Disruptive Innovation in Healthcare 2009

8/14/2019 Disruptive Innovation in Healthcare 2009

1/25

Disruptive Innovation in Healthcare

12th November 2009

Loy Lobo Global Healthcare Practice [email protected]


2/25

Session Overview

(Re) Defining Disruptive Innovation

Disruptive Innovation in Healthcare Innovation Killers

Making Innovation Happen

Take Away


3/25

(Re) Defining Disruptive Innovation


4/25


5/25

(Re) Defining Disruptive Innovation Disruptive Technological Innovation

Scaling up of a niche market into a mass market (compact copiers, 100 cc

motorcycles, consumer power tools, quartz movement, inkjet printers). Changes the performance economics and / or expands the market.

Disruptive Product Innovation (Radical Innovation) Introduce products & value propositions that disturb prevailing consumer habits

in a major way (car, TV, PC, mobiles).

Disrupt both consumers and producers. More supply driven rather than demand driven.

First mover may not be an advantage.

Disruptive Business Model Innovation (Strategic Innovation) Discovery of a fundamentally different business model within an existing

business (SaaS, no frills airlines, .online retailing). Changes the basis of competition.

Requires different activities that are often incompatible with legacy businessmodels due to trade-offs & conflicts.

Frequently arise in response to unmet need (demand driven).

Ref: Disruptive Innovation: In Need of Better Theory. Constantinos Markides; Journal of Product Innovation Management; 2006; 23; 19-25


6/25

(Re) Defining Disruptive Innovation So What?

Disruptors: Know the nature of your disruption and what you need to do to

be successful. Incumbents: Realise what you are dealing with and choose your response.


7/25

Behaviour of Disruptors (Product)

Initial invasion by hordes of entrants. Surge happens early before marketstarts growing.

Product variety and rate of innovation is highest when market is nascent.

High technological and product uncertainty.

Entry rate subsides, followed by shakeout.

Emergence of a dominant design.

Market structure remains fluid for a long time.


8/25

Demand creation

drives success


9/25

Behaviour of Disruptors (Business Model)

Identify unmet need in particular customer segment

Create customer value proposition that is good enough and cheapenough to capture customers left out by incumbents.

Not necessarily a superior business model.

Gradually go mainstream.

May never replace the incumbent entirely.


10/25

Response of Incumbents

Ref: Responses toDisruptive StrategicInnovations; Charitou &Markides; SloanManagement Review;

Winter 2003; 55-63


11/25

Disruptive Innovation in Healthcare


12/25

State of innovation in Healthcare

The Healthcare system was designed to fix people whenthey fell ill and return them to better health

Interventions are designed to be episodic (even ifstitched together with a care plan)

Investment continues to focus on higher end and life-

saving treatments (Sustaining Innovations) Education system promotes further specialisation and

enhancement of clinical skills & reputation (SustainingInnovations)

Leading to a spiral of increasing cost and diminishingreturns performance is frequently beyond needs ofmost demanding customers.


13/25

Technological change has disrupted human

biology


14/25

Lower intensity and longer duration care

models emerging for unmet needs

Ref: Will Disruptive Innovations Cure Healthcare?; Christensen, Bohmer, Kenagy; Harvard Business Review; Sep-Oct 2000; 102-112

Cheap enough & good enough.


15/25

2008 15

0 25 65Age

Illness

Pre-I

lln

ess

Wellness

Unpredictable Health

Predictable (Rules-based) Health

DeathDeath

60-80% Lifestyle

Non-medical model for health gain


16/25

Disrupting Healthcare Key Principles In population health, gene expression trumps gene disposition Large majority of health experience is daily-habit mediated

What ails the globe is Rules based Normal means prevalent not Optimal Optimal across populations appears rules-based and thus

Digitalisable!

Participatory models with quick feedback loops can Help create personal mastery over own health Elicit effort from expert users to help others

Link in specialist resources / skills where required

Leverage clinical resources and use external free resource (users) tomake model cheap enough Stimulate continuous improvement and enhancement around a core

kernel of services.

Ref: Brigitte Piniewski MD, Director of Bio Wellness Research, Oregon Medical Labs.


17/25

Innovation Killers


18/25


19/25

Innovation Killers 2 & 3

Using Fixed and Sunk costs unwisely

Biases decisions towards Sustainable innovations Focuses investment on assets and capabilities that are likely to

become obsolete

Fails to match investments of newcomers that are necessary to

develop a new configuration of assets and capabilities. Focusing myopically on Earnings Per Share (EPS)

Short term executive incentives create bias against long-terminvestment strategies.

CEO sponsorship and clear leadership required for sustainableinnovation processes in large organisations.


20/25

Making innovation happen


21/25

Innovation Processes Stage Gate Elimination

Numbers driven; Market size,

investment required, ROI.

Decision makers usuallyprominent in business-as-usual.

Tends to select opportunitiesthat leverage currentcapabilities / assets.

Innovators can game systemby changing assumptions

behind the numbers.

In worst case, salami slicesbudget so that nothing reallyprogresses.

Discovery Driven Planning

Minimum threshold for

success is clearly defined

Supporting assumptions arearticulated and challenged

Key assumptions and deal

killers tested early Correct / incorrect

assumptions used to refreshstrategy.

More often than not, failure ininnovation is rooted in not

having asked an important

question, rather than in having

arrived at an incorrect answer.Ref: Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things; Christensen, Kaufman, Shih; Harvard Business Review; Jan2008; 98-106


22/25

Disruptive Innovation for Social Change

Participative healthcare requires social change on anational scale (Catalytic Change)

Characteristics of Catalytic Changes

Create systemic social change through scaling and replication

Meet a need that is either over-served, or not served at all

Are cheap enough and good enough

Generate resources in ways that are unattractive to incumbents

Are ignored or disparaged by incumbents, but could beencouraged if the business model is currently unattractive to

them.

Ref: Disruptive Innovation for Social Change; Christensen, Baumann, Ruggles, Sadtler; Harvard Business Review; Dec 2006; 94-101


23/25


24/25


25/25

Disruptive Innovation in Healthcare 2009

Documents

Transcript of Disruptive Innovation in Healthcare 2009