In preparing for our upcoming Client Bombora, I had the opportunity to relook (and rethink) through The Innovator’s Prescription. The book was authored by Clayton Christensen of Disruptive Innovation fame, but primarily co-written by Jason Hwang, MD, who we are thrilled to have joining us at our event as one of the two opening morning keynote speakers. This seminal book, along with Porter’s Redefining Health Care, were the twin catalysts behind my decision to start Crossover Health. As we mark the tenth year since its publication, I thought it would be both useful and interesting to measure the predictive accuracy of many of its key tenets.
Christensen, a professor at the Harvard Business School, had written a precursor in 1997 titled “The Innovator’s Dilemma.” In this earlier book, which introduced the theory of “disruptive innovation,” he argued that incumbent companies rarely responded effectively to upstart competitors. His research showed that existing companies had ingrained business models that created organizational inertia and could only produce “sustaining innovations.” The big drag was that business was often too good, i.e. too much money was being made, so it made no sense to shift from profitable lines of business to newer technologies that in their current form did not meet market needs. The profitability and market dominance of the incumbent led to both avarice and arrogance that blinded them to the threat of the new disruptive technology. The threat didn’t materialize all at once, of course, but rather “slowly,” meeting more and more customer needs until “suddenly” the new technology didn’t just displace, rather, it fundamentally disrupted.
Amazon was barely past the bell ringing stage when Christensen published his first book, but it furnishes exactly the kind of disruptive story he described. No one paid any attention (let alone feared) a small online book retailer in Seattle. What they missed were the incredible technological underpinnings of a logistics business that could sell anything. Christensen mentioned how the hugely profitable micro-computer sector just about vanished with MS-DOS, how Southwest became the most consistently profitable airline in history by disrupting the legacy carrier business model, and dozens of other examples. The underlying tenet of Christensen’s book was that if companies could understand Disruptive Innovations, and if they had the right organizational commitment and market foresight, they could disrupt themselves. Indeed, a few companies such as Netflix (twice), IBM (mainframe to thinkpads), and now even Microsoft (internet pivots, gaming, cloud computing, etc.) seem to have learned how to disrupt themselves with wholesale changes to their own businesses. But these examples are rarities.
“The Innovator’s Prescription” was published 12 years later, and was all about how Christensen’s lessons of business (r)evolution and innovation could be applied to healthcare. [By the way, I always say that healthcare is 7-10 years behind other industries; and, the fact that a healthcare “disruptive innovation” book took an additional 12 years just confirms this!] As Jason shares the story behind the making of the book, it becomes abundantly clear that the principles are universal in their application, even to the “unique” challenges of healthcare. Comparing the hospital to the mainframe computer, he talks about how centralized healthcare (Doctor as God, Hospital as Heaven) is being disrupted by all kinds of decentralized solutions (new locations of care, different types of providers, etc). He contends that hospitals have their place, but that the conflict between the business models of fee-based “intuitive medicine” (using experience and some precedents to solve gnarly diagnoses) versus results-based “precision medicine” (evidence-based, predictable, and accountable processes) renders the hospital inefficient at both. In the end, both business models are diluted and done poorly, thereby creating the “disruptive” opportunities for new entrants. The new service innovator “specialists” then start carving up first the margins, and then the market, of the inefficient “generalist” hospital.
The healthcare disrupters, just like those in other industries, are predicted to achieve this by the introduction of some combination of enabling technology, new business models, and a virtuous network of value creation (i.e. microsurgeries in walk-in surgery centers, new non-invasive diagnostic tools, retail clinics, etc). These innovations won’t just be financially driven either; many are operational, including advances in technology that allow people with “lesser” training to do the work that previously required more highly-trained practitioners. Finally, in the new world order predicted by “The Innovator’s Prescription,” technology and data would be the binding agent, like a network of distributed PCs or smart devices held together in the cloud, as opposed to a single mainframe computer.
I thought it would be interesting to ask Jason, whom I appreciate took the time to respond, what predictions were most accurate; and which have not (yet?) come to pass. Two that he brought up as accurate forecasts were:
- The rise of precision medicine, and the shifting boundaries of practice. We see that at Crossover, where far more can happen within our physical and virtual walls than a decade ago, helping members avoid the complex specialist ecosystem.
- The creation of new medical schools much more closely aligned with both the business of healthcare and an integrative approach to care, which he suggested would be a good initiative for an organization like Kaiser Permanente. They thought so too, as the KP school opened a few years later.
Two that have not come to pass the way he expected include:
- The slower than expected growth of health savings accounts. As Jason noted in his email, “While HSA adoption has increased a lot, it hasn’t quite been exponential. We did mention there were other market forces at play that could affect HSA growth—chiefly, why would anyone want a medical wallet if there wasn’t anything affordable to spend it on?” I agree, but also suggest that the reluctance of the system to move beyond a volume-based fee for service model (the tyranny of the visit!) has precluded value and outcomes-based offerings that are ideal for HSAs and informed consumers.
- Jason predicted retail clinics like Minute Clinic would continue to expand in number and scope. While they did expand in number after CVS acquired Minute Clinic, they never expanded in scope to the extent he thought they could. The potential is there, but we’re still waiting for it to happen.
Having previewed Jason’s presentation, the highlights for me are three-fold. First, the role that primary care can play in reinventing not only the care model, but perhaps more importantly, the business model. I also love his focus on using technology as a way to develop an even better doctor/patient relationship built on trust, access, convenience, and communication. Finally, the idea around creating a value network where the more clients we aggregate, the bigger and more influential our network of health activists becomes. We see these forces all coming together to elevate the role of patients as they start to expect more from both providers and the payers, and as they begin to use enabling technology to change the very nature of the healthcare relationship. It’s all in Jason’s book, which is why I’m so appreciative of the insights, the ideas, and of course the inspiration provided by The Innovator’s Prescription.