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Can CVS Survive?

CVS stock was down more than 10% with much larger volumes than the average, in just seven trading days (10/04/2017 to 10/13/2017).  The main reason is that Amazon is planning to enter pharmacy business. The whole market seems believe that Amazon will crash CVS, just like it did for some bookstores or retailers.

However, there is another possibility. If CVS leadership would do the right innovation and transformation quickly, CVS would not only survive from the competition with Amazon, but also could lead the business and industry to the future. This is not unreachable for CVS, because
1. Business: CVS has much more industry “know-hows” than Amazon in Pharmacy/PBM industry. This is the key difference from the cases of retail industry in which Amazon has been building up its “know-hows” in years before it can really crash some leading retailers or department stores.
2. Regulation: Pharmacy business has much more complicated regulations and rules than retail industry.
3. Timing: Amazon just started to enter pharmacy business. It will take some time (2-5 years) for it to know and transform the industry. This is the last chance for CVS to change and innovate effectively to lead the industry transformation, rather than to follow Amazon’s lead, so that it can win the competition.
4. Technology: All the emerging technologies enabling the innovation and transformation of the pharmacy and PBM business are open and available for any company, not just Amazon.
5. Partnership: Although Amazon has much stronger capability in utilizing technologies to innovate business, CVS can quickly gain the capability through working with top (technology & business) consulting firms, industry-specific consulting firms and other vendors/partners as needed.
6. Grit: Overall, CVS has good chance to compete and win IF its leadership is willing to change and do the right innovation and transformation quickly. I know, this is a BIG IF.

Here is a quick comparison of the key competencies between the two companies.
Key Competencies
Amazon
CVS
Pharmacy, PBM Business Expertise
4
10
Technologies & Development  for Innovation and Transformation
10
8
(with help from vendors/partners)
Willing & Able to Change and Innovate
9
6

Although the above is a rough and quick analysis, it provides some directional thoughts. CVS still has chance. The only concern is whether the CVS leadership has the strong willing to “change” and compete with Amazon, or they already “gave up” as most people on the market did.

CVS, Go! Innovate and Transform the Industry, and Compete to Win! The world will be better with right competitions.

PS: To systematically identify strategic “new” business landscape/opportunity introduced by emerging technologies and design a constructive innovation and transformation roadmap, please refer to EmergingTechnology Strategic Analysis Framework, or contact support@xcresource.com.


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