It's official: the Obamacare rollout was an unmitigated, absurdly expensive disaster. When even the administration's biggest fans in the media (The Huffington Post, The New York Times, The Washington Post) are forced to admit it, it's so obvious as to be excruciatingly painful.
But some of us who teach entrepreneurship could have predicted it. (Though, I will admit, even I was stunned to read that the federal government had shelled out nearly two-thirds of a billion dollars on millions of lines of garbage code.) Observing this administration's complete ignorance of (and often, hostility to) business made clear early on that such a failure would be inevitable. They made every mistake in the book. Here are just a few of them:
1. Not identifying your assumptions
This is Obamacare Major Mistake #1. And to a certain extent, it's forgivable. Even businesses blow this. All first-time entrepreneurs think they are launching a product or starting a business. But they aren't. They are actually testing assumptions about that product or business: assumptions about the customers; assumptions about the features and functions those customers want; assumptions about pricing; assumptions about the competition; even just basic assumptions about human behavior.
No matter how bright or talented you are (and more about this, below), you won't be right 100 percent of the time. And the newer, or more "disruptive" a product or service or business model is, the more the entrepreneur is working in the dark. Chances are, at least one of his or her fundamental assumptions is wrong. The key is to find out which assumptions are right and which are wrong without breaking the bank. That means creating and testing initial iterations of the product, or "beta" versions. Which brings us to Obamacare Major Mistake #2:
2. No beta-testing
This term was initially used strictly in software development, but has now permeated throughout product development in virtually every industry. No entrepreneur worth his or her salt would dream of launching a product without having tested earlier versions of it. Especially when it is a computer program.
We're not talking about a fully-functional, completed version, either. What needs to be tested are very preliminary versions of the product that will enable people to see it, try it, use it – and give the entrepreneur, developer, or innovator important early feedback. And that brings us to …
3. No early adopters
… Obamacare Major Mistake #3. In the world of entrepreneurship, we call these first users "earlyvangelists" – the people who are willing to try, buy, or otherwise experiment with the first iteration of a product or service. These are critical to a new product's and company's success, because they provide meaningful feedback. If your assumptions about pricing are wrong, your earlyvangelists will tell you. If you've got the wrong functions or features, they'll tell you. If your user interface is clunky, or your navigation is impenetrable, they'll tell you. Frankly, if your assumptions about who your earliest adopters will be are wrong, you'll learn that quickly, too.
Feedback can validate assumptions, challenge them, or provide information that the innovator never even thought of. And, in the words of entrepreneur and author Eric Ries, the entrepreneur can then "pivot" to a better idea/product/business model, or "persevere" in the original one.
The Obama administration could very easily have identified 50, then 500, then 5000 potential users of the Healthcare.gov site, and utilized them to test product design assumptions and the efficacy of the user interface: did people want to compare prices earlier? Was the system asking for too much information up front? How easy was the navigation for less sophisticated users like the elderly?
Getting feedback from a small group of properly identified initial users allows the innovator to test his or her assumptions before the big rollout, incorporate that feedback into version 2.0, and then 3.0, and then 4.0, each time bringing larger number of users into the fold. And certainly before throwing ridiculous sums of money into it. Which bring me to the Obamacare Major Mistake #4 …
4. Throwing ridiculous sums of money into it
This should be obvious, but it isn't. Entrepreneurs who don't realize that their business launch is teetering on untested assumptions often assume that more money means more market penetration, more advertising, better salaries for the most talented employees. They think, If only I had more money, this business would really take off!
As should be painfully obvious now, if your product is built on flawed assumptions, all the money in the world won't fix it. Or, to be more specific, if $634 million won't produce a decent computer program, it isn't a matter of more money.
Some writers have compared the Healthcare.gov website to the historic (in the sense of historically bad) launch of New Coke. I was thrilled to see the comparison, because it's true, and proves this point, as well as driving home another one, nearly as important: the "more-money-will-fix-it" strategy will FAIL just as inevitably in the private sector as it will in government. Money thrown after a failed business model is just more money lost. If your product is terrible, people won't buy it. If it's too expensive, people won't buy it. If it doesn't do what they need it to do, people won't buy it.
Admittedly, here's where it becomes hard to persuade people that we can analogize a business or product launch to a government program launch.
Private companies must persuade consumers to part with their hard-earned cash. If a company's product or service is a disappointment, people simply will not buy it. A company that fails the public one too many times (and sometimes, that means just once) will go out of business. Entrepreneurs and business owners understand that there is such a thing as failure.
By contrast, elected representatives often act as if there IS no thing as a "failed government program" – just a program that needs more money. And because government can extract money from taxpayers by force, there is little financial incentive to meet the public's expectations. Lawmakers also seem to suffer from the delusion that there will always be more money. (There won't be, and that is a topic for another day.) But even in the absence of complete financial collapse, government's easy access to other people's money breeds a certain arrogance, which will doom a policy or program launches, specifically:
5. "Expert-centric" versus "user-centric" thinking
This, in my opinion, is the biggest flaw in the Obama administration's worldview generally, because it drives every other mistake they make: We've got the wunderkinds with their Ivy League degrees, and Obama is a genius; why would we need you lot to tell us what to do?"
Alas, poor Yorick: the landscape of entrepreneurship is littered with the bodies of failed entrepreneurs whose shiny college degrees didn't save them. And we have plenty of examples of successful entrepreneurs who were college dropouts. (Ever heard of Bill Gates or Steve Jobs?)
The move to user-centric thinking is a spin-off of the "design thinking" movement popularized by Professor Don Norman, and brought into widespread business consciousness by Tim Brown and Tom Kelley of über-design firm IDEO. In a nutshell, design thinking places the emphasis in product and system design on how people actually behave; not how the "experts" think they should.
Businesses have learned the lessons of design thinking the hard way, and many are still not on board. Government is slower still to recognize that people's actual incentives and behaviors are relevant to successful policy design. But we have seen the alternative, and it is catastrophic, both from the standpoint of expenditures, and more importantly, the success of the policy's or program's purpose.
Just as it does in business, it makes good sense for new government programs to start small, with assumptions being tested in multiple initiatives launched in cities, states, or even regions. Think about it: healthcare issues, poverty causes, and education concerns are going to be quite different in Appalachian Kentucky than in south central Los Angeles. One size does not fit all. When policymakers allow for this kind of experimental iteration, it permits the most successful programs to flourish, attract attention, be modified and adapted, and expanded to other areas, other populations, and to address other concerns.
Or, as I tell my entrepreneurship students, "start up, screw up, and then scale up."
I often hear the objection to my argument that "This [fill-in-the-blank policy initiative] is too important to implement in stages!"
As the absolute failure of the Obamacare launch should make clear -- actually, no, it's quite the opposite: It's too important to screw it up by launching an untested, widespread, top-down, federal initiative. It's a massive waste of money, resources, political capital, and public goodwill. Worse, an administration which makes these fundamental mistakes with something as straightforward as a computer program will make the same mistakes about the way the healthcare program should operate. That does not bode well.
Just like business, government is made up of people. Entrepreneurs in business make mistakes – and those who learn from them can overcome them. The successful political entrepreneur should know that he or she has to start small, work the bugs out, get the foundation right, and then scale up. And that also means seeing citizens as investors and consumers.
A government that legitimately wants to serve people, to solve serious human problems, and to design excellent policy absolutely can learn from the mistakes – and successes – of the best entrepreneurs.
Or, they can keep blowing our money the way they have done.