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I spent the morning yesterday with the Board of Directors of a multi-billion dollar credit union, taking a good hard look at the trends sweeping the financial services space. They know that disruption is real, and that it is happening now.

And disruption is everywhere: every business, and every industry is  being redefined at blinding speed by technology, globalization, the rapid emergence of new competitors, new forms of collaborative global R&D, and countless other challenges.


The speed with which these changes occur are now being increasingly driven by he arrival of a younger, more entrepreneurial generation; a group that seems determined to change the world to reflect their ideas and concept of opportunity. They’ve grown up networked, wired, and are collaborative in ways that no previous generation seems to be.

And therein lies the challenge.

Most organizations are bound up in traditions, process, certain defined ways of doing things — rules — that have helped them succeed in the past. Over time, they have developed a corporate culture which might have worked at the slower paced world of the past — but now has them on the sick-bed, suffering from an organizational sclerosis that clogs up their ability to try to do anything new.

Those very things which worked for them in the past might be the anchors that could now hold them back as the future rushes at them with ever increasing speed.

They are being challenged in a fundamental way by those who think big, and by some really big, transformative trends.

How to cope with accelerating change?  Think big, start small and scale fast!

I’m doing many keynotes in which I outline the major trends and opportunities that come from “thinking big, starting small, and scaling fast,” by addressing some of the fundamental changes that are underway.

1. Entire industries are going “upside down”

One thing you need to know is this: entire industries are being flipped on their back by some pretty big trends.

Consider the world of health care. Essentially, today, it’s a system in which we fix people after they become sick. You come down with some type of medical condition; your doctor does a diagnosis, and a form of treatment is put in place. That’s overly simplifying things, but essentially that is how it works.

Yet that is going to change in a pretty fundamental way with genomic, or DNA based medicine. It takes us into a world in which we can more easily understand what health conditions are you susceptible or at risk for throughout your life. It moves us from a world in which we fix you after you are sick — to one in which we know what you are likely to become sick with, and come up with a course of action before things go wrong. That’s a pretty BIG and pretty fundamental change. I like to say that the system is going “upside down.”

So it is with the automotive and transport industry. One day, most people drove their own cars. One day in the future, cars will do much of the driving on their own. That’s a pretty change — sort of the reverse, or upside-down, from how it use to be.

Or think about education: at one time, most people went to the place where education is delivered. But with the massive explosion of connectivity and new education delivery methods involving technology, an increasing number of people are in a situation where education is delivered to them. That’s upside down too!

You can go through any industry and see similar signs. That’s a lot of opportunity for big change.

2. Moore’s law – everywhere!

Another big trend that is driving a lot of change comes about as technology takes over the rate of change in the industry.

Going forward, every single industry, from health care to agriculture to insurance and banking, will find out that change will start to come at the speed of Moore’s law — a speed of change that is MUCH faster than they are used too. (Remember, Moore’s law explains that roughly, the processing power of a computer chip doubles every 18 months while its cost cuts in half. It provides for the pretty extreme exponential growth curve we see with a lot of consumer and computer technology today.)

Back to health care. We know that genomic medicine is moving us from a world in which we fix people after they are sick – to one where we know what they will likely become sick with as a result of DNA testing. But now kick in the impact of Moore’s law, as Silicon Valley takes over the pace of development of the genomic sequencing machines. It took $3 billion to sequence the first genome, which by 2009 had dropped to $100,000. It’s said that by mid-summer, the cost had dropped to under $10,000, and by the end of the year, $1,000. In just a few years, you’ll be able to go to a local Source by Circuit City and buy a little $5 genomic sequencer – and one day, such a device will cost just a few pennies.

The collapsing cost and increasing sophistication of these machines portends a revolution in the world of health care. Similar trends are occurring elsewhere – in every single industry, we know one thing: that Moore’s law rules!

3. Loss of the control of the pace of innovation

What happens when Moore’s law appears in every industry? Accelerating change, and massive business model disruption as staid, slow moving organizations struggle to keep up with faster paced technology upstarts.

Consider the world of car insurance — we are witnessing a flood of GPS based driver monitoring technologies that measure your speed, acceleration and whether you are stopping at all the stop signs. Show good driving behaviour, and you’ll get a rebate on your insurance. It’s happening in banking, with the the imminent emergence of the digital wallet and the trend in which your cell phone becomes a credit card.

In both cases, large, stodgy, slow insurance companies and banks that move like molasses will have to struggle to fine tune their ability to innovate and keep up : they’re not used to working at the same fast pace as technology companies.

Not only that, while they work to get their innovation agenda on track, they’ll realize with horror that its really hard to compete with companies like Google, PayPal, Facebook, and Apple — all of whom compete at the speed of light.

It should make for lots of fun!

4.  “Follow the leader” business methodologies

We’re also witnessing the more rapid emergence of new ways of doing business, and it’s leading us to a time in which companies have to instantly be able to copy any move by their competition – or risk falling behind.

For example, think about what is going on in retail, with one major trend defining the future: the Apple checkout process. Given what they’ve done, it seems to be all of a sudden, cash registers seemed to become obsolete. And if you take a look around, you’ll notice a trend in which a lot of other retailers are scrambling to duplicate the process, trying to link themselves to the cool Apple cachet.

That’s the new reality in the world of business — pacesetters today can swiftly and suddenly change the pace and structure of an industry, and other competitors have to scramble to keep up.  Consider this scenario: Amazon announces a same day delivery in some major centres. Google and Walmart almost immediately jump on board. And in just a short time, retailers in every major city are going to have be able to play the same game!

Fast format change, instant business model implementation, rapid fire strategic moves. That’s the new reality for business, and it’s the innovators who will adapt.

5. All interaction — all the time!

If there is one other major trend that is defining the world of retail and shopping, take a look at all the big television screens scattered all over the store! We’re entering the era of constant video bombardment in the retail space. How fast is the trend towards constant interaction evolving? Consider the comments by

Ron Boire, the new Chief Marketing Officer for Sears in the US (and former chief executive of Brookstone Inc.): “My focus will really be on creating more and better theatre in the stores.”

We are going to see a linking of this ‘in-store theatre’ with our mobile devices and our social networking relationships. Our Facebook app for a store brand (or the fact we’ve ‘liked’ the brand) will know we’re in the store, causing a a customized commercial to run, offering us a personalized product promotion with a  hefty discount. This type of scenario will be here faster than you think!

6. Products reinvented

Smart entrepreneurs have long realized something that few others have clued into : the future of products is all about enhancement through intelligence and connectivity. Nail those two aspects, and you suddenly sell an old product at significantly higher new prices.

Consider the NEST Learning Thermostat. It’s design is uber-cutting edge, and was in fact dreamed up by one of the key designers of the iPad. It looks cool, it’s smart, connected, and there’s an App for that! Then there is a Phillips Hue Smart LED Lightbulb, a $69 light bulb that is uber-smart, connected, and can be controlled from your mobile device. Both are sold at the Apple store!

Or take a look at the Whitings Wi-Fi Body Scale. Splash a bit of design onto the concept of a home weigh scale, build it with connectivity, link it to some cool online graphs and you’ve got a device that will take your daily weight, BMI and body-fat-mass tracking into a real motivational tool.  Where is it sold? Why, at the Apple store too!

Do you notice a trend here?

7. Careers reinvented

For those who that the post-2008 North American recovery from the recession was slow, here’s an open secret: there was a significant economic recovery underway for quite some time, as companies in every sector ranging from manufacturing to agriculture worked hard to reinvent themselves. It just didn’t involve a lot of new jobs, because the knowledge required to do a new job in today’s economy is pretty complex. We’ve moved quickly from the economy of menial, brute force jobs to new careers that require a lot of high level skill. The trend has been underway for a long, long time.

Consider the North American manufacturing sector, a true renaissance industry if there ever was one! Smart engineers at a wide variety of manufacturing organizations have transformed process to such a degree, and involved the use of such sophisticated robotic technology, that the economic recovery in this sector involves workers who have to master a lot of new knowledge. One client observed of their manufacturing staff: “The education level of our workforce has increased so much….The machinists in this industry do trigonometry in their heads.”

Similar skills transitions are underway in a wide variety of other industries….

8. The Rise of the Small over Incumbents

We are living in the era that involves the end of incumbency. Companies aren’t assured that they will own the marketplace and industry they operate within because of past success ; they’ll have to continually re-prove themselves through innovation.

Consider Square, the small little device that lets your iPhone become a credit card. What a fascinating little concept that has such big potential for disruption. And it’s a case where once again, small little upstarts are causing turmoil, disruption and competitive challenge in larger industries — and often times, the incumbents are too slow to react.

Anyone who has ever tried to get a Merchant Account from Visa, MasterCard or American Express in order to accept credit cards knows that it is likely trying to pull teeth from a pen – many folks just give up in exasperation. Square, on the other hand, will send you this little device for free (or you can pick one up at the Apple Store.) Link it to your bank account, and you’re in business.

So while credit card companies have been trying to figure out the complexities of the future of their industry, a small little company comes along and just does something magical! No complexities, no challenges, no problems.

* * * *
There are people who are making big bold bets, big bold decisions, who are going to change the world and who are going to do things differently.” That phrase was from my opening keynote for the Accenture International Utilities and Energy Conference in San Francisco some years back.

It’s a good sentiment, and is a good way to think about the idea of ‘thinking big.’

I’ve been doing keynotes on the future of healthcare for over 15 years. Much of what I’ve focused on has involved the technological, scientific and other real trends (i.e. non-political) that will provide for transformation of a very complex system.

This includes the acceleration of genomic medicine, and the transition to a system in which we “fix people before they become sick.” Last week, I was the opening keynote speaker for the AGM of the YMCA of Canada, with a talk around the future of fitness and wellness. This included a bit on the impact of genomics, and the nature of the transition which is underway.

Here’s the thing: I’ve been talking about DNA testing for so long that I finally realized: I can’t just talk about it on stage — I should bite the bullet and have my actual DNA tested to see what health conditions I might be at risk for.

So I purchased my kit from 23AndMe, sent in my sample, and just received my results.

I must admit, it takes a bit of bravery to do this – after all, you can discover that you carry particular genes that make you at risk for some very complex diseases.

I’m thrilled to know that I don’t have any real risk factors! 

Beyond that, I find the entire voyage to be utterly fascinating. Not only did I receive a detailed overview of my genetic risk factors and inherited conditions (i.e. health risks passed down through families such as cystic fibrosis and Tay Sachs disease), I also got some detailed insight into some really quirky things.

For example, I will bore my friends forever with the fact that I carry a gene that is typical of high performance athletes and sprinters. Did I say the future belongs to those who are fast?

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The test confirms my Irish and British/Scottish ancestry. But the big surprise was the Scandinavian component. I carry the blood of Vikings!

 

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In addition, 2.5% of my DNA is from Neanderthal’s. Who would have thought?

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Another unique genetic trait: If I was to smoke, I carry the gene that would make me a ‘heavy smoker.’ Absolutely fascinating, in that before I quit 29 years ago, I was a heavy, heavy smoker!

And I have slightly higher odds of liking sweet foods. No surprise there!

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In addition to fascinating tidbits like there, there is a lot of detail on medical issues, such as your genetic response to various drugs. If I develop an ulcer, the typical drugs used for treatment would not be very effective. Good to know, but I don’t plan for an ulcer anytime soon.

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The entire field of genomic science is accelerating at a furious pace, particularly as the cost to undertake genetic sequencing starts to approach the cost curve of Moore’s law. There are massive legal, social, ethical, political and other issues that come with the territory.

There is a tremendous amount of information on my thoughts on the future of healthcare — check the trends section of my site for more. And check out this document which I wrote a number of years ago

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Click for the PDF

But it’s all based on science, and the science won’t slow down. We’re headed into a new and interesting world.!

In the last few weeks, I’ve done a number of insurance oriented keynotes, including one for a meeting with the CEO and top leadership team of one of the largest insurers in the world, as well as a top insurance association.

We are quickly moving into an era of "performance oriented insurance" with policies / pricing based on performance. There will be huge opportunities for disruptive business model change as this trend unfolds.

And I’ve been busy speaking to the trends and opportunities for innovation that are going to come into this often-slow-to-react industry at lightning speed.

In an era in which everything around is plugging together,  there are tremendous new opportunities for some pretty massive business model change. I often make a joke on stage that perhaps one day my weigh scale might send an email to my fridge one day if I’m not living up to the terms of my life insurance wellness clause.

Yet, is such thinking far fetched?

Maybe not!

One of the biggest trends which is going to hit the world of insurance like a tidal wave is performance based insurance policies. If you live up to or exceed some performance standard, you’ll get a rebate or reduction on your insurance  policy rate.

It’s going to happen extremely quickly in the field of automotive insurance. A flood of GPS enabled performance measuring devices will soon come to inhabit most automobiles throughout the industrialized world. Insurance companies will set a policy price, and then give you a rebate if you exhibit better than average behavior.

Consider a program already underway in the UK:

Insure The Box measures drivers’ mileage, when they drive, and how they drive. Excessive G-forces, sudden braking or cornering and long periods of driving without a break are monitored.

Policyholders are charged by the mile and motorists initially pay for 6,000 miles. Once these are used up they can buy more miles as they need them. Policyholders are rewarded with “free” miles if they drive safely.

Money: A spy in the car that could cut cost of cover for young drivers
The Guardian, UK, April 2011

You can expect most North American insurance companies to roll out similar technology and performance. Or maybe not — some organizations won’t have the speed, agility and flexibility to do this at the pace that the market, competitive and customer pressure will require.

The result is a classic opportunity for big business model disruption.

The same type of thing is going to occur in the world of life insurance.

It has long been the assumption that despite the rapid emergence of genomic, preventative medicine, that it would never be desirable, ethical or even fair to underwrite policies based on a DNA test.

I’m a believer that this is a pretty big assumption to make. History shows that assumptions that underlie a business model barely last. When I speak about innovation, I advise people it’s often best to challenge assumptions — those who don’t often miss the biggest opportunities.

Clearly, we know that there are some powerful trends at work:

  • the cost for a DNA test that can be used to predict with a high degree of accuracy the disesases and conditions you will inherit in your lifetime is set to collapse, as Moore’s law comes to drive the cost of DNA sequencing machines that do the test
  • hence, greater numbers of people will have the opportunity to gain such insight (whether it be good or bad)
  • those who have a test that shows a life that will be relatively disease and condition free would likely be able to offer themselves up to a group of speciality insurers and get a policy discount compared to the average population

Again, there’s opportunity for big business model change and upheaval as this happens.

So too is the concept of a rebate of your life, medical or disability insurance, if you can prove that you are taking regular, active steps to ensure that you are in good health. Certainly there are those in the the health care system, who know that with the massive challenges in front of, the system, a lot of big, bold transformative thinking is necessary.

A federal grant program authorized in the health overhaul law is offering states $100 million to reward Medicaid recipients who make an effort to quit smoking or keep their weight, blood pressure or cholesterol levels in check. The grant program is meant to encourage states to experiment with an uncertain approach to wellness: offering incentives for healthy behavior.

Healthy behaviors pay off; Medicaid recipients who commit to improving their health will be eligible for financial rewards, Los Angeles Times, April 2011

Extend this type of thinking into what comes next in our hyperconnected world — individuals who monitor their blood pressure, glucose levels and other vitals that they are willing to share with their insurer. Exercise and wellness apps on their iPhone that they can use to demonstrate the commitment to a regular series of workouts. Adherence to a personalized lifestyle plan — with insurance cost reductions based on performance.

This type of stuff isn’t far-fetched at all. And it’s going to hit the insurance world quicker than it thinks.

Then there’s the issue of the underwriting of insurance risk. Today, in the life insurance industry, you must undergo a battery of medical and blood tests so that they can make an assessment as to whether you are insurable.

Tomorrow will be completely different, and it will be here before the industry knows it:

“Assuming privacy regulations require it, by 2020 underwriting will consist of one question: ‘Can I look up everything about you?’”

The Next Decade in Innovation, Insurance & Technology, May 2011

Tomorrow? They might simply look you up on Facebook, and based on what they see, come to a decision as to whether they will insure you or not.

Farfetched? Not at all!  In fact, some in the insurance industry are already talking about it:

“Insurers are preparing to use people’s Facebook profiles and online spending habits as a way of setting premiums based on their lifestyle. The Sunday Times, December 2010

The article goes on to note:

“Studies for the insurers suggest that people’s online data detailing their food purchases, activities and social groups can be as good an indicator of their life expectancy as conventional medical examinations.

The trials were conducted by Deloitte Consulting LLP and showed that consumer data, based on a sample of 60,000 people, was as effective in identifying potential health risks as if the applicant for insurance had gone for a blood and urine test

Aviva, one of Britain’s largest insurers, is planning to introduce the new “predictive modelling” in Britain next year after studying the results of trials in America. Swiss Re is also working on a similar scheme.

The Sunday Times, December 2010

The bottom line is that in the next several years, at a very fast paced, the world of insurance is going to be challenged through innovation involving analytics and predictive modelling, performance based policies, and a whole series of other opportunity.

The future will belong to those who are fast!

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