Building an Innovation Program

INNOVATION Joe Messina, Director of Planning Marla Kouche, VP-Strategic Program Office Innovations in New Product Development & Marketing 2009 FROST & SULLIVAN EXECUTIVE MINDXCHANGE June 7-10, 2009 / SAN FRANCISCO, CA

Lessons Learned 1. Insight on building pragmatic innovation practices that are effective at creating ROI 2. Tools & methods to “change the engine while the airplane is in flight” 3. Successful factors for creating a corporate culture of innovation 4. Best practices gleaned from the 2008 MindXchange applied toward innovation excellence 2

Quest Diagnostics and MedPlus • Parent Company: Quest Diagnostics (NYSE: DGX) – Global leader in diagnostic laboratory testing, information and services – >$7B in annual revenue – Established business relationships with 300,000+ physicians, 3,000+ hospitals and 1,000 payers • MedPlus, Inc. – Healthcare information technology subsidiary of Quest Diagnostics – Headquartered in Cincinnati, Ohio with operations serving North America – Commercial software provider responsible for 25-30% compound annual growth and external IT strategy – Create and deliver IT solutions to Hospitals, Health Systems, RHIOs, and 140,000+ physicians 3

Our Vision Dedicated people improving the health of patients through unsurpassed diagnostic insights 45,000 employees and innovation. Our Mission We will be the undisputed world leader in diagnostic testing, information and services. 450 employees 4

Enabled by the MedPlus Solutions Clinical Portal Clinical Catalyst ChartMaxx • Seamless access to • Bridge to a full EMR • Centralized electronic aggregated patient • Point-of-care toolset for the access to the complete clinical data creation, management & legal medical record • Driver of physician sharing of clinical • Preserves paper processes satisfaction and improved information for the floor while clinical decision making • Incremental functionality to automating work flows for the existing Care360 HIM and back office Data Exchange Physician Portal • Fully supports HIM Services compliance needs • Facilitate the exchange of Patient Portal • Improved data access information between source supports improvements systems and user systems • Engage the patient in the beginning with management of their care registration through • Hybrid-federated data model • On-ramp for the patient for delivery of the final bill • Enterprise Master Patient administrative and clinical Index capabilities • Record Locator Service 5

Opportunity… Right Place, Right Time… The Healthcare IT Outlook, spurred by the Economic Stimulus Package, directly aligns to our core competencies Majority of records still Data resides in Unconnected networks — exist in paper different silos suboptimal business & clinical outcomes 6

Change Imperative Getting to revenue in Emergent business Employee attrition and a an opportunistic model and product drop in satisfaction market platform scores 7

discovery 8

Early Conversations 1. What is the mission… what is our change agenda? 2. What can we learn from other innovation models? 3. Why did it take so long for us to get this far? 4. How will we resource/fund the program? 5. How does this pipeline connect to our others? 6. How will we prioritize projects? 7. What kind of innovation do we seek? 8. Are all innovations welcome? 9. What core capabilities do we possess? 10. What core capabilities do we lack? 11. How wide/open is our community? 12. How will we engage people over time? 9

Innovation Models RANK RANK COMPANY REVENUE MARGIN KNOWN FOR ITS MOST 2008 2007 GROWTH GROWTH INNOVATIVE 2005-08 2005-08 [% WHO THINK SO] 1 1 APPLE 30.4 15.8 Product (47%) 2 2 GOOGLE 52.6 -8.2 Customer Experience (26%) 3 3 TOYOTA 4.2 -35.9 Process (35%) 4 5 MICROSOFT 13.5 -1.3 Process (26%) 5 7 NINTENDO 61.1 20.6 Product (48%) 6 12 IBM 4.4 14.3 Process (31%) 7 15 HP 10.9 31.6 Process (39%) 8 13 RIM 74.1 11.2 Product (53%) 9 10 NOKIA 14.0 -10.3 Product (38%) 10 23 WAL-MART 9.1 -2.1 Process (49%) 11 11 AMAZON.COM 31.2 -4.8 Customer Experience (41%) 12 8 P&G 11.7 2.4 Process (27%) 13 6 TATA Private Private Product (44%) 14 9 SONY 3.1 -41.1 Product (40%) 15 19 RELIANCE 28.5 11.9 Business Model (35%) 16 26 SAMSUNG 10.5 -1.5 Product (41%) 17 4 GE 10.1 -12.2 Process (36%) 18 NR VOLKSWAGEN 7.1 33.6 Customer Experience (38%) 19 30 MCDONALDS 7.2 9.5 Customer Experience (55%) 20 14 BMW 6.9 -14.6 Customer Experience (37%) BusinessWeek: The 50 Most Innovative Companies 10

Innovation Categories 1. Business Model: strategy / positioning 2. People: management / community 3. Process: operational efficiency 4. Product: technology / services / customer experience 11

Innovation Strategies 1. Inspire: Provide an inspiring vision; lead innovation; emphasize opportunities, not problems; trust your people. 2. Organize: Set rules; create a system, guiding structures and processes supporting innovation and idea management. 3. Synergize: Leverage diversity; facilitate cross-pollination of ideas; create and empower cross-functional teams. 4. Empower: Create a culture of questioning; encourage risk taking; give your people freedom to experiment, fail, and restart. 5. Reward: Measure progress; reward both individual and collective contributions; celebrate success, make business fun. 12

Change Agenda Hero-culture Mentoring-culture Formal and closed Informal and open Command and control Consensus-driven Fear of making mistakes Explore and evaluate Local thinking Systems thinking Redundancy Diversity 13

Challenges BUSINESS AND PROGRAM 14

BUSINESS CHALLENGE 1 MILLION TRANSACTIONS PER DAY 15

BUSINESS CHALLENGE non-traditional competitors $19.6 Stimulus billion HIT LAND RUN 2009 16

BUSINESS CHALLENGE emergent standards and business model 17

PROGRAM CHALLENGE HIGH EXPECTATION low realization 18

PROGRAM CHALLENGE task-tool mismatch 19

PROGRAM CHALLENGE competing priorities 20

process PROGRAM CHALLENGE entrenched behaviors idea 21

PROGRAM CHALLENGE resource constraints 22

solution 23

DEVELOP COMMUNITY VISION buyer-seller market IDEA IDEA IDEA IDEA 24

PROVOKE STRATEGIC CONVERSATION how big… how open? 2009 2010 2011 • MedPlus Employees • MedPlus Employees • MedPlus Employees • Quest Employees • Quest Employees • Quest Employees • Advisory Customers • Advisory Customers • Customers • Partners • Partners 500 members 500 members 10,000 members 10,000 members 100,000+ members 100,000+ members 25

ADOPT-ADAPT COMPLIMENTARY management frameworks BOS Blue Ocean Strategy BSC Balanced Scorecard SCRUM/Agile Six Sigma Carrots 26

INJECT DISCIPLINE innovation program • Articulate Mission, Vision, Values and Change Agenda • Install the Innovation Foundation – Team – Process – Funding – Idea Management Technology – Reward System • Cultivate community soil w/ challenges & content aligned to strategic objectives • Seed, Manage and Harvest 27

DESIGN PROCESS dual pathways DIRECT-INJECT INCUBATE ELICIT EVALUATE INCUBATE JUSTIFY RATIONALIZE DELIVER • CHALLENGE • SCREEN • RESOURCE • COST/BENEFIT • GROUP/PACKAGE • DMAIC • IDEATE • PICK • REFINE • PRIORITIZE • ITIL • FRAME • ANALYZE • SCHEDULE • SDLC • CATALOG • EXPERIMENT • PROTOTYPE 28

CREATE INNOVATION PIPELINE VIEWS Tomato garden Source: Strategy as a Portfolio of Real Options, Timothy A. Luehrman, Harvard Publishing 29

PROVIDE A REVIEW PLATFORM fast-pitch spotlight 30

GO I AM NOT SIT I LIKE LONGHORNS A CROOK NUTS GO AWAY I GOT NO [regional dialects] MONEY crush kill destroy I SEE I PASS PAIN passive consultative stern I’LL TAKE __ BEERS DEVELOP SCREENS AND DECISION RULES tribal voting gestures 31

STAGE EVENTS mission impossible • 50% short of MBO pipeline target • – Have 250 ideas…need 250 more 15 days left 350 Double our pipeline … produce at least Sweet 250 sweet new new ideas • Twas week before Christmas ideas! • 25% of staff stirring • 1st Time Challenge… FUD • 6 Teams • 18 framed questions • 90-minute team sessions 32

REDIRECT INVESTMENTS portfolio judo-flip Market Share Market Share High Low 10 % 20% Market Growth High Pearl Oyster Market Growth Low Cow Dog 70% 33

iPhone App Spark: CTO Challenge to develop a robust application that runs effectively on Apple iPhone platform. Incubation Team: 4 Software Engineers, 1 Executive Sponsor Seed Investment: <$50,000 Highlights: Proved technical feasibility of Care360 on iPhone, positive market reaction. Lessons: 1) Concept required passionate “owners” to sustain forward motion. 2) Business relevance was required to attract commitment for initial seed investment. 3) Ramp-up time was longer than expected but Apple development publications and support were solid. 4) Importance of mobility to a growing customer segment. Business Impact: Buzz from Sales channel, prospective HIE customers and business partners who are looking for leverage within vertical (healthcare) markets. Technical Team acquired requisite knowledge of new development environment (COCOA technology framework and Objective-C language). Road Ahead: Care360 iPhone application is now available in the Apple App Store. More muscular mobility strategy in play. 34

lessons 35

HOW MIGHT WE… Gain products Reduce theclinical involve, Stretch internal order adoption Expand our model ofCloudservicing Improvehealthcare datarelevant Betterourinfrastructureinnovation? Impactunderstand, morehow Make growthcollaborative a our to Drive betterthe thatwithinthat cost Accelerate our rateofdomain andin products arefor experience insights on usable? using handling products world markets? from our _ customers? computing? cents? market knowledge? between customers? serve_ to are Quest developing nation? produce and emergingand deployed and used? MedPlus home office practices? solo to five-physicianand remote locations? own? LESSON NO. 1 Framed challenges work 36

Ant Farm, by Uncle Milton, invented 1956 LESSON NO. 2 Harness the community make the innovation process transparent… make it theirs 37

• timely • right-sized • individualized LESSON NO. 3 Reward quiet contribution too 38

LESSON NO. 4 Inform culture thru stories 39

Noise-dampening Accessible Extensible Immediate Fun Simple Cost effective powered by spigit LESSON NO. 5 muchmuch Technology makes it easier 40

recap • Installed Strategic Management Frameworks – Blue Ocean, Balanced Scorecard, SCRUM/Agile, Six Sigma • Reoriented the Portfolio for innovative growth • Launched formal Innovation Program – Team ◦ Mission/Vision/Objectives ◦ Funding ◦ Plan – Pointed innovation feelers to strategic objectives – Ran Innovation events to keep it fresh and relevant – Rotated core team to create energy and diversity – Installed connectivity technology – Improved innovation measurements • Harnessed COMMUNITY to moderate, evaluate and form ideas 41

reference 42

About the Presenters Marla J.J.Kouche Marla Kouche Joseph R. Messina Joseph R. Messina Vice President, Strategic Program Office of MedPlus, Inc. Vice President, Strategic Program Office of MedPlus, Inc. Director of Planning, Strategic Program Office of MedPlus, Inc. Director of Planning, Strategic Program Office of MedPlus, Inc. 4690 Parkway Drive 4690 Parkway Drive 4690 Parkway Drive 4690 Parkway Drive Mason, OH 45040 Mason, OH 45040 Mason, OH 45040 Mason, OH 45040 www.medplus.com www.medplus.com www.medplus.com www.medplus.com marla.kouche@medplus.com marla.kouche@medplus.com joe.messina@medplus.com joe.messina@medplus.com http://www.linkedin.com/pub/marla-kouche/7/482/1a http://www.linkedin.com/pub/marla-kouche/7/482/1a www.linkedin.com/in/joemessina www.linkedin.com/in/joemessina Marla J.J.Kouche is the Vice President of the Strategic Program Office of MedPlus, Marla Kouche is the Vice President of the Strategic Program Office of MedPlus, Joe is aaPlanning Director within the Strategic Program Office of MedPlus, Inc., aa Joe is Planning Director within the Strategic Program Office of MedPlus, Inc., Inc., aawholly owned subsidiary of Quest Diagnostics. With over $7B in annual Inc., wholly owned subsidiary of Quest Diagnostics. With over $7B in annual healthcare information technology subsidiary of Quest Diagnostics. With over $7B healthcare information technology subsidiary of Quest Diagnostics. With over $7B revenue, Quest Diagnostics is the world’s leading provider of diagnostic testing, revenue, Quest Diagnostics is the world’s leading provider of diagnostic testing, in annual revenue, Quest Diagnostics is the world’s leading provider of diagnostic in annual revenue, Quest Diagnostics is the world’s leading provider of diagnostic information and services. Ms. Kouche is responsible for the management of the information and services. Ms. Kouche is responsible for the management of the testing, information and services. testing, information and services. organization’s enterprise-wide customer facing strategies, product planning and organization’s enterprise-wide customer facing strategies, product planning and management disciplines and direct product line responsibility for all technology management disciplines and direct product line responsibility for all technology Since joining MedPlus in 2001, he has held aanumber of positions focused on offerings. Since joining MedPlus in 2001, he has held number of positions focused on offerings. systemic change, applying transformative frameworks to NPD, BPM, KM, systemic change, applying transformative frameworks to NPD, BPM, KM, innovation and strategy management. innovation and strategy management. Since joining MedPlus in 1998, she has held several positions with varying Since joining MedPlus in 1998, she has held several positions with varying strategic, technical and business layers, including the role of Vice President of strategic, technical and business layers, including the role of Vice President of Prior to joining MedPlus, Joe served as aaproduct lifecycle management specialist Finance for the organization. Prior to joining MedPlus, Joe served as product lifecycle management specialist Finance for the organization. with Siemens PLM, IBM and Lockheed where he worked closely with clients across with Siemens PLM, IBM and Lockheed where he worked closely with clients across aavariety of industries including architecture-engineering-construction, aerospace variety of industries including architecture-engineering-construction, aerospace Prior to joining MedPlus, Ms. Kouche was with Deloitte and Touche LLP, the Prior to joining MedPlus, Ms. Kouche was with Deloitte and Touche LLP, the and defense, automotive, consumer electronics, energy, healthcare, high-tech, and defense, automotive, consumer electronics, energy, healthcare, high-tech, international audit and accounting firm. She served as aaspecialist within the international audit and accounting firm. She served as specialist within the manufacturing, and telecom. He has aaBA in Architecture (1983) from the manufacturing, and telecom. He has BA in Architecture (1983) from the SEC and Information Technology sectors. SEC and Information Technology sectors. University of Kentucky and Balanced Scorecard (BSC) Practitioner Certification University of Kentucky and Balanced Scorecard (BSC) Practitioner Certification through Kaplan and Norton. through Kaplan and Norton. 43

Publications The Balanced Scorecard, Making Us More Ruthless Execution, 10 Rules for Robert Kaplan, David Innovative, Amir Hartman Strategic Innovators, Norton Jeffrey Phillips 2003 Vijay Govindarajan, 1996 2008 Chris Trimble 2005 Blue Ocean Strategy, The Ten Faces of The Global Brain, Democratizing W. Chan Kim, Renée Innovation, Mohan Sawhney Innovation, Mauborgne Tom Kelley 2007 Eric Von Hippel 2005 2005 2005 Getting to Innovation, Globality, Fast Innovation, The Human Side of Arthur B. VanGundy Hal Sirkin, Jim Michael George Managing 2007 2005 Technological Hemerling, Arindam Innovation, Bhattacharya By Ralph Katz 2008 2003 Around The The Carrot Principle, Think Better, Corporate Campfire, By Adrian Gostick, Tim Hurson by Evelyn Clark Chester Elton 2007 2004 2009 44

Publications How to get the most 12 Different Ways for Perfecting Cross- Co-Creation's 5 from your best ideas, Companies to Pollination, Guiding Principles, Accenture Outlook Innovate, Lee Fleming Martijn Pater 2008 Sawhney, Wolcott & 2004 2009 Arroniz 2006 45

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Building an Innovation Program

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