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hbr.org | July–August 2007 | Harvard Business Review 29

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HBR CASE STUDY

RESHLY SHOWERED AND COOLING DOWN after their squash

game, Max Berndt drank iced tea with his board chairman,

Paul Lefl er. Max, a thoracic surgeon by training, was the

CEO of Peachtree Healthcare. He’d occupied the post for

nearly 12 years. In that time the company had grown – mainly

by mergers – from a single teaching hospital into a regional net-

work of 11 large and midsize institutions, supported by ancillary

clinics, physician practices, trauma centers, rehabilitation facili-

ties, and nursing homes.

Together, these entities had nearly 4,000 employed and

affiliated physicians, who annually treated a million patients

from throughout Georgia and beyond. The patients ranged in

age from newborn to nonagenarian; represented all races, eth-

nicities, lifestyles, and economic conditions; and manifested ev-

ery imaginable injury and disease. Many of them, over the course

of a year, would be seen at more than one Peachtree Healthcare

facility. Max’s marching orders were to ensure quality, consis-

tency, and continuity of care across the entire network – and to

Too Far Ahead of the IT Curve? Peachtree Healthcare’s patchwork IT infrastructure is in critical condition. Should the CEO approve a shift to risky new technology or go with the time-tested monolithic system?

by John P. Glaser

F

HBR’s cases, which are fi ctional, present common managerial

dilemmas and offer concrete solutions from experts.

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MANAGING FOR THE LONG TERM | HBR CASE STUDY | Too Far Ahead of the IT Curve?

deliver all that with the highest levels

of efficacy, economy, and respect for pa-

tients and staff.

Max, still sweating lightly, finished

his tea and ordered more. He and Paul

commiserated over the steady vanish-

ing of squash courts in the metro At-

lanta area. This particular block of

four courts was located in a health

club not far from Peachtree’s Marietta

headquarters. Apart from the one Max

and Paul had used, the other three

were dark.

“By next week,” Paul predicted, “at

least one of those courts is gone.”

In Paul Lefl er’s worldview, things al-

ways happened fast. Paul was the CEO

of Wyndham Trust, the region’s leading

retail bank and mortgage lender. Hav-

ing overseen Wyndham’s rapid growth

through mergers and acquisitions, he

was an avid believer in brute-force stan-

dardization. His management team

had honed the art of disciplined con-

version, changing everything from sig-

nage to systems and processes in very

short order, “like ripping off an adhe-

sive bandage.”

Squash courts weren’t the only

thing vanishing from Max’s universe.

So was a comfortable management

consensus about Peachtree Health-

care’s long-term aims and how best to

achieve them. Paul – like other board

members and some in Max’s manage-

ment inner circle – was applying con-

stant pressure on Max to follow the

example of others in the health care

industry: Push ahead on standards and

on the systems and processes to sup-

port them. “You’ve got all the hospitals

doing things differently. You’ve got

incompatible technology that’s held

together by sweat and ingenuity and,

possibly, prayer. Just do what other

institutions are doing. Common sys-

tems, broad standardization… It’s the

competitive reality, and it’s the right

long-term play! So, what the hell are

you waiting for?” But then the iced tea

arrived, and Max used the interrup-

tion as an excuse not to answer Paul’s

question.

They’d been having this conversa-

tion for several months – sometimes

informally, other times in full board or

committee meetings. Max listened, to a

point. Eventually, he always fell back on

his clinical experience. “You can stan-

dardize the testing of ball bearings for

manufacturing defects,” he said. “But as

far as I know, you can’t – at least not

yet – standardize the protocol for treat-

ing colon cancer.”

As a physician, Max believed that

the last word in all matters of patient

care should rest with the doctor and

the patient. But as a CEO he believed in

best practices. So his compromise posi-

tion was to favor selective (Max called

it “surgical”) standardization. Indeed,

many areas of clinical treatment – im-

munizations, pharmacy record keeping,

aspects of diabetes care – could safely

be standardized around best practices

over which there were few disagree-

ments. In other areas, though, standard-

ized practices could have scary patient-

safety consequences, and physicians

had to be free to form their own judg-

ments about which treatments were

best for which patients.

Lately, however, worrisome develop-

ments were eroding Max’s confidence

that he could hold out against Paul’s

brute-force prescription.

Remember The African Queen? Days before, there had been a meltdown

of the clinical information system at

Wallis Memorial Hospital in Decatur.

(Wallis was Peachtree’s most recent ad-

dition.) Since Max had been lunching

with his chief information officer, Can-

dace Markovich, when the alarm came

through to her PDA, he drove her over

to Wallis to investigate.

On the way, Candace reprised her

concerns about ensuring uptime and

performance quality across Peachtree’s

patchwork infrastructure. “More and

more, I feel like Humphrey Bogart in

The African Queen, trying to keep the

blasted engine running on the boat,” she

said. “So much of our energy and bud-

get goes into just treading water. And

the more we grow, the worse it gets.”

At Wallis, Max saw cold panic on

the faces of the IT staff as they rushed

around trying to repair and reboot the

system. Doctors and nursing super-

visors stood around looking helpless

or angry, sometimes a mix of both.

Clinicians, having finally been per-

suaded to use information technology

as a primary tool in delivering care,

now depended on it to work reliably.

When it didn’t cooperate, they – and

their patients – were basically screwed.

Now Max witnessed the routine

nightmare that many doctors recoiled

from. Talented, hardworking, highly

paid people were being kept from do-

ing their jobs by the too-unremarkable

failure of what had become an indis-

pensable tool. Although everyone in IT

was working diligently to fix the prob-

lem, diligence wasn’t enough to keep

disgust at bay. Wherever Max looked,

he saw pain.

John P. Glaser is the chief information of-

fi cer for Partners HealthCare System, in

Boston; a senior adviser to the Deloitte

Center for Health Solutions, in Washington,

DC; and president emeritus of the eHealth

Initiative, whose mission is to improve the

quality, safety, and effi ciency of health care

through information and IT. He is a coauthor

of Managing Health Care Information Sys-

tems (Jossey-Bass, 2005).

“ You’ve got incompatible technology that’s held together by sweat and ingenuity and, possibly, prayer. Just do what other institutions are doing. Common systems, broad standardization.”

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hbr.org | July–August 2007 | Harvard Business Review 31

And yet Max was also that rarity in

medicine – a physician leader who

recognized and embraced the value in

technology. An early enthusiast of tele-

medicine, he had participated in long-

distance, computer-assisted research

conferences and consultations on behalf

of his own and other doctors’ patients.

He had easily been converted to the

view that computerized, consolidated

patient records were vastly superior to

manila file folders scattered through-

out various specialists’ offices, subject

to eccentric clinical and record-keeping

habits. As CEO, he had shown consis-

tent leadership in visibly championing

IT-based innovation. And he enjoyed

a close, positive working relationship

with Candace.

Even so, all he was hearing from Can-

dace lately was that the IT infrastruc-

ture was consuming so much mainte-

nance energy that further technical

innovation was becoming a luxury, an

afterthought. At Wallis, Max had got-

ten to see the nature of the problem up

close and personal.

Luckily, the situation ended up being

resolved without major consequences

to patients – this time. But Max was

now convinced that something urgently

needed to be done. The African Queen

was headed toward the rapids.

Medicine Is Different The day after the squash match, Max

sat in a budget meeting in his office

attended by Candace and Peachtree

CFO Tom Drane. Max wanted to know

what it was going to cost to rearchitect

technology across all of Peachtree’s

facilities. Candace and Tom cataloged

the results of a request for informa-

tion Candace had put out earlier in

the year. Max paid nervous attention.

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MANAGING FOR THE LONG TERM | HBR CASE STUDY | Too Far Ahead of the IT Curve?

The combination of IT and big, hairy

numbers was certainly not unheard of,

but it was still intimidating, mysterious,

and worrying. Moreover, it was hard

for Max to reconcile the task of stan-

dardization with all the realities of the

health care mission.

Sometimes Max envied Paul Lefl er

the dispassionate nature of the banking

business. No patients, only customers –

and most of them just wanted some-

thing simple: a loan, a place to put their

money, a way to get at it easily. Paul

could choose end-to-end standardiza-

tion with a clear conscience.

Health care, though, was different.

It was a matter of life or death. Doc-

tors – not wizards of finance – were

the authority figures of greatest con-

sequence. Any effort to control or oth-

erwise interfere in physicians’ duties

was scrutinized in the long shadow of

the Hippocratic oath. For that and other

reasons, mergers were not typically a

feature of market behavior among

hospitals. Often when they were tried,

hospital mergers failed. Each institu-

tion had its own idiosyncratic, doctor-

dominated identity. Put one together

with another, and you’d constructed an

oxymoron – a health care “system.”

Or so the wisdom went until Peach-

tree did its first merger and created

a potent synergy between two great

teaching hospitals. Now Max presided

over a federation of 11 hospitals of as-

sorted sizes and special purposes, each

with its own proud history and culture,

each with its own weird mishmash

of IT systems of various vintages and

vendor pedigrees. Soon, depending on

just how much standardization he ul-

timately decided to pursue, Max was

going to rock the whole boat either

a little or a lot.

Presently under consideration were

proposals for what Candace called

monoliths – massive systems running

massively ambitious enterprise soft-

ware that would compel the arduous

redesign of every business process. The

hardware and software, she explained,

“are the tip of the iceberg costwise. It’s

everything that comes next that makes

this so expensive.”

Tom reached across a small con-

ference table and turned the page in

a three-ring notebook assembled for

Max’s edification (Max was famously

scornful of PowerPoint). “Looking

at benchmark data for implementa-

tions of comparable size,” said Tom,

“you see there’s potential for the cost

to multiply two or three times over

budget.”

Max admired the way Tom could con-

vey a thoroughly terrifying possibility

without betraying the slightest vocal

stress – the CFO version of bedside

manner.

“Really?” said Max. “Two or three?

Depending on what?”

“Mainly on consulting services,” said

Candace. “The time it takes. How hard

it is to change the processes, get buy-in,

roll out the system without too much

scope creep, train the people, make cus-

tomizations, fix problems that crop up

after implementation.”

“The good news?” asked Max.

“It can work,” said Candace. “It gets

the job done. It leaves us with a brand-

new homogeneous infrastructure, a

single set of systems and applica-

tions, complete interoperability and

consistency across all of the hospitals,

a unified patient records database.

Unified everything, really. It’s like we

become a single institution with mul-

tiple campuses.”

“Okay,” said Max, looking now at Tom.

“Is there a number you’d like to leave

me with?”

“Five hundred million to a billion,”

said Tom. “Spread out over five to seven

years.”

“But it could be more?”

Tom shrugged. “It could. But I’m com-

fortable with a billion at the high end.”

Caveat Emptor Everywhere On an evening a few weeks later, in mid-

July, Candace appeared at Max’s door,

obviously in the grip of a fresh enthu-

siasm. Max was trying to get out of the

office for his son’s tenth birthday cel-

ebration (the boy already regretted his

summer birthday, because most of his

friends were scattered to family vaca-

tions and camps).

“Five minutes,” said Max. “It’s Teddy’s

birthday.” Candace proceeded to take

nearly ten.

“As you know, we’ve been goofing

around some with SOA,” she told him,

pronouncing it “SO-wuh,” a gentle-

sounding locution that suggested a sea-

weed wrap at a Japanese spa. “Nothing

too intense, just some prototypes to get

a feel for it. My view has been that it’s a

couple of years away from being ready as

an option we’d have a lot of confidence

in. But maybe there’s a way to manage

the risk of being more aggressive.”

Max understood service-oriented ar-

chitecture in a limited way. It was the

latest hyperbolic promise of technol-

ogy magic, a way of parsing informa-

tion systems into modules that perform

discrete services. Built out of reusable

strands of programming code, these

modules could be reconfigured, Lego-

like, into new applications at a dimin-

ishing future cost. With Max’s blessing

Candace had funded some SOA experi-

ments; the results had been mixed but

still were encouraging in the proof-of-

concept sense.

“What’s good is that this would give

us a lot of agility. We could easily change

a system. We could try something out

on a limited scale and move forward in

small steps to keep the risk lower. But

Each institution had its own idiosyncratic, doctor- dominated identity. Put one together with another, and you’d constructed an oxymoron – a health care “system.”

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hbr.org | July–August 2007 | Harvard Business Review 33

the thing for you to bear in mind is that

SOA gives us the fl exibility to go after

selective standardization. It’s not a

my-way-or-the-highway kind of deal.”

Max nodded, intrigued. Neverthe-

less, he remained standing and edged

toward the door – he had to stop at the

bakery on the way home to pick up

the cake his wife had ordered. Candace

talked faster. “The problem is, the SOA

market’s not mature yet. There’s a lot of

unpredictability. The vendors are still

feeling their way along, and the risk for

us is we become a victim of their – and

our own – steep learning curve.”

After a couple of further ambigu-

ous upside and downside observations,

Candace released Max. In the car he

continued processing the conversation.

It was the devil you know versus the

one you don’t. But the thought of sur-

rendering on the question of selective

standardization continued to nag at

Max – it was a choice with huge im-

plications for the indigenous clinical

cultures of Peachtree’s original parts.

A monolithic system would render

the surgical approach difficult to the

point of impossibility. But SOA might

blow up in everyone’s faces, leaving

Peachtree with selectively standard-

ized chaos that was scarcely better than

what existed today.

At the bakery Max was impressed

by the colorful sheet cake. It was toma-

hawk themed for the Braves – Teddy

was a big fan of Andruw Jones.

A Femur Meeting At Max’s urgent behest, Candace pre-

sented the pros and cons of the SOA

option to a small strategy task force,

whose deliberations would inform

Max’s recommendation to the board

of directors. They met in a 12th fl oor

conference room known as Femur (all

of Peachtree’s meeting spaces were

named for least-disagreeable body parts,

mainly bones).

“No choice is perfect,” Candace said by

way of introduction. “But who knows?

Maybe there’s something here for us.”

At a meeting two days earlier she had

sketched out the monolithic system,

scaring everyone with its price tag.

The team had originally been impan-

eled to give more shape and detail to

Max’s goal of surgical standardization.

It had made progress toward identify-

ing best-practice opportunities and fl ag-

ging areas where physicians and institu-

tions should – for now, at least – be left

to their own devices.

At the outset of this process, Max

had framed what for him was the key

issue: “We could declare that everyone

in this building will from now on wear

uniforms,” he said. “We’d then have an

office-wear standard, but what would

be the point? Standardization has to be

seen in the context of something gained.

Do no harm, right?” But now the whole

strategy was up in the air. Max firmly

believed that Peachtree’s best long-

term bet – exemplified by his cautious

approach to standardization – was to

preserve at all costs the hospitals’ fl ex-

ibility to respond to constant change.

But Paul Lefl er and others saw his cau-

tion as timid. Their view was that only

by creating a thoroughly unified insti-

tution would Peachtree shed its legacy,

premerger shackles.

Besides Max, Candace, and Tom, the

team consisted of the COO, presidents

of two of Peachtree’s hospitals, and the

president of the Peachtree Healthcare

Foundation, the company’s nonprofit

research arm.

Candace moved quickly through her

formal briefing, careful not to dive too

deep, so there would be time for ques-

tions at the end. Tom asked who else

in the health care industry was aggres-

sively adopting an SOA strategy. “No

one that I’m aware of,” she said. “To be

honest, that’s one of the reasons key

vendors are eager to work with us. They

want to get some health care cred. On

the one hand, that motivates them to

be fl exible on pricing. On the other, it

makes us the guinea pigs.”

Max listened as Candace laid out

the risks and uncertainties. SOA was

new and had no industry track record,

she said. “So it’s very hard to estimate

with any reliability what a given unit of

progress will cost, how long it will take

to achieve it, and how close the result-

ing service will come to performing the

way we intended it to. The concept of

SOA suggests that it’s less expensive in

the long run than the monolithic sys-

tem, but we don’t have any data from

other health care institutions to prove

that. So you can’t rule out that it might

end up costing the same.”

Max found himself wanting Candace

to be just a little more upbeat on SOA.

She’d incited him to think about it, and

now he was beginning to wish he’d

never heard of it. “So, why would any-

one bother with it now?” he asked her.

She proceeded to share the Candace

Markovich Theory of the IT Future:

SOA was potentially the migration

path to a transformative way of creat-

ing technology capability. “I really do

believe that’s true,” she said. “So you can

imagine how it might not totally thrill

me to think about spending a bazillion

dollars on a brand-new, shiny dinosaur

that we’d be stuck with at a point in

history when the IT world is moving

someplace else. That isn’t a choice I’d

want to have to make. But I can see the

logic in making it, because SOA is still

kind of a crapshoot.”

How should Peachtree try to fi x its IT infrastructure problem? Four commentators offer expert advice beginning on page 36.

Max fi rmly believed that Peachtree’s best long-term bet – exemplifi ed by his cautious approach to standardization – was to preserve the hospitals’ fl exibility.

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