Robert Musslewhite, CEO of Advisory Board and president of Optum Analytics

Why Advisory Board and Optum joined forces

Question: Robert, I'm excited about our conversation for a number of reasons. First, we've worked together for more than 15 years, so I've got a great perspective on you not just as a leader, but as a friend—and I'll try to self-censor any compromising stories I might have about you. But more importantly, this past year has arguably been the most significant in ABC's history. Lots for us to talk about. Let's start with the issue our membership has been asking us about a lot these past few months—our combination with Optum.

Musslewhite: Yes, absolutely—let me start with some reflections on why we sought this partnership. First and foremost, it's about growth and scale. Advisory Board is great at figuring out what providers need and how to fulfill that need, but fulfilling that need today, truly impacting the industry in a transformational way, requires a step change in resources, capabilities, and investment. Optum brings all that. It has tons of relationships, tons of data, tons of data scientists—it's massive. And I felt, "You know what? We do need the scale, and the power, and the reach that a larger partner could bring." They'll move us significantly forward in our ability to change health care, and that gets me personally very jazzed.

Second, Optum understands our value to members very clearly. We're going to keep our Research division as an independent, objective arm within Optum called, as it has always been, Advisory Board. But we're also going to expand that research into other parts of health care: life sciences, payers, potentially employers. I think we can add a lot of value in terms of best-practice health care insights to those sectors, especially as dividing lines between them become more and more blurred.

And third, Optum has the same mission we do. They want to make health care better for everyone, but on an enormous scale that raises our ambitions as well. Optum has data on 180 million claims lives with 20-year longitudinal visibility and data on about 100 million clinical lives. Our data scientists are chomping at the bit to get access to that and power valuable solutions for our members.

Q: Was there a singular moment where you were like, "OK, Optum gets us, and we get Optum?" Or was it more incremental?

Musslewhite: To be honest, from the first set of discussions with Optum, they "got" us as well as or better than anybody else. In fact, one of their people at the early meetings was a former Advisory Board member. Someone who has experienced us from the member side obviously has a deep understanding of who we are.

It's an instance where one plus one really does equal three. You know, Advisory Board delivered $2 billion in documented value to our members a couple years ago. Now I'm hoping we can deliver $50 billion, $100 billion, $200 billion in value as we look forward.

How the merger came together

Q: I think by most measures 2017 was a turbulent, eventful, fascinating year for our members. And for us as well. In early 2017, Elliott Associates bought a widely reported 8.3% stake in the firm. Is that what precipitated the strategic review that led to the transaction with Optum?

Musslewhite: What really sparked our exploration was the success of our education business, which used to be called the Education Advisory Board and is now called EAB. EAB is only a little bit over 10 years old. We grew it rapidly into what it is today, and as part of our transaction we spun it off for over $1.5 billion.

Once it was clear that EAB had so much size and oomph, we had to figure out whether we wanted health care and education under the same structure or separate ones. And I think that, if we were honest with ourselves, we sensed it was time for each one to have its own investment path and growth trajectory.

We had started discussions and worked with outside advisors for a good six to 12 months before Elliott Associates came knocking, but the pace and urgency and visibility of our discussions obviously increased once they announced their stake.

Q: Talk a bit about that if you would. Elliott Associates of course has a well-deserved reputation as an aggressive and astute activist investor. How would you characterize the interactions?

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Musslewhite: Interestingly, it was very cordial. We had only a handful of conversations. At the beginning it was, "Hey, we bought a stake in your company because we think there's a lot of value in there, and we think there are a lot of good options for you to pursue that."

And we said, "We agree. We've been looking at these." And so we announced publicly, "We're undergoing a strategic review." We signed a standstill with Elliott Associates, and we spent a good part of last year figuring out the right answer. And then once we had our answer we called them, and they said, "Great, thank you. Nice work." They were fans of Advisory Board and felt we were undervalued, which we all agreed with.

At the end of the day, the highest bids were not for the whole company; they were for separate parts. And those bids, when you put them together, were higher than our modeled value for separating the businesses ourselves.

We talked to more than 100 companies, and 20 or so made serious bids. And I think what's interesting about the process is that, on the one hand, you could say, "Well, we had no control over the process. It's just the highest bidder." On the other hand, what really happens is as others learn more about you, they kind of naturally figure out who is the best fit. So I honestly think the company that had the best fit and saw the most value in working with us was Optum, and they ended up with the highest bid.

Q: So it sounds like you have conviction, as I certainly do, that the merger is a positive move for Advisory Board and our members. But if I've heard any hesitation in my conversations with CEOs, it's been a concern voiced that what's special about Advisory Board—the unique trust we've built with members—might somehow change. How do you preserve what is rare and special about our culture when you go from a company with 3,500 employees to one with 150,000?

Musslewhite: It is a good point. When Advisory Board acquired other companies, I would always tell people, "We're not imposing our culture on you." The whole reason we acquired them was because we saw something special—enough similarities in mission and culture that we felt like we could be better together.

And it's the same thing here. Optum has a great culture—a culture that 150,000 people are excited about—so we start from a good point. We'll need to be purposeful about what we believe in and bring forward, and we should also be open to learning what makes Optum tick and incorporating that in positive ways

I don't think we can fool ourselves and say the culture isn't going to change. Of course it's going to change. But I hope it's a positive change, for us and our members, in ways that we may not know yet today.

The quintessential Robert Musslewhite story

Q: OK, we've talked about Advisory Board's future; let's step back into your own past. In these conversations I try to convey a sense of a CEO as a person, not just a "role," so I've been having some fun thinking about some quintessential Robert Musslewhite stories. And I keep coming back to your freshman year at Princeton.

You were on the swim team, and one of the lead swimmers had a freak accident—incredibly, he punctured his lung rolling over on a toothpick that was stuck in his dorm room carpet. It was the eve of the NCAA Championships, and totally unexpectedly, you got to anchor the 200-meter medley relay, which won the gold medal.

So in one sense, this opportunity fell in your lap. But isn't that your whole philosophy encapsulated—that you earn luck through hard work and discipline?

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Musslewhite: It is. I mean, I was a fine swimmer, but not the top swimmer by any stretch. But I had worked hard for 14 years, especially that season, you know? And this was the one relay where the team felt we had a shot—which, for a school like Princeton that doesn't give athletic scholarships, that's pretty rare.

When that guy got hurt, I'm pretty sure everyone thought, "OK, forget it. We're done. We've got to have this freshman sub in, and he's not that good, and we're screwed."

But maybe that motivated them. They had such a huge lead by the time I dove in. The other swimmers were catching up to me all the way to the wall, but I managed to barely finish in front of them. I was so relieved I didn't blow the lead; that's why I jumped up and down.

Again, this was a ton of luck. Obviously there's something there that you can control—if I hadn't worked hard and made the team, I wouldn't have been in the position—but to be on that relay was a stroke of luck.

And by the way, there was a happy ending: The guy who was injured that year was on the same relay the next year, and they won the championship again. That was great, because he's an awesome guy.

Q: So you graduated from Princeton and headed to Harvard Law School, after a year-long detour doing some ski instructing. Given your penchant for the law, why am I not talking to Robert Musslewhite, Esquire, prominent attorney?

Musslewhite: My dad was a lawyer, and I always just assumed that would be a good path for me too. So I went to law school and actually enjoyed it. My wife Jeannie was in my class, and we started dating the first year, which probably helped!

The summer after my first year, I worked at a law firm—which, in the summers, is more about recruiting than it is about actual work. They do a good job of fooling you into thinking working there is really fun.

The second summer, I went to McKinsey. The project was really hard, and my boss was … I didn't like him. He was kind of erratic and not a great manager, operated with a lot of stress. And so after that, I was like, "That was terrible."

Then, after my third year, I had offers from law firms and McKinsey. And I was pretty much going to go into law, just because the summers had been more fun.

Q: What changed your mind?

Musslewhite: Jeannie. She said, "Step back and be sure you're thinking more than one year out."

The things I started realizing about law—number one, as a litigator, you get immersed in state law. After you've built that expertise, you don't have much mobility geographically, and I wasn't ready to commit to staying in Dallas.

Number two, with litigation, you're coming in when something is messed up to fix it—whereas at McKinsey, the project we did was very much about looking forward and setting strategy. And I've always loved strategy.

So when I thought about those things, I realized, "McKinsey is actually a much better place to start out."

Family influences

Q: You mentioned your father, who was a very accomplished, colorful guy—quarterback of the team at Southern Methodist University, Master's degree from Oxford, lawyer. I'm surmising he was a big influence?

Musslewhite: He was. He was a litigator, super smart, really talented. He retired from a large law firm, started his own practice, and eventually founded this law and coffee shop called Legal Grounds. He sold flat-fee legal services in the back and had a regular coffee shop in the front. It became kind of a cool independent coffee shop, and he actually got a reasonable amount of legal business too.

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But honestly, I don't think he ever loved the law. It suited his talents, but he actually found at the end of his life the job he loved the most: being a minister. It's funny how life comes full circle like that.

If you want to talk about influences, I'd also mention my grandfather. He was really the only grandparent I knew. He lived to be 102, so he only died a couple of years ago. We didn't get to see him that often—he was Dutch—but when we did it was always special, and I'm grateful to my mother for being sure we got to spend time with him, despite the long distance between us

He was an engineer. He played a big role in the Delta Works in Holland, which is a big flood prevention mechanism. His thing was always problem-solving. He would send me puzzles and tell me, "Just solve them and send them back to me."

I always loved doing that stuff with him. That probably had as much influence on me as a young kid as anybody. I do love solving problems. It's played a big role in my career choices.

Q: I think your family life also had something to do with you ending up at Advisory Board after six years at McKinsey. Something about your firstborn child?

Musslewhite: Yeah—so I was at McKinsey for six years: Dallas, Amsterdam, Washington, D.C. And McKinsey does outstanding work; I have tons of respect for the firm. But for me personally, there were two hang-ups.

First, we'd work four, five, six months with the same group of people, form a tremendously powerful team, and then poof—the study ends, and you're off to the next client with a new team. And so all that power you built up as a team then has to be rebuilt. That's not all bad, you meet other people, but it seems like a pretty high price to pay.

And then second, McKinsey is world-class at strategy, but most clients felt it didn't make sense for McKinsey to stay around to implement the strategy. They'd rather have their own people run it. So we delivered some great answers, but we didn't control turning those answers into reality or value.

So for those two reasons, I felt open to making a move. And then I ran into David Felsenthal in the hospital on the day our first kids were born. We were already great friends, but we'd never talked about his work—David is so modest, but he was the wunderkind CFO of Advisory Board at the time, leading its IPO. And once I got him talking about it, it sounded like a great place.

You get a lot of headhunter calls at McKinsey, but when I got a call near the end of 2003 that Advisory Board was looking for a head of strategy, I took the call. I came in and thought they were amazing. Number one, great people, but beyond that, it was a smaller organization with a strategic challenge that went straight to their ultimate success. They wanted to shift from being a research organization to diversifying the business. If they made that shift right, they had a chance to dramatically improve health care in this country.

It felt like the perfect match. Even on tough days, all you've got to do is go spend time with one of our members, or read some of our evaluative reports, and it just makes you feel great about the endeavor.

The path to the C-suite

Q: You came to Advisory Board to work on strategy in 2003, and then by 2008 you were CEO. I'm curious, how much intentionality did you have about being CEO? Or was it more serendipity?

Musslewhite: When I joined the company, it would've been crazy to say, "I'm joining this company to become CEO." At that point, it was much more, "I want to help. I see myself being able to contribute here, and that's exciting to me." That's kind of all it was.

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But then luck came back into the picture. One of my favorite quotes is by Thomas Jefferson: "I am a great believer in luck, and I find the harder I work, the more I have of it." And it's true. You can work hard, you can be the type of worker and leader that you want to be, but you don't always control what happens next.

And by sheer luck, it turned out that Frank Williams, who was the CEO at the time, wanted to move back to California, which would create an opening. I was clearly a newer, wild-card-type candidate for the CEO role, but as I grew to love the company and my work, it certainly felt like something that I would want if it became available.

Q: What did it feel like to be offered the role? Did you feel ready for the job?

Musslewhite: Frank actually punked me! He brought me in and said, "Hey, look, I just want to let you know I've made a CEO decision, and I'm sorry, it's not going to be you." And he let me go for a good several minutes before he finally told me he was kidding. He said, "I want you to be CEO." At that point I couldn't even be happy. I was like, "Oh."

I felt ready in some respects, but in other ways I don't think you ever really feel ready until you've done it. I was much more on the strategy and product development side, so I certainly wasn't deep in finance, for instance, so I had to learn quickly and rely on really good people.

But there aren't very many decisions that are just me sitting in this office. Most of the time, it's very collaborative. Maybe that came from McKinsey days: I believe in the power of teams, and thus, there's a lot of "we" here.

Q: One observation I have about your leadership style and how it has evolved over the years: You've always been very collaborative, but I think I've seen you become more decisive over time. Certainly not in an autocratic way, but in knowing—like Jeff Bezos says—that once you have 70% of the information you need, it's time to make a decision. I'm curious for you to be a little self-analytical: After nine years as CEO, how else would you say you've changed?

Musslewhite: Well, I'll tell you a story. I started on September 1, 2008. And I think Lehman Brothers went out of business two weeks later, and the financial system just collapsed. Advisory Board was not performing well. Our members were going through all kinds of trouble, and it was hard for us to find ways to partner and expand our relationships with them. Literally for the first six months on this job, I'd come home at night and be like, "Yeah, I'm probably getting fired."

But we developed an action plan, we listened to our members as to what they needed from us, and of course we made it through. And the next several years were the best years in the company's 35-year history. So one thing that I've gained over the years is the ability to take the long view. How can I look three, five, 10 years ahead, look beyond today and be sure we are making the right strategic moves, investments, talent plays, and overall decisions to set us up for the long haul? I'm much more confident in that now, and I think it really helped me navigate the last couple of years.

Advisory Board has changed a lot over that time. When I started as CEO, we had fewer than 1,000 people. We're now at about 3,500. We've grown so much in size, in scope, and in complexity, so much of my work lately as CEO has been about adjusting to scale. For example, we can't create a culture where no one can make a decision. We have to be proactive about creating accountability, creating systems that enable us to work. That's a very different endeavor than the first few years, which were all about running hard at different growth opportunities.

Gratitude

Q: Robert, you know I like to close out these conversations by talking about gratitude. You've already mentioned some mentors you're grateful to—your dad, your mother, your grandfather, Frank Williams—but can you describe some experiences you're grateful to have had?

Musslewhite: I feel like one of the ways we live out our culture at Advisory Board has been through our Community Impact program—which I'm tremendously grateful for. A few years ago we had 100% of staff volunteer, which was a source of pride for all of us. I'm thinking especially of a pro bono project we did for Miriam's Kitchen, an organization that I was on the board of at the time.

Miriam's asked us, "Can you help us understand the cost of homelessness so we can make our case for new community models of solving homelessness?" And we found that the average homeless person in D.C. consumed about $40,000 a year worth of resources.

That cost number was helpful for Miriam's in convincing the city to budget the right amount to get housing provided to individuals. And it's helped Miriam's transform from an organization that serves homeless people to an agency that really is looking to end chronic homelessness in D.C.

The other thing I'd mention is BUILD Health. We were one of the founding leaders, pulling together a program that provides grants to partnerships between providers and their communities. A lot of our members stepped up and received these grants to solve a specific area of societal health challenge.

We have all these pilots running across the nation, and the stories have been amazing. There's one example of a partnership in Iowa to address pediatric asthma. We're giving 62 families asthma education and home assessments, repairing 42 homes, and the kids are having six more asthma-free symptom days per month. That's just one example. I'm really proud of this work and grateful that we have passionate colleagues who actively want to apply their professional skillset to solving bigger problems.

Q: And what about gratitude for you personally?

Musslewhite: I mean, every day I'm grateful I've had this experience. I've found a job I love with people that have been amazing. Even on bad days, I'm like, "I'm just so lucky to have this opportunity."

And to have found Advisory Board is kind of random, right? I mean, it was luck—all the chips that fell in the right way, or decisions made one way rather than the other that led to here.

I've been fortunate to have a company that really does make the world better and celebrates it, and the opportunity to help shape that and grow it. There's a lot of gratitude for that.

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