Session Information:

How Innovation and Digital are the Cornerstones to Mayo Clinic’s Supply Chain Future

In this session, Joe Dudas, Vice Chair, Supply Chain Management, Mayo Clinic, will share insights on:

• What does it mean to innovate?
• What is Digital and why is it important?
• How does the Mayo Supply Chain intend to leverage Digital?
• Why does healthcare need a Digital Supply Chain? 

Session Transcript:

Hello and uh welcome to my presentation today surrounding our digital supply chain i work at mayo clinic and we'll get into introductions next there we go little bit about myself as i said earlier i work at the mayo clinic.

I've been here for about 15 years I've got experience in other industries as well i'm currently a vice chair in our supply chain I manage all of our strategy and our strategic initiatives that link to that strategy a little bit about disclosures I don't feel like i have anything relevant to today's discussion although you'll see there are various technology and business claims that i have as well as some of the industry advisories that i serve on I do want to stress that the contents of this pre-presentation um reflect my own opinions and thoughts and shouldn't be considered mayo clinic's policy or position on on these various topics.

So I also want to thank you for having me here today it's always humbling to be among colleagues such as my fellow presenters as well as yourself in the audience hopefully i can contribute give you some ideas and some things that you can take forward whether you work in the supply chain or not more specifically.

I intend to address three important questions first of all first of all is what does it mean to innovate what is digital and why is it important how is it related to innovation and last but not least but how is mayo clinic particularly in our supply chain leveraging innovation and digital as far as our future is concerned so let's start right off with that first question what does it mean to innovate terms like innovation often get over used and often misused.

So I'll start with a good definition this is a real simple one and that innovation can be defined simply as a new idea new device or a new method i like this because it's simple it's it's the something new however uh of the definition that i find the most interesting and perhaps something that i don't necessarily agree with because often innovation is is new to those that are experiencing it but it might not really be new um and i'll talk about that in a little bit and it's reinforced by one of my favorite books.

Which is called the Medici effect and it was written by Franz Johansson and the name of the book was derived from the Medici dynasty which was an Italian banking family it came together in the 14th century as a matter of fact they invented double entry bookkeeping which it may not be the most interesting or exciting innovation that we have when we think of innovation but what's more important is is what the Medici did with the wealth that they accumulated.

They started to really converge things like art and science and literature and architecture in their various investments with with their wealth and that spawned something that we refer today as the great renaissance and this was a period of unparalleled innovation one of the main theories of the book is that innovation occurs when diverse ideas interest and that's that's what i'll carry on to my next slide.

Johannsen explains why diversity is so important he points out to the point that i made earlier is that very little is actually invented but instead that innovation is through the recombining of proven solutions in new ways the apple iPhone is a great example of this you know who would have ever imagined spending 600 700 or even a thousand dollars for a phone that you would carry with you why because it's not just a phone uh today's iPhone is an intersection of many products.

It's a camera an organizer an iPod a video camera a pc and of course it is a phone you can make phone calls on it I would argue that none of these are necessarily new products but when they're intersected on a single platform they certainly are innovative and it's something that will pay for in fact Johannsen questions whether the most important trait for an innovator is actually even creativity which we'll get to on our next slide following this last slot let's take a look these are some of the my favorite quotes uh in the book uh for example.

Innovators are often uh self-taught uh and the diversity in teams allows different viewpoints approaches and frames of mind and if we only seek intersection when things are going poorly we hurt our overall chances of success these are kind of some of the main themes of the book and also some of the things that i carry forward when I think of innovation kind of let's let's really focus in on this first idea of innovators are often self-taught.

I think many of us have seen that most innovators are not the most skilled but instead they're the most convinced that things could be better we see this time and time again within our organizations those that often innovate or are new to our teams or come from outside of an industry all together with new ideas and proven solutions that work there and they could be reapplied in in our situation the other important part here is that if things are going well.

We tend to stay in a field you know it's human nature to seek safety and uh inferior failure in fact many individuals are so fearful to rock the boat that they never do so this is also why certain organizations uh innovate more than others uh really depends on your corporate culture i guess my dominating thought is that the first and foremost that innovation is not as much about creativity as it is create or curiosity and courage once again curiosity and courage.

If you accept these conclusions it can be quite liberating because often many of us think of us think of ourselves as not very creative but we all are curious and i think we all can be inspired to have courage to do something different and something new so if you're in business along with innovation i think you really need to understand and appreciate.

What's going on with digital and the main reason is is that i think of digital is a kind of rocket fuel for innovation it makes innovation easy i'll explain why in a second so this leads us to our next question of what is digital and why is it important this i think is not an over hyped up term there is a lot of confusion as it applies to digital but i really believe that this is different and I'll explain why i think it's different in the upcoming slides first like we did for innovation.

Let's start on a single definition and now that's a little more difficult uh for digital because it's a lot of things to a lot of people it is an entirely new way of do doing business and it is about technology and it is about a new way of engaging customers and as a matter of fact suppliers as well uh particularly when we think about the supply chain so it's all these things but i think there's something larger underneath these things that makes it kind of special.

I have to give credit uh i don't know who the presenter was but this particular presenter kind of gave their presentation as to what they thought digital was and they described it as a fourth industrial revolution and it really made sense to me and put context to those prior three bullets in matter of fact and more now you see in the 19 or in the 1700s.

We had our first industrial revolution and that was really centered around the invention of the mechanical machine now this was introduced in the 1700s but right behind that came a second industrial revolution and it really what it sought to do was to really optimize that mechanical machine and it was all around the assembly line so this also created the factory it created specialization and it created great scale that we've never had before uh and really completely revolutionized business at the time.

We went quite a bit of time all the way to right just before 1970 for the next industrial revolution and it really centered around the introduction of the computer and what the computer did is it allowed us to automate that assembly line now the interesting thing is and here we are today um we never really had that next um revolution until now we call that uh the fourth industrial revolution or somewhere referring to this is industry 400 and what it does is it optimizes business for the with the use of the computer.

You see the computer wasn't necessarily designed and developed to automate an assembly line as a matter of fact it doesn't like assembly lines it likes real-time interactions and more and to operate more in a network uh in digital terms we call that a platform and I'm gonna talk about that in a few moments so today we have implemented in many of our automated systems mainly our enterprise resource planning or ERP it's a pipeline process.

It's a very siloed function very structured you hear best practices as a matter of fact you can't stray from best practices uh within these systems because they're relatively rigid by design and so they move batches of information through an assembly line and then towards an end goal as as a batch well platforms were substantially different.

They work more in a real time uh automated fashion where they're directly connecting a transaction at a time to stakeholders that need something immediately so if you think about this and you think about some of the digital businesses like transportation and you think about if lift operated as a pipeline what it might look like many of us would still be waiting for our first ride along with everybody else it's this platform concept that makes it work and makes it work really well.

So this next question i think we'll start and start to understand a little bit more about this platform concept as well as how we intersect technologies to create that platform and it brings us to our next question which is what is mayo's supply chain plan to leveraging digital so before we get into what the supply chain needs to look like in healthcare.

You've got to first kind of get your head around where is health care going and it too is moving down a digital platform oriented place very much like what we've experienced in retail i don't think it will be a matter of where you get certain things done in healthcare facilities whether it's in a hospital in a skilled nursing home in a center in your home I think at the end of the day.

It's going to be for the consumer to decide where they want service just like you are as a consumer you decide whether you want to shop online or whether you want to go to a brick and mortar or some combination of the both you decide how do you do that but you do expect the same type of experience we call that omni channel.

I think that's very much where healthcare is heading and if you think about that from a supply chain perspective it's pretty scary because what it means is that we're going to have to always be available to the provider into the healthcare consumer no matter where they're at and no matter when they ask for our service which is radically different than how we how we think of delivering supply chain services in healthcare today.

So if you look at our vision of our supply chain we want to completely reimagine our supply chain as a platform primarily so that we're always available we're always on and we're incredibly easy to use as a matter of fact I'd like to describe the supply chain as invisible.

When it's working you don't even notice it's there you just have what you need when you need it you don't even need to ask and that's what we think that's how we think of supply chain and healthcare and that's how we'd like to think of it in the same digital environment as well well that's a real challenge um this is what our current um systems infrastructure looks like today.

It's a pipeline all centered around our ERP and you can see real quickly where the bottleneck is it's right in the center of the chart where it is that ERP um it's batch oriented uh it's not 24 7. as a matter of fact it doesn't support 24 7 real well it worked real well for the past 20 years and this was state of the art for the past 20 years but it's just not going to cut it as we move to this this new platform of healthcare so in its place when when you go to talk to digital organizations like lyft or uber they'll kind of look at you real funny.

When you ask them what ERP they use they center their entire infrastructure around data and analytics as opposed to a process and that's what we intend to do with our our supply chain it'll all be based off of what we're calling an information management platform so even beyond analytics it's made up of four key components process automation process integration analytics and data management none of these concepts are really or are brand new or have recently been invented but it's the putting them together which is really different it's that intersecting like that iPhone example i gave you earlier that really makes this work.

So just real briefly data management includes knowledge management so both storing structured and structured knowledge as it applies to all the products that flow through our supply chain master data management and of course data quality analytics consists of our big data stack including our data lakes and high speed access to those data lakes and what we're looking to do here uh is this is really a self-service environment matter of fact this whole information management platform is a self-service environment for the operator not for it uh to be able to meet the needs of our healthcare consumers and providers one of the interesting things about analytics is we're eliminating the most expensive part.

Which is the data warehouse we'll go straight from raw data to insights we'll feed those insights into processes through something called process automation and process integration process automation for those that are familiar with RPA.

I would totally get this but it's a it's a tool that allows us to basically create robots anything that we do manually and interacting with the system today we can basically create a robot to do that uh and and then we can encapsulate that and we can create an interface to that called an api which is the last part which is process inter integration now what's really cool is when we we meld all these together.

So when I have a process that it needs to have some knowledge say some knowledge about a product it could use our data management platform it can get those analytics and those insights and it itself with some rules can make some decisions as opposed to a human doing so so it's when you put all these things together it gets very exciting and it's also through automation where we can be always accessible uh in 24 7 and extremely fast now like i said.

It's when you put these four things back together it's these intersecting on a platform now that i spoke earlier uh about innovation is what makes this really different let me give you a really basic uh example today through that batch process we submit orders to our suppliers they check if they have inventory if they have inventory that fulfill the order if not they send us what's called a backorder we get about 3 000 of these back orders today a day.

Which is just crazy so in the future what we'll do or could do is a transaction at a time so when we get that request we'll place a per we'll we'll check to see if they have inventory available if they do we'll buy it from if they don't we'll buy it from somebody else so instead of getting a back order uh in something that we have to deal with as an exception in our supply chain like I said 3 000 of these things a day instead.

We won't get any back orders and instead that manufacturer will get a lost sale now that's gonna that's a dynamic that will change how our supply chain operates and what service looks like in our supply chain overnight and that's just one really small example really feel that like i said before all this technology our our ERP users of the future aren't going to be sitting on screens you know manually doing work instead their use of the system will be programming it and we won't rely on it staff to program.

It will rely on them for the security for the infrastructure things like that but the the operator within the supply chain will be programming these business processes as opposed to actually sitting tight tethered to a screen and approving transactions so really exciting stuff it's going to be a lot different it's also what gives us that points out ability and the ability to serve anywhere anytime and to be really easy to use so what's the point um I think you probably already made the point in several cases but I think I think this one's an important one.

So Gartner recently did a study and they estimate that 38.5 of the cost of health care is in our supply chain so that's close to 40 percent of healthcare is a supply chain problem so the fact of the matter is if we don't change supply chain we're not going to be able to change healthcare so it's critically important that we change our supply chain the second point is is that this this this totally changes the game as to who a supplier might be.

You know we think about digital uh industries that have transformed such as transportation uh with lyft and uber and we think about the capacity that's now available to you and i on their platform and if we apply this broader to our healthcare supply chain it gets really exciting because you don't have to be a massive supplier in order to participate so we're really getting to where you know these top-tier suppliers it may not be your size it may be your your ability to innovate and to serve through this digital platform that really makes you a leader and so we're really thinking uh instead of kind of this top-down approach kind of this waterfall approach it's really an ecosystem uh very much like what you see in uber and lyft in the transportation industry.

So big impact really uh really feel that this is going to enable competition with competition comes more innovation more solutions and and as a healthcare consumer better products and services to meet the needs um so what can you do um what i would advise is get started um i'm encouraging everybody to simply get started start small if you have to but go ahead and get started as a matter of fact you know i don't like the the saying about the tortoise and the hair and and that it's a marathon and not a sprint or a race.

I think of today's world is a bunch of races or a bunch of sprints and so act fast learn fast fail fast and continue to to innovate so i would encourage you to do the same and the hard reality is is is you know don't let corporate culture get in your way you know there are always those that are ready to jump on the on the bus or even are already on the bus embrace them bring them along for the ride there are also those that just need a little bit of encouragement to get on the bus and and i encourage you I'd encourage you to bring them along the best you can um the one thing i would say is that there's always those that want to stand in the bus and hold it up for everybody else if you're one of those don't be like this guy.

That's splattered on the on the front of the bus because this bus is moving and it's moving really really fast my last my last points here is that i hope that you found this material was interesting and helpful i don't think it has to have to be in supply chain in order to apply these concepts i think innovation and digital are applicable to just about any business function um i also hope that you have the the courage uh and and and you can bring the ideas uh to innovate you don't have to be creative if you are creative that's great but anybody can innovate and then last but not least i hope you join me in and kind of this fourth industrial revolution which is uh industry 40. it's really exciting time for all of us.

Thank you.