PegaWORLD: Medco’s Business Transformation

Kenny Klepper, president of Medco Health, gave a keynote on their business transformation, and how Pega has played a part in that. Personalized medicine is at the core of their strategy; that concept, plus their rapid change and growth through acquisition makes business agility a critical competency. They are looking at how to make medicine smarter through delivering pharmaceutical care as well as ongoing genetic research, particularly for patients with chronic and/or complex conditions. Since poor management of chronic and complex diseases leads to $350B in excess healthcare costs each year in the US, getting a better handle on this is important for the patients, for healthcare providers and ultimately (given the new healthcare bill in the US) on everyone in the country via tax burden. This isn’t about reducing care: it’s about making sure that the right people are getting the right care in order to prevent future problems.

Shifting focus to agile enterprises, he talked about the necessity of agility in order to address changing requirements, and to reduce operating expenses. He sees high operational expenses as an indicator of lack of agility in an enterprise, and hence agility as a primary way to drive down operating expenses. An agile enterprise needs to have a strong underlying technology platform to allow new applications to be built and deployed with a minimum of new investment: their architecture includes a data warehouse, a data management layer, data “fabric”, a service bus, and application frameworks on top of all of that. That provides wide access to information – no one needs to reinvent data access protocols, for example – and allows business applications to be built easily and quickly (using Pega) on top of the stack. As their business becomes more complex, expanding across lines of business and new markets, they are focusing on the common core processes across those lines, and aligning centers of excellence with those horizontal business processes, not just on lines of business or technologies. This shifts the “hot spot” issues from those processes into the CoEs (e.g., an order processing CoE), providing a single source for resolving problems in similar processes across the entire organization. This, plus the fact that they allocate budgets to the joint control of business and IT (redeploying many IT people to the business-focused CoEs), enables real business-IT alignment.

Klepper noted that the more legacy-bound that your organization is, the harder it is for individual operating units to achieve their goals, and the more conflict there is within IT for competing resources. Their focus, however, is on productivity: he considers that they get Agile methods for free by focusing on the ROI of reducing operational costs through the business applications that they create. To achieve this, however, a key focus for any change agent is on sustaining sponsorship: you can’t keep these initiatives going unless you can successfully sell them internally.

This wasn’t at all a technical talk on how Medco uses Pega; rather, it was a call to arms for the agile enterprise. I hope that some of the attendees, mired in legacy-bound conservative industries, got the message.

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