Saturday, March 20, 2010
“Politicking Myopia” -- Obamacare Meets Theodore Levitt
As of Saturday afternoon, the Obamacare forces have what might be called “O-mentum.” The above-the-fold headline in The Washington Post this morning reads, “Late push yields more votes for healthcare,” and underneath we see a shirt-sleeved President Obama, speaking Friday to a rally at George Mason University, looking, as he likes to say, “fired up and ready to go.” Meanwhile, the Intrade number for passage of the bill, after dipping down to 55 on Wednesday, out of a possible 100, has now surged to 88.6.
If President Obama has been willing to bet his presidency on this bill, then chances are, at the beginning of his second year, he will get his wish--a wish granted to him solely by fellow Democrats. And although Obamacare momentum screeched to a halt after the January special-election victory of Sen. Scott Brown, that momentum started up again in the wake of Anthem Blue Cross’s announcement of a 39 percent rate increase in California, which, along with other rate increases, caused a nationwide uproar and jolted Obamacare back to life. So we are reminded of the power of unpredictable, or at least unknown, events to change outcomes. And that reminding should keep us humble about predicting an outcome even now, barely 24 hours ahead of the House vote. Things could change.
But assuming that the Obamacare bill does pass, one question in particular continues to nag. And that question is, what exactly are the Democrats offering to the American people? Does anybody in Washington really know what’s going to come? Frankly, I’m not sure that those doing the offering really care that much--they just want to get a bill signed. And so details can go by the boards. Some Obamacare supporters declared the goal to be universal coverage, although that’s gone now. Others declared the goal to be cost control, and that, too, is gone. Some even promised full transparency and no special favors--another lost promise. And yet still the bill grinds onward, because top officials have said it’s too late turn back. The only thing left is to go full speed ahead.
Yet while the progress of the bill--“reconciliation,” “deem,” “sidecars”--has been confusing to the point of opacity, that’s nothing compared to the the complexity of the bill itself. Nearly 3,000 pages of text will have to be converted into a trillion-dollar program, as all the hidden provisions are unpacked and splayed out in the months and years to come. Many billions will be spent on lawyers and consultants, but even then, nobody will really understand all the details of Obamacare.
That’s why many are predicting chaos to come. The same federal government that couldn’t run the bailout, that couldn’t manage the stimulus package, that couldn't supervise grantees such as ACORN, will now be dominating one-sixth of the economy as never before.
For their part, the politicians--the bill’s proponents, at least--will wish to move on to other topics. Democrats, having checked a box they believe has been left unchecked for decades, will move on to other agenda items, such as “jobs.”
But here’s the problem for politicians, at least for those who vote for the Obamacare bill. If the program causes problems, if it breaks down in key places, or if it costs more in every place, then Obamacare supporters will get the blame. That’s exactly what Republicans, of course, are hoping for this November--and a big comeback for the loyal opposition. But if the GOP does win the House back, and maybe the Senate, too, what then will its stance be toward Obamacare, now that it has obtained some real power? Some Republicans will say, “Repeal the whole thing!” but that’s not going to happen, at least for as long as Obama is president. And other Republicans, mindful that some provisions of Obamacare--a ban on exclusions based on pre-existing conditions, as well as drug subsidies to seniors, to name two examples--are extremely popular, will be reluctant to support repeal.
So inevitably, Republicans, too, if they share power in Washington, will be trapped in management issues, as some GOpers seek to defend, and maybe even expand, parts of the program. Thus GOP fingerprints, too, will end up on the bill.
And yet, as we have seen, nobody, in either party, will be able fully to comprehend the system that’s been created. So whom will Democrats trust to advise them on the workings of their own progam? Whom will Republicans trust? The same experts? Or dueling sets of experts? Will there be any overlap at all? And which think-tankers? Which cadre of costly consultants? And we haven’t yet addressed the noise from clamorous constituencies, out beyond the Beltway, and their inevitably clashing desires and demands.
So now we see the uneasy relationship between the politicking class and the policy-implementing class. The policy-implementers might work for the politicians, but once the program is in place, the politicians, to a large extent, are hostage to the policy-implementers. If the policy-implementers do a bad job--or if it merely seems that they are doing a bad job--the politicians get the blame. The political equivalent of Three Mile Island, or the subprime mortage meltdown, could be exploding inside the various healthcare bureaucracies, and the politicians who are theoretically in charge of the system will likely not know until it is too late.
Thus we see the fundamental flaw in the political system, as it applies to healthcare and other complicated undertakings. The political science word is “delegation.” If the politicians don’t really understand the programs that they are supporting, they must delegate power to others. The chasm between political delegators, on the one cliff, and policy delegatees, on the other cliff, is simply too great to be spanned by anyone in Washington. And yet if those programs are troubled to begin with, chances are that support for such programs will bring politicians to grief--and it’s the visible politicians who will be blamed by the public, not the invisible policy-implementers.
To further illustrate this chasm point, we might consider a classic work from the realm of marketing. Back in 1960, Harvard Business School’s Theodore Levitt published “Marketing Myopia,” an article zeroing in on a business chasm: the gap between production managers, including engineers, on one side, and marketers on the other--that is, between the people in a company who make things and the people tasked with selling those things.
The differences were stark, Levitt asserted: “Engineers and scientists are at home in the world of concrete things like machines, test tubes, production lines, and even balance sheets.” To these people, tangibles are good. It’s the intangibles that bother them, and so, Levitt wrote, they ignore the intangibles for as long as they can. Producers produce, and then hand over the product to be marketed.
In this environment, Levitt continued, “Marketing gets treated as a residual activity, ‘something else’ that must be done once the vital job of product creation and production is completed.” In other words, producers produce the product, because that’s what they do, and only then does somebody else have to worry about selling it.
And the customers--the folks on the receiving end? The world of customers, outside of the factory labs and the production line, is seemingly unknowable. To producers, Levitt explains, “Consumers are unpredictable, varied, fickle, stupid, shortsighted, stubborn, and generally bothersome.” Levitt continues:
This is not what the engineer-managers say, but deep down in their consciousness, it is what they believe. And this accounts for their concentrating on what they know and what they can control, namely, product research, engineering, and production.
In other words, the producers do what they like to do. And if the results for the company are disastrous, the producers can always blame the marketers. Such blaming won’t help the bottom line, but it might at least protect the self-esteem of the producers.
The point here is not to elicit pity for marketers--although Levitt was on their side--but rather to show that only a working cooperation between production and marketing can enhance customer satisfaction and increase shareholder value.
The challenge to business, therefore, is fully to integrate the production process and the marketing process. And indeed, much ferment within the business world is oriented toward just that--toward the inclusion of marketers, who presumably reflect consumer wishes, in the production process. Some companies are even reaching out directly to consumers; the multinational 3-M, for example, has set up 23 “customer innovation centers” around the world, usually near company research facilities, to facilitate maximum personal interaction between producers and consumers. And a vast new field of information technology, known as CRM, for Customer Relationship Management, has opened up in the last three decades. CRM includes all the computer-based tools that companies use to track their interactions with customers, from sales to accounting to returns. CRM is a big business; the three leading companies in the field, SAP, Oracle, and Salesforce.com, are all multi-billion dollar firms. According to the Gartner Group, CRM revenues in the US totalled nearly five billion in 2008. So while CRM is hardly an altruistic exercise, to a customer who gets exactly what he or she wants as a result of a better information flow with the producer, CRM can be a great gift, indeed. And of course, newer tools, such as social networks, permit even more interaction with customers. Coca-Cola, for example, has 5,225,090 “fans” on Facebook; to become a fan is to give Coke access to one’s own personal data. So Facebook is a new kind of CRM tool, and yet those 5.22 million Coke fans are presumably happy in their relationship with the company.
We might pause to ask: Is Obamacare going to feature “customer innovation centers” where Americans can examine government healthcare policies? Will Uncle Sam deploy CRM to help ensure healthcare customer satisfaction? Will he have a Facebook page that offers real value to “fans”? And even non-fans?
We might further ask: If such features, now standard in business practice, are absent from the Obamacare portfolio, will ordinary Americans notice? Will Americans, having grown accustomed to nimble software programs for e-commerce, object if such services are unavailable for their health concerns? The answer is that many of them will notice, and they will object.
And so we see the bombshell ahead for the over-optimistic politicians, who gave their fate away to policy implementers; those implementers will inevitably fall short of customer expectations. The politicians spent all their energy getting the bill passed, when they should have thought more about what would happen after it passed. With apologies to Levitt, we might call it, “Politicking Myopia.”
In this telling, we can see politicians as the equivalents of the producer-managers. In politics, the product is politics. It’s a highly specialized field; most politicos have done little else in their life except politics. So they know the political game, and little else. Politics is the product--it’s up to others to move the policy.
And right now, as we have seen, this political class--at least the Democratic part of it--is giddy with the thought that it might finally be producing a healthcare bill. And headlines, written by reporters mostly caught up in the same political enthusiasm, will be resounding with words such as “historic” and “watershed.”
But when the product is enacted into law, what happens then? Then the real challenge will present itself, because the real customers for Obamacare have not yet been heard from. So far, the audience for Obamacare has been the ardent proponents, as well as ardent opponents, of the bill. For all the intensity we see--pro and con, 24/7 on cable news--we must remember that the vast majority of Americans have not been engaged in the debate either way. Barely more than half of adult Americans vote in presidential years, and less in midterm elections. Plenty of Americans are completely tuned out of politics, and so they have not been heard from in the debate that has transfixed Washington for a more than year.
Yet while only a small percentage of Americans are involved in what we might call the political production process, 100 percent of Americans, some 307 million people, will be involved on the receiving end of the Obamacare marketing process--something to be figured out after the main act of political production has been completed.
It might not have seemed that way, but selling a healthcare plan to Democrats was easy--as long as Democrats controlled the White House and both chambers of Congress. The hard part is yet to come, as the politicians will have ceded management of their hard-wrought program to policy implementers. Those policy implementers, improbable as it might seem, will be the marketers for Obamacare. It is they who will set up “customer innovation centers”--or not. It is they who will set up user-friendly CRM--or not. Facebook--or not.
The Democrats seem to have won the Washington battle for political production. But the bigger war, for the hearts and minds of American healthcare consumers, is about to begin--because we all consume healthcare, whether or not we believe in conspiracy theories, whether or not we speak English, whether or not we are old enough to vote. And each of us will have an opinion on the healthcare we are receiving.
The political reverberation of Obamacare will be loud--maybe even deafening. Maybe even shattering.
UPDATE: In Sunday's Washington Post, William D. Eggers and John O'Leary offer a fascinating sneak peek of their new book, If We Can Put a Man on the Moon: Getting Big Things Done in Government. Eggers and O'Leary offer five points of which, one, the idea of a "bridger," is germane to what was mentioned above, about getting across "the chasm," in re: making the healthcare system work. Here's that portion:
What do the Apollo mission, the 1964 Alaska earthquake recovery and the Iraq troop surge all have in common? Critical to the success of each was the presence of a "bridger." This is a leader who can move between the political and bureaucratic worlds -- the rare person who can translate bureaucratic language to politicians and tell the political masters when they are off course.
With Apollo it was NASA Administrator James Webb; in Alaska it was career civil servant Dwight Ink; with the surge it was Gen. David Petraeus. Such individuals are critical to executing history-making undertakings but are often undervalued at the time.
Webb was a quintessential bridger. President John F. Kennedy chose him to lead NASA through the political, administrative and technical challenges of putting a man on the moon, and it proved a wise decision. Though an early draft of Kennedy's 1961 man-on-the-moon speech had set 1967 as the goal for a lunar landing, Webb added what he called an "administrative discount" of two years to account for unforeseen contingencies. He also doubled the cost estimates developed by NASA for the Apollo mission before sending them to the president, adding his administrative realism to counter the optimism of his technical staff.
Posted by James P. Pinkerton at 3:50 PM