The Harvard Business Review is running an excellent series of articles about the challenge for innovation in healthcare, and although it is US centric, it makes for great reading. Clayten Christensen has a particularly interesting article applying his model for disruptive innovation to the healthcare industry, and the changes that will need to take place :
A Disruptive Solution for Health Care
8:12 AM Wednesday March 2, 2011
by Clayton M. Christensen
The challenge that we face — making health care affordable and conveniently accessible to most people — is not unique to health care. Almost every industry began with services and products that were so complicated and expensive to provide that only people with a lot of skill and a lot of money could participate. The transformational force that has brought affordability and accessibility to other industries is disruptive innovation. Today’s health-care industry screams for disruption. Politicians are consumed with how we can afford health care. But disruption solves the more fundamental question: How do we make health care affordable?
Most disruptions have three enablers: a simplifying technology, a business model innovation, and a disruptive value network. The technological enabler transforms a technological problem from something that requires deep training, intuition, and iteration to resolve, into a problem that can be addressed in a predictable, rules-based way. Diagnostic abilities are the technological enablers of disruption in health care. Precise definition of the problem, in this and in every industry, is a prerequisite to the development of a predictably effective solution.
In the past, business model innovation was common in health care. When the technological enablers for the diagnosis and treatment of infectious diseases emerged, most patient care was transferred away from hospitals to doctors’ offices, and away from the doctors to nurses. However, business model innovation has stalled in the last three decades. Regulations and reimbursement systems currently trap in high-cost venues much care that could be provided in lower-cost, more convenient business models. Other disruptions fail because they lack new value networks that combine business models into coherent ecosystems that allow them to disrupt their predecessors.
Three key lessons from the history of disruptive innovation are particularly important in the disruption of health care. The first is that while the technological enablers almost always emerge form the laboratories of leading institutions in the industry, the business model innovations do not. Almost always these are forged by new entrants to the industry. Regulators must beware, therefore, of attempts by the leading institutions to outlaw business model innovation. Regulation should facilitate it. What is in the interest of society most often does not coincide with the self-perceived interests of the leading institutions.
The second key lesson is that disruption rarely happens piecemeal, where stand-alone disruptions are plugged into the existing value network of an industry. Rather, entirely new value networks arise, disrupting the old. Hence, disruptive business models such as value-adding process clinics, retail clinics, and facilitated networks must be married with disruptive innovations in insurance and reimbursement in order to reap the full impact in cost and accessibility. At the outset, knitting all these pieces together will require a much higher degree of integration than has been the norm in the health-care industry. Difficult though it will be, these providers need to disrupt themselves. Employers will need to play a more proactive role in orchestrating the emergence of this new value network, compared to the reactive posture they have taken in the past.
Finally, we have seen a pervasive pattern in every industry that has been transformed through disruption. This same pattern characterizes what has happened to date with disruptive initiatives in health care. The energies, talent, and resources of the leading organizations in an established system always are absorbed in improving their best products, which are sold to address the most demanding applications in the industry. Why? Because the high end of most markets is where the most attractive profits are made, serving the most profitable customers. When a disruptive technological enabler emerges, the leaders in the industry disparage and discourage it because, with its orientation toward simplicity and accessibility, the disruption just isn’t capable of solving the complicated problems that define the world in which the leading experts work.
Always, the technological enablers of disruption are successfully deployed against the industry’s simplest problems first. They then build commercial and technological momentum upon that foothold and improve, progressively displacing the old, high-cost approach application by application, customer by customer, disease by disease. Apple sold its Apple IIe personal computer as a toy to children, not to the accounting departments of major banks. Nucor cut its teeth on concrete reinforcing bars, not the sheet steel that fed Ford. Cisco deployed its switches to route data, not voice – because data didn’t care about the router’s four-second latency delay. Target started by selling thing like paint, hardware, and simple kitchen supplies, not designer clothing.
Health care is no different. Disruption in health care entails moving the simplest procedures now performed in expensive hospitals to outpatient clinics, retail clinics, and patients’ homes.
Excerpted and adapted from The Innovator’s Prescription, pp. xlv-xlvi by Clayton Christensen, Jerome Grossman M.D., and Jason Hwang M.D.
Clayton M. Christensen is a professor at Harvard Business School. He co-founded Innosight andRose Park Advisors. He is the author of six books, including The Innovator’s Dilemma and, most recently, the HBR article, “How Will You Measure Your Life?”
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