case study 783

In the Healthcare Business In 2014, CVS made headlines when it decided to ban tobacco products from stores. Despite projected annual revenue losses of up to $2 billion, CVS believed this was an important step in shifting consumers’ perceptions of who it is as a company. Rather than being identified as a national retail chain, CVS wanted its brand to be known for helping people lead healthier lives. With the healthcare industry placing a greater emphasis on improving outcomes, reducing chronic diseases, and controlling costs, CVS saw an opportunity to more effectively enter the health space and differentiate itself from competitors. CVS believed that removing tobacco products would cement its strategic commitment to health and wellness. CVS continues to deliver on this goal today in several ways. To more accurately brand its position, the company has adjusted its corporate name to CVSHealth. CEOLarry Merlo sees the name change as a way to double down on the organization’s mission.

Management has also made significant investments in technological innovations that offer CVS several sources of sustainable competitive advantage: CVS Pharmacy App: This serves as the hub of the consumer’s digital healthcare experience. App users can set medication reminders, scan a picture of their insurance card, and scan prescription labels to trigger auto-refills. Aimed at increasing compliance with prescriptions to medications, these tools ensure patients get and stay on the proper treatment. IBM Partnership: CVS is working with IBM’s artificial intelligence software program, Watson, to prevent health crises before they happen. By analyzing medical utilization and patient behavior data to predict which customers are potentially at risk and may need medical interventions, CVS is able to serve its customers more effectively. Telehealth Pilot: As site of care expands beyond the physician’s office, CVS is piloting telehealth capabilities that allow patients to interact with providers from their homes. Additionally, brick-and-mortar MinuteClinics may offer virtual consultation options in the near future. CVS’ significant investment in digital solutions has led to usability among approximately one-third of its customers, and adoption is expected to continue to increase. Perhaps more importantly, it has helped the company reposition itself as a serious player in healthcare and to build a foundation for solid future growth.

Questions: What type of value does CVS Health offer to the market? Was it necessary to ban tobacco from its stores to make this strategic move? What strategic synergies should CVS Health exploit to improve its effectiveness in this market?

Sources: Margo Geogiadis, “How Clorox, and CVS Health are Winning Micro-Moments,” Think with Google, June, 2016,… Mark Brohan, “Exclusive: Q&A with Brian Tilzer, Chief Digital Officer of CVS Health,” Mobile Strategies 360, May 9, 2016,… “Message from Larry Merlo, President and CEO,”… “CVS Caremark Announces Corporate Name Change to CVS Health to Reflect Broader Health Care Commitment,” September 3, 2014,… “CVS Health to Partner with Direct-to-Consumer Telehealth Providers to Increase Access to Physician Care,” August 26, 2015,… Bruce Japsen, “CVS and IBM’s Watson Cloud Pursue Ways to Predict Patient Health,” Forbes, July 30, 2015,…

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