Mar
25
On Co-creation and Procreation
Filed Under B2B, Big Data, Blog, data analytics, Financial services, Industry Analysis, internet, Reed Elsevier, Thomson, Uncategorized, Workflow | Leave a Comment
A few days have gone by and I have read a great deal of commentary on the merger of IHS and Markit. It has been interesting to see the various hopes expressed for a dynamic future, the justified faith in valuations borne of data and analytics, the readings of the leadership tea leaves in analytical circles and the various interpretations surrounding the decision to move the tax base to London. All good stuff. But it leaves me puzzled about the questions not asked and the analysis not performed. I have known IHS since it was a Thyssen Bornemiza company years ago, aligned with search engines of the 1980s like BRS. Seeing it then as the Information Handling Services outsource for the aircraft industry of Denver (think taxonomy when we called it thesaurus!) I have watched it grow at least once before out of control, re-niche itself around energy and engineering, and then regrow again in wild acquisitive profusion. Likewise I have watched Markit’s lusty growth, it’s move into data markets (recall DataExplorers) and its competitive issues with Bloomberg and Thomson Reuters.
So, what I wanted to know from the commentators was fairly basic: Does this mean that the IHS rapid acquisition strategy has failed? Is this a portfolio company that, once again, needs weeding and reconcentrating? Will that be done more effectively in London than in Denver? Does this mean that the strategy of buying high value, profitable operations and keeping them in their niches is at an end? When they decide which business areas they want to centre upon, will they create a new data platform, concentrate all of their data from these currently unrelated companies, and begin again on new product development in co-operation with their clients?
And the questions go on. Does this mean the end of using acquisitions as a way of goosing the share price and a return to strategies based around organic growth? Does it suggest a strategy that returns to the old portfolio ideas (it’s never raining everywhere), or, hopefully, is there a Thomsonesque idea here of a Markets company, with the glue not corporate law and compliance, but a specialization in the energy and engineering sectors, the former especially being of great interest and a wider concern for all corporates at large. So does such a strategy foreshadow a bid for Thomson’s IP interests, now available, which would cement a traditional specialization of IHS in industrial documentation from standards to patents? And having just swallowed IPIS, the oil pricing service, can they let Argus Media, now on the block, go to a competitor with similar strategic aims (like Verisk, owner of Wood Mackenzie). (Perhaps, since it will probably go to private equity, this should not disturb a night’s sleep!).
Nature abhors a vacuum! Since I have no answers to hand from managers or analysts, I may have to supply some of my own. IHS owns many stunning properties. But it really does need to get them onto one coherent platform, along with the user data and profiling that has arisen from their historical usage, and get into the service provision mode of co-creating new services in conjunction with their clients. They need no more than two “broad niches”, and Markit can well cover the market focus of those – sell everything that does not fit these niche definitions. Bring third party and Open niche data onto the platform in order to become once more the focus of user service creation efforts – I have already written at boring length on the flawed decision to sell GlobalSpec. Use the business models that give greatest returns for the greatest amount of user reliance and loyalty – business models are not religious beliefs. Above all, think carefully about new product development. Your data is vital: your productisation of it as of now is less so. Your brands are valuable but they are not static either, so you need to be able to extend them across new services built co-operatively with your customers.
And is there room for such a strategy? And who is doing it? Well, a class example would be Lexis Nexis Risk in the insurance vertical. Thomson Reuters are slowly moving from Portfolio Mode to Corporate Market Services mode (corporates as investment vehicles plugged into a service base of law, tax, risk and compliance). Does Bloomberg see it or not? Bloomberg Law and BNA says they buy some of this – but neither of the large markets players, by their small investments in data (New Energy Finance, Point Carbon etc) has put themselves in anywhere near the position now occupied by Markit in energy markets. How that positioning is deployed and how successful it is could be the key to consolidations as yet un-imagined.
Above all, success will depend upon how effectively these players can co-create with users who know and trust them and procreate new product development. The start-ups cannot be relied on to work quickly enough on seed corn funding. The conglomerates cannot simply wait for start-up trial and error to succeed and buy the results – and then not integrate them into their own operations. If we as an industry cannot get this right- then our users will do it for themselves!
Feb
18
Clinical Killing in Ann Arbor
Filed Under B2B, Big Data, Blog, data analytics, Financial services, healthcare, Industry Analysis, internet, Publishing, Thomson, Uncategorized, Workflow | Leave a Comment
What is the difference between the value of a database company in 2012 and then, forty-three inflation-free months later, in February 2016? According to IBM Watson Health, who have just bought Truven Health for $2.6 billion from Veritas Capital, who bought it from Thomson in 2012 for $1.25 billion, a neat 100%. Now, private equity is capable of wondrous things in short time periods, and Mike Boswood and his team are great managers and have made great strides with the company, but when things double in value over such a short period, other factors must be coming into play. Maybe there is a sudden perceived shortage of clinical evidence data in healthcare? Hardly seems likely. Fresh stuff is produced daily, and better recorded than ever before. The good folk at Hearst Business will be looking at the balance sheet valuations of Zincs and First Databank, and over at the BMJ, Clinical Evidence takes on a bright new gleam of interest. A gusher in Ann Arbor, Truven’s base, could float an awful lot of other boats.
But, just a minute, what is Truven Health Analytics? Well, at base dear old Micromedex, an indexing and recording database for clinical evidence. And is it sparkly and new? No, it’s about 40 years old. It records decisions and costs, centred on drug use, and has spawned great tools for doctors and hospitals its Formulary Advisor, Red Book and PDR Electronic Library are the tool sets that enable administrators and clinicians to know if they are using the right products in the right combinations at the right dosages and for the right price. Pretty valuable stuff then? Yes, it fully justified the price that Veritas paid in 2012. In earlier times it had been hard to deploy the data effectively – I remember initially encountering it on microfiche (use Google to look this up if you are under 50). When it was densely impenetrable. But Truven has, in recent years, added another word to its title. It is now Truven Health Analytics. And therein lies our tale.
Truven, I must be clear, does more than pure clinical evidence. Services like Marketscan or the patient information services support policy, administration and patient welfare. Its client roster begins with the 100 top US hospitals and includes another 8400 healthcare data buyers. Anyone entering the sector would love to get hands on its client list. So has IBM bought this as a prestige, flagship purchase? There is no evidence of that. Watson Health has made three acquisitions already. Phytel and Explorys have been with them for ten months, and the most recent, Merge Healthcare, cost a mere billion dollars. However, this is the first large data play they have made, and one of the key issues here is probably people – one thing that IBM would have been short of in healthcare was sector data scientists, curators and architects. Now it has a whole cadre. And yet, a 100% price hike?
So let’s get back to that Analytics word that has added itself to the Truven name. Truven, I learnt four years ago, stands for a concatenation of “trusted” and “proven”. Neat, eh? Health is Health. And Analytics… stands for a burgeoning ambition to turn analysis into solutions. The use of the word in the company name was, I suspect, a sign post pointing towards a destination. But for IBM it represents an arrival point – where they now are and intend to be. The coming together of Watson and Truven is thus the wheel hitting the road, or the data hitting the fan. It had to be a big price, if it is to carry the weight of problems solved, solutions created, revolutionary productivity gains and quality hurdles surmounted. You could call this the marketing price, securing not so much the value of Truven but the power and importance of what happens next at IBM Watson Health.
Yet I still have two niggling reservations. One concerns healthcare data. It’s a sector famous for data profusion. All that stuff so arduously recorded and so expensively stored in administrative systems built to withstand the storms of litigation by insurers and patients. If Truven and Hearst can collect it at source, why couldn’t IBM? If IBM is creating a big data solution, then the highly organised and structured databases of Hearst and Truven are a drop in their ocean. Why not lease the data, already becoming commoditised, rather than owning it? We come back to all those data scientists but by now they are beginning to sound like very expensive staffers.
And my final concern, of course, is for my friends and colleagues at Thomson Reuters. Mercifully the trustees of the Woodbridge Trust, beneficial owners of 53% of that company, are supremely unlikely to read this blog, but surely they will find out at some point that an asset their management disposed of in four years ago has doubled in price in the intervening period. They will then reflect that their managers are currently selling Thomson Reuters Science and IP. In patent information and in science citation indexation, these are two of the most data rich information companies in the market place. As ever, it seems that Thomson Reuters want to sell both units together, always looking at a clean deal with low fees. But what if a private equity player should buy them, split them up and add the word Analytics on the end of each – and then sell them for double the purchase price. Thomson Reuters only has one shareholder who matters but that would not entirely reduce the mutterings about valuations and returns. In fact, someone in the City is probably running some analytics on it right now!
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