July 24, 2024

Advancing Corporate Yields

Pioneering Business Success

How Will Retail & Tech Evolve Now That They Are In The Healthcare Business?

The most courageous act in modern business history may be the decision by CVS Health nearly a decade ago to quit selling cigarettes.

In what seemed like the blink of an eye, CVS walked away from $2 billion in revenue and hundreds of millions in profit. Remarkably, when CVS quit selling cigarettes, many Americans who relied on CVS as their supplier quit smoking altogether.

The move coincided with the company’s shift into more direct provisioning of healthcare services—and sent a strong message to employees and external stakeholders that CVS was truly in the business of health. “The sale of tobacco products is inconsistent with our purpose,” said then-CEO Larry J. Merlo.

Since then, other retail companies have scaled back their tobacco sales or raised age restrictions, but the CVS action on tobacco remains truly exceptional. As more and more retailers and tech companies have gotten into the business of healthcare, it both raises questions about the role they should play in healthcare and offers instruction for these companies as they take on new functions and play an increasingly important role in our communities.

The ‘ethical implications’ of entering the healthcare business

Once the provenance of hospitals and health systems, healthcare is now a business function of a variety of different organizations. Walmart, for example, has opened clinics, and is rumored to be eyeing an acquisition of ChenMed. Walgreens owns most of VillageMD and all of CareCentrix. Amazon acquired OneMedical. Just a couple of weeks ago, Costco announced a partnership with Sesame Health.

On the tech side, Apple, Microsoft, Google, and Facebook all have announced major initiatives in healthcare.

Hearing this, a colleague recently asked me whether retailers and tech companies would adequately grapple with the ethical implications of their conflicting businesses as they diversify into healthcare.

In the case of retailers, this tension is felt strongly in continuing to sell obesity-inducing foods and/or alcohol—in the same way that CVS did with tobacco.

In the case of tech companies, their platforms are undoubtedly enablers of the spread of misinformation—one of the greatest threats to public health. There’s also growing evidence that addicting technologies deeply compromise mental health and well-being.

Managing conflicts

Of course, there’s little black and white when it comes to these issues. For example, no matter how benevolent a retailer can try to be with its product assortment, certainly it’s also incumbent on individuals, aided by supportive care teams, to make choices that drive their own desired health outcomes.

When CVS made the decision to stop selling tobacco, Merlo drew a distinction between cigarettes and foods with poor nutritional value: “These products are different than tobacco in that there’s no amount of tobacco use that can be considered safe.” In short, it was public consent CEO speak for “everything is fine in moderation.”

While this was a defensible perspective from a company that had just made a significant stand that imperiled its own quarterly earnings, the retail push into healthcare services will require everyone to look more carefully at the suite of services that they sell and manage conflicts.

Alcohol, for example, is a known neurotoxin that is associated with addiction, depression, anxiety, and obsessive-compulsive disorder—not to mention traffic fatalities (and poor decision-making). Countless food items contribute to worsening obesity and heart disease. Often, these products are among the least expensive in the grocery aisle, increasing consumers’ incentive to buy them.

If we aren’t comfortable selling tobacco to customers with lung disease, why are we comfortable selling sodas to diabetics? And alcohol to people whose health is compromised by it? It’s hard to justify being in both businesses without at least some more deliberate effort to resolve the moral tension.

On the tech side, colleagues have lauded the potential for tech to improve the quality and reliability of information. At the same time, the job of doctors and nurses has been made infinitely harder by technology platforms that profit from the spread of unmoderated click bait and junk science.

Some ways forward

How can these companies simultaneously be in the business of health while retailing platforms that compromise health? How can they promote wellness when we know mental health is compromised with technology addiction?

I can’t say I have all of the answers for these companies, but I do have some suggestions:

1. Openly acknowledge the tension. Companies engaged in healthcare are often overrun with inauthentic happy-talk that fails to acknowledge the tension between competing priorities between healthcare and non-healthcare directives. Build trust with consumers by acknowledging the tension between different lines of business. Don’t pretend selling primary care next to Cheetos is “normal;” or that promoting misinformation while selling healthcare devices and services is “business as usual.”

2. Strive for balance. Retailers that stock their shelves with sugary drinks and sodium-laden snacks should also clear some aisle space for fresh fruits and vegetables. They should strive to make these foods affordable, too. Rather than limit consumer choice, retailers can give people more choices, enabling them to make personal decisions that meet their health needs. Tech companies whose platforms have unintended negative health consequences should work visibly and deliberately to address those challenges.

3. Track SKUs and adjust their product strategies. I’d like to see retailers pay more attention to which side of the line their products fall on. It’s easy these days to track product sales in comparison to their health benefits. Companies that truly wish to promote health should adjust their offerings and marketing strategies to ensure that they are not promoting products that undermine their own health-improving initiatives. On the contrary, discounts on healthy foods and other incentives can both improve customer loyalty and reward consumers for making decisions that align with companies’ health-promoting goals.

4. Seek out competitive advantage. CVS was brave to stop selling tobacco. Similar moves by retailers could give them an advantage in the marketplace and help them differentiate themselves from their competitors. Consumers just might reward retailers whose health-promoting goals align with their owns, boosting those companies’ revenues. Likewise, it seems evident that people would be thrilled to use tech platforms that promote science and truth and well-being.

5. Fewer press releases, more ambitious goal setting. Companies across the nation are getting in the habit of releasing regular environmental, social and corporate governance data. These reports can help corporate leaders, shareholders and consumers better understand an organization’s ethics and values. The best of these reports inspire competitors to become more transparent in reporting ambitious goals and achievements toward them.

As retailers and tech companies make greater forays into healthcare, they’d be wise to consider their commitments not just to profits but to healthcare as a goal in itself.

By asking tough questions and taking bold moves, they can both increase revenues and improve health.

If they fail to do so, however, the more cynical among us might be right in saying that CVS’s grand bargain on tobacco was a meaningful exception and the diversification into healthcare isn’t anything more than a revenue land grab.

I hope they prove the cynics wrong.