07 Jan Part I: Innovators Prescription – Introduction to Theory
I am just finishing up The Innovators Prescription: A Disruptive Solution for Health Care. It is the third installment by Clayton Christensen in his innovations series where he collaborates with the esteemed Jerome Grossman, MD and newcomer Jason Hwang, MD. I believe this book will make a profound impact on healthcare by introducing the Disruptive Innovation framework to the ongoing health care reform debate.
While not advocating a specific philosophy, Christensen et al introduce how the Disruptive Innovation theory can be applied to health care (“boiled down to its elements, health care is very similar to other industries we have studied” but “wrapping my brain around it took 3.1416X more time, and 10X more intellectual energy than I could have imagined”). They chose to take the hard road by “not succumb[ing] to complexity of this sort by offering simplistic solutions to incorrectly defined problems . . . but instead wrestle with and boil down the complexity in order to distill from it the essence of the problems so that we could recommend solutiosn that would address them at their root.
Given that it is such a new book, I don’t believe it is even out on Amazon yet, I will provide a fairly detailed review of its contents with commentary as appropriate:
- DISRUPTIVE INNOVATION DEFINED
- Defined as the “AGENT” of transformation that enables industries achieve increased access, lowered costs, and higher quality products and services
- Requires: 1) Technology enabler, 2) Business model innovation, and 3) Value network
- Regulations and Standards then help hold these three required elements together by facilitating the transformation.
- Disruption does not necessarily mean “radically different” or “upsetting” but rather making things simpler, easier, and more affordable
- Innovation does not necessarily mean some “radically new technology” but rather new way to combine INPUTS to obtain higher value OUTPUTS
- So “Disruptive Innovation” = simpler, easier, and more affordable way to achieve more valuable outputs from given set of inputs
- Disruptive Innovation, within the health care context, creates a mechanism to achieve increased access, lowered cost, and higher quality health care
- TECHNOLOGY itself is not enough. A BUSINESS MODEL “trapped” within old paradigm is not enough. A new innovation w/o supporting NETWORK is not enough
- Requires all three favorable regulatory environment with industry standards to make all this happen.
- DISRUPTIVE INNOVATION THEORY
- Basically market leaders continue to develop and enhance product along a upward sloping, linear performance line. Performance (Y axis) improves over time (X axis) but customers typically can’t absorb these improvements and soon the products exceeds what the “job” consumers “hired” the product to do (this job concept is important!)
- So you end up with a DVD player that can do all kinds of wizardry that you have no time to figure out; or a microwave with 90 ways to fry when all you do is push play or push 1 minute fry every time.
- Basically market leading companies tend to over innovate along the “sustaining innovation” curve as they listen to their best customers who are paying them real dollars today
- This sets up market leaders for the paradox, or the Innovators Dilemma, wherein the become trapped in listening to their best paying customers today, delivering more and more incremental features/functionality that ultimately locks companies into a certain trajectory of increasingly feature rich, complex, and ultimately high priced products
- This then sets up the opportunity for someone else to come along, often due to some new TECHNOLOGY ENABLER, to offer a simpler product without as many features which DOES NOT appeal to the current market. But it does appeal to some market – “non-consumers” or people who like some aspect of the newly introduced but insufficient product.
- Over time, this new product picks up new features and functionality that appeals to a wider and wider group of consumers but at a drastically different cost structure due to a totally different BUSINESS MODEL that was required in order to introduce the product in the first place. Soon an entirely new VALUE NETWORK grows up around
- BAM! The Disruptive Innovation moves along the S-curve and after some time peculating along hits the hockey stick and blows past the incumbent often before they knew or understood what him them.
We will pick up Part II with backgrounder on the interplay of Technology Enablers and Business Models before diving into specifics disruptionw within Hospital, Physician Offices, and Chronic Disease areas.