Thanks Keely for sharing your insights on Teva. The shift by companies like Teva up the supply chain has been interesting to follow, especially with respect to medical devices. In 2016, Medtronic released the first FDA-approved insulin pump that automatically sensed glucose levels and administered insulin (https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm522974.htm). These closed-loop systems have drawn attention partly because they place a greater legal burden on the manufacturer in the event of a mishap. Fortunately, some data suggests the safety profile of closed-loop systems is comparable to other devices (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5260117/), though the primary studies were done over only 3 months and were funded by Medtronic (https://jamanetwork.com/journals/jama/fullarticle/2552454). This is an exciting space for Teva to pursue, but not without the very real challenge of needing to balance patient safety with the desire for innovation, especially in an age where IT systems seem so easily hacked. Also, I would be curious to hear more about the partnership with IBM Watson, in light of IBM’s failed partnership with MD Anderson (https://www.technologyreview.com/s/607965/a-reality-check-for-ibms-ai-ambitions/). It’s possible that this type of technology is better suited for drug development, as you mention, than for diagnostic purposes.
Sushant, thanks for sharing your insight on the great work being done at Phillips to leverage digitalization to improve the medical device supply chain. From the maintenance standpoint, it sounds like the major shift is from a reactive to a proactive approach. The 90% reduction in downtime from this proactive approach is considerable. While average MRI charges vary between hospitals, sources suggest that the average cost is approximately $2-3K per scan (http://time.com/money/2993644/why-health-care-costs-vary-widely/). How is Philips pricing the value of the increased revenues for providers from this proactive approach into the service cost? Will providers or administrators be charged on a fee-per-upgrade or fee-per-service basis or does Philips plan to bundle this under a one-time maintenance fee at the point of sale? From a quality perspective, will providers be notified of the content of the remote upgrades in advance and is there an option for providers to reject an upgrade before it is made? While I think these innovations are great, the cost and quality implications must be addressed before I see this being widely accepted in hospitals.
Maria, thanks so much for this great discussion on sustainability! I agree with your recommendations for Syngenta to publicly commit to their goals and create transparent metrics by which to evaluate their progress. At the heart of this issue is the role of authenticity and accountability. Interestingly, a study by Bain found that only 2% of companies achieve their sustainability goals (https://www.forbes.com/sites/deeppatel/2017/11/17/4-ways-companies-can-reach-millennials-with-a-message-of-sustainability/#1d1b870aff80). The root cause is potentially a failure by management to set realistic expectations and metrics. While some argue that any progress in sustainability is good progress, I believe that inauthentic efforts that cuts corners can be counterproductive by setting the bar low for others and undermining opportunities for real progress. If companies are using sustainability as a public relations push, do you think there should be external groups tasked with holding these company initiatives accountable, assuming that the management teams will not?
TJ, this was a fascinating read on how Nespresso is handling the current and looming climate change. I agree that their goal to achieve a 100% recycling rate is admirable, but unrealistic. There are several other competitors who have turned to more innovative solutions, such as cups made of dissolvable sugar or biodegradable material such as plant-based fibers (http://www.bbc.com/news/magazine-35605927). Given the costs of Nespresso’s recycling program and its publicity efforts to justify aluminum, it seems that the reason behind sticking with aluminum has more to do with brand image than sustainability. Did Nespresso ever consider other alternatives to aluminum, and have they reported the success of their recycling program? In the spirit of authenticity and accountability, Nespresso should publicly report its performance and even consider a change to a core aspect of its product.
Amanda, thanks so much for this great discussion on isolationism in the context of Ford. It has been interesting to read your perspective in combination with Ben’s post on this issue. Both of you hit on a common theme which is how to manage the tension between short-term and long-term strategy. I think our conversation from the Fuyao case is especially relevant and informative here. Ford is making 2 major assumptions by deciding to move to China, 1) that the probability of changes to NAFTA are greater than the probability of changes to trade relations with China and that the NAFTA changes would be more detrimental to Ford’s business, and 2) that the favorable manufacturing environment in China, compared to the US or Mexico, will persist. Yet, as we see from our Fuyao case and other sources (https://www.cnbc.com/2017/02/27/chinese-wages-rise-made-in-china-isnt-so-cheap-anymore.html), manufacturing wages in China are on the rise. Additionally, the US-China trade deficit has attracted significant rhetoric from Washington, suggesting that the assumptions behind Ford’s calculations may be incorrect.
Sushant offers a great solution to diversify risk. I agree that Ford should entertain a smaller scale, local manufacturing approach across multiple countries, as appropriate based on market demand. This in turn could mitigate political risk, achieve economies of scale, give access to new markets, and increase Ford’s leverage in conversations with Washington.
Thanks for this interesting discussion, Ben. The question of whether the move to China, rather than Mexico or elsewhere, was correct is an interesting one. At the heart of the question is a debate of probabilities. Is the Trump administration more likely to unfavorably change NAFTA or trade relations with China? For Ford, the probability of changes to NAFTA, combined with other opportunities offered by China, was compelling enough. With all the rhetoric from Washington, it’s ironic that Ford pulled out of Mexico, only to overlook the US and invest in China. Interestingly, in 2016, the US trade deficit with China was nearly $350B (https://www.census.gov/foreign-trade/balance/c5700.html). Contributing to this deficit are 25% import tariffs and additional value-added taxes on US automobiles imported into China. In contrast, foreign automakers pay only 2.5% import taxes to reach the US market (https://www.washingtonpost.com/news/wonk/wp/2017/03/20/a-slap-in-the-face-to-u-s-taxpayers-most-vehicles-imported-from-china-are-made-by-an-american-company/?utm_term=.0fbf74e43652). Moreover, Chinese subsidies on eco-friendly cars often exclude foreign-built vehicles, furthering dampening the prospect of closing this trade gap. Given the harsh language against China by Trump, Ford may come to regret its decision to pass on investing in other countries. In the end, it may well have been better served by following your recommendation to further diversify its global presence elsewhere.