Thursday, March 8, 2012

The Healthcare Innovator's Dilemma

Here is an excellent short video featuring Clayton Christensen from the Harvard Business School explaining his theory about "disruptive innovation", which in essence boils down to: existing companies' existing business models can help them innovate to build better products for existing customers, but shackle them from being able to go after truly disruptive innovations that can create different versions of those products for different customers - examples, cheaper high quality cars, or personal computers for the home.

He wrote a landmark book on the topic called "The Innovator's Dilemma", which identified how this dilemma plays out, and how companies can navigate their way out of this dilemma.

The dilemma lies ever so profoundly at the heart of the ailing healthcare system. Existing healthcare providers' products and services are driven by "more expensive, latest technology, more volume" consumption by all - including patients, doctors, insurance companies. It is not hard to see the medical and scientific innovation at play in these cutting-edge technologies. However, these companies have little or no incentive to deliver a different product that provides services at a lower price, is more oriented around wellness or primary care, is more oriented around the healthcare needs of the patient rather than the system, and can be delivered without the use of expensive technology.

Attempts underway to change the business model from within, by improving access to healthcare, or changing the compensation system, are just nibbling at the edges, and may not provide enough of an incentive for true disruption. How many entities will change their business model to a new way of providing care at the expense of their existing "book of business"? This schizophrenia is generally not sustainable within organizational environments which in order to be successful have to be organized around a common mission, vision, and goals.

Perhaps Clayton's ideas will hold some promise of redemption for healthcare innovators as well. Will blog about those in a subsequent post. 

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