Retailer CVS made big headlines several months back when it announced that it planned to cease selling all tobacco products. On September 3, the company made good on that promise ahead of schedule. CVS said that it would forego the short-term revenue from tobacco and related products as part of its expanding health care business. In fact, the American Medical Association and other groups had long been pressuring CVS and its competitors to resolve the perceived conflict between selling products harmful to public health while also dispensing medication and other health-related products and services. Ending tobacco sales would be the right thing to do, argued critics.
Did CVS simply cave to these outside groups? No. CVS pursued what we call “the simultaneous solve.” That is, they are forging a path that marries social and economic returns where doing the “right” thing for stakeholders is also doing the smart, strategic thing for the business. CVS is best known for its pharmacy business but it also operates CVS/Caremark, a large pharmacy benefits management company and several hundred walk-in clinics. It also has more than 40 formal affiliations with hospital systems and other health care providers. As the healthcare delivery landscape evolves, there will be significant opportunities for the company to play an expanded role with its customers and strategic partners, potentially increasing convenience, decreasing costs, and improving outcomes. It can only realize this potential, however, if more consumers, doctors, nurses, hospitals, and health insurers perceive them as true health care partners and not simply the local store that happens to have a pharmacy.
“CVS is really trying very hard to position themselves as the winner in that marketplace,” said Skip Snow, a health care analyst at Forrester Research. “If they can be perceived as a place to go to receive health care, and buy health care products, as opposed to the place to go to buy a bottle of whiskey or get your film developed, then they can capture more of the retail medicine dollars.”
This multi-stakeholder approach will require foregoing some short-term revenue in service to cultivating long-term growth and value creation. That is the kind of trade-off that Higher Ambition companies are willing to make. Delivering health care requires high levels of trust particularly when offering non-traditional products and services; earning that trust is easier when there is clarity of strategic identity and alignment of values with customers, suppliers, and other stakeholders. Executives clearly came to the realization that selling products with proven public health risks created dissonance that had to be resolved. As further evidence that there changes represent a fundamental commitment to this new direction and not simply an opportunistic testing of the waters the company has changed its name to CVS Health. One suspects that there are other significant changes ahead as CVS management adapts to the changes resulting from Affordable Care Act and the continuing disruption to and evolution of the larger health care system in the United States.
To date, Walgreens, Walt-Mart, and other major competitors have not answered the CVS move.
Image credit: By Calmon1 (Own work) [CC-BY-SA-3.0], via Wikimedia Commons