by Tony Chen

Last week, I posted an entry on the most innovative hospital in the country. Today let's see what we can learn from the most innovative retailer in the world - do you know who it is? What store makes more revenue per square foot than Tiffany & Co, Best Buy, Neuman Marcus, and Saks? You might not intuitively think that the masters of product design are also masters of retail:

Apple is the best retailer in America, making more than $4,000 of annual sales per square foot in 2006. (Tiffany's is 2nd, at a mere $2,666 per sq ft) Read this great article in Fortune on how Apple came to make the controversial decision to go into retail and how they nailed it.

One the most important things Apple did was to build a store in their warehouse for testing. In other words, they approach store concept/design the same way they approach their product design. It has to be human-centric. Among many other insights, here were a few key take-aways for me:

- They designed the store around customer needs, not around product functionality. Their first "test-store-in-a-warehouse" was laid out by product category (i.e. how their company is structured internally). Immediately they knew it wasn't going work - people don't care about the actual machine/hardware, they just care about what they can do with it.
- They learned one of their best insights from outside of retail - hotels. When asked to name the "best service experience", 16 of 18 focus group participants named hotels. So, to inject that Four Seasons flavor of friendliness/service, they added the "Genius Bar" - "let's put a bar in our stores. But instead of dispensing alcohol, we dispense advice."
- They focused only on 20 products, and cut all the other clutter. Computers are complex enough - they keep it visually simple and attractive.
- They paid a premium for the best locations. And by best locations, it is mainly accessibility and visibility. They realized most people won't invest 20 minutes to drop by an Apple store, but they may invest 20 footsteps. Once they're in, the store, the service, and products are pretty compelling.

We all know that hospitals of the future will be drastically more retail than it is now. So, what questions should we be asking as we put together a hospital retail strategy? The main take-away for me is the laser-sharp focus on the consumer. Every little detail about how the store is designed is to add value to the consumer - learning about new products, having an "aha!" moment, getting some small bug fixed. Yes, it costs more to design it, the build it, and to operate it. But their results speak for themselves - their closest competitor has to increase revenue per square foot by 50% to match them.

In some sense, hospitals have been following this advice, except that we've treated the physicians as the end-user, not the patient.

And rightfully so, as thus far, it's really the physician who has more choice and can shop around. Nonetheless, Apple has shown us that everyday consumers notice when things are designed just for them - they vote with feet and will eventually rule (or at least largely influence) the healthcare landscape.