[Paleopsych] NYT: (Andrew Grove) From Intel to Health Care and Beyond
checker at panix.com
Sat Jul 30 15:25:58 UTC 2005
>From Intel to Health Care and Beyond
[Grove's "Efficiency in the Health Care Industries: A View From the Outside"
appended. A great article indeed!]
IN case you missed it, Andrew S. Grove has an article in this week's
issue of the Journal of the American Medical Association. In his 68
years, Mr. Grove has written six books, including a management
classic, "Only the Paranoid Survive"; a beautifully rendered memoir,
"Swimming Across"; and a new book, published last month, composed of
case studies that he uses in the class he teaches with Robert A.
Burgelman, a Stanford University professor, entitled "Strategic
Dynamics: Concepts and Cases." But it's not every day that he makes an
appearance in an eminent medical journal like JAMA.
The article, "Efficiency in the Health Care Industries," was labeled
commentary, but it was more akin to a jeremiad. Mr. Grove took dead
aim at the lack of efficiency in health care - the amount of time it
takes a research lab to turn an idea into a working drug, for
instance; and the extent to which medicine lags behind other
industries in using technology to store and retrieve data, to the
detriment of doctors and patients. He compared it unfavorably to an
industry he knows rather intimately, microchips, which has turned
efficiency into an art, thanks in no small part to Mr. Grove.
The article signaled that Mr. Grove's obsession with the problems in
the health care industry, problems he first explored in a 1996 Fortune
magazine article about his battle with prostate cancer, has not waned.
It signaled something else as well: Mr. Grove has been keeping plenty
busy in retirement.
Did you know that Mr. Grove, one of Silicon Valley's most iconic and
influential figures, has retired from Intel? Well, O.K., retirement
may be a bit strong: he still has a desk at Intel, where he describes
his current role as "internal agitator." (His official title is senior
adviser to executive management.) But on May 18, at Intel's annual
meeting, Mr. Grove resigned as chairman of the board. For the first
time since 1979, when he was named its president, Intel's fortunes are
not Mr. Grove's responsibility. Although the meeting was, in part, a
public retirement party for Mr. Grove, the news garnered surprisingly
little attention in the East Coast business media.
ONE of the great joys of being a business journalist over the last
quarter century has been the chance to listen to Andy Grove. As
president, chief executive and finally chairman of Intel, he would
periodically make the rounds of the business magazines and the
business sections of the big newspapers, where he would sit in a
conference room and take questions from the reporters and editors.
Yes, of course, he gave us the Intel spin. But unlike most C.E.O.'s,
programmed like robots to stay on message, Mr. Grove was willing to
share his thoughts on all manner of things.
With his wide-ranging intellect and his engagement with the world, he
broadened our understanding of technology, strategy, the fall of
communism (he escaped from communist Hungary at the age of 20), and
dozens of other topics.
I last sat in on one of his jam sessions maybe three years ago, and
I've missed them. So a few weeks ago, I decided to bring the mountain
to Mohammed. I went to visit him in Silicon Valley, to see what he was
up to (audio excerpts of my interview with Mr. Grove are at
It turns out that he's up to quite a bit. "My mind is spinning as fast
as it did then," he said, comparing his new life to his old in his
mellifluous Hungarian accent. "But I'm not in meetings all day. I have
the ability to pick and choose what I do, which I never had in my
life. The penalty is that I deal with issues that are mammoth."
We met at the office of his foundation, which, among other things, is
financing stem cell research ("We are helping to keep U.S. stem cell
programs limping along," he said), and trying to develop programs that
will help people who are not college-bound acquire vocational skills
to allow them to earn a decent living.
He talked about his quest to find what he called "the Rosetta code"
for the health care industry. By that he means the development of
software "that takes incompatible systems and translates them into
each other, so that one system can automatically read the other." He
thinks there are few things more important for patients than to have
any doctor, anywhere, be able to access their medical records, but
because the industry is so fragmented, with so many records still in
paper form, that is currently impossible.
At Intel, most of his time is spent with a new health care group,
where he pushes and prods and argues with its members as they try to
figure out how to bring this laggard industry into the technological
age - and with any luck, make some money for Intel in the process.
We talked a bit about the central ideas in his new book, which
examines what happens when a particular business environment suddenly
changes and industries collide, as when, for instance, digital
technology turned the music industry upside down. Mr. Grove, not
surprisingly, had mainly contempt for the music industry's early
efforts to keep the digital wave from coming to shore.
"If the new technology is compelling enough," he said, "it will win
out. When the railroads came, Wells Fargo was in trouble. When the
printing press came along, the monks didn't stay around very long."
Music, telephony, media: they've all faced the same disruptions, and
in Mr. Grove's view they are all going to have to adapt - or else.
At the annual meeting last May, he laughingly described the line
"Technology will always win" as "Grove's Law."
Then he moved to the subject of his latest obsession: globalization.
Will it surprise you to know that this refugee from Hungary, whose
company derives 70 percent of its revenue from places other than the
United States, is a bear on the potential consequences of
globalization on this country? He is.
"I don't think there is a good outcome," he said. "I looked up a quote
for you. 'If you don't believe that [globalization] changes the
average wages in America, you believe in the tooth fairy.' Do you know
who said that? Paul Samuelson, age 90."
Although mainstream economic thought holds that America's history of
creativity and entrepreneurialism will allow it to adapt to the rise
of such emerging economies as India and China, Mr. Grove thinks that
is so much wishful thinking. In his view, globalization will not only
finish off what's left of American manufacturing, but will turn
so-called knowledge workers, which was supposed to be America's
competitive advantage, into just another global commodity.
"There is an increasing trend towards lathroscopic surgery being done
with robots," he said by way of example. "Once you are doing it with
robotics, why do you have to be there?" The procedure might just as
well be done from India. Or China.
What particularly bugs Mr. Grove is that he can't see a way that this
country can find the equivalent of a disruptive technology that will
allow it to retain is current place atop the economic heap. He's
always been someone who liked to generate big, gnarly solutions that
may take years to work through, and though it may seem a tad grandiose
on his part to think that he should be able to devise a way to solve
America's globalization problem, it is also part of what makes him
such an appealing character.
"I think Intel and me and the JAMA article can move health care a few
pebbles forward," he said. "This last one, I will be happy just to
have some people talking about it, and legitimize it. There are no
Toward the end of the interview I asked him whether he liked his new
life. "I love it," he said. "I was very ready for it. I have liked all
phases of my career. I liked the technological side. I liked
management. I liked discovering strategy." He likes being able to read
history now, something he rarely had time for in his previous life. He
likes not having to worry about every minute twist and turn in the
technology industry, and how it might effect Intel.
Did that last annual meeting have any special meaning? I wondered.
"Nothing emotional happened that day," he replied. But, he added, he
has been having dreams lately about Intel. "It is as if I'm reliving
an event that happened when I was operations manager 25 years ago. It
is not speeches, not limelight, just factory visits and arguments,
which didn't really happen. I didn't used to have these dreams. So I
have a lot of feelings.
"I see a lot of Intel retirees," he added. "They keep company with
each other. There is some nostalgia. I don't know if it is for the
Intel of those days, or my younger self.
"But not on May 18," he said. "That was just a nice event."
Efficiency in the Health Care Industries: A View From the Outside
Andrew S. Grove, PhD
Vol. 294 No. 4, July 27, 2005
The health science/health care industry and the microchip industry are similar
in some important ways: both are populated by extremely dedicated and
well-trained individuals, both are based on science, and both are striving to
put to use the result of this science. But there is a major difference between
them, with a wide disparity in the efficiency with which results are developed
and then turned into widely available products and services.
To be sure, there are additional fundamental differences between the 2
industries. One industry deals with the well-defined world of silicon, the
other with living human beings. Humans are incredibly complex biological
systems, and working with them has to be subject to safety, legal, and ethical
concerns. Nevertheless, it is helpful to mine this comparison for every measure
of learning that can be found.
First, there are important differences between health care and microchip
industries in terms of research efficiency. This year marks the 40th
anniversary of a construct widely known as Moore's Law, which predicts that the
number of transistors that can be practically included on a microchip doubles
every year. This law has been a guiding metric of the rate of technology
development.1 According to this metric, the microchip industry has reached a
state in which microchips containing many millions of transistors are shipped
to the worldwide electronics industry in quantities that are measured in the
billions per month.
By contrast, a Fortune magazine article suggested that the rate of progress in
the "war on cancer" during the same 40 years was slow.2 The dominant cause for
this discrepancy appears to lie in the disparate rates of knowledge turns
between the 2 industries. Knowledge turns are indicators of the time it takes
for an experiment to proceed from hypothesis to results and then lead to a new
hypothesis and a new result.
The importance of rapid knowledge turns is widely recognized in the microchip
industry. Techniques for early evaluation are designed and implemented
throughout the development process. For example, simple electronic structures,
called test chips, are incorporated alongside every complex experiment. The
test chips are monitored as an experiment progresses. If they show negative
results, the experiment is stopped, the information is recorded, and a new
experiment is started.
This concept is also well known in the health sciences. It is embodied in the
practice of futility studies, which are designed to eliminate drugs without
promise. A recent example of the use of futility studies for this purpose is
the exercise of narrowing the list of putative neuroprotective agents before
launching a major randomized clinical trial.3
The difference is this: whereas the surrogate "end point" in the case of
microchip development--the test chip failure--is well defined, its equivalent
in the health sciences is usually not. Most clinical trials fall back on an end
point that compares the extent by which a new drug or therapy extends life as
compared with the current standard treatment. Reaching this end point usually
takes a long time; thus, knowledge turns are slow. In many instances, a
scientist's career can continue only through 2 or 3 such turns. The result is
wide-scale experimentation with animal models of dubious relevance, whose merit
principally lies in their short lifespan. If reliable biomarkers existed that
track the progression of disease, their impact on knowledge turns and
consequently on the speed of development of treatments and drugs could be
Even though such biomarkers could have a profound effect on medical research
efficiency, biomarker development efforts seem far too low. Although precise
numbers are difficult to come by, in my estimation, in the microchip industry,
research into development, test, and evaluation methods represents about 10% of
total research and development budgets. This 10% is taken off the top,
resulting in less actual product development than the engineers, marketers, or
business managers would like. But an understanding that this approach will lead
to more rapid knowledge turns protects this allocation from the insatiable
appetite of the business. The National Institutes of Health (NIH) budget is
about $28 billion a year.4 It seems unlikely that anywhere near 10%--$2.8
billion--is spent on biomarker development.
A second difference between the microchip and health science industries is the
rate at which hard-fought scientific results are "brought to market"--produced
in volume in the case of microchips or translated into clinical use in the case
of medicine. A key factor in accelerating the movement of discoveries from the
research laboratory to marketplace (or from bench to bedside) is the nature of
the facilities in which translational work is performed. The world of business
has many stories of failures of organizational designs that impede technology
transfer. The classical research laboratory, isolated and protected from the
chaos and business-driven urgencies of production units, often led to
disappointing results. For example, when Intel started, the leadership resolved
to operate without the traditional separation of development from production,
which worked remarkably well for quite some time. Developers had to compete for
resources with the business-driven needs of production, but their efforts were
more than compensated by the ease with which new technology, developed on the
production line, could be made production worthy.
Today, an evolution of this resource-sharing principle continues in the
microchip industry. Dedicated developmental factory units are designed from the
ground up with the aim of eventually turning them into production units. They
are overbuilt for the needs of development, but once development is completed,
the facility is filled with equipment and people and transformed into a
production unit in a matter of months. Although overbuilding for the
development phase costs more initially, the savings in efficiency of moving
products to production more than make up for this initial outlay. Medical
facilities are designed for a variety of purposes, ranging from outpatient
clinics to surgical centers, from general hospitals to tertiary hospitals.
There is room for a translational hospital designed from the ground up with the
mission of speeding new developments toward usage in general hospitals. These
hospitals would be flexible, equipped for capability of extra monitoring, ready
to deal with emergencies--all extra costs but likely to be made up by the
resulting increase in translational efficiency. Some examples exist, such as
the NIH Clinical Center. Some cancer centers have adopted changes in hospital
design that are steps in this direction. However, much more needs to be done
before these designs are evaluated and an optimal approach is adopted and
proliferated throughout the health care industry.
When it comes to operational efficiency, nothing illustrates the chasm between
the 2 industries better than a comparison of the rate of implementation of
electronic medical records with the rate of growth of electronic commerce
(e-commerce). Common estimates suggest that no more than 15% to 20% of US
medical institutions use any form of electronic records systems.5 By contrast,
during the last 10 years, more than $20 trillion worth of goods and services
have been bought and sold over the Internet (A. Bartels, written communication,
e-Commerce started in the era of mainframe computers. It required specialized
software, created and owned by the participants (so-called proprietary
software). To link buyer with seller, each had to have the same software. The
software was expensive and difficult to modify and maintain. Consequently, the
use of e-commerce was limited to a few large companies.
The Internet changed all that. Computing became standardized, driven by the
volumes of substantially identical personal computers; interconnection
standards were defined and implemented everywhere. A virtuous cycle evolved:
standards begot large numbers of users, and the increasing numbers of users
reinforced the standards. It was easy to become part of an electronic
marketplace because it no longer required the installation of proprietary
software and equipment.
The early results were pedestrian: orders taken by telephone, manual data entry
and reentry, and the use of faxes were reduced. But the benefits were
spectacular. Costs and error rates plunged. Small- and medium-sized companies
rushed to join the electronic marketplace, necessitating the development of a
standardized software code that would translate information from one company's
system to that of another, the computing version of the Rosetta stone.
Although the computer industry is fairly fragmented,6 the health care industry
is even more so. Like the computer industry, health care is a largely
horizontally organized industry, with the horizontal layers representing
patients, payers, physicians, and hospitals, as well as pharmaceutical and
medical device companies. Standard ways of interconnecting all these
constituencies are crucial. The good news is that the desire to increase
internal productivity has led to at least partial deployment of information
technology within the companies of many of the participants. Further good news
is that the physical means of interconnecting the many participants already
exists in the form of the Internet.
The bad news is that with the exception of a few, large, vertically integrated
health care organizations, in which participants from several layers are
contained in 1 organization (as is the case with the Veterans Affairs
Administration and Kaiser Permanente), the benefits of electronic information
exchange are not necessarily realized by the participants in proportion to
their own investment.7 The industry faces what is called in game theory the
"prisoners' dilemma" all members have to act for any one member to enjoy the
benefit of action.
Such collective action often requires external stimulus. The year 2000 problem
(ie, "Y2K") was an example of such a stimulus, causing the near-simultaneous
upgrade of the worldwide computing and communications infrastructure. Although
its ostensible benefit was the avoidance of a digital calamity at the turn of
the century, its greatest benefit was in readying thousands of commercial
organizations for the age of the Internet and e-commerce.
Even though the task facing the health care industry in developing and
deploying the crucial "Rosetta code" is much smaller than the task of getting
ready for 2000 was, external impetus is still needed to catalyze serious
action. The National Health Information Infrastructure Initiative8 demonstrates
some desire to encourage progress along these lines.
However, what is needed to cause the industry to act is customer demand. The
largest customer--approaching half of total health care spending9--is the
Medicare system. It seems that the entire health care industry would benefit if
Medicare mandated the adoption of a Rosetta code for the health care industry
before institutions were granted permission to participate in Medicare
There are signs that individual consumers may be taking matters into their own
hands. The proliferation of companies providing personal health record
services10 is an indication of such a movement. This phenomenon has all the
makings of becoming a disruptive technology.11 Disruptive technologies, usually
initiated by small businesses that are new to the industry in question, can
force widespread defensive actions by the much larger industry incumbents. In
this case, inadequate response by the incumbents could lead to some of the
emerging providers of personal health record services becoming the owners of
the customer relationship--a development of considerable strategic significance
to all such businesses.
The health care industry in the United States represents 15% of the gross
domestic product,12 and bearing its cost is a heavy burden on corporations and
individuals alike. The mandate for increasing its efficiency--in research,
translation, and operations--is clear. History shows that whatever technology
can do, it will do.
If not here, where? If not now, when?
Corresponding Author: Andrew S. Grove, PhD, Intel Corporation, 2200 Mission
College Blvd, Santa Clara, CA 95054 (Andy.Grove at intel.com).
Financial Disclosures: Intel Corporation manufactures microprocessors and other
types of microchips that can be used in health care information technology.
Author Affiliation: Dr Grove is former chairman of the board of Intel
Corporation, Santa Clara, Calif.
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disease neuroprotection futility studies. Ann Neurol. 2005;57:197-203.
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turns hard in 2005: R&D funding update on R&D in the FY 2005 NIH budget.
Available at: http://www.aaas.org/spp/rd/nih05p.htm. February 20, 2004.
Accessed June 20, 2005.
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Information Technologies. New York, NY: Manhattan Research; April 12, 2005.
Available at: http://www.manhattanresearch.com/thepulse2005.htm. Accessed June
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Health Care Financ Rev. 2004;25:143-166.
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June 20, 2005.
11. Christensen CM. The Innovator's Dilemma: When New Technologies Cause Great
Firms to Fail. Boston, Mass: Harvard Business School Press; 1997.
12. 2004 CMS Statistics . Baltimore, Md: US Dept of Health and Human Services,
Centers for Medicare & Medicaid Services, Office of Research, Development and
Information; 2004. CMS Pub No. 03455. Available at:
June 20, 2005.
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