CIO Speaks – Episode 10: A Conversation with David Chou of Constellation Research

Guest

David Chou is a healthcare industry leader in the digital space. David is the VP, Principal Analyst of Silicon Valley based Constellation Research, Inc. Chou has held executive roles with the Cleveland Clinic, Children's Mercy Hospital, University Of Mississippi Medical Center, AHMC Healthcare, Prime Healthcare, and is also advising many academic medical centers and healthcare start-ups.

David is a dynamic keynote speaker and industry commentator working with clients to transform their business models using technology. He has spoken around the world at healthcare tech-related conference including keynotes for leading industry events and intimate executive settings. Chou is also one of the most mentioned CIOs in the media and well quoted in outlets such as the Wall Street Journal, Modern Healthcare, HIMSS Media, ZDNet, CIO.com, Huffington Post, and Becker's Healthcare. David is an active member of both ACHE and HIMSS while serving on the board for CHIME.

Transcript

Steve Ginsberg: Hi, David. Thanks for joining us today.

David Chou: Thanks for having me, excited to be here.

I wanted to ask you, having held both roles, how do you view the positions of CIO and Chief Digital Officer?

I view the CIO–I'll call it the 2.0 version. They really need to think about digital first, whereas you’re starting to see a lot of organizations that have both a CIO and a Chief Digital Officer. I'm seeing a lot of that use case there, and that's because the CIO has traditionally been viewed as a back office, keeping the lights on, making sure [that] infrastructure is ready, while the Chief Digital Officer is really trying to build new business policy utilizing the technology. I would say most aspiring CIOs [are] probably thinking they're trying to fill both roles, more so than ever trying to become that Chief Digital Officer rather than the traditional brand of a Chief Information Officer.

How do you see the two roles working together?

‘Working together’–that's a really tough one because unless you have a CIO with the personality of... they really want to focus on keeping lights on and are okay with the infrastructure, I don't see the two aligning well in any organization. There's usually some sort of hierarchy where either the CIO reports to the Chief Digital Officer or the Chief Digital Officer reports to the CIO.

When you see it in an organization where they're peers or one above the other in the hierarchy, it doesn't work out too well because there's too much overlap. For example, the Chief Digital Officer needs the core foundational infrastructure that the CIO has traditionally been accountable for to be in tip-top shape to really drive these initiatives. Some of those foundational elements, if they're not there–then the digital officer cannot drive and execute. I would say it really depends on the structure, but if they're peers, it's a really hard structure to work out well from an organization perspective.

That makes a lot of sense. Any advice from what you've seen on who's better to have on the top of the food chain, whether it's better for the CIO to report to the CDO or vice-versa?

I would say forget about the title. Let's just focus on the personality and let's focus on that individual who is aspiring to lead digital initiatives and that individual who has the aspiration to realize that their technology investment–they make that a competitive advantage versus other organizations. I would say if you have that talent and you have that aspiration for a single leader, then designate them to lead the digital initiatives regardless of the title.

If you don't have that, I think that's what happens when you see an organization go out there trying to recruit a Chief Digital Officer thinking that one individual miraculously is going to transform their organization where in reality, it does not happen that much because one, the individual's not going to be able to do much and that one individual coming in, they're probably not going to have a big team either, and they have to build it up. It's a really hard dynamic for a lot of CEOs out there trying to just pull in this one miraculous individual to solve that digital challenge and drive the transformation.

That sounds like great advice. What learnings from healthcare do you think organizations should consider for organizations that are not in the healthcare field?

I would say the fact that healthcare is a 24x7 business, you really learn and take some of those lessons learned from that vertical. Obviously we're dealing with people's lives, so we cannot tolerate any mistakes. A mistake may actually have an impact on life or death. Taking some of those lessons learned, some of those initiatives, some of the approaches, I would say that may be an area to learn from healthcare.

It's also highly regulated, so a lot of requirements that may or may not be applicable to other industries. On the flipside, I want to say healthcare can learn a lot from other industries as well, specifically in the retail sector, how retail drives the brand stickiness, consumer engagement. That's really a big thing that's happening in healthcare. I would say vice-versa; healthcare can also learn a lot from other verticals as well.

Is there something from the data technology specifically in that area that you feel is most promising coming out of healthcare or going the other way?

Data technologies, I would say are pretty consistent[ly] vertical-agnostic. Every organization, every vertical, they're trying to figure out how to become data-driven. They want to figure out how can they use data to make decisions better versus trusting their gut intuition. I would say regardless of the vertical, everyone's trying to focus on how to do that.

But I would say the retail side has done a better job in terms of understanding consumer behavior. That's where healthcare as an industry moves towards the model of keeping patients out and promote wellness and drive a healthier lifestyle. You really have to understand this patient/staff/consumer a lot better, and that's where the healthcare vertical can learn so much from a retail perspective as far as understanding its whole person approach.

Sounds like you are seeing healthcare companies starting to deploy that type of technology?

Yes, there are a lot of CRM technologies out there tailored toward healthcare. I would say most healthcare organizations are trying to figure out what is the right tool set to help them. There's the challenge. Most health systems and healthcare providers, hospitals, they have on average between 450 applications to 1,000-plus. One of the things that really needs to be known is really application portfolio rationalization. They need to really look internally first to understand some of the overlaps and then understand which one of their current tools can be that platform or do they need to make another investment.

That's a struggle that I have seen even personally as a CIO for various healthcare situations as well. We're managing so many different things. Generally having the large enterprise platform on top, while it makes sense, is just challenging. I've seen lots of healthcare platforms out there to drive consumer engagement, to drive what we call population health, which is focusing on this whole person engagement and wellness. That's where the future of healthcare is moving towards, and there are a lot of solutions for the buyers to really select and choose from.

It's interesting. I think that organization sprawl in terms of technology is something that a lot of CIOs face across the board these days. Then I think organizational challenges can be for the CIO's role some of the toughest pieces to actual changes in how the organizations themselves are structured. I saw that at the University of Mississippi Medical Center, you consolidated large organizations into a single one. I'm curious what were the motivations for that and then what were the more interesting parts of the process?

That was a very unique organization where they allowed me to consolidate the three verticals of healthcare: the health system, the hospitals and clinics; research, which is a big component of the academic medical center; and the higher education–to activate the technology over all three areas. I would say that is the right approach because when you look at other academic medical center systems, they usually have a CIO over each vertical.

What happens is at the top level, at the vice-chancellor as they call it or the chancellor layer, they allocate budgets equally or sometimes to all three verticals. Then you're always competing for dollars to do stuff, rather than trying to create the synergy among all three areas from a technology aspect, or some places that even have it where one area, whether it's higher education, there's the technical foundational component. They become a reseller of technology to the other verticals.

You see these different interesting models where the majority of times, the executive leadership team, they're just fighting for dollars just to do stuff. The fact that they allowed me to consolidate, it really at least took that budget allocation time that I would have to spend away and I could focus more on delivery. That was a great move from that standpoint in terms of organization, governance, and trying to maximize the investments so I could scale out to the other verticals.

Any insight for the audience on how to manage communications during such a big change?

Oh, that is a tough one, because in these organizations, historically, and even now, most of the decisions are done by committee. I would say the I in the Chief Information Officer should really stand for ‘influence’ because the majority of my time out there was trying to influence a decision. Even decisions that you thought would be very simple, I would have to gain executive buy-in and support from all the various verticals. A lot of my time was driving decisions and influencing new behaviors, so I would say the advice is understanding the details of this political landscape and work their way to navigate and drive influence and overly communicate. I think that's what it comes down to. Even a simple decision that you would think would be a slam dunk requires a lot of effort.

That sounds like the challenge, indeed. Among other things, you focus on enjoyable workplace for employees. In your view, how does that work and can it be consistently done within an organization and between organizations?

Oh, definitely. The key is to make sure you're driving initiatives or projects that get folks excited. Here's the reality: people wake up and go to work and if they don't feel energized, then they're not going to drive value. No one wakes up to do a bad job, everyone wants to wake up in the morning and get to their profession and do a great job. Number one, you have to entice them with extremely exciting projects that's in line with what their personal aspirations and their personal interests are. Number two, you need to reward them. I would say thinking about those two factors on the people side is very crucial to employee engagement and making sure you have a workforce that's jelling.

Most of the work on the executive leadership side is really how do you get people to work together; how do you get them to function as a team; how do you break down silos; and most importantly, how do you make sure they're spending a lot of fun times at their job? That's where they are the majority of their day–is at work, so figuring out where you can make it a fun event is crucial.

In your mind, is that in addition to the alignment of the work is also that enjoyable activities at work that are not specifically work-focused, or is it really just about getting the work and doing it in a pleasant way?

Oh, definitely just doing it in a pleasant way. Yes, you can set up a lot of different social activities outside of work just to ensure that the teams get to know each other. In certain large enterprises, you try your best effort to make that happen, but it's hard to scale. You have a 30,000 employee workforce, how do you get everybody engaged outside of work with busy schedules unless it's at a departmental function? You can do that from a department aspect outside of work. It's really important: how do you create those great environments? Internally, you get the entire enterprise on the same page.

What qualities are most important in the people that you're seeking?

The ability to really learn or the willingness to learn, I would say that's the most important aspect. We are always reinventing ourselves in this industry; technology's always changing. Healthcare's changing. Combining the two [into] healthcare technology, it's always evolving, and you have to be extremely flexible. You have to be willing to learn, take on new skills. I'll view the role of the CIO; the role today is going to be different three years from now. It'll be different five years and ten years from now. As a professional, you need to really seek that self-learning and evolution standpoint. That's what I look for in employees who have that drive, that willingness, and who can really think outside the box.

Your current work involves advising companies on how to maximize their technology investments while they're digitally transforming their operations. What are some of the most important pieces of that?

The most important piece of that is the reality is the executives that we work with within our network are so busy with the day-to-day that they don't have the time to understand what's reality in the market. They either get upsold the wrong information, or they hear a sales pitch and really need validation. That's where we come in is: provide that validation for our executive network, and we provide them a guidance as far as where they should be thinking about two, three years ahead. That's a value from our executive network.

We also work with the vendor side. On the vendor side, they have great solutions but what they're missing is they don't understand the operational factor. For example in a hospital system, they don't have the knowledge of hospital operations. What is the clinicians' workflow? What happens when a supply chain runs–they're out of stock or how's that impact nurses? What is the workflow in day-to-day operations? That's where we help the vendors’ side from an operational perspective.

I would say I get the luxury right now of working with both sides to create this ecosystem because I really want to see the healthcare vertical make that transition and have some sort of true disruption because the industry has not changed much. I really want to create an ecosystem where patients have access to care conveniently and from a technology side, that's where it can really enable that. I'm a big believer and am passionate about the work that we're doing just because I'm able to see both sides of the worldnow, from a vendor's perspective and also from a buyer's perspective.

On the companies themselves on the healthcare side, are you seeing movement to the public cloud? How are they viewing cloud across SaaS and also compute?

The cloud has won everywhere. Personally, I've always been a believer in ‘cloud first.’ The reality is: a lot of these healthcare enterprise applications are having challenges getting into a public cloud environment and then become a SaaS offering. The reason why they can't get into a public cloud environment easily is because there are a lot of legacy enterprise systems that were not born cloud-first. That would require these companies to rewrite the entire code and really start from scratch, and that's a very hard ‘ask’ for businesses that have been profitable for the last 20, 30 years to go back and rewrite their code just to be adaptable to public cloud.

We're seeing the trend as new systems come out, they're always going to be a cloud-first model, a SaaS offering. Unfortunately, the majority of the healthcare enterprise applications have been traditionally on-premise but we are starting to see a shift toward a SaaS offering. I'm curious to see what's going to happen in five, ten years from now whether everything is going to either be SaaS or cloud model or hopefully nothing happens where everything reverses the other way because cloud's going to get very expensive.

Most folks, they may get to a point where they say “No, this is a lot more expensive than hosting it on premise, even though you get all the agility and the scale things,” and then we see that transition back down [to on-]premise. I hope that never happens, but I would not be surprised. It feels like we've seen this wave of application going from mainframes to hosted models and back on premise and now back to SaaS or move to the cloud. It's an evolution back and forth.

We certainly see some examples of companies whose AWS bills or similar are quite high. There are some surprises for companies that are not planning around managing costs in the cloud. I'm wondering: since you're describing the healthcare providers moving into essentially a hybrid world, if you think that they're generally managing that transition well–moving into a hybrid cloud with some on-premise than having some SaaS applications or some public cloud?

Yes, they're definitely managing. It is really a challenge to even migrate. Just think about an on-premise enterprise system. Now you're migrating to either a SaaS or a public cloud. That migration's not easy, and that migration can cause a lot of headaches. Think about when you move toward a cloud multi-tenant environment. The client where the organization, they're traditionally used to managing their own downtime, something as simple as downtime, now because they're in multi-tenant environments, the vendor provides the time for them to schedule downtime.

As a hospital, that's a very hard thing to adapt [to] and requires a lot of communication. Let's just say our enterprise ERP system has a scheduled downtime twice a week whereas traditionally, the hospital only had a downtime once a month just to do maintenance and so forth. Now you have to tell the nurses: “Twice a week at this time, we're going to be down so adjust your workflow.” That downhill impact operationally is one that most organizations do not appreciate or understand unless they have gone through it. That's also from a vendor perspective. That's something they should also think about when they're scheduling updates, things of that nature, where the deal is routine, but not really as routine just because of the impact they have. Hospitals are transitioning to the hybrid cloud, but they're still learning and they're still maturing their operating model.

That's a great point to raise, as you say, both for customers and vendors about how they think about maintenance and schedules and how on the customer side, they think about what's mission-critical in that way. We do try here at GigaOm to advise people to really think, as they move to cloud, what is the SLA they really need and are they getting that proper SLA? I'm wondering as you look at all of this, what do you think is the most valuable thing or things that CIOs and their staff should be working on in 2019?

2019, what we're seeing is there's still a lot of catch-up, unfortunately. I think people are focusing a lot on data to try to get their data solutions in place, number one. Number two, most are still trying to get their infrastructure up to date. When I look at almost every healthcare provider organization and health systems, their infrastructure's not up to date. There's just never been a big investment for them where they've kept it going, but now as security heightens, you have to have the proper hardware and infrastructure in place to have the right security protocols. They have to secure their environments, so because it has been so under-invested, now people are trying to play catch-up. Those are the two main themes from a foundational aspect.

Then of course, people are trying in healthcare to figure out how can they understand this whole-person engagement. ERP's a hot area that's coming up as well in healthcare just because every hospital organization has been so focused on the clinical system the last eight-plus years they neglected the back office. Now the back office is due for an upgrade, and they're looking at ways to cut costs and be more efficient. That's a major trend as well. Those are some of the major trends that we're seeing in healthcare for 2019.

That's really interesting. I guess given your comments earlier, you're seeing a fair amount of cloud ERP introduction, not just on-premise ERP.

It's only cloud now. Most of them don't offer you the option to host it yourself unless you're still a legacy platform. If you're not moving towards the latest ERP platform out there, they're either a SaaS model or in the public cloud. You don't have an option anymore.

Maybe one final [question] on the security point of view, what are you seeing as the most interesting part of the trend there in terms of what they need to catch up, maybe what the biggest challenge is for healthcare providers or how they're responding to these things?

One of the biggest challenges is, most of the breaches happen due to human mistakes and human mistakes by internal employees. It's not because someone externally is hacking into a system. It's the lack of education, awareness, or let me put it in a different way: the emphasis on education, awareness for security.

Security's an issue everyone needs to be involved with, and it should be high on everyone's radar. In the hospital world, there's a lot of focus on hand-washing from a hygiene perspective. I would say security has to be just as urgent in terms of education as hand-washing. That way, you can keep the internal workforce knowledgeable for making mistakes. I would say that's a big focus, and that should be the top focus.

Number two is start building a true IT security program. Historically, organizations have done their annual audits and what they have done is they get these audits in; there's gaps. They're just checking off the boxes to close out the audit and they think they're compliant. They're not building a security program, so I would say the two recommendations are: educate your employees on security; number two, build out this security program versus checking off boxes for audits.

That seems like great advice for healthcare companies and from what I know and beyond, I think a lot of enterprises are in that place, as well. David, I really want to thank you for joining me today and sharing your perspective and your insights with our audience.

Thanks for having me, glad to be here.

Take care. Thanks, everybody.