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Rethink Baseball : Kyruus Case

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    “At the bottom of the Oakland experiment was a willingness to rethink baseball: how it is managed, how it is played, who is best suited to play it, and why. ” “First came radical advancements in computer technology: this dramatically reduced the cost of compiling and analyzing vast amounts of baseball data. Then came the boom in baseball players’ salaries: this dramatically raised the benefits of having such knowledge.

    ‘If we’re going to pay these guys $150,000 a year [1977] to do this…we should at least know how good they are’… If this sounded compelling when baseball players were getting paid $150,000 a year, it sounded one hundred times more so when they were paid $15 million a year…” — Michael Lewis, Moneyball1 Graham Gardner, CEO of Kyruus, looked around the room at his executive team. The room included the leaders of the technology, analytics, product, marketing and legal divisions of the company.

    He and his co-founder, Julie Yoo, were firm believers in hiring exceptional people with varied backgrounds and then empowering them to collectively steer the company in the right direction. This was exactly the situation for which he needed such a team. The company was preparing for the next Board of Directors meeting in the spring of 2012 and the team had a number of key decisions to make. The group was in agreement that Kyruus needed to identify the ‘killer app’ for the company. What was up for debate was how to manage the company’s resources as it identified and pursued its most promising customers and markets.

    Gardner and Yoo had founded Kyruus in August, 2010. (See exhibit 1 for management biographies. ) The company’s vision was to optimize how organizations worked with their physicians’ networks. It provided data and analytics about physicians to multiple customers (e. g. hospitals, payers and pharmaceutical companies) to help those organizations understand and manage both the risk and value of their networks. Since inception, the company had gathered information about the 800,000 physicians working in the U. S.

    The data included information about each physician’s education, licensing, publication and patent history, interactions with industry, as well as prescription and medical device utilization patterns. ________________________________________________________________________________________________________________ Senior Lecturer Robert F. Higgins and Research Associate Penrose O’Donnell and Mehul Bhatt (MBA 2013) prepared this case. HBS cases are developed solely as the basis for class discussion. Robert F. Higgins is the chairman of the board of directors of Kyruus.

    Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www. hbsp. harvard. edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

    This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib 813-060 Kyruus: Big Data’s Search for the Killer App Kyruus had already developed and sold its first product, a regulatory compliance software package, to some of the leading academic medical centers. It was in negotiations to sell the next version of the product to three other major hospitals. The product helped academic institutions abide by regulations governing how physicians interacted with industry.

    Preliminary market research indicated that a number of other buyers were interested in physician data. Hospital CFOs indicated that Kyruus could help manage their revenues and costs better by focusing on patient “leakage” from their system. Pharmaceutical industry executives expressed interest in Kyruus developing more targeted marketing strategies. Constituents throughout the healthcare industry were excited about Kyruus’ ability to help them improve their businesses. Strategic Challenges In fact, the excitement from potential customers was one of the challenges now facing Kyruus.

    The data set fueled myriad applications. The team was willing to work frantically to design multiple products for different healthcare verticals. However, it was becoming difficult to integrate product, engineering and sales teams across numerous products. As much as Gardner wanted to pursue multiple verticals, further doing so would increase Kyruus’ burn and might cause the company to under-deliver to clients. As Gardner listened to his team debate their strategy, he realized Kyruus had three options. First, Kyruus could concentrate on the regulatory compliance market.

    This option allowed the team to focus on a small client base of academic medical centers while perfecting the market positioning and product features for this audience. The company was beginning to develop real traction in this market. The American Hospital Association (AHA) had recently endorsed Kyruus’ solution for meeting compliance requirements (see exhibit 3). Pursuing the compliance market was the least risky option. However, it arguably had the most limited upside and some internal executives questioned the ultimate size of this market opportunity.

    The company’s second option was to expand its reach within hospitals. Kyruus could develop tools for physician network development and patient referral operations. Early conversations with hospital CEOs and CFOs suggested that optimizing patient referrals was a top priority for hospitals. Reducing “leakage” of patients to other institutions was expected to significantly impact a hospital’s bottom line. The market potential for this product was sizeable, and expected to be far larger than the compliance market.

    The team still had much to learn in order to develop and sell the referral and network products. Finally, the company could put more weight behind selling to the life sciences industry (e. g. pharmaceutical, medical device and diagnostics companies). Several team members felt that the budgets of these organizations were much larger than hospital budgets and that the shorter sales cycles made them logical clients. Kyruus had already developed a few products that were well received by industry sales forces, and many on the Kyruus team saw this channel as a potentially very profitable market.

    Underlying all these options was the fundamental question of whether, when, and how to engage physicians themselves. During the first year of product and market development, Gardner and Yoo had chosen to serve hospital administrators in the management of their physician staff. However, Gardner was a big fan of “feedback loops” and suspected that the optimization of physician performance would ultimately require the direct engagement of physicians through Kyruus’ technology platform. He knew they would only get one chance with doctors – any errors in the data could mean the instant loss of credibility for Kyruus.

    As he listened to his data scientist describe their latest progress, he wondered whether they should also be prioritizing applications for physician engagement as part of these three options. 2 This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib Kyruus: Big Data’s Search for the Killer App 813-060 Some team members clearly favored the first option. They noted that Kyruus had just started to develop some real momentum in this area, and the

    marketing team was developing an entire set of campaigns surrounding the recent AHA endorsement. Just as importantly, the data team had prioritized the acquisition and processing of compliance-related information – making this some of the most immediately usable information in the database. “We should nail our first product and our first market,” argued one of the team members as she looked at Gardner. “We have a completely unique and disruptive product for this growing market – succeeding here has to be our first priority.

    ” As was the style of the executive team, another member pushed back in order to drive the conversation. The hospital compliance market is a solid $50 million market and I agree that Kyruus is well on its way to providing an excellent product in this area. But, the real goal for our company is to identify the $500 million product. I worry that the compliance office is a difficult place to start if you want to expand into other parts of the hospital. As hard as it may be for the Kyruus team, I think we really have to prioritize our understanding of the patient referral market and aim our product team in that direction.

    In support of the second option, another team member reminded the group about some initial research the team had done on the referral optimization opportunity. “If we can help redirect 1% of the patient flow (flow that would otherwise be lost to outside referrals) for a $1 billion health care system, that translates into $10 million in revenues – revenues that may well flow to the bottom line because of the fixed cost nature of these hospitals,” he noted. “Given that many of these hospitals are operating on razor-thin margins, referral optimization is a ‘must-have’ for these medical centers.

    ” While the audience and product may have to be different, some team members felt that a referral optimization application was a logical extension of the company’s data asset and would allow the sales team to approach potential hospital clients from several directions. A third group argued for an even more aggressive approach: targeting the life sciences industry as well as hospitals. After all, hadn’t Gardner and Yoo designed the company to iterate quickly with multiple clients in order to identify the products that would have the most impact?

    One member of the team noted that the identification of referral management as a product had originated from conversations with a medical device company. In addition, the iPad application platform for referral management had first been developed for a medical device sales force. A broader customer base was improving their current products and gave them ideas for novel markets. “In addition to the revenues we can make from industry, we are also learning a tremendous amount by working with different stakeholders across healthcare.

    We have made tremendous progress and a lot of people are interested in investing in our growth – why not put the foot on the accelerator and build our team to meet the demand for our products? ” Gardner looked at the clock. It was a great conversation, but he and the team needed to make a decision to present to the Board. He had frequently drawn an analogy to “moneyball” – recalling how the sport of baseball had embraced statistics and analysis as the game evolved a generation ago.

    Gardner knew that Big Data represented a similar leap forward in technology at a time when health reform demanded a new level of insight on the part of hospitals, payers, and life science companies. But, should they focus on one lead application or was the “killer app” actually the underlying platform that drove a portfolio of products? And what about the doctors? Was the right answer the option that would drive the greatest use of the data by physicians themselves? 3 This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014.

    For the exclusive use of F. Habib 813-060 Kyruus: Big Data’s Search for the Killer App The Founders Graham Gardner Gardner was born in Boston to Scottish parents who had immigrated to the United States to pursue higher education. After his parents completed their studies, Gardner moved to Scotland with his family where he lived for two years. His father then accepted a job with a pharmaceutical company in France where they lived for 6 years, before moving back to the States. The eldest of 3 sons, Graham was surrounded by many family friends who were physicians and knew from a young age that he wanted to become a doctor.

    However, the conversations during dinner with his father about the impact of the pharmaceutical industry also implanted the realization that healthcare was broader than just practicing medicine and that physicians could make a difference in many ways. Gardner entered Brown University’s combined BA/MD program where he majored in History and Biology. Keen on exploring the various roles physicians could play in the medical field, he accumulated diverse experiences doing basic science research, working in the marketing division of a pharmaceutical company, and even doing some consulting during his summers in medical school.

    At the same time, Gardner loved the learning curve inherent in medical education and wanted to absorb as much as he could before leaving the clinical setting. He decided to enter an internal medicine residency program at one of the Harvard hospitals in Boston and there fell in love with cardiology. Cardiology training was very meaningful for me. In addition to the privilege of caring for patients’ lives, it was the first time that I began to realize that physicians were all different from one another. Until that time, I had always worried about the areas of medicine that didn’t “stick” with me.

    Cardiology had always come easily to me, but I spent all my time worrying about the kidney while I was an internal medicine resident because I was responsible for all the different aspects of someone’s health. Once I was a cardiologist, I was able to focus on what I did well. That had a profound impact on me. First, I became comfortable not knowing everything and even now, as a CEO, I am very open with my team and my Directors about what I do well and where I need support. Second, I realized that the more we could understand and leverage people’s strengths in medicine, the more we could deliver high quality, cost-effective care to patients.

    If we could “match” physician styles to specific patients and conditions, we could move the needle on trillions of dollars of healthcare spend while empowering physicians to do what they are best at doing. As his learning curve in medicine began to slow down, Gardner also realized that the best place to pursue his passions may lie at the intersection of business and medicine. Toward the end of my training, my parents moved to Boston so that my father could help start a new company with a long-time family friend, Bob Langer. That’s when I was introduced to the venture capital and entrepreneurial world.

    I couldn’t believe that people were actually paid to start companies and create things that hadn’t been there before. After many conversations with mentors, I decided then to go to business school in order to learn more about the business world and explore where I could potentially play a role. During my time at Harvard Business School, I worked at both Boston Scientific and Highland Capital Partners. I was very fortunate to get invited to join the Highland team after graduation and initially had every intention of being a traditional venture capitalist.

    However, during my first year there, I realized what an incredible platform Highland could be to actually form companies. You are sitting with a pot of gold, meeting great people, and thinking about the ideas that will shape the future. You have all the tools to create the next great company. 4 This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib Kyruus: Big Data’s Search for the Killer App 813-060

    While at Highland, Gardner helped to start Generation Health, a company focused on becoming a genetic testing benefit management company. After initially serving as a board member, he took on the role of Chief Medical Officer (CMO) during the company’s first year in order to help build out the clinical team and first generation product. During that time, he reconnected with Julie Yoo, a TA of one of his classes during business school. Given Yoo’s background in big data and thesis work in medical genetics, he asked her to come onboard as head of clinical informatics at Generation Health.

    The two worked closely over the next year through the acquisition by CVS Caremark. Julie Yoo Yoo was born to academic parents who began their careers as professors. Her father was a physicist and materials science engineer who spent several years leading research and development for a large Korean electronics conglomerate, before taking an entrepreneurial dive into a new venture towards the end of his career. Her mother was a linguistics major who taught English as a Second Language to students seeking to study in the U. S. While growing up, Yoo had wanted to go into medicine.

    When she was admitted to MIT, she enrolled as a Biology major. However, she happened to be in school during the dot-com boom of the late 90’s, so as she observed the excitement surrounding technology and software companies grow around her, Yoo thought she might try her hand in Computer Science. She ended up finding it to be a great fit for her love of problem solving, so she switched her major to Computer Science while also completing her pre-medicine requirements. During her college years, Yoo started taking on consulting projects with local start-ups to gain experience in application development and information architecture.

    In the summer after her junior year, she interned at Endeca Technologies, a venture-backed software company specializing in datadriven search and business intelligence for enterprises. 2 Thoroughly enjoying her experience there, she decided to join them full-time after graduation in a software engineer role, becoming the 37th employee at the firm. Over the course of her tenure at the company, Yoo was exposed to various industries, but her foray into the field of healthcare was the one that made the strongest impression.

    As Yoo explained: While working as a sales engineer at Endeca, I was exposed to various industries such as retail, financial services, manufacturing, and eventually healthcare. Healthcare was the one field where enterprise IT solutions that had demonstrated success in other verticals were not being readily adopted or successfully deployed. That posed a very intriguing challenge – what were the characteristics and nuances of healthcare and life sciences that might prevent the optimal use of data and technology?

    This question motivated me to explore this space indepth. Thus, after 6 years at Endeca, I decided to gain deeper expertise in the healthcare industry through the Biomedical Enterprise Program, a joint MS/MBA program at MIT and Harvard Medical School that offered exposure to the intersection of basic science, clinical medicine, and entrepreneurship. While there, I did my thesis work in the fields of genomics and personalized medicine, where there was a great deal of opportunity to commercialize big data solutions for both research and clinical applications.

    During this time, I picked up my practice of working with local startups, this time in the healthcare informatics and analytics space, and realized there was huge potential to appropriately utilize data to better help physicians and organizations that worked with physicians. Gardner tapped Yoo to join Generation Health (GH) after she completed her graduate studies. GH was looking for someone with a background in genomics and clinical applications of genetic testing to help payors set reimbursement policies for genetic tests. Yoo was a perfect fit. 5

    This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib 813-060 Kyruus: Big Data’s Search for the Killer App Founding Kyruus In the winter of 2009, Generation Health was acquired by CVS Caremark. 3 Highland Capital had realized a 6x gain on its investment in 13 months. Gardner left his position as CMO soon afterwards. As the genetic testing benefits field evolved, a large percent of its business was within oncology, and Graham felt that an oncologist should have the position of CMO.

    In early 2010, Graham returned to Highland Capital to resume his role as a venture capitalist. Yoo left Generation Health in July of 2010. She missed the flexibility and entrepreneurial spirit of a small organization, and was eager to explore new opportunities in the burgeoning Health IT and Analytics space. That summer, Gardner and Yoo got together to compare notes, and Yoo recalled: We agreed that most healthcare IT companies were simply laying the plumbing for data collection, and that there was a relative vacuum in the analytics space. No one was asking: ‘what does the data mean?

    ’ or ‘how can we use data to improve performance? ’ The healthcare industry was a tremendous producer of data, but a very poor utilizer of that data. We saw an opportunity to change that. In August 2010, Gardner and Yoo founded Kyruus. Kyruus’ goal was to help organizations optimize their interactions with physicians by being the leading provider of physician data and physician engagement tools. While some leading healthcare data companies were already examining discrete aspects of physician behavior (e. g. IMS’ physician prescribing data), none were bringing together all physician interactions in one place.

    Yoo described the ideal data set: Physicians are multi-dimensional professionals. They treat patients, conduct research, lead clinical trials, publish studies, work as consultants, get educated in different places, and train others as educators themselves. There are tons of data that describe all of these activities, but they aren’t easily searchable in a single place. The first step for Kyruus is to enable basic access to and navigation of the information for different stakeholders across the healthcare system. Before developing any product, however, they tried to understand the market for physician information.

    Gardner met with his contacts in medical device companies and hospitals to determine their needs. As it turned out, there was a big demand and high willingness-to-pay for information about physicians. As Gardner described: One of the things I had learned during my venture career was that companies that engaged with clients early on in their product development built things that the market wanted and generally had a better chance of success. So I went out and talked to anyone who would listen to me. After these meetings, Julie would then build a prototype to the company’s specification – that

    would spur further discussions and also signal our ability to respond to customer needs very quickly. That is how we got our first pilots. People were willing to tell us what they wanted and they were willing to pay a lot for it. While these conversations were informing a lot of different uses for physician data, the inspiration for Kyruus’ initial product came when Gardner and Yoo attended a pharmaceutical regulatory compliance conference in October, 2010. At the conference, Gardner and Yoo realized how central physician interactions were to the entire healthcare ecosystem.

    Kyruus could create a comprehensive data platform that organizations could use to manage risk and optimize value in the context of those relationships. Gardner explained: 6 This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib Kyruus: Big Data’s Search for the Killer App 813-060 We noticed executive after executive from the major pharmaceutical and medical device companies visibly shaken after their company had been slapped with severe penalties for illegal interactions with physicians.

    I knew that physician-industry interactions were essential for driving innovation in healthcare, but these companies were acknowledging that they simply didn’t have the data or the mechanism to engage with physicians in a transparent and compliant manner. We noticed a slew of law firms advertising their services, but there were no companies providing these organizations with data to drive compliant relationship management. That’s when Julie and I realized we were sitting on a transformational data platform that could optimize physician interactions with companies, hospitals, and each other. Background: Compliance, Healthcare IT and ‘Big Data’

    Physician-Industry Interaction: The Physician Payment Sunshine Act The Physician Payment Sunshine Act (PPSA) was one of the key provisions of the healthcare reform law (Patient Protection and Affordable Care Act) of 2010. 4 The PPSA mandated that all payments greater than $10 to physicians or hospitals from pharmaceutical, medical device or medical supply companies be reported to the government. Failure to report payments could lead to penalties of up to $1 million. 5 The impetus for the PPSA was a concern around the lack of transparency regarding the billions of dollars that physicians were paid by the pharmaceutical industry each year.

    While many of these payments went to support research, others wondered whether multiple interactions and/or financial relationships between the entities might create a conflict of interest in the clinical setting (See exhibit 4). One of the unfortunate side effects of this regulation was that academic medical centers had to deal with a public relations catastrophe. While many of these institutions had robust conflict of interest policies, most of them relied upon physicians to disclose industry relationships.

    The hospital compliance officers were now facing questions from journalists who were collecting information from pharmaceutical companies and publishing stories about physicians who were making large sums of money from life science companies. In many cases, the compliance officers at the physician’s academic institution were unaware of the interactions because they had not been disclosed, or because they had occurred in the time since the last disclosure cycle. Failure to adequately report potential conflicts of interest could threaten the federally-sponsored grant awards to institutions.

    At large institutions, these awards amounted to hundreds of millions of dollars annually. Collecting the information released by pharmaceutical companies was not easy. The companies were posting the data in different formats, referring to the same physician by different names (John Reynolds vs. Jonathan Reynolds, MD) and using highly varied terms to describe the nature of their physician relationships (See exhibit 5). Some academic institutions had begun to hire analysts to log into each company’s website and search through hundreds of thousands of transactions for their staff members’ names.

    This was neither a reliable nor a scalable solution. Kyruus’s Big Data approach was ideally suited for dynamically aggregating this information, “disambiguating” the physician identities, contextualizing the information, and then allowing institutions to benchmark themselves and their physicians with peer institutions around the country. Gardner and Yoo saw an opportunity to help institutions with data management solutions in the name of regulatory compliance. Studies had demonstrated that physicians often failed to adequately disclose their industry relationships – leaving them exposed to public relations and regulatory risks. 6, 7

    This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib 813-060 Kyruus: Big Data’s Search for the Killer App They saw an opportunity to collect data proactively and help physicians avoid reporting errors. At the same time, they could develop individual portfolios of professional activities that would contextualize industry interactions. Gardner and Yoo hoped that these comprehensive narratives would protect the reputations of physicians and institutions as they interacted over the long term with industry.

    7 Big Data “Big Data” refers to very large data sets that cannot be managed, organized or analyzed using traditional database software tools. 8 Data sets are ubiquitous, and their volume is increasing exponentially. Worldwide, 1. 8 zettabytes of digital information was created in 2011, with 35 zettabytes projected to be produced in 2020. a,9 Our capacity to store this data doubled every three years since 1980. 10 Troves of data were being collected across all industries. Facebook had 30 billion new items of content on its website every month. 11 Walmart processed 1 million transactions per hour, which were shared with a database containing 2.

    5 petabytes of data (more than ten times the amount of information in the books of the entire US Library of Congress). 12 One popular framework for describing big data sets is the 3V’s: volume (the amount of data produced), velocity (the speed with which the data is produced) and variety (the formats from which the data is derived, such as a database, blog, website, etc. ). 13 Analysis of large data sets aimed to produce better information about potential customers, develop innovative products and services, and help with decision making to reduce risks.

    14 Gardner and Yoo saw healthcare as a logical place to apply the benefits of big data. Gardner explained: One of my favorite definitions of Big Data is when data itself becomes part of the problem you are trying to solve. People didn’t need more data, they needed to integrate their existing data, look at novel intersections of information, and then use the learnings to drive better outcomes. Information about physicians, the key players at these institutions, was generally distributed across hundreds of different silos, including HR departments, credentialing systems, electronic health records, and supply chain databases.

    The data was stored in different formats and impossible to join with a simple join key. And yet, at the intersections of these data were critical insights that organizations could use to steer and optimize their operations. Healthcare IT Market There are four major pools of healthcare data: pharmaceutical R&D data, claims and billing data, clinical data, and patient behavior data. 15 The integration of such data had the potential to create immense value for all members of the healthcare value chain.

    16 There had recently been a government-sponsored push to incorporate information technology in the healthcare industry. The American Recovery and Reinvestment Act (ARRA) of 2009 set out to provide $20 billion in stimulus funding over 5 years to encourage use of electronic health records by physicians and hospitals. 17 In 2010, the healthcare IT (HCIT) market was estimated to be $25 billion. Of the various sectors in healthcare, the HCIT market was expected to have the greatest annual growth, greater than 10%, for the next five years.

    The pharmaceutical, medical device, and diagnostics markets were expected to have single digit growth. 18 a Zettabyte=270 bytes of information 8 This document is authorized for use only by Farhan Habib in Information Systems Development – Spring 2014 taught by Anna Sidorova from January 2014 to July 2014. For the exclusive use of F. Habib Kyruus: Big Data’s Search for the Killer App 813-060 Consequently, more VC funding was being directed toward the Health IT sector. In 2009, total U. S. venture funding was $21. 4 billion, of which $7. 73 billion was directed toward the healthcare sector.

    This had dropped 13% from 2008 when $8. 93 billion was invested. The median healthcare financing round in 2009 was $5. 9 million, also down from the previous year. However, funding to the HCIT sector grew from 2008 to 2009, from $363 million to $498 million. 19 Developing the Kyruus Platform Gathering Data On Physicians Gardner was confident that Kyruus could create the leading comprehensive physician data set. He described this first stage as “becoming the Bloomberg of physician information. ” A number of companies had been successful in providing informatio

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