New Business Opportunities  

01/18/02

Amy:

Your articles provoke thinking and action - they are helpful - and this one is no exception. I have couple of questions / requests.

1. Why " pharmaceuticals and healthcare (there is no cycle here--we always need them)"? What would bring about cycles here to make it more challenging in those sectors? 
   
   

2. What are your thoughts on Education and Transportation - Surface & Air? 
   
   

3. Who would put money in Transportation (surface and air)?
   

Dr. Sukumar Sikdar

Dr. Sikdar:

Thank you for your comments and questions.

1. 1. Healthcare and pharmaceuticals are generally non-cyclical (or at any rate, less cyclical) because the demand for healthcare and drugs doesn't depend on the state of the economy.  In fact there are some cyclical tendencies here, but they're longer term and harder to predict.

1. Changes in government policy that makes more or less money available for healthcare.
   
   

2. Changes in government taxation, research rules, or FDA new drug application processing that make it more or less economically appealing to invest in new drugs, new drug research, etc.
   

3. Long term demographic population changes (such as the current aging of America), requiring more health care (and more pharmaceuticals) over time.

2. Education is the other "cycle-proof" sector.  I left it out inadvertently.  It has some cyclical activity based on
   

   1. Demographic trends, like the baby boom.  They are always long term and very predictable.  For example, we know that someone is going to enter the workforce or college at least 18 years in advance.
      
      

   2. There is a counter-cyclical trend in education with respect to economic cycles.  That is, activity for college, graduate school, and vocational training all increase whenever there is a sharp decrease in employment.  It's something else to do. 

3. Transportation is more-or-less economically based (that is, how much we use is generally directly related to the level of economic activity).  There can be exceptions to this, created by government subsidized transportation activities, but this relates more to infrastructure building than to the use of the infrastructure itself and is more prevalent outside the U.S. than here.

I'm not sure what you mean by "who would put money into education and transportation?" 

	As an investment in technology in those sectors?
	As a technology investor focused on those sectors?
	As a stock market speculator?

Most large infrastructure software companies have some part of their business focused on education and transportation since both are large, important sectors.  Application software companies would focus on them if it was appropriate. 

If this was an investment question, I don't give stock market advice! 

Amy Wohl

Amy:

Thank you for your reply email.  By “put money” I meant long-term investment for that sector in totality – technology, infrastructure, business model and paradigm shift included – to really make an impact on that sector – and definitely not the transient stock speculation.

I am glad I asked those questions and your answers give light; I have a few more questions. The questions are from a long-term perspective.

1.  What do you see as a weakness in common – amongst Healthcare and Pharmaceuticals, Education, and Transportation? 
   
   

2. In a common way, how IT helped and hurt (= not helped)? 
   
   

3. Common in all 3 sectors, is there a “one thing” we must do/add; a “one thing” we must avoid/remove and a “one thing” we have and must keep?

Sukumar Sikdar 

Dr. Sikdar:

These are tougher questions, Dr. Sikdar, but I'll give them a try.

1. What do you see as a weakness in common – amongst Healthcare and Pharmaceuticals, Education, and Transportation? 

These are all big infrastructure investment sectors.  They require lots of up-front capital investment (land, buildings and/or construction, equipment, research).  The results of these investments are not guaranteed.  That is, there is no linear relationship between the amount invested and the reward -- luck, timing, disruptive change, may all make significant investments less valuable or not valuable at all.

Think of investing in a state of the art hospital before computing, in pharmaceuticals before antibiotics, in education at any stage (there are no guarantees here) or in transportation just before a new mode of transportation occurs (railroads in 1910, for example).

2. In a common way, how IT helped and hurt (= not helped)?

IT helps by providing information, a way to organize the information, and a way to navigate the information, seeking patterns on which to base decisions.

IT is not helpful when it focuses on trying to figure out how to use new technology (all of these market sectors, except possibly transportation, have done this) because it's new, rather than because it solves a recognized problem that has a high priority. 

3. Common in all 3 sectors, is there a “one thing” we must do/add; a “one thing” we must avoid/remove and a “one thing” we have and must keep?

One thing we must do or add:  Intimate Customer Communication (although we call customers patients in the healthcare applications, doctors in the pharmaceutical one, and students or teachers in education.)

One thing we must avoid or remove: Poor Service of any type

One thing we must have and keep:  Significant investment in technology (I'd argue that all of these segments do that). 

(back to top)