I recently read an article, What is Disruptive Innovation? by Clayton M. Christensen, Michael E. Raynor, and Rory McDonald from the Harvard Business Review, that got me thinking about disruptive innovation in healthcare and why it is so difficult. Incumbents, or the supply side, focus on improving their products to their present customer base and inherently ignore the needs of others, the demand side, though they believe they are filling their needs.
Healthcare is no different. We today as the suppliers of healthcare services view everything through the lens of being a “solution shop” business model. We ask those we serve to come to us, and we provide a solution for them. We are very good at this as we are focused on diagnosing and treating those that come to us. However, we are completely missing large segments on the demand side by how we view ourselves and by the true needs of those we serve.
If we truly want to become disruptive in healthcare, we need to change to a “process” business model, which are models that standardize protocols to diagnosis and treat. Obviously this will not work for all situations, as there is great knowledge and experience in healthcare where such protocols will not suffice. However, we must remember that to be truly disruptive, we are not trying to replace the present situation, but provide a service for a market that is presently not being addressed. Once this is done, then as we continue to innovate, it will begin to replace the present model.
It is very hard for healthcare systems to think this way because as the incumbent, why would we move away from what is working? Christensen’s disruptive innovation model does not say you need to move away from what is working, but instead to manage both needs by setting up structures that allow this innovation to occur. We also need to remember that true disruptive innovation, by definition, takes long periods of time to work or even to realize if it is disruptive or not.
Moving from fee-for-service to fee-for-value is a great example of this duality. We all talk about having a foot in two different canoes and how hard it is. We intuitively know that as we move to fee-for-value we will erode our fee-for-service revenue. We should not shy away from this polarity, but focus on how to be an incumbent and disrupter at the same time. We need to set up structures that focus on our present consumers and present payment models while we invest in innovations that might be disruptive.
Healthcare and education have been two areas that have resisted this dichotomy. We see the prevalence now of online education, and I have no doubt we will see disruptive innovators in the healthcare space. The question really becomes, do we in the healthcare space want to swing the pendulum? Or do we chase the pendulum when it’s swung by others?