The Importance of Vertical Knowledge. Understanding the Customer. NTT Case Study.

In reviewing operators’ attempts to build / expand their enterprise ICT (Information and Communication Technology) business, given market pressures in the consumer sector, it’s interesting to see the variation in performance.  A common theme for those telcos successfully making the move or expanding on an existing business is the focus on vertical knowledge.  Vertical knowledge, also known as domain knowledge, refers to the understanding of a specific industry including its operations, actors, acronyms, issues and trends.  The industry could be healthcare, education, government, insurance, automotive, etc.

As its simplest, deep vertical knowledge supports:

  • The sales process. Understanding the customer’s acronyms, problems and internal processes so a customer is confident in the ability of its supplier;
  • The solution. Solution is built for purpose, integrates with existing systems, improves processes, solves customers’ problems in a way they can implement today, its not a grandiose architecture; and
  • The support process.  Understanding strategic shifts in industry and customer to support the solution so it works into the future.

An example of such knowledge in healthcare would be understanding the requirements of Electronic Health / Patient Records (EHR/EPR) across all actors’ needs, e.g. lab services, public health services, etc.  We’re currently seeing a mHealth focus in many telcos, but mHealth is part of eHealth, which is part of the Healthcare IT system.  Successful mHealth solution sales fit within existing systems, in fact the mHealth component of the project is very small, its all the other IT stuff that dominates.

Looking into the healthcare vertical a little more, according to the World Health Organization:

  • 180 million people have diabetes, and the figure is expected to be more than 360 million in 2030;
  • Currently, 210 million people have chronic respiratory diseases – estimated to hit 273 million in 2015, and 300 million have asthma;
  • 17.5 million people died of cardiovascular diseases – including stroke, a figure that is estimated to rise to 20 million in 2015;

The numbers of people affected by these diseases are expected to rise, due to: obesity, which affects 400 million people last year, a figure expected to exceed 700 million in 2015.  And aging, globally, 650 million people are over 60 (2011), a figure  estimated to reach 2 billion in 2050. The total addressable market for chronic-illness monitoring is therefore just under 400 million (2011) growing to over 700 million by 2015.  Its unfortunately a vertical with much potential.

Healthcare is also a rich and dynamic ecosystem with many established vendors with established relationships.  Examining the tip of a massive iceberg of innovative companies focused on the mHealth space (the list is a little old and needs updating given some of the recent M&A activity):

  • AED Satellife (US).  Healthcare work support – moblie phone based – Africa focus.
  • Aperion (Germany).  Equipment for health monitoring including heart rate, blood pressure, activity, and coaching (food intake and activity).
  • BeWell Mobile (US).  Patient monitoring via mobile phone.
  • Card Guard (US).  Wireless and fixed remote testing solutions for Cardiology, Hypertension, Diabetes, Asthma/COPD, Ob/Gyn and Wellness.
  • Connexion2 (UK).  Lone worker (health visitor) protection, wearable alarm / recording device.
  • Dimagi (US).  Reminders, field-based health care worker support – focused on developing countries.
  • eWave MD (US).  Integrated SaaS solution including EMR (Eletronic Medical Record), Quality Reporting, eRx, eLabs and interoperability. Used in over 1,000 practices in 49 states.   Leveraging ARRA/HITECH stimulus.
  • Health Hero Network (UK).  Countertop device for management of chronic disease.
  • iPlato (UK).  Appointment reminders.
  • Isis Biopolymer (US).  Start-up: Drug delivery through smart patch – enables people to remain active / out of hospital when receiving drug therapy.
  • Kiwanja (UK).  Health engagement via mobile phone.
  • Lifewatch (US).  Provides managed solutions for Card Guard products.
  • McKesson Company (US).  Healthcare IS – support homecare, behavior support, etc.
  • Meditech (US).  Healthcare IS – support homecare, behavior support, etc.
  • Medline (US).  Wound management.
  • Mednet (US).  Heart monitoring solutions.
  • Medtronic (US).  Leader in medical devices, focuses on Cardiac Rhythm Disease Management, Spinal and Biologics, CardioVascular, Neuromodulation, Diabetes, and Surgical Technologies.
  • MIMS (Australia).  Medication information – available on mobile device.
  • OBS Medical (UK).  Tele-Health, Care and Assisted Living.  Solutions across all chronic diseases.
  • PatientKeeper (US).  Physician workflow – leveraging ARRA/HITECH stimulus.
  • Pepid LLC (US).  PDA / Smartphone access to medical research.
  • Praekelt Foundation (South Africa).  Reminders for HIV drug therapy.
  • Proteus Biomedical (US).  Implantable technology for monitoring peoples response to drugs.
  • TeleCareHome. Start-up focused on diabetes care – in particular wound management.  Using mobile devices to support diagnosis and reporting.
  • Thomson Reuters Mercury MD (US).  Mobile device based decision support tool.
  • Unitech (UK).  Clinical RFID reader.
  • Voxiva (US).  Health engagement via mobile phone.

Moving back to examining how telcos are approaching this space.  Its generally not with a revolutionary pitch, that is offering for free what was once paid for (the classic web service provider pitch) as privacy matters intensely.  Its a pitch focused on incremental improvements and saving from consolidation and integration.  So working within the vertical’s ecosystem is essential.

NTT provides a good case study in how to build an ICT business.  Organic growth will take a decade or more, and likely fail.  What NTT has done is bought ICT companies focused on specific verticals or geographies.  Over the past few years they’ve bought: Value Team, Keane, Dimension Data, Intelligroup, Emerlo, Adelante, Integralis, SoftLabs, intelligence, Vertex, Revere Group to name just a few.

There is a pattern to NTT’s acquisitions.  It pays well, it pays in cash and it remains hands-off. The last point is the most important. That’s because it goes to the heart of NTT’s strategy and is linked to a traditional Japanese business practice of keiretsu, a web of corporate affiliations and shareholding ties that are a unique feature of Japan’s corporate world. Companies operating within such business groups typically retain operational independence while maintaining beneficial commercial relationships, including buying each other products or services.

Such vertically or horizontally interlocked business entities might draw the scrutiny of antitrust authorities.  However, NTT’s investment pattern is too disparate, although linkages across companies clearly exist.  Through this strategy NTT are well on their way to being in the top 5 IT services vendors by 2015, with the likes of Accenture and IBM.

NTT have committed to building an ICT business, buying the deep vertical credibility and geographic focus.  Buying in businesses that have decades of experience and customer relationships.  This cannot be substituted with creating a division called healthcare, populating it with telcom people, hiring in someone from the healthcare industry that then has to manage the gulf between the telco culture and culture of that vertical.  In looking at the telcos who are building future ICT success, look for those that have made a strong commitment not window-dressing.