On December 3rd 2017, New York times ran an article stating CVS’s intent to purchase Atena for a record price of $69 billion dollars. This deal would combine the drugstore giant with insurance capabilities of Atena. This in my opinion marks an important event, for disruption in US Healthcare. Here is my understanding of events, and why I feel this will trigger more events. I belief the next company to make a major impact in Healthcare is Walmart.

1. Wal-Mart Stores Inc.
702 S.W. 8th Street, Bentonville, Arkansas 72716, USA
NYSE: WMT
General Description
The goal of Wal-Mart (Walmart) is to help people around the world save money and live
better – anytime and anywhere – in retail stores or through their e-commerce and mobile
capabilities. They strive to create a customer-centric experience that seamlessly integrates
digital and physical shopping experience using innovation. The digital shopping experience
includes their website and mobile applications, while the physical shopping experience includes
their brick and mortar stores. Although they started in US they are an international brand with
presence in 27 countries. Each week they serve nearly 260 million customers, who visit their
11,000 stores under 72 banners and e-commerce websites in 11 countries. They do business in
3 reportable segments - Walmart U.S., Walmart International and Sam's Club. 1
Figure 1
1
Wal-Mart 2017 10K (http://stock.walmart.com/investors/financial-information/sec-filings/default.aspx)
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy

2. Although, Walmart was incorporated in Delaware in 1969, but the actual business started in
1945. Sam Walton founded the first store in 1945 in Newport, Arkansas while his brother
opened a similar store in Versailles, Missouri in 1946. The time-line chart above gives a
historical perspective of their development till 20142
. In 2014, Forbes released an article stating
Walmart’s goal to become the #1 healthcare provider in the industry3
.
US: Health Care Industry
The total size of US healthcare market is about $3 trillion
4
. US health care industry is very
fragmented and the eco-system is made-up of complex relationships between Providers
(Hospitals, Physicians, etc.), Payers (Insurance companies), Pharmacies, Tech-players,
Pharmaceuticals, employers and finally the patients.
Figure 2
2
Wal-Mart 2017 10K (http://stock.walmart.com/investors/financial-information/sec-filings/default.aspx)
3
https://www.forbes.com/sites/dandiamond/2014/10/06/walmart-announces-ambitious-goal-to-be-the-number-
one-healthcare-provider/#8c9b7a35be11
4
https://www.beckershospitalreview.com/finance/17-fascinating-statistics-on-the-current-state-of-us-healthcare-
spending-finances.html
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy
Page 2

3. Situation: Innovation @ Wal-Mart
Walmart is one of the very innovative companies of our time. Over the period of last 50
years they have successfully diversified their consumer segments, added new product lines and
harnessed the power of technology to serve the customer. In 2014 Walmart has put forward an
audacious goal to
become the #1 health-
care provider.
However, they have
invested and are
preparing for this for some years now. In 2006 they started the $4 prescription for up to 30-day
supply of commonly prescribed dosages.5
After that they piloted care clinics, vision centers,
pharmacy mobile apps and insurance in partnership with directhealth.com6
. The picture below
shows the different areas in health care that Walmart has invested in.
In this section we analyze Walmart’s innovation strategy, using a frameworks provided
by Dr. Clayton Christensen. There are 3 main theories that are most applicable to Walmart’s
situation – Jobs To be Done, Organizing for innovation and managing a disruptive scope. Jobs
to be done framework.
Before we go to these frameworks, I believe the innovation type Wal-Mart is doing is
“Low End Disruption”. This is because – its an new entrant in an already existing market. It is
5
https://news.walmart.com/news-archive/2006/09/21/wal-mart-cuts-generic-prescription-medicines-to-4
6
http://www.slate.com/articles/business/moneybox/2014/10/walmart_and_health_care_partnership_with_direct
health_com.html
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy
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4. utilizing its already existing infrastructure (stores, online web and mobile) technologies to
provide discount prices to win business at Low End Market.
According to the framework “Organizing for Innovation”, Resources, Processes and Profit formula
determines what an organization can
or cannot do. In the figure, I have
aligned Wal-Mart to this formula. Their
resources have been used to
innovation. They set-up Walmart
Labs, to create their competence in e-
commerce followed by mobile
applications. In order to get into health
care they have started to do a variety
of things as you see on figure 3. One
of my recommendations to Walmart
CEO will be to start a new business unit – Wal-Mart Health if they have not already done that.
Wal-Mart should maintain a disruptive scope, which means even if they are able to temporarily
successful, they should keep disrupting. They have 2 interdependencies with their core business:
Functional Interdependence is due to their utilization of store location, and Marketing or Brand
Interdependence, since the customers believe in their customer centric focus. The health-care
industry as I show in figure 2 is very complex and digital health is becoming a new reality. Thus,
in order to be number one, my second recommendation to the Wal-Mart CEO will be to keep
innovating and maintaining a disruptive scope.
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy
Page 4

5. Recommendations
Wal-Mart is playing at a variety of segments of health-care ecosystem, if we map their
presence to figure 2, US Health Care System, we will see that they are trying to be an
entrant in – Provider, Payer, Employer (since they employ 1.4 million people in US) and in
Retail Pharmacy.
I feel their situation is like that of GM’s On-Star 7
when they started, they are trying to focus
on everything with their concierge service. However, Wal-Mart may be different given their
7
https://hbswk.hbs.edu/item/lessons-from-running-gms-onstar
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy
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6. structure and international reach. If Wal-Mart truly believes they can do this well, they should
create sub-business units within their Wal-Mart Heath, mapping to the US Health Care
ecosystem. If the company continues to follow the current path, then their core business
profit formula will interfere with the new business where they are entrant. Also, health care is
very complex, which needs experienced resources both in domain and ability to run this unit
as a start-up. They are not truly focused on any one segment of US health care ecosystem.
Business Segment: Wal-Mart Health
Wal-Mart’s 2016 10K1
does not talk about the business unit Wal-Mart Health. One of my
recommendations to start with will be to create a separate reportable business segment with
a separate P&L and structure. Within this business segment, Wal-Mart could create sub-
business units for provider, payers and pharmacy. They can also, look at the other large
health care conglomerates such as Kaiser Permanente8
. Before this change of creation of
sub-business units, they
should determine if they truly
would like to be in the
provider space or their
announcement was meant to
be number one in health care period. Their actions of be in insurance exchanges with 7000
plans and partnership with Direct Health signals they want to be in payer space as well.
8
https://en.wikipedia.org/wiki/Kaiser_Permanente
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy
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7. Purchase or Merge
Wal-Mart’s 2016 Balance Sheets as shown in 10K1
shows they have more than $9 Billion in
cash and cash equivalent. In order to emerge as a leader I feel they should look for purchasing
businesses that are cutting edge in health care. Together with their reach to the customers and
a cutting edge business unit they can improve their foot hold in the industry.
Source: Walmart 10K
Focus on Digital & Analytics in Health
Wal-Mart has its own e-commerce digital business unit – Walmart Labs. Within the Walmart
Labs they could create a digital health initiative, starting with the development of some app
which is a FHIR9
based product. This app can be integrated to their existing pharmacy based
mobile application.
9
https://www.hl7.org/fhir/overview.html
Walmart in Health Care
An Innovation Strategy Story
by Taposh Dutta Roy
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8. Implementation Risks
Walmart is one of the large companies of our time. They a huge network of stores and
customers both in US and internationally. US health-care is one of the complex ecosystems
in the world. If Walmart does not follow the new business unit recommendation and carry on
with their existing system. The core business will always overshadow the new innovation
idea. Other bigger companies such as IBM that has similar interests and have expressed
that by purchasing Truven Health10
will lead this market. The incumbent health industry
veterans might rise into their digital and analytics initiatives and lead this space.
Conclusion
Walmart has a unique opportunity. It has the necessary Resources, Processes and Profit
Formula to achieve their goal to be the #1 health care provider in US. I believe following the
principles and recommendations laid out here, will certainly focus Walmart to the right
direction.
Author’s Note:
Taposh Dutta Roy, leads Innovation Team of Decision Support at Kaiser Permanente. These are his
thoughts based on the Walmart’s announcement and industry analysis. These thoughts and
recommendations are not of Kaiser Permanente and Kaiser Permanente is not responsible for the
content. If you have questions Mr. Dutta Roy can be reached via linkedin or taposh.dr@gmail.com
10
http://www-03.ibm.com/press/us/en/pressrelease/49474.wss
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An Innovation Strategy Story
by Taposh Dutta Roy
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