptive innovation. Mainstream suppliers of tabletop radios, which were made with vacuum tubes, couldn't figure out how to use transistors because they couldn't initially handle the power requirements of these components. Then in 1955, Sony introduced the pocket radio. It was a static-laced product with horrible fidelity. But it enabled teenagers to do something that they couldn't before—listen to rock'n'roll out of their parents' earshot. Had Sony targeted consumers in established markets, the pocket radio would have bombed. But for teenagers, the alternative to a Sony pocket radio was no radio at all. By competing against nonconsumption, Sony set a very low technical hurdle for itself: The product just had to be better than nothing in order to find delighted consumers.

The second type of disruptive innovation takes root among an incumbent's worst customers. These low-end disruptions do not create new markets, but they can create new growth. The disruption of integrated steel mills by steel minimills demonstrates how low-end disruptors harness what we call “asymmetries of motivation.”

Minimills first took hold in the steel industry in the mid-1960s. They were very efficient. They had a 20 percent cost advantage over integrated mills. But the quality of the steel they produced was inferior. The rebar market at the bottom rung of the industry (rebar is small steel bars made from scrap and used to create reinforced concrete) was the only market that would accept the minimills' steel.

As the minimills entered the rebar market, the integrated mills were happy to exit it. Their gross margins in the rebar business were a mere 7 percent, and rebar accounted for only 4 percent of the industry's tonnage. So the integrated mills decided to focus on higher-profit steel products. The minimills made boatloads of money until they finally drove the last of the integrated mills out of the market—and then the price of rebar dropped 20 percent, because rebar had essentially become a commodity market. The minimills' reward for victory was that none of them could make money.

To make attractive money again, the minimills had to figure out how to make better-quality steel in larger shapes—not only angle iron but also thicker bars and rods. Profit margins in this market tier were 12 percent, almost double those of the rebar market; the overall market was also twice as large. So the minimills invested in equipment to make the larger pieces and worked to improve the quality and consistency of their steel. As the minimills began making inroads with better and bigger steel, the integrated mills were happy to exit this market tier to concentrate on more profitable products. When the last integrated mill left the market, the price of angle iron collapsed. Once again, the minimills had to move up to the next tier of the industry in order to survive. And so on.

At each stage of the minimills' climb up-market, an asymmetry of motivation was at work. For the minimills, the need to enter a more profitable market provided the motivation to solve the technological hurdles preventing them from producing higher-quality steel. The integrated mills were happy to leave these markets because the lower tiers in their product mix were always less profitable than products targeting higher-end customers. Eventually, of course, the integrated mills ran out of markets to flee to.

3. Disruptive opportunities require a separate business-planning process. All innovative ideas start out as half-baked propositions. They then go through a shaping process as they wind their way through the organization to reach senior management. When firms have a single process for all the various forms of innovation, what comes out the other end of the process looks like what has been approved in the past, and it all looks like sustaining innovations.

Consider IBM's efforts to introduce voice-recognition software. Early iterations of IBM's ViaVoice software package featured IBM's "ideal" customer on the front: an administrative assistant sitting in front of her computer, speaking into a headset. It is easy to see why IBM targeted such customers. They constituted a large, obvious market, well aligned with IBM's needs and capabilities. But think about IBM's value proposition to this woman. She types 80 words a minute and almost never makes a mistake. IBM was telling her, "Why don't you change your behavior and use a system that gives you lower accuracy and slower speeds. We promise future releases will get better." The only way to attract great typists would be for voice recognition to be faster and more accurate than typing. This is a very high technical hurdle.

Where has voice-recognition technology begun to take off? Kids love the ability to tell their animated toys to "stop" or "go." "Press or say one" menu commands are another obvious application. In these contexts, people are delighted with a crummy voice-recognition product. Another good market for the technology may be all those executives you see standing in airport lines, trying to punch messages into their BlackBerries. Their fingers are too big to enable accurate typing—they'd be more than happy with a voice-recognition algorithm that's only 80% accurate.

Not surprisingly, disruptive ideas stand a small chance of ever seeing the light of day when they are evaluated with the screens and lenses a company uses to identify and shape sustaining innovations. Companies frustrated by an inability to create new growth shouldn't conclude that they aren't generating enough good ideas. The problem doesn't lie in their creativity; it lies in their processes.

Only by creating a parallel process for developing and shaping disruptive ideas—one that acknowledges their distinctive features—can companies successfully launch disruption after disruption. Such a process relies more on pattern recognition than on data-driven market analysis. After all, markets that do not exist cannot be analyzed. Even when numbers are available, they are never clear.

An intuitive process can still be rigorous if managers use the right tools. For example, discovery-driven planning lets you create a plan to test assumptions; aggregate project planning helps you allocate resources between sustaining and disruptive opportunities; the "schools of experience" theory informs hiring decisions.

4. Don't try to change your customers—help them. Faulty market segmentation schemes help to explain the stunningly high rate of failure of new-product development. Most companies define markets in terms of product categories and demographics. We just don't live our lives in product categories or in demographics. When companies segment markets this way they often fail to connect with their customers.

How do we live our lives? During the course of the day, problems arise, jobs we need to get done. We look around to hire products to get those jobs done. Products that successfully match the circumstances we find ourselves in end up being the real "killer applications." They make it easier for consumers (including physicians) to do something they were already trying to accomplish.

Some manufacturers pushed digital cameras based on the value proposition that they made it easy to edit out the red eyes from all your images and create an online album of your best photos. Research shows, however, that 98 percent of all photos get looked at only once. Only the most conscientious of us prioritized editing images or creating albums. Where digital camera makers found success was in marketing their products to consumers who used to order double prints of their photos and mail them to relatives. The digital technology enables consumers to use the Internet to do more easily what they already wanted to do.

A business plan predicated upon asking customers to adopt new priorities and behave differently from how they have in the past is an uphill death march through knee-deep mud.
Instead of designing products and services that dictate consumers' behavior, let the tasks people are trying to get done inform your design.

5. Integrate across whatever is not good enough. One critical decision firms face when creating an innovation-driven growth business is determining its optimal scope. Specifically, which activities need to be managed internally and which can be safely outsourced?

The answer often is driven by the fad of the day. During the 1960s, everyone thought IBM's integration was an unassailable point of competitive advantage. Because IBM controlled such a wide swath of the industry's value chain, it could make better products than anybody else. So companies copied IBM and tried to integrate. In the 1990s, everyone thought that Cisco's disintegrated business model that made extensive use of outsourcing was an unassailable point of competitive advantage. So companies jumped on this new bandwagon and sought to disintegrate.

The critical question is: What are the circumstances in which my firm should be integrated and what are the circumstances in which my firm can be a specialist? Integration provides advantages whenever a product is not good enough to meet customer needs. Proprietary, interdependent architectures allow companies to run multiple experiments, pushing the frontier of what is possible. Engineers can reconfigure their systems to wring the best performance possible out of the available technology.

Think about the computer industry. In its early days, you simply couldn't exist as a specialist provider. There were too many unpredictable interdependencies across every interface in the first mainframes. The manufacturing process depended on the design of the computer and vice versa. The design of the operating system affected the design of the logic circuitry. IBM had to be integrated across the entire value chain to produce a mainframe that came close to meeting its customers' needs.

By contrast, the modular architectures that characterize disintegration always sacrifice raw performance. Stitching together a system with partner companies reduces the degrees of design freedom engineers have to optimize the entire system. But modular architectures have other benefits. Companies can customize their products by upgrading individual subsystems without having to redesign an entire product. They can mix and match components from best-of-breed suppliers to respond conveniently to individual customers' needs.

But even in a modular architecture, successful companies still are integrated—just in a different place. Consider the computer industry in the 1990s. The computer's basic performance was more than good enough. What did customers want instead? They wanted lower prices and a computer customized for their needs. Because the product's functionality was more than good enough, companies like Dell could outsource the subsystems from which its machines were assembled. What was not good enough? The interface with the customer. By directly interacting with customers, Dell could ensure it delivered what customers wanted—convenience and customization. Value flowed to Dell and to the manufacturers of important subsystems that themselves were not good enough, like Microsoft and Intel.

In short, companies must be integrated across whatever interface drives performance along the dimension that customers value. In an industry's early days, integration typically needs to occur across interfaces that drive raw performance—for example, design and assembly. Once a product's basic performance is more than good enough, competition forces firms to compete on convenience or customization. In these situations, specialist firms emerge and the necessary locus of integration typically shifts to the interface with the customer.

6. Be patient for growth but impatient for profitability. Managers inside new-growth businesses often feel tremendous pressure to quickly ramp up sales volume. But disruptive businesses can't get big very fast. The only way to make them grow quickly is to cram them into large, obvious markets. In established markets, customers don't care about the disruptive innovation's strengths. They only care about its weaknesses. This is a recipe for disaster, and one reason why company-backed disruptive ventures can have a leg up. Venture capitalists have become increasingly impatient for businesses to get huge. As long as their core businesses are growing healthily, companies will find it easier to wait for the disruptive businesses to find a foothold market and slowly build commercial mass.

Managers must be patient for growth but impatient for profitability. When you are willing to put up with a lot of losses before a disruptive business turns profitable, that means you are trying to lay the foundation for a huge new business. Insisting on early profitability pushes the new disruptive business to find the markets where its unique capabilities will be uniquely valued. Forced to keep its fixed costs low, the new business can serve small customers who would not meet the needs of a high fixed cost structure.

Managers in large companies who read The Innovator's Dilemma may have finished the book thinking they're destined to fail, no matter what they do. We hope to shift their sentiment from despair to hope. If managers understand the theories of innovation, they have the ability to create new-growth businesses again and again.

Reprinted with permission from "Six Keys to Creating New-Growth Businesses," Harvard Management Update, January 2003.

BUSINESS INTELLIGENCE
Mission: Turn the ad paradigm on its head
Coauthors say marketing misses the mark on catering to real needs
By Robert Weisman January 1, 2006

Harvard Business School professor Clayton M. Christensen is trying to shake up the marketing establishment with a deceptively simple proposition that flies in the face of conventional wisdom: People hire a product to get a job done.

(For the complete article as posted in Boston.com, see:

http://www.boston.com/business/articles/2006/01/01/mission_turn_the_ad_paradigm_on_its_head?mode=PF )

To Ward Off New Competitors, Comcast Builds a Mini Internet
The Threat of Being Bypassed Prompts Talks With Google About Investment in AOL and Watching 'Lost' on an iPod

By PETER GRANT Staff Reporter of THE WALL STREET JOURNAL October 13, 2005; Page A1

Here's one reason why the nation's largest cable company needs to reinvent itself: CBS is developing an online service for people to watch as an alternative to the early evening news.

"We call that the cable bypass," said Leslie Moonves, co-president of CBS's parent, Viacom Inc., at a recent investor conference.

Just 10 years ago, the cable industry had a virtual monopoly on the $56 billion market for piping TV into subscribers' homes. Now, a host of new technologies is threatening that business. In addition to battling the old enemy of satellite TV, cable operators are up against Internet companies, telephone operators and even television programmers, who, in various ways, are exploring how to sell TV to consumers.

Their efforts suggest the possibility that soon, consumers will be able to watch whatever they want, when they want, without the help of the local cable company.

To protect its turf, cable giant Comcast Corp. has 400 software engineers building what amounts to a TV version of the Internet, stocked with movies, archived television programs and other interactive features, including a search function.

Now, to push into the online-video business, among other reasons, the company is in talks with Google Inc. about teaming up to buy a stake in the Web operations of Time Warner Inc.'s America Online.

TV Program Search Technology:
Comcast is also pouring money into new technology to allow subscribers to search through its television-program library.

Just 18 months ago, Comcast's interactive TV guide consisted of little more than a grid showing channels and times on a tan background. About one-third of the screen was an ad. Unlike other guides, viewers couldn't watch shows while browsing through the grid.

Comcast has added that feature, dropped the ad, expanded the grid and organized on-demand offerings under headings such as movies, news, kids and teens and lifestyle.

Last year, Comcast paid $250 million for a majority stake in the on-screen guide business of Gemstar-TV Guide International Inc. Gemstar, which publishes TV Guide magazine, is 41%-owned by News Corp.

Renamed GuideWorks, the on-screen unit now employs 160 of Comcast's new software engineers. Its $26 million research budget is more than double what Gemstar-TV Guide was spending.

A soon-to-be released version of Comcast's interactive guide borrows from the experience of navigating the Internet. When the TV is turned on, most viewers will see a home page with choices, including "On Demand" or "Main Menu." A group of four screens will show what's happening on different channels.

Comcast executives acknowledge that their search technology is still limited. You can't pick the channels airing on the four screens -- technicians in Comcast's Denver network center control what's appearing. Typing names of shows using a remote is awkward.

In future versions, GuideWorks is looking at ways to recommend shows based on a favorites list. Comcast subscribers may also be able to do keyword searches for TV shows on their computers and have the results communicated to their TVs. Comcast won't say when this could be available.

Earlier this year, Comcast cut a deal with Motorola Inc. that gives Comcast more control over the development of its set-top box. The company has also acquired two software companies and cut a deal with TiVo Inc. to customize its digital video recorder service for Comcast subscribers.



In DVD Format Split, Paramount Goes 2 Ways:

By KEN BELSON

October 3, 2005 NY Times

Recognizing that a split over the format of the next generation of digital video discs is deepening, Paramount Pictures said yesterday that it will make DVD movies in the Blu-ray format as well as in the HD DVD standard.

Paramount is the first major studio to say publicly that it will produce DVD's in each of the two formats, which both promise high-definition pictures, enhanced audio and five or more times the storage space on a disc.

Until now, the big Hollywood studios have supported one format or the other.

However, the chance for an agreement to use one format dimmed earlier this year when negotiations stalled between Toshiba*, which makes the HD DVD standard, and Sony, Panasonic and others in the Blu-ray group. Since then, companies on both sides have promised to start selling DVD players that use their respective formats as early as this winter.

The studios, retailers and others had hoped to avoid a showdown between the competing formats because it is costly to make and sell two sets of discs.

Other studios may follow in Paramount's path. In addition to Paramount, Warner Brothers and Universal have backed the HD DVD format, while Sony Pictures, Disney, 20th Century Fox and Lion's Gate have come out in favor of Blu-ray.

The plans to produce two types of machines and movies for both formats suggests that there may not be a clear resolution to the battle anytime soon, according to industry executives.

The president of Paramount Pictures, Thomas Lesinski, said in a statement that Sony's inclusion of Blu-ray technology in its PlayStation 3 videogame console when it is released next spring was an important factor in his studio's decision. With that technology inside, the game machine will effectively double as a Blu-ray DVD player.

Mr. Lesinski called this a "key advantage" for the Blu-ray group. He added that the studio made its decision to produce Blu-ray DVDs based on "new data on cost, manufacturability and copy protection solutions." Paramount, Warner and Universal, as well as Microsoft, Intel and disc manufacturers, have said that the HD DVD discs can be produced more cheaply and more reliably than Blu-ray discs. Disc manufacturers have also said privately that the HD DVD format discs are far closer to being ready for mass production than Blu-ray discs.

In response to Paramount's announcement, Toshiba said it remained committed to bringing HD DVD to market. In a statement, the company said that the Blu-ray group "still needs to answer the tough questions about how they plan to deliver on their promises." This includes whether it will allow all manufacturers to make Blu-ray players and whether the Blu-ray group will set a date for delivering their high-capacity discs.

Paramount did not say how many movies it initially plans to release in the Blu-ray format, or which titles.

*Toshiba currently receives $0.50 in royalty payments for the use of its technical format standard on the sale of every first generation DVD worldwide. Similarly, Dolby Laboratories receives a $0.75 royalty upon the sale of every consumer electronic product using its global audio algorithm standards.

Even micropayments can produce large annual revenue streams when they are applied to millions of product sales (including patient diagnostic tests). For example, sales of more than 18 million Dolby audio-equipped iPods in 2005 will produce $13.5 million in royalties for Dolby Labs.

In the United States in 2005 with its population of 296 million,total private and public spending on healthcare exceeded $2 trillion. A significant portion of this sum was based on the more than 40 billion diagnostic tests carried out annually on patients in 5,800 hospitals and thousands of ambulatory testing facilities.

Quest Diagnostics Inc., one of the largest clinical labs performs over 250 million tests annually (about 0.00625% of the total tests performed). A Diagnostic Information System(SM) patent license with Quest that paid $0.01 for each test Quest reported in the standardized cumulative format to physicians and their patients would generate $2.5 million in annual royalties.