A look at the year that might be in business
Wheeling and dealing in the hospital industry
The idea that bigger is better in health care won’t fall out of favor. A couple of major hospital mergers are in the works in Massachusetts: Partners HealthCare wants to acquire the specialty hospital Massachusetts Eye and Ear, and Beth Israel Deaconess Medical Center is planning a merger with Lahey Health and other health care providers. But industry watchers say that in 2018, health care organizations will think differently about mergers. It won’t be just hospitals doing deals with other hospitals, they say. It could be a hospital and an insurer, or a pharmaceutical company and an insurer, or another combination. Some creative tie-ups are already underway. CVS Health recently announced a bid to acquire the insurer Aetna, and UnitedHealth Group, an insurer that also provides health services, said it plans to take over a large doctors group. David E. Williams, president of the Boston consulting firm Health Business Group, says he expects such deals to pick up in the new year, driven in part by fear and uncertainty surrounding the ongoing changes in the health care industry. “You do see new models being developed,” Williams says. “I think you’re going to see other big deals.” Gurpreet Singh, health services sector leader at the big consulting firm PwC, says companies are pursuing this kind of “cross-sector” collaboration because they need different types of expertise to weather challenges. “With all of the changes in the health care landscape,” Singh says, “the roles that health care institutions need to play are broader.”
— PRIYANKA DAYAL MCCLUSKEY
5G data speed zooms into the Boston area
Wireless broadband services took a sizable step forward in 2017, as cellular companies like T-Mobile offered 4G LTE systems capable of delivering 100 megabits per second and more to mobile phones. In 2018, 5G wireless systems will bring even faster connections to homes and businesses, according to Chet Kanojia, founder of Starry Inc., a Boston company that recently began offering a wireless broadband service. “We’ll cover most of Greater Boston, Boston metro, by the end of 2018,” Kanojia says. “We’re kind of a little ahead of the pack in getting our technology out.” But he expects lots of competition. Industry giant Verizon Communications Inc. is set to start selling 5G wireless residential service in Sacramento sometime next year and other wireless companies are making similar plans.
— HIAWATHA BRAY
The movement toward “age-friendly” communities — those with programs supporting housing, transportation, and in-home services for older residents — will be in the spotlight when the Gerontological Society of America hosts its 2018 scientific meeting in Boston. Massachusetts has been a hotbed of age-friendly communities. The Baker administration has embraced the movement, and municipalities and regions from Boston and Brookline to Cape Cod and the Berkshires have been in the forefront. “We want to have a very wide door so many people can come through,” says Len Fishman, director of the Gerontology Institute at the University of Massachusetts Boston.
— ROBERT WEISMAN
More dads get paid parental leave
Matt and Christine Vasallo both work at Cengage Learning. They are also both enjoying 12 weeks paid parental leave, bonding with their daughter Rosalie.
Employers that offer paid parental leave have long been hailed as progressive. But new mothers tend to get more time off than fathers, and in recent years, men have started to push back. Several lawsuits filed this year, including one against Estee Lauder and another against J.P. Morgan, make the case that dads deserve to have just as much bonding time with their babies as moms do. If these lawsuits go in favor of the men in 2018, more companies will be compelled to revamp their leave policies, says Brad Harrington, executive director of the Center for Work & Family at Boston College. “It could have a ripple effect on changing the way people think about dads in the workplace,” he says.
— KATIE JOHNSTON
R2-D2 isn’t likely to replace your waiter in 2018, but artificial intelligence and robotics do have the capacity to change the way we go out to eat, says Steve Fredette, the president and co-founder of Toast, the Boston-based restaurant management system company. We’ll likely begin to see voice recognition introduced in the drive-through line, rather than the scratchy speakers of old, he says. Face recognition may soon follow, with takeout restaurants using software to streamline ordering by connecting your face to your favorite order and credit card info on file. “I would love that,” he says. And robot chefs aren’t far off: MIT student startup Spyce set up an automated restaurant in a campus dining hall last year, and in 2018 is planning to open a restaurant in Downtown Crossing.
— JANELLE NANOS
Commercial real estate heats up in Malden, Medford, Watertown . . .
Expect to see more new hubs of business sprouting around Boston. As companies look for places to call home in an increasingly expensive city, they’ll land in places you might not expect. Developers from Dorchester to the Fenway to Assembly Row in Somerville are planning big mixed-use projects that are heavy on office space, aiming to woo companies that want access to young, urban workers, but are wary of downtown rents. And they won’t have a problem finding tenants, says Jim Elcock, managing partner at the Boston office of real estate firm Colliers, and as they do, they’ll turn quiet corners of the region into business centers. “Watertown is going to become a much more developed market. Allston and Brighton around the new Commuter Rail stop (at Boston Landing),” Elcock says. “Think about Malden, Medford, Everett.” These locations, with access to highways and the MBTA, already are winning their share of blue-chip tenants — from Partners HealthCare at Assembly Row to Bose at Boston Landing. In 2018, more projects will push forward, in more geographic pockets around the region. “People want to be in clusters,” Elcock says. “There’s no right or wrong location. It’s just about being under the umbrella.”
— TIM LOGAN
Apartment rents: Want the good news first?
New apartment construction in the Boston area is lowering the demand for older units. “Rents are beginning to moderate on apartments that were built in 2011 or earlier,” says Marc Draisen, executive director of the Metropolitan Area Planning Council. “And most of our stock is older.” But for that trend to continue in 2018, more housing production is needed to meet overwhelming demand. While leaders from 14 Boston area cities and towns have pledged to work on new housing development in the coming year, Draisen says building permits for new housing have started to decline. “That’s usually a leading indicator for the market cooling off, and we still need housing,” he says. “It’s too soon to know if it’s a shift in the market, or growing opposition to new housing. . . . It’s going to keep the price of building really high.”
— KATHELEEN CONTI
This could be like Netflix for college textbooks
Michael Hansen’s team at Cengage has created a more affordable alternative to the traditional way of buying textbooks.
Michael Hansen believes his team at Cengage has found a way to ease the burden of college costs in a small but important way: by creating a more affordable alternative to the traditional way of buying textbooks. Hansen, CEO of the Boston-based company, has been driving his team to improve digital revenue. The latest concept? Cengage Unlimited. It’s like Netflix, but for college texts. Through Cengage Unlimited, college students will pay nearly $120 a semester, or $180 a year, for unlimited access to Cengage’s entire online catalog. That compares with the more than $500 a year that students spend on textbooks today. Cengage is launching it in time for next fall’s classes. The company needs to convince more professors in the coming months to pick Cengage texts for their syllabi. Cengage materials are already widely used — it’s No. 2 in the college textbook market after Pearson. But it certainly doesn’t have a lock on the majority of classes. At least not yet. “We believe this solution addresses the single biggest concern in the industry,” Hansen says.
— JON CHESTO
More companies start hiring Uber-style
Work will become more task-oriented, as companies increasingly seek out people through digital platforms to complete individual assignments The gig economy that has given rise to the likes of Uber and Instacart is largely driven by people who need a service performed — whether it’s a ride or grocery shopping. But more companies are turning to these kinds of digital platforms to find workers who can do piecemeal jobs in lieu of hiring full-time employees, says Marina Gorbis, executive director of the California think tank Institute for the Future. These types of arrangements give workers more flexibility but also mean fewer people with health care and retirement benefits, paid vacation and sick days, and other protections traditionally provided by employers. “It creates much more precarious work conditions,” Gorbis says. “Long term, this will be a very positive development but short term it’s a problem. Institutionally, we’re not set up for this new way of working, so the transition is likely to be difficult.”
— KATIE JOHNSTON
Ghost restaurants will be on the menu
Restaurants have a lot obstacles to overcome: tight labor markets, low margins, and skyrocketing real estate prices. But what if they could hack the system? Enter the “ghost restaurant.” Typically, these takeout-only food operations piggyback on existing restaurant kitchens, prepping their meals during off-hours. Eric Papachristos, a partner with chef Jody Adams in the restaurants Trade, Porto, and Saloniki, says the concept presents some of the same flexibility of a food truck — “think of it as a food truck 2.0,” he says — and it’s poised to take off in the year ahead. “You could build a restaurant without having to worry about front-of-house,” he said. “I think it’s great for entrepreneur and younger chefs who want to test out concepts.”
— JANELLE NANOS
Beware of more ransomware attacks
The Equifax breach that may have exposed personal information of millions of Americans was just the beginning, Rapid7’s CEO believes.
The waning year brought one of the worst data breaches ever, when hackers stole personal information on 143 million Americans from the credit agency Equifax. Corey Thomas, president and chief executive of Boston-based data security firm Rapid7, believes that was just the beginning. “We’ve installed technology faster than we can maintain it,” Thomas says. As a result, millions of computer systems remain vulnerable to a wide range of attacks. “I think we’re just seeing the first waves of the ransomware attacks,” he says, where criminals infect machines with software that scrambles the victim’s files, then demand cash in exchange for a key that will restore the data. “I think you’re going to see another year of those.” In addition, millions of insecure “Internet of Things” devices, like cheap video security cameras, will be used to carry out attacks on critical systems. “When you have a high volume of weak and poorly managed devices, they tend to be exploited over time,” Thomas says. Despite all this, he says things are improving, as vulnerable companies start giving digital threats the attention they deserve.
— HIAWATHA BRAY
Statewide zoning reform might be on the way
Zoning reform legislation to require communities to allow for more housing has been kicking around Beacon Hill for about two decades, but Paul Yorkis, the outgoing president of the Massachusetts Association of Realtors, is hopeful something will be passed in 2018. “It could conceivably require that every community in the Commonwealth by right would have accessory dwelling units, an area for multifamily zoning, and an area where open space residential developments or clustered developments could be built,” Yorkis says. “We need more housing production at all price points. . . . We don’t have enough housing supply, whether it’s apartments, or condominiums, or single-family homes.”
— KATHELEEN CONTI
Boomer downsizing will become an industry
With more empty-nesters contemplating moves to smaller quarters, and many others helping aging parents relocate, the process of downsizing is ripe for a new wave of consultants offering help and advice. In 2018, “you’re going to see businesses emerging to help you decide which knick-knacks to keep,” predicts Joseph F. Coughlin, founder and director of the MIT AgeLab. “Deciding what to keep and what to throw out is profoundly emotional. Downsizing is going to become a new ritual and a new life event.”
— ROBERT WEISMAN
More startups might bet on digital currency
After decades of funding companies setting out to “disrupt” industries from computing to grocery shopping, Boston’s venture capitalists in 2018 might get a glimpse into just how vulnerable they are to being disrupted themselves. This year, there were two significant new ways for young companies to raise money without going to traditional VCs. One was to seek a major infusion from SoftBank, the Japanese conglomerate whose Vision fund could exceed $100 billion. With coin like that, SoftBank “anoints winners really quickly” in emerging fields, according to Michael Greeley, cofounder of Flare Capital Partners. Earlier stage companies are finding opportunities through a more novel funding mechanism — so-called Initial Coin Offerings, which allow small investors to back businesses by buying dedicated digital currencies, like bitcoin. But Greeley and many others predict government regulators will pour cold water on the ICO trend by declaring them to be securities, thus requiring stringent oversight. He’s also not convinced venture capital is about to go digital in a big way. “Are great entrepreneurs going to go down that path and raise ICOs and not use venture capital?” he asks. “And does the bitcoin euphoria explode in our face and create all sorts of collateral damage?” Rudina Seseri, founder of Glasswing Ventures said she hopes any blowback on cryptocurrency won’t dampen the outlook for other applications of the promising blockchain technology, which allows developers to build tools for secure, anonymous transactions. “It will be interesting from that point of view what impact it has on blockchain activity and how it moves forward,” Seseri says.
— ANDY ROSEN
More really great but expensive drugs are on the way
Bob Coughlin, president of the Massachusetts Biotechnology Council, expects the Food and Drug Administration will approve a wave of pricey gene and cell therapies that will offer hope to people with rare diseases, and add to worries about how to pay for “miracle” medicines. “Researchers at MIT recently estimated that about 40 gene therapies might win FDA approval by the end of 2022,” Coughlin says. “This has the potential to break the health care system because the system is not set up to pay for these type of therapies.” Some of these treatments are likely to cost six or seven figures, he says, so health insurers will have to figure out ways to cover them without causing massive increases in premiums. One option is for insurers to cover a drug’s cost only if it works, a move some leaders of Massachusetts biotechs have said they would consider supporting. “Our industry is moving at such a rapid pace that the insurance industry hasn’t kept up,” Coughlin says. “It’s extremely exciting, and at the same time it’s a lot to be concerned about.”
— JONATHAN SALTZMAN
More millennials will be called ‘boss’
As millennials move into their mid-30s, they are assuming leadership roles at work in record numbers, and it’s having an impact on how workplaces are run, says Elaine Varelas, managing partner at the career management firm Keystone Partners. These new leaders are bringing their “millennial-ness” with them, Varelas says: demanding transparency, doing away with set work hours and locations, promoting social responsibility, and putting an emphasis on career development over stock options. Millennials also are more likely to treat both genders equally and add creative benefits such as student loan repayment. “They have very little use or time for, ‘We’re doing it that way because it’s been done that way,’ “ Varelas says. Of course, all this disruption will inevitably lead to conflict, too, especially among older workers who don’t respond well to change — or to a 30-something boss. But these young executives know they need to hire, and retain, people with more experience to keep things running smoothly. Still, the transition could be tough, especially for baby boomers.
— KATIE JOHNSTON
State Street banks on rolling out ‘Project Pharos’
A State Street-developed program crosschecks a client’s equity investments with news events that could have some bearing on those stocks.
State Street Corp.’s latest venture, dubbed Project Pharos, bears some similarities with the algorithms that determine what shows up in your Facebook feed. A team led by Stephen Marshall at the Boston-based financial giant has developed a program that crosschecks a client’s equity investments with news events that could have some bearing on those stocks. Pharos uses artificial intelligence to rank the headlines based on their relevance to the client’s portfolio. State Street developed Pharos in response to clients who said they were suffering from information overload. “There was a fear of missing something, of not understanding the downstream of a fast-moving news cycle,” Marshall says. Pharos was tested with a few clients this year, but the goal is to roll it out to State Street’s custody and asset management clients in the first half of 2018. For now, State Street plans to use the software as a way to help clients understand the connection between news events and their portfolios. “We’re not turning State Street into a news service,” Marshall says. “We’re not looking to compete with Bloomberg.”