Youngjin Yoo: We Are Entering a New Age of Digitalization

Professor Youngjin Yoo of the Weatherhead School of Management at Case Western Reserve University.

The healthcare industry sits at the brink of a new era of digitalization, according to Weatherhead School of Management professor Youngjin Yoo. He should know. As founder and director of Case Western Reserve University's groundbreaking xLab—an initiative that partners with companies to develop and launch digital innovations—Yoo specializes in design and innovation initiatives with a particular focus on digital transformation.

Yoo's extensive research includes examining ethical artificial intelligence (AI), digital health and organizational genetics. He is constantly searching for new subjects to explore, a passion he chronicles through his blog. His past consulting clients include Samsung Electronics, LG, Goodyear, Sherwin Williams, Progressive, Moen, Ford Motor Co., University Hospitals in Cleveland, Poly One, and the Department of Housing and Urban Development.

We spoke with Yoo about the transitional period digitalization is undergoing and the development's ramifications on the healthcare industry.

Digitalization has transformed the world economy. Where are we in the digitalization process?

I think we have ended one era of digitalization and are entering a second era, which should continue for a while. I don't know how long, but I think we're moving into a new era.

Let's take a step back. How did human economic systems evolve? How did homo sapiens become the dominant force on Earth?

We did it through three main tools. First, we understand how to shape physical material to build technical objects that extend and amplify our physical ability. Second, we create organizations and communities to mobilize our collective energy above and beyond what individuals can do, amplifying our ability. Third, we create meaning out of our technological objects and our collectives.

Other animals can use tools and collectives, but humans are unique in our ability to create and give meaning to both technology and our collectives in ways that other animals cannot. The combination of these three was quite powerful in mobilizing our forces to accomplish whatever we want to do.

I see business organization as a particular form of collective, created with the aid of technology over the past several centuries, enabling us to enhance the quality of life for all humans. We can extend our lifespans, create more food and enjoy greater comfort. All this occurs through distribution systems and creative systems—economic systems, that is—which largely govern Western society and the majority of the world.

Technology and the way we organize the world have grown intricately related over the last 250 years because we create value and organize ourselves through the lens of technology. The Industrial Revolution constitutes the first stage of this process. Physical machines, like the steam engine, transformed natural energy into productive energy to enable much more work than any individual could accomplish on their own. These machines were expensive, which led to an organizing form that dominated our economy over the past centuries, well into the 1970.

Next comes the emergence of smart machines—here, I draw on the work of the sociologist Shoshana Zuboff. She talks about computers, where digitalization begins. Companies started using computers as early as the 1950's. At that point, technology was divided into different tools for computing, communication and production. Remember, computers still weren't connected. That started to happen around the late 1970’s with local area networks, accelerated with the internet in the 1990's, and then exploded in the 2000's with smartphones. That has an unintended—or unanticipated—result: computers connect large numbers of people and start collecting vast amounts of data.

That brings us to the first decade of the 21st century and Google, Facebook and similar companies. At this point, the amount of data coming in for technology to digest and use explodes. Users want to search, they want to connect, they want to share information. Search engine optimization, digital media-based targeting and retargeting—these things start to happen because of the convergence of computing and communication technology. With billions of smartphones, suddenly everyone has communication technology with computing power that is equivalent to the old generation supercomputers in their pockets that are always-on and always-connected to the internet.

As a result, people's ability to communicate with one another completely changed the nature of the information that we get from the internet. It created this open-ended technology, which I would call the organic machine. Previously, computers performed the same way each time you pushed a button.

That's no longer the case. We have crowd-sourcing and artificial intelligence. With billions of connected devices constantly producing new data, now we have the basic ingredient of an organic machine. An organic machine is a machine that does not repeat itself twice. All living organisms do not remain the same. They change all the time. Organic machines are just like that. Google search engine does not give you the same search results twice. Facebook does not show you the same timeline twice. Why? Because we get bored easily. We want to be distracted and entertained. These organic digital services give us something different each time we interact with them. It's compelling. Four companies in this sector—Google, Apple, Facebook and Amazon, GAFA for short—were the first to reach trillion-dollar market capitalization.

This sets up the end of the digitalization era 1.0 and the beginning of the next era, 2.0. I think it holds even bigger market opportunities for businesses.

How will the digitalization 2.0 era be different?

First, the public is growing increasingly dissatisfied with the negative externalities of the reigning formula employed by GAFA. These companies don't respect human data ownership, data portability and privacy, and people are fed up with that. They're beginning to say, "I want to get my control back." These companies are trying to extend their grip on the world with a patchwork approach. Google is introducing differential privacy, for example.

Second, 2.0 will focus on the convergence of digital technology and physical machines: that is, the production tools we use to build physical products and the physical products themselves. Until recently, cars and utensils and home appliances and roads were physical entities with no intelligence or communication capacity. Now we've learned to embed digital technology into these physical tools, and that's generating a lot of data. The data is not just coming from activities in the online space anymore. It's not just what I type, what I share, and so forth, but also what I do in real life. Everything I do generates data that is valuable to someone. The Internet of Things (IoT), 5G and all the ubiquitous sensors and data technologies create a richness and dimensionality of data far beyond what was previously imaginable.

These physical machines are becoming a part of organic machines. Your car isn't going to do the same thing twice. It will learn your driving behaviors and assess others' driving behaviors. It will factor in changes in the Earth's rotation. In the end, it will have a different understanding of your transportation needs every day. That's 2.0.

It remains to be seen how the big players, how GAFA, fit into that picture. They operate on a 1.0 model, and their infrastructure reflects that. It's not easy to just unwind. Facebook spends $20 billion each year merely on upgrading infrastructure. Apple makes something like $1,500 per second doing business the way it does. How do you reverse that? Having a lot of money helps, but it's still difficult.

How does one lead in this new business environment?

How do you manage change? It's not just a matter of executing a right-answer formula. If that were the case, there'd be no need for managers and leaders. That's where management education, like the one offered through the Online MBA with a Healthcare Management Track at Case Western Reserve University, becomes essential.

Leadership is challenging. Anyone can understand what's the right thing to do. The challenge comes when that right thing involves something that a large number of people in your ecosystem, including your employees and investors, may hate. Your task as a leader is to persuade them to do what they may not want to do but what is absolutely necessary to be done in order to thrive in the next phase.

An effective leader figures out where an organization needs to go, which requires strategic choices. Then they need to implement the plan in a way that others will accept. Digital transformation will require many such decisions. We seek to train leaders who will thrive in that environment.

What is the most exciting new development in healthcare?

Incredible innovations are taking place. You can program individual robots the size of nanoparticles to enter your body and perform specific tasks based on the program reacting to your body's unique makeup. It sounds like science fiction, but these things are already being done in animals.

Digitalization 2.0 is going to be far different than 1.0 in healthcare. It's not going to end with predictive and prescriptive analytics. We're going to close the loop by delivering therapeutics. It's a significant change.

Finding the right business model will present a challenge. In digital technology, the biggest healthcare opportunities lie in helping us live better before we get sick. The current business model—fee-for-service—is designed to serve us once we get sick. There's no business model for interventions that keep us healthy or that prevent us from getting sick in the first place. So there has to be radical innovation in that area.

What course will you be teaching in the Weatherhead School of Management Online MBA?

I'm teaching "Digital Innovation in Healthcare." We've talked about how companies, whether startups or hospitals or insurance companies or device managers, can be part of the coming changes in the healthcare business. How can they create innovation that could fundamentally change the way healthcare service is delivered to make us all live longer and healthier? That's what we'll examine in my class.

The healthcare industry is rapidly transforming as digital innovations facilitate newer and better diagnostics and treatments. These changes will impact healthcare management as dramatically as they affect healthcare delivery. If you want to advance the healthcare business as it undergoes this latest transformation, an Online MBA with a Healthcare Management Track from Case Western Reserve University's Weatherhead School of Business can help you achieve your goal. Why not apply today?

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