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Stephen D. Pierce: So, a brief introduction of myself. I’m Stephen Pierce. I drive our business development activities with our global medical device clients, and so as Joe mentioned I have been spending quite a bit of time recently in Asia. So to our Japanese participant, [00:00:28]. That’s—I know a little bit of Japanese—welcome to America, and hopefully together we’ll gain some insights into the future of wearable tech in healthcare.

Speaking of which, how many of us are involved in the wearable tech space. [00:00:47] A raise of hands. Okay, a few of us. And as you’ve seen from recent trade shows like CES, wearable tech and healthcare applications of wearable tech were a key theme of major trade shows. However, if you think about wearable technology in healthcare, it’s been around for quite a bit of time, and if I can get this thing to work, here we go, wearable tech, at CES a lot of the discussion was around fitness bands – Jawbone, Nike FuelBand, Fitbit, etc. And I must admit—complete disclosure—I am not just a participant in this space, I’m actually a user. I have a Basis [00:01:36], which is fantastic, as well as Garmin Vivofit. I have the Misfit. I have the Fitbit. Jawbone UP as well. So I’ve used many of these devices, and as you can see by my posture, I fit well within John’s definition of a Homo geekus. I try to avoid the fastfooderus subspecies, but based upon an extreme travel schedule and also high-stress with the job, I will be a future user of many of your implantable devices, I’m sure, as well. Hopefully, not a hackable pacemaker.

But to that end, IBM is doing quite a bit of work with medical device companies in the healthcare space, and we’re also engaged heavily with healthcare providers and payers as well in defining how wearable technology can be leveraged to drive what we call smarter care. So I’ll talk a little bit about that, about areas where we view medical opportunities to be for wearable technology as well as some of the challenges and opportunities in realizing that future.

So just a little bit of a perspective on IBM. When you think of healthcare, you probably don’t think of IBM as one of the key companies, but we actually have quite a bit of involvement in the healthcare space. We have a number of professionals and clinicians who are part of our global healthcare team. We also have a self-pay model, so we are involved in setting policies related to the care of our employees. And we are investing significantly in healthcare technologies, as I believe Dr. Marty Kohn explained a little bit about yesterday. Watson [00:03:32] in healthcare would be one example of some of the investments that are being made, and not just in healthcare space but in adjacent spaces. We have an initiative around the Internet of Things and around taking data from not just medical devices but from other devices that can be connected to the Internet around them in the patient’s environment whether they be a television, a camera, an air-conditioning unit, energy-based devices, etc. to get a more holistic view of the patient, not just their clinical vitals but also their activity levels, dietary levels, social components as well, because those are key to realizing this vision of smarter care, which is heavily focused not just on acute care but also on early interpretation and even preventative care.

So as I mentioned before, wearable med tech isn’t new. As was mentioned in the previous presentation, you’ve had implantable pacemakers, for example. I think the first one was developed in the 1950s by Siemens, I believe. So you have—and that’s an image of that first implantable pacemaker. You’ve had of course vital monitoring suits used in military applications since the forties and fifties, so wearable tech has been around a while.

So what’s new? Why thy hype? Well, a lot of it is around, well, what I call the three I’s, we call them in IBM, the Smarter Planet three I’s – interconnection, insights, and integration, really taking the data from discrete devices, aggregating it not just along a single data silo but across multiple data sources that would include multiple wearable devices, diagnostic imaging, the EMR, etc. to provide a more complete picture of the patient, and then using that to drive analytics, to drive insights on what is the patient’s condition, how does that patient’s condition compare to tens or hundreds of thousands of other patients to identify similar cohorts or cohorts of patients with similar conditions, and then to use that to drive a coordinated care plan that spans organizational walls, that extends beyond the hospital to homecare, transitional care, etc.

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So those are some of the recent changes where wearable tech has a significant opportunity. Of course, there are challenges to this. If you look at the fitness market, it’s already being commoditized. Most of the technologies from these types of devices are based upon accelerometer-based technology, so my colleagues would like to joke, if I’m short on my steps at the end of the day, I just wave my arm a few times and I achieve my goal. Whereas, for example, the Garmin Vivofit, I have a heart rate monitor that actually tracks heart rate patterns. The Basis also as well has a wrist-based heart rate monitor. So we’re starting to move into a direction of having more data of clinical value, but still it’s a long road and the current devices don’t necessarily have the clinical value nor…and they’re being commoditized quickly as you’ve seen from the recent announcement from Nike and their discontinuation of the FuelBand. There are questions as to whether a device itself can really capture financial value for the technology provider, so definitely issues around device commoditization and the business model. So selling devices in and of themselves won’t necessarily be a road to success. Also, just providing a smartphone app or providing a silo of data or analytics associated with that data silo would not necessarily be of significant value to the patient or the provider as well. So even this Garmin Vivofit has a great smartphone app, it tracks sleep patterns as well as activity levels, but it doesn’t necessarily help me to improve my health. So I think those are some of the challenges that we’re seeing in our discussions with wearable tech clients.

This is probably a “so what” slide here. I think we all agree that chronic disease management is the primary opportunity that we see as far as driving healthcare transformation. As you look at the majority of spend on healthcare, not just in the US but even in emerging markets that are developing developed economy types of diseases, like India that has tremendous growth in cardiac disease, the focus on reducing cost by taking action earlier in the process, during the earlier intervention stage or even the healthy stage, is critical. I’m a great example of that genetic predisposition towards heart disease – not very good activity levels, 200,000-plus miles of business-related travel each year. So my cardiologist should be taking me I need to take certain actions, and wearable devices will enable me to monitor my patterns and potentially drive benefits if done correctly or drive positive action on my part.

As you see from some of the quotes on the bottom, this isn’t just kind of pie in the sky type of discussions but there are significant growth potential in these markets on the order of estimated 20 billion dollars in the next couple of years and significant value from a healthcare cost reduction standpoint. McKinsey has estimated 10 to 20% reduction or savings in chronic disease management, which could be huge from an overall societal perspective.

So how do we take action on where the market opportunities in this space? We feel strongly remote patient monitoring, not just focusing on inpatient monitoring but outpatient is the huge opportunity. Interestingly enough, when we talk with most traditional medical device companies whose customer sets are the provider or the hospital CIO or CMIO, they still think within that traditional customer set. So they want to do interesting things when it comes to wearable technology but is still having the traditional customer and maybe providing consultative services on discharge procedures, for example for a CHF patient, and how to optimize that to reduce patient readmissions. It definitely has a potentially benefit to ACOs around the reduction of 30-day patient readmits. But I think they’re focusing a little bit on this narrow slice and on the short-term, but forgetting this long-term opportunity.

I think as you mentioned, I didn’t catch your name, but Medtronic is trying to transition from just a technology provider to a heart disease management company. So they’re trying to own the disease. Even they are still silo because as you consider that most patients with heart disease have multiple comorbidities, then how do they extend beyond just heart disease into other diseases? And I think Medtronic, of all the companies, is probably in the best position because they also have diabetes and other associated diseases, so they have the potential to grow and they are investing in acquisition such as Cardiocom to really transition from a discrete product or technology provider into a solutions company. So I think they’re making strides. That’s one thing that I would suggest to you as you look at the wearable tech spaces going from just providing a very interesting technology to providing a disease management solution, but I’ll get into more of that later.

There’s also an issue around or implications to product development and sales as you transition outside of the acute care environment. Many of my clients love investing in high-end, high-quality, very expensive technologies, diagnostic and therapeutic technologies that are focused on the acute care environment. But as you move into areas like residential care, assisted living, nursing homes, and even homecare, price becomes a critical issue, and so being able to balance between investment in superior hardware technology and good-enough hardware technology with the primary value being provided in software and services becomes more of a balance that a COO and VP of R&D needs to consider. So we’re talking with companies around doing data analytics in the cloud environment and then of course providing the data back to the provider or to the patient in a mobile type of format. So telehealth is a key example of this transition between the hardware/software services balance in the solution.

This also applies to the emerging market. As you look at China and India, the ability of emerging market providers and payers to pay for these high-end solutions is much more constrained, so being able to provide a lower-cost solution or lower-capex solution with some type of subscription model that enables you to capture value but is more of an operating expense or aligns their revenue and their cost becomes a much more important play. I think one kind of morbid example of some of the issues in emerging markets is that there is an established recyclable market for implantable devices in emerging markets. So you may see an internal cardioverter defibrillator that is actually recycled postmortem and used in emerging markets. Still, because it’s so high-quality, it can be recycled and recertified, but the price point would be such that an emerging market can afford them.

So wearables of course will enable a transition from morbid traditional care delivery process to a process that is more integrated where you’ll have data that’s being captured in the hospital, integrated with an overall care plan, that telehealth and telemedicine type of offerings would also integrate those sources of data with the care plan, and that there will be advanced analytics, cognitive analytics which will support the provider whether it be the specialist, the primary care provider, the care coordinator, etc. to get additional insights into what the patient is dealing with, and then dynamically modify the care plan based upon those insights. And you’ll see a number of devices that go from cardiac rhythm monitoring devices to cell-phone-based devices that Dr. Topol has used before when he diagnosed a patient suffering from a heart arrhythmia on a plane via a [00:15:07] case that connect to a cell phone to the Pancreum artificial pancreas that monitors glucose levels and can act as an insulin pump [00:15:20] kind of one integrated device. So, a number of interesting technologies that are being developed.

I think the one in the middle, we talked about Google Glass, well, we’re going one level further. Google is investing in contact lens technology. There are other companies that are also investing in this kind of technology to drive not just presentation of patient data but also therapeutic value and diagnostic value to assess the…do retinal scans of patients to identify predisposition towards diabetes or even identify diabetic retinopathy. So there are very interesting technologies that are being applied not just in the traditional wrist space but across the body. So the opportunities to med tech companies are that you can get outside of the traditional market of dealing with the cardiologist, the imaging specialist, the emergency room physician, etc. into new spaces, into the home, into accountable care organizations and again, into early chronic and healthier or wellness type of solutions.

That said, there are also challenges. There are new competitors that are coming up. When I go to Asia, almost every company that I talk to in the electronics industry, not just in the med device space, whether they be in consumer electronics, industrial automation, networking, telcos, etc., all want to talk about healthcare. They see it as a great opportunity and they are providing or coming at it from a unique perspective. Their primary relationships aren’t necessarily with clinicians but they have an understanding in consumer usage patterns. And so ease of use or developing something that has a high tendency to be used is something that they tend to be a little bit better at than traditional medical device companies. Also, they may have an additional presence in the home. They can embed a camera in their flat panel display that can then monitor a geriatric patient as they go about their daily routine. They can also provide rehabilitative services through that camera where they can do image recognition to identify is a patient doing their exercise appropriately, and then integrate that back into the care plan to say, “Okay, they did do their daily exercise.” If they didn’t, send a message to their son or daughter, say, “Hey, you may want to go check on them or give them a call to encourage them to take action or to do their exercise.” So they have a unique perspective in the healthcare ecosystem, which I think we can learn from, and also there’s the opportunity to partner together with them.

So based upon our insight and experience and discussions with a number of players in the healthcare ecosystem, we have this vision we call Smarter Care, part of our overall Smarter Planet and Internet of Things initiative, and that’s really to drive healthcare transformation at three levels, the first of which of course is the connectivity level – gather data not just from a single medical device but from multiple medical devices; gather environmental data; gather activity type of data; gather data from a smarter refrigerator on dietary consumption; gather information from retailers, retailer loyalty programs to say, “What is this? Is Stephen purchasing lucky charms or is he purchasing lettuce and vegetables?” So, gathering that type of information. The challenge of c
ourse is integrating that data and having a consistent 360-degree view of the patient.

Also, even just within the medical device space, developing what we call a longitudinal patient record, which is being able to filter the terabytes of data and to provide insights to the clinician [00:19:30] and the provider and the patient at the right time, that is meaningful. We’ve had discussions around image analytics with a number of radiologists, and the typical radiologist will not look at most of the data related to an angiography because there are just so many images. What is it, about 30 to 40% of clinicians take significant or make significant use of an EMR, so relatively low adoption patterns. Even though EMRs are out there, the effective usage of EMR is still limited because there’s just so much data and a clinician does not have the time to get meaningful insight from that data. So being able to filter the data, put it through a sieve as it were, and then drive analytics based upon that.

And Marty talked I believe a little bit about Watson, applying cognitive capabilities to provide advisory support to the clinician, so what are the potential issues with the patient and what is the source data associated with those so that the clinician can make effective decisions. Again, Watson isn’t a doctor. It’s not making the decisions for the clinician but it’s an adviser that will provide the clinician a few options and help them to be more efficient. And then of course, tying that to a care plan, being able to coordinate care based upon the patient’s condition is absolutely essential, and it’s not just within the clinical environment but it’s in the social environment. It’s within the community. It’s factoring in lifestyle issues and relationships that the patient has.

So those are the key components of what we call Smarter Care, and you can see some examples at the top. There’s a new kind of design that will be particularly applicable in the Chinese market where I think you’re going to have over a hundred million COPD patients over the next couple of years primarily based upon environmental factors. So an example of Smarter Care would be to understand the patient’s predisposition towards certain types of pollutants in the air based upon clinical data, being able to based upon environmental data predict the presence of certain pollutants in the skies over Xinjiang and then being able to integrate that with suggestions back to the patient or the provider to take action, to wear a mask or to not go outside, and then potentially link that back to employers to say, “These employees will not be able to come in to work. You need to adjust your plans or your capacity or your [00:22:12] restaffing based upon these particular issues. Has anybody spent much time in China? So you probably know the air quality is just crazy. Exactly, exactly, Beijing. And I’m going to Xinjiang, which is I think almost as, yeah, yeah, almost as bad as Beijing in two weeks. And so these types of solutions will have not just individual benefits but tremendous societal benefits and economic benefits to businesses.

So wearable devices, where do these fit? As you can see, if you’re talking just about a diagnostic technology, it’s kind of just a piece of the picture. The real value comes from the data, from the insights, and from the coordination. Of course, wearable devices can also fit in the user interface assuming that you’re going beyond just providing something in an iPhone or iPad type of interface, or Google Glass or the Google contact lens, etc. But the key thing that companies investing in the wearable tech space is, how do they solve those middle pieces? Do you invest in developing that capability yourself, potentially? Or you can also partner with other companies or acquire new companies that may have capabilities in those spaces. Typically, the way that IBM goes to market is we partner. We don’t manufacture medical devices. So we may provide some of those middle pieces and engage with an ecosystem of data sources. And then also, the owners of the data, IBM doesn’t own patient data, of course, so we’ll partner with providers, with payers, and with communities to capture that type of data, and we’ll provide some services or technologies to them to enable that.

So these are just some of the components of IBM’s Smarter Care. As I talked about, it’s really the foundational components. That blue piece is around remote patient monitoring. That’s where wearables can fit. And then it’s integrating that into a longitudinal patient record, using some analytics to first filter out the data, to focus only on the data that’s relevant to the patient’s condition, to drive analytics both at an individual level, at a population level, and then to use that to drive personalized care to the patient. And IBM is investing in these kind of capabilities, but…oh, I think I’m talking too much. I’m not very far in my presentation, so okay. [Laughs]

So we’re not just providing a complete solution around this, but again, we partner together with companies to do this. Watson is one example. We have something called the Watson Developer Cloud, which allows some of our strategic partners to access the Watson tool and do analytics using data they provide and even build applications on top of that platform. Bluemix is another more recent announcement around developing and providing a cloud platform and development environment that can enable companies to develop new applications, leveraging the infrastructure that’s there.

So there are different opportunities as we look at partnering, as I look at some of our clients in an area where I’ve been spending quite a bit of time in Asia. Many of them are interested in investing in neat new technologies. One CTO recently told me, “I want to be like Olympus who has, what, 70, 80% market share of the diagnostic endoscopy market? I want to invest and develop that new sustainable technology, but this other piece around what happens with the data, I don’t know what to do with that. So let’s talk about how we can build those pieces together.” Also, if any of you are interested in providing or selling your technology to companies, every Asian company that I talked to has an active acquisition strategy around acquiring new healthcare technologies, so I’d be happy to talk with you more about that.

So Watson is just one example. I think Marty already talked about this. Unless you have questions, I’ll kind of skip over this piece for the sake of time. But just to let you know, Watson is…our pilots is being used not just in a kind of analytics or diagnostic support role but also in training, in identifying or evaluating different care protocols for…chemotherapy protocols, for example. So there are a number of different applications of cognitive type of capability.

So as you can see, IBM is investing quite a bit in this space. What do we see our clients doing? Some of them as they look at this transformation in healthcare are sticking to their knitting. They’re saying, “We have great technology and we may use connectivity and we may use these analytics pieces to enhance our own products but still within a [00:27:35] very narrow band.” So even though we’re told that healthcare or medical device companies are not supposed to capture de-identified data, I don’t know of many who are not. But they’re using that to enhance their products, to say, “Okay, what features are being used? How can we improve the diagnostic value of our particular products?” So it’s tightly involved in R&D and POM process.

But there are other companies that are saying, “Okay, we recognize that the value is not in the technology necessarily. Well, there’s value in the technology but there’s an increasing value in the data. Right now we have terabytes of data that are just sitting around. Let’s do something meaningful with that to provide, for example, population analytics, to provide consulting services back to providers on how they, again, discharge patients
and instruct them to look for these pre-symptoms towards readmission.” So they’re looking to expand their services. Still, the primary data source is their products.

And then there are other companies, Medtronic for example is looking to expand into disease management solutions. And you could even see potentially, and I’ve actually talked with an entrepreneur around a very low-end endoscopy device that is based upon off-the-shelf components that plugs into a PC via USB port that is targeted at clinicians in Africa. I’m not sure if you saw CNBC yesterday, but our CEO, Ginni Rometty, was on, conducted an interview, and one of the things she said was, “Africa offers tremendous growth in the future,” and this would just be one example of that. A clinician or a general practice practitioner in Tanzania may not have specific experience around OB-GYN procedures or oncology but, due to capacity issues, he may have to play that role. So this company is looking to provide kind of good enough hardware technology but provide educational and training services via the cloud. So they’ll provide instructions and say, “Okay, for this type of procedure, here’s what you do,” and then capture the data and via teleimaging services or teleradiology services provide some feedback to say, “Here are some warning areas you need to look for.” So that’s an example of a very low-cost hardware technology solution, high-value to the particular practitioner that is using this. By the way, that’s subscription model. Because the device is relatively low-cost, they rent it for a few hundred dollars a month. There are ultrasound devices as well that are being used in a similar fashion.

So as we look at the approach to wearable medical solutions, these are just some of the key findings and I’d love to talk about this more with you. Of course, it’s important to have clinical assets or defined clinical value to the technologies that you develop. What we’re talking about is not just providing generic technologies, but really focusing on specific disease states like diabetes, oncology, cardiology, etc. and specifically around helping to manage the disease before it ever becomes acute.

Radical simplification of the user experience is absolutely essential. Even something like this, which is relatively simple, and for Homo geekus like me I forget to press the button that puts it into sleep monitoring mode, so something that is just… And if you look at many of the telehealth pilots, many of them require the patients to step on a scale, look at the information, insert it, or actually have them set up the Bluetooth or WiFi connectivity between their Withings scale and their PC, and then that transmits the information to a provider, and then how the provider gets that and integrates that, that’s still a relatively manual process. So radical simplification, and also partnerships to drive integration of that data so you have a more complete picture of the patient, and then also you’re providing more value to your customer.

Again, the leverage analytics for extreme personalization, driving insight at the point of care. So as I use these devices, for example, and again they’re not clinical devices, but providing feedback to me when I can take action, is critical, or to the provider. Dr. Topol likes to say that in the future there will be a heart attack app that will tell you, “Okay, in the next three days you’re going to have a heart attack,” which I think is great, but even that, to say within 30 days you may have a heart attack, it’s you need to take action now because you’re suffering an arrhythmia and you need to either take medication or sit down or automatically call an ambulance to take care of you. So that’s the kind of integration and extreme personalization that we’re talking about, and inside at the point of care. Partnering is absolutely essential, focus on value, as I’m sure you will know.

Looking to new customer sets, looking at emerging markets is a great opportunity because they’re willing to invest…they may not have the Balkanization of governance that is evident in the US. And so there are great opportunities in the Middle East. I think the Singapore Ministry of Health, for example, is running a study around telehealth for aging-in-place patients so that they don’t have to visit their doctor but can get information on their state of health and then appropriate action taken if necessary.

And then also, you could have new customers even in developed markets. Walgreens, CVS, Walmart – they are investing in healthcare services and they’re still trying to figure it out, but to the degree that you can provide new [00:33:59] technology around the insights to them, that opens up a huge new customer segment for you around, for example, remote triage. Geriatric patients tend to visit Walgreens quite a bit, so going in and having a device that will capture data from a wearable device have enabled a patient to scan their insurance card, maybe do some diagnostics right there whether it be a quick blood test or a scan of their retina, which would suggest different types of disease states or predisposition towards diseases, and then integration back with the nurse behind the pharmacy counter or even to the nearest urgent care facility to say, “This patient needs to come and visit,” scheduling an appointment for that patient.

Those are the types of opportunities as you look at wearable technology that will expand beyond just your traditional customer segment. And then of course, to do all this, the traditional product development process that is very hardware-focused—investing for years in technology, going through clinical trials and then doing pilots with providers, and then bringing it to market—that’s going to change a bit where you’re going to need solutions, delivery capability and sales capability, partnering capability, together with a multitude of different types of partners will be absolutely essential.

So those are just some of the things that we’re discussing with our clients, both medical device/medical equipment to life sciences and healthcare peers and providers. So that’s just a quick overview of where we see the wearable tech market going in healthcare and some of the activities that we’re doing. Are there any questions? Joe, did I come in in time?

Joe Hage: Yes.

Stephen D. Pierce: Okay, great, great.

Rick Stockton: In the video game industry, I’m seeing an interesting trend where rather than highly centralized games we have…there’s a real market for games, devices and physical things which are really just single-person-centric. In other words, they can operate them without a high degree of interoperability with a larger system. Do you see a lot of that especially with application to the Middle East and remote areas with medical devices?

Stephen D. Pierce: I’m not sure if I fully understood your question, so please correct me if I’m going off on a tangent. Gamification, the social aspect of care…oh, not that, just the individualization.

Rick Stockton: Mm-hmm. Right.

Stephen D. Pierce: In other words, you would sell somebody an instrument of therapy which would not require being linked in with a central control network. I think certainly there’s the opportunity to do that. The discussions we’ve had with many of our clients are around trying to drive or use large sets of data, big data, to really drive personalization. So at some point there would need to be some linkage, but is that a persistent linkage? Not necessarily? So you could say, “Okay, let’s do some population-level analytics and then drive that to the particular patient’s care at a single point,” or it could be on a continuous or persistent basis?

But one other comment that I did mention is socialization. Gamification of healthcare is absolutely essential. As you can see from these de
vices, these devices aren’t necessarily having the desired effect. One reason is…

Joe Hage: We don’t know how big you were last week, though.

Stephen D. Pierce: [Laughs] I gained 30 pounds over the last year, primarily due to IBM’s hectic travel schedule. But if this data were being provided to my wife or to my friends and if we were conducting a game on who can lose the most weight, then the effectiveness of efficacy of the particular solution would be heightened.

Joe Hage: I have a question. Who is going to pay for all this? So there’s just terabytes of data, I understand, that could be generated every hour per person, and ultimately wouldn’t it be great if all this went to our health record and the telemedicine provider called you and told you you’re running low, have a shot of orange juice and all this stuff? But there are so many players between “I’m wearing my Fitbit” and “I got a call from my telemedicine provider, who by the way is not compensating my position, who’s not so on board with telemed…” How, who, what are you finding, what are the obstacles to IBM closing business as a result of this?

Stephen D. Pierce: Right. Well, oh, one of the reasons that many med device companies are focused on transitional care is because to a certain degree there is a defined business model and customer. ACOs will look to use remote patient monitoring in a transitional care environment to avoid cost of readmission.

So that’s one example, but in the larger sense around chronic disease management, that is a question. That’s it. There are cities that are starting to develop private partnerships around population-level health to drive certain initiatives around wellness and prevention of chronic disease. You’ll see in Europe, for example, ministries of health that are investing in these initiatives as well, and then also on the other side capitating services that providers can provide. So one example that I’m involved in is outside of the wearable space, but diagnostic imaging, imaging centers in the UK, for example, have a certain capacity level and they are not supposed to exceed that, so radiologists are starting to be consulted as part of the process for determining whether or not a certain imaging study needs to occur. So there, and I think both carrot and stick components out there in the market, in the US market, it’s I think much more challenging, and that’s why one of the things we discuss with our clients is to identify a potential emerging market where some of these use cases can be evaluated and developed, and you have a more streamlined government structure when it comes to investing in these types of initiatives.

Joe Hage: I have another question, but let me defer to the crowd, if you have something.

Question: So you talked about what medical device companies are doing in terms of providing some sort of solutions to help hospitals manage their patients a little bit better. Given that there are so many new entrants in the space, Apple, Google, what is the real danger from device companies to ignore the consumer?

Stephen D. Pierce: Say, in the near term? In the US, there is limited risk. The providers and the payers still make the decisions [00:41:27] in order to define the reimbursement model. In the future, however…are you familiar with Clay Christensen’s Innovator’s Dilemma?

Joe Hage: Yes.

Stephen D. Pierce: Yes. So an old professor of mine—great guy, by the way—he wrote a book called The Innovator’s Dilemma also, a book around how his model applies to healthcare. But he’s basically saying that there are companies that invest in great technologies and on a high degree of innovation, but then they get stuck on that innovation, and then there are companies on the low end that start to come from an adjacent space or another space and then slowly build their presence using their capabilities, and that the high-innovation companies will say, “Well, we don’t want that low end, that’s low-margin products, so we’ll just invest in this high-quality space because we have defined differentiation there.” And what happens is they increasingly become a niche player in a market.

So you’ll see this in the consumer electronics base quite a bit, but in the medical device space that’s happening as well. In the imaging space, GE, Siemens, Philips continue to dominate the market, but a Chinese company called [00:42:45] in Xinjiang has basically developed a strong position in the Chinese market and is now competing with them effectively in the development markets as well, so using good enough technology and then going to that space. So consumer electronics companies, for example, other players, they don’t have the assets and the technologies and the insights and the relationships that you have, but that’s something that they can start to acquire, and then also as you see this somewhat delayed trend towards patient-centric healthcare that their presence and their understanding of the patient will play a greater role, and so I think that that’ll be important to watch over the next few years.

Joe Hage: For me it’s easy to imagine 50 years from now surely everyone will, and then go down the list of everything that will have worked itself out. In the near term, however, with a lot of devices entering the marketplace and who’s going to pay for it and adoption and doctor acceptance and the like, in your view and perhaps IBM’s view, what do you think will be the catalyst, the thing that is firmly rooted…? Now, given that the device or given that the information or given that doctors have now come to accept, what do you think is going to be the thing that pivots and has, “Okay, now this is obvious, we absolutely have to get on board with this?”

Stephen D. Pierce: Now, there continue to be a lot of obstacles, whether it be defined value of some of the data that’s coming from wearable devices, what’s the clinical value, what’s meaningful use, what are the issues around security and data and patient privacy, etc., I would say the inflection point is as you look at—and I focus more on emerging markets—the growth in, for example, India around diabetes and congestive heart failure, there is just a fundamental train wreck happening where the capacity, the available number of beds per patient…or per capita will demand that something be done, that care be extended into the home and they use technology to drive this. So I could see that the emerging markets will really drive this transition and the inflection point will be this issue between supply and demand.

Joe Hage: We’ll take our last question.

Neyha Seghal: Hi, Neyha Seghal with a healthcare technology incubator in El Paso called RedSky. Why haven’t the superpowers that be—IBM, Google, HP is up there as well, Microsoft—come together and come up with a one-stop shop solution instead of separate different initiatives? I mean, I’m seeing even the mobile companies, AT&T, [00:45:47] and things like that, why hasn’t this…is it happening or is it going to happen?

Stephen D. Pierce: Yeah, there are always attempts to do some of that. A number of tech companies are involved in a wearable and connected device healthcare interface called Continue and IBM has contributed a certain transmission protocol, made it open source as part of that. So I think there are a number of initiatives that are going on, but to be honest, technology providers and even medical device manufacturers can’t drive this. We’re like the tail wagging the dog. It’s the providers, particularly payer providers like Kaiser that are really in the strongest position to drive this change, and as you see this confluence in the ecosystem around recognizing the need t
o change, then I think that’s when it’ll happen. So we’re active participants in it. We’re trying to drive transformation, but even a number of high tech…Google, IBM, Microsoft, Apple… we can’t do it alone. It’s really the clinicians, patients, and payers that will drive this change.