09 Mar 2009  Research & Ideas

How to Revive Health-Care Innovation

Simple solutions to complex problems lead to breakthroughs in industries from retailing to personal computers to printing. So let's try health care, too. According to HBS professor Clayton M. Christensen and coauthors of The Innovator's Prescription, such disruption to an industry might look like a threat, but it "always proves to be an extraordinary growth opportunity." Book excerpt. Key concepts include:

  • Most disruptions have three enablers: a simplifying technology, a business model innovation, and a disruptive value network.
  • Business model innovations are almost always forged by new entrants to an industry.
  • Disruption of an industry rarely happens piecemeal. It is more common that entirely new value networks arise, displacing the old.
  • Always, the technological enablers of disruption are successfully deployed against an industry's simplest problems first. Health care is no different.

 

Editor's Note— The patient is weak, the situation is serious, but a cure is on the horizon—if we think differently about the underlying problem. Specifically, we need to innovate in health care just the way it is done in any other industry, by tackling the simplest problems first and by devising rules-based solutions to make care accessible and affordable.

That's the message of HBS professor Clayton M. Christensen and colleagues in their new book, The Innovator's Prescription: A Disruptive Solution for Health Care (McGraw-Hill, 2009). According to Christensen, the late Jerome H. Grossman, M.D., and Jason Hwang, M.D. (HBS MBA '06), the most essential innovations begin with simplicity and accessibility. As they note in the book excerpt below, Toyota made a name for itself in the United States first with a Corona; the far more ambitious Lexus came later. Many other industries have been disrupted in a similar way, write the authors. "There is little dispute that we need a system that is competitive, responsive, and consumer-driven, with clear metrics of value per dollar spent." In the following excerpt, they outline three lessons of industry disruption that can help cure this ailing industry.

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 and consume 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 the 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 for the disruption of health care. The first is that while the technological enablers almost always emerge from 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. […] 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, whereas voice telecommunications did. Target started by selling things like paint, hardware, and simple kitchen supplies, not designer clothing. JCB transformed the digging of big holes not by aspiring to use hydraulics technology to excavate massive underground parking garages upon which skyscrapers would be built. JCB started by digging one-foot trenches to run water lines from homes to the pipes under the street. Toyota's launch vehicle was a Corona, not a Lexus.

Health care is no different. An illustration: Angioplasty has transformed the interventional care of coronary artery disease—making it much more affordable and much more convenient for many more people to receive effective treatment.1 It was initially deployed against partially occluded, easy-to-access coronary arteries. Luckily, angioplasty wasn't blocked from the market just because it couldn't beat the gold standard of open-heart bypass surgery, which was unquestionably the best way to resolve intractable blockages in complicated locations. But step by step, stent by stent, the minimally invasive approach has improved to the point where fewer and fewer people need bypass surgery. Now, pharmaceuticals, including lipid-lowering agents such as Lipitor, are disrupting angioplasty in the same manner. They were not withheld from the market because they couldn't dissolve defiant arterial blockages. But deployed as prevention, patient by patient, these "statins" demonstrate reabsorption of atherosclerotic plaques that can obviate the need for angioplasty.

Doctors and hospitals, regulators, and policymakers need to convert to this religion because it isn't myth: it is true. The fact that cost-lowering, accessibility—enhancing disruptive enablers can address only the simplest of problems at the outset is indeed a gospel of good news. It frees physicians and hospitals to focus their energies on what they do best-tackling complex medical problems and moving more and more problems along the spectrum from intuitive toward precision medicine. However, in the history of health care, industry leaders have repeatedly lobbied for legislation and regulation that block disruptive approaches from being used anywhere until they are certifiably good enough to used everywhere. This traps the industry where it began, in the expertise-intensive world of high costs.

Generally, the leading practitioners of the old order become the victims of disruption, not the initiators of it. But properly educated, the leaders of the existing systems can take the lead in disrupting themselves—because while leaders instinctively view disruption as a threat, it always proves to be an extraordinary growth opportunity. Hence, IBM played a huge role in creating the personal computer industry; the department store Dayton-Hudson launched Target; and Hewlett-Packard created and grew to dominate the disruptive ink-jet printer business. When they follow the rules we've described in our research, the leaders in the old indeed can become the leaders of the new.

The forces of health-care reform have had no credible map of the terrain ahead. Our hope is that this book can serve as the map. We hope this map inspires some of you to step to the front and become leaders in a coordinated revolution, because the reforms that make health care affordable and accessible are indeed possible.

1. Some recent studies purport to show that angioplasty is just as costly on a per-patient basis as open-heart surgery. We contend that even if these studies are accurate, it is simply the result of pricing and profit distortions of the present reimbursement system.

About the authors

Clayton M. Christensen is the Robert and Jane Cizik Professor of Business Administration at Harvard Business School.

The late Jerome H. Grossman, M.D., was director of the Harvard Kennedy School Health Care Delivery Policy Program.

Jason Hwang, M.D. (HBS MBA '06), is an internal medicine physician and senior strategist for the health-care practice at Innosight LLC, an innovation and strategy consulting firm cofounded by Christensen.

Excerpted with permission from The Innovator's Prescription: A Disruptive Solution for Health Care by Clayton M. Christensen, Jerome H. Grossman, M.D., and Jason Hwang, M.D. Copyright © 2009 by Clayton M. Christensen, Jerome Grossman, and Jason Hwang. All rights reserved.