Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?

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ecosystem

  • The Current State of Electric Vehicles Part 4: Current Electric Vehicle Offerings

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    Now let’s take a look at the characteristics of the current offerings of electric vehicles across manufacturers, which are presented (above in Figure 2 and) in Figures 4 and 5.

    Figure 4

    Figure 5

  • The Current State of Electric Vehicles Part 5: The Costs of Manufacturing Li-ion Batteries

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    This section examines the structure of costs associated with manufacturing Li-ion batteries for use in electric vehicles.

    The battery packs used in electric vehicles consist of numerous individual batteries connected together and packaged into modules, which are then connected together and packaged into battery packs.  David L. Anderson, in “An Evaluation of Current and Future Costs for Lithium-ion Batteries for Use in Electrified Vehicle Powertrains” explains this process in a bit more detail:

    [F]or automotive applications, individual cells are typically connected together in various configurations and packaged with associated control and safety circuitry to form a battery module. Multiple modules are then combined with additional control circuitry, a thermal management system, and power electronics to create the complete battery pack…

  • The Current State of Electric Vehicles Part 6: The Future of Electric Vehicles

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Part 1 we learned that the essential factors at issue when considering batteries for use in powering electric vehicles include (i) the amount of energy that can be stored, (ii) longevity, (iii) cost, and (iv) safety.

    In Part 2we learned that (i) theearliest EVs (hybrids) used NiMH batteries, due to their greater safety, longer life, and lower cost; and (ii) two factors led to the industry-wide adoption of Li-ion batteries as the battery family of choice for electric vehicles: (a) their potential for greater vehicle range, and (b) patent access problems to NiMH battery technology.

    In Part 3 we learned that (i) current EVs use Li-ion batteries because they offer the greatest potential energy capacity and density; (ii) Li-ion batteries include a family of batteries composed of different materials; (iii) the cost of the battery is the largest cost component of electric vehicles; of the battery costs, the most significant contributors are the costs of the raw materials, which vary greatly in price; and (iv) different material constructions of Li-ion batteries generate differences in battery performance, where the ranking of battery potential from least to greatest is (a) LCO (1st gen) and LMO (2nd gen), (b) LFP (3rd gen) and NMC (4th gen), and (c) NCA and LTO.

    In Part 4 we learned that information on current EV offerings provide three indications: (i) many of the current EV offerings are “compliance cars”; (ii) the performance of most EVs is clustered around similar levels of energy capacity and range; and (iii) the battery manufacturing industry is consolidating around a few key suppliers.

    In Part 5 we learned that (i) high quality control standards for the manufacture of batteries for EVs result in low manufacturing yields, on the order of about 60%; (ii) materials account for about 75% of total manufacturing costs of batteries for EVs; and (iii) cost reductions in the manufacture of lithium-ion batteries may be achieved through larger scale production volumes and technological breakthroughs.

    Putting it all together yields the following insights.

  • The US Healthcare System Is Massively Complex and Massively Interconnected 

    Consider how the different groups of players in the healthcare system are connected to one another:

    hc game

    Healthcare Industry Trends

    Trends in society and in the healthcare industry over time have led to 

    • Increases in medical information 
    • Increases in numbers and specialties of service providers
    • Increases in numbers of available medical devices and pharmaceuticals
    • Increases in malpractice attorneys and healthcare regulations
    • Consolidation of payers
    • Consolidation of providers
    • Increases in consumer access to healthcare insurance
    • Increases in incidences of chronic disease in consumers

    All these trends in the healthcare industry have led all the different sets of players to become more interconnected to one another in their actions and payoffs. As players become more interconnected, small changes to one piece of the system increasingly ripple through and affect all other parts of the system. In other words, you cannot change one part of a system without that change rippling through and causing changes in other parts of the system.

    The healthcare system has become an intricately interconnected web of players. Furthermore, each player acts in seemingly perverse ways — given his particular set of incentives — to optimize his payoffs. Actions in one of the system lead to unexpected outcomes in other parts of the system.

  • Understanding the Evolution of IoT and What Will Be Important for Success

    The IoT Ecosystem Contains a Vast Array Of Components

    The Potential Value of Iot Will Increase Exponentially Over Time

    Barriers Are Currently Impeding Adoption of Iot

    How the Evolution of Iot Will Proceed

    Why Be an Early Adopter?

    What Will Be Important for Success in Iot?

     

    Introduction 

    Vasyl Mylko of SoftServe notes that the Internet of Things is emerging at the intersection of Semiconductors, Telecommunications, and Big Data, through the evolution of their respective laws (see Figure 1)

    • Moore’s Law observes that semiconductors have been achieving a 60% increase in computer power every year.
    • Nielsen’s Law observes that Internet bandwidth has been achieving a 50% increase in speed every year.
    • Metcalfe’s Lawobserves that telecommunications networks increase in value with the square of the number of nodes
    • Law of Large Numbersobserves that the average obtained from a set of data approaches the true value as the size of the dataset increases.

    Charles McLellan, in “The internet of things and big data: Unlocking the power,” describes more directly how the confluence of trends inspired by these laws is enabling the rise of IoT:

    A huge number of 'things' could join the IoT, whose recent rise to prominence is the result of several trends conspiring to cause a tipping point: low-cost, low-power sensor technology; widespread wireless connectivity; huge amounts of available and affordable (largely cloud- based) storage and compute power; and plenty of internet addresses to go round, courtesy of the IPv6 protocol…

     

    Figure 1

    1 iot intersection

  • Why Are Healthcare Costs So High? - Part 1

    Underlying Issue

    Trends in Total US Healthcare Expenditures

    Trends in Personal Healthcare Expenditures

    Trends in Healthcare Expenditures by Condition

    In Sum

     

     

    Underlying Issue

    The total annual costs of healthcare paid by each individual is the sum of the healthcare premiums he pays and the out-of-pocket costs he incurs:

    Total Cost of Healthcare = Insurance Premiums + Out-of-pocket Costs

    Roughly speaking, the annual insurance premium an individual pays is the average of the total annual costs paid by his insurance company for the healthcare costs incurred by all individuals in his (age) group. What this means is that if the healthcare costs of one individual rise, then that individual does not bear the full burden of the costs increase, but rather, the burden is shared by all members of the group. This is the very nature of risk-pooling, and it works fine when all the members in the group face the same risks.

    Out-of-pocket costs for healthcare depend on the type of coverage an individual has, plus the amount of healthcare individuals use.

    Moving on, the amount of healthcare an individual will use/need during the year depends on several factors:

    • Genes: People will end up using more healthcare services to the extent that they have “bad” genes.
    • Luck: People will end up using more healthcare services to the extent that they have bad luck or are otherwise accident prone.
    • Lifestyle: People will end up using more healthcare services to the extent that they have an unhealthy diet, don’t exercise, smoke, don’t take safety precautions (e.g., wear seatbelts), or otherwise lead more risky lifestyles.
    • Compliance: People will end up using more healthcare services to the extent that they don’t comply with their doctors’ recommendations (e.g., take medication, lose weight, stop smoking, etc.)

    Obviously, people can’t control whether they have bad genes or bad luck. However, they can control the type of lifestyle they live and whether they comply with their doctors’ recommendations.

    This begs the following question: To what extent are healthcare costs attributable to factors that people cannot control (bad genes and bad luck), as opposed to factors that they can control (lifestyle and compliance)?

    Most people would probably agree to have society (government) subsidize healthcare costs associated with factors people cannot control. However, to the extent that people choose to not control those factors over which they do have power, then to what extent should society be responsible for subsidizing those people’s higher healthcare costs?

    Clearly, the issue becomes more important as the costs of healthcare have increased so dramatically over the years.

  • Why Are Healthcare Costs So High? - Part 2

    Healthcare Expenditures Are Concentrated

    High-Cost Healthcare Users

    Causes of Common Chronic Conditions

    Addressing the High Costs of Healthcare

     

    In my previous blog entry, Why Are Healthcare Costs So High? - Part 1, I presented data indicating that

    • US healthcare expenditures have been increasing over time (see Figure 1 below reproduced from my previous blog entry),
    • There seems to be a shift during the 1980s, in which annual personal expenditures on healthcare started increasing at a faster rate (see Figure 1 below reproduced from my previous blog entry),
    • Healthcare expenditures for treating the top 20 medical conditions account for 75% of expenditures captured in surveys of healthcare expenditures for hospital inpatients, patients treated in physicians’ offices, and prescription medication, and
    • The increases in spending for the top 20 diseases are due mostly to increases in the number of people being treated for (chronic) diseases, rather than to increases in per-patient costs of treatment (see Figure 2 below reproduced from my previous blog entry).

    In this blog entry I examine the distribution of healthcare spending across different portions of the population.

     

  • Why Are Healthcare Costs So High? - Part 3

    Factors Contributing to Rising Healthcare Expenditures Over Time

    America’s Weight Problem: Increasing BMIs Over Time

    Changes in Society Causing Increases in BMI over TIme

    The Rise in Healthcare Expenditures is a Consequence of America’s Weight Problem

     

     

    In my last two blog entries, I found that

    Part 1

    • US healthcare expenditures have been increasing over time,
    • There seems to be a shift during the 1980s, in which annual personal expenditures on healthcare started increasing at a faster,
    • Healthcare expenditures for treating the top 20 medical conditions account for 75% of expenditures captured in surveys of healthcare expenditures for hospital inpatients, patients treated in physicians’ offices, and prescription medication, and
    • The increases in spending for the top 20 diseases are due mostly to increases in the number of people being treated for (chronic) diseases, rather than to increases in per-patient costs of treatment.

    Part 2

    • Healthcare expenditures are concentrated, where the Top 5% of Users account for over half of total healthcare expenditures
    • the Bottom 95% of the population is paying roughly twice as much for healthcare services than they actually use, where the difference is going to subsidize the Top 5% of healthcare users, and the Bottom 70% of the population is paying seven times as much as they use, where the difference is going to subsidize the Top 30% of healthcare users.
    • The high-cost healthcare users are people with multiple, chronic conditions, including coronary artery disease, diabetes, congestive heart failure, and chronic obstructive pulmonary disease.
    • At least seven of the top ten medical conditions that account for the majority of healthcare spending can be at least partially prevented and/or mitigated by factors under the control of individuals, namely, weight control, eating habits, drinking (alcohol) habits, activity levels, and smoking status.

    In this blog entry I examine how changes in society over time have led us to where we are now, with so many people suffering from chronic medical conditions.

  • Will Adoption of Electronic Medical Records Live up to the Promise?

    Proponents of electronic medical records (EMR) claim their full-scale adoption will lower the costs of providing healthcare, improve the quality of healthcare, and save lives.

    For example, in 2009, ABC News reported

    In the latest step toward the computerization of Americans' medical information, President-elect Barack Obama said in a speech Thursday that the government will push for electronic health records for all Americans within five years in order to save both dollars and lives.

    "To improve the quality of our health care while lowering its cost, we will make the immediate investments necessary to ensure that, within five years, all of America's medical records are computerized," Obama said in a speech from George Mason University in Fairfax, Va. "This will cut waste, eliminate red tape and reduce the need to repeat expensive medical tests."

    "But it just won't save billions of dollars and thousands of jobs; it will save lives by reducing the deadly but preventable medical errors that pervade our health-care system," he said.

    Will electronic medical records actually live up to these promises?

    An analysis was undertaken to examine all the various plusses and minuses – in terms of costs, quality of care and efficiency of care – electronic medical records are expected to achieve and have been found to have achieved with their implementation in the US.

    This blog entry provides a summary of the actual/expected gains and losses found and answers the question posed above as to whether or not adoption and use of EMR systems will reduce medical errors.

    A full copy of the report is available here for download.