In the new book, The Innovator’s Prescription:
A Disruptive Solution for Health Care,
Clayton Christensen, the Robert and Jane
Cizik Professor of Business Administration
at the Harvard Business School, and author
of The Innovator’s Dilemma, together with
doctors Jerome Grossman and Jason Hwang,
turns his thoughts of innovation to the
healthcare arena.
While Christensen is writing partly about
the US healthcare system, a market-led
system, substantially different from the
National Health Service in the UK, in many
ways, there are important parallels between
the two systems. And, indeed, many of the
observations that the authors make are
equally applicable to the public sector NHS
and healthcare provision in the UK.
The authors begin by outlining a number of
worrying factors for healthcare providers.
For a start, the cost of healthcare provision
is growing rapidly; in the US for example, in
1970 it accounted for approximately 7 per cent
of GDP, but that figure had risen to 16 per cent
by 2007. The growth in healthcare costs also
outpaces the growth in the US economy.
Even in nationalised health systems, budget
limitations impose considerable pressures on
provision. While the NHS, for example, has
cut waiting times and upgraded facilities,
says Christensen, the increasing costs
associated with this have not been offset
by improved productivity.
Christensen approaches the problem of
providing for healthcare in the future from
the perspective of introducing innovation
to reduce the cost of healthcare provision,
and improve quality and accessibility of
care. The emphasis is on making healthcare
more affordable, while at the same time
improving quality.
To do this Christensen applies the
principles of disruptive innovation (DI)
to the healthcare sector. The essential
fundamentals of DI are that initially, products
and services offered are both complicated
and expensive. Only the wealthy can access
them. Only the extremely technically
competent can provide them – or indeed,
in many cases, use them.
In time, however, a force which Christensen
calls DI, transforms the particular sector,
enabling the same products and services
to be provided at much lower cost. One
obvious example of this is the mainframe
computer, which was eventually replaced by
the personal computer, a product available
more widely and at a much lower cost.
Three elements of DI
Disruptive innovation consists of three
elements: a technological enabler; a
business model innovation; and a new
value network.
In healthcare, the technological enablers are
those things that enable the precise diagnosis
of the patient’s condition. This involves a
move from what the authors call intuitive
medicine – highly trained and expensive
professionals solving medical problems
through intuitive experimentation and
pattern recognition – to empirical medicine –
which uses data to assess which methods of
treatment are more efficacious than others.
When patients can be diagnosed precisely,
then standardised therapies can be applied to
treatment – precision medicine.
With regard to the business model
innovation, the authors identify three types
of business model in the healthcare system:
solution shops; value adding process (VAP)
businesses; and facilitated networks.
For each to function most effectively, they
need to be separated, whereas in modern
healthcare systems they have become
intermingled.
Solution shops diagnose and solve
unstructured problems, the value is primarily
delivered through the people they employ,
and those people are usually experts who
use intuition and analytical problem solving
skills to ‘diagnose the cause of complex
problems’. This may be, for example, the
diagnostic work performed in general
hospitals as well as in some GP practices.
The VAP business model is where
organisations “take incomplete or broken
things and transform them into more
complete outputs of high-value”. Car
manufacturers, or oil refineries, are examples
of VAP business models. Surgery and
medicine prescription after a rules-based
diagnostic test are VAP activities.
VAP activities follow on from a definitive
diagnosis. Where they can be separated
organisationally from solution shops, then
costs come down considerably. In a way, what
the authors are suggesting sounds like minihealthcare
factories, providing commoditised
services following diagnosis, in much the same
way, for example, as a laser eye clinic operates.
Finally, facilitated networks allow people
to exchange things of value with each
other. The authors point out that these can
be effective business models for the care
of chronic illnesses, for example, where
patients with chronic diseases can exchange
information and resources in order to
manage and improve care.
In the first wave of innovation the authors
envisage the healthcare system separating
out into the three different types of
business model: solution shops focusing
on diagnostics; value adding process
hospitals providing a specialist focus on
post-diagnostic procedures; and facilitated
networks managing the care of many
behaviour dependent chronic diseases.
Once the three different types of business
model have separated out, further DI will
produce new business models within each.
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The third and final enabler of DI is the
creation of a new independent value
network platform around the new business
models. Incorporating new business models
and innovations, within the existing value
network, often leads to that innovation
being reshaped or co-opted to conform to
the old system. Hence the need for a new
value system, say the authors. So in order to
succeed, once existing organisational models
are fragmented into separate business
models, they then need to coalesce into a
new value network.
Future trends
Left to its own devices, DI may take a long
time to impose itself on existing healthcare
provision models, says Christensen. But the
process of DI can be speeded up. Much
of the discussion at this point refers to the
market-led solution in the US, with various
corporate providers. However, there are
a number of observations relevant to the
NHS. For example, the book notes that
when healthcare providers are rewarded
for providing more care, then supply creates
demand. The more sickness there is, in
theory, the greater the potential reward.
Surely it is, suggests Christensen, better to
focus on solutions that reward wellness.
The authors also note a trend for
corporations to integrate more healthcare
provision into their corporate competences,
at the same time dismissing the widely
offered notion that organisations should
stick with their ‘core competence’ as a
comparatively recent, backward looking,
and misguided concept.
Christensen predicts that information
technology will play an essential role in the
emergence of disruptive business models.
In the first instance information technology
will facilitate the point of care provision
from solution shops to user networks
where appropriate, enabling doctors and
nurses and patients to share insights and
information that may previously have only
been available to specialists.
The second way that Christensen sees IT
being instrumental to DI in healthcare, is
through the enhancement of medical records,
both as basic electronic medical records
and more usefully as personally controlled
electronic medical records, where control
resides with the patients, who can access
their records from anywhere in the world.
A number of changes are due in the
pharmaceutical medical devices industries
as well. For a start, blockbuster drugs will
become rare, drug companies will market
directly to patients, diagnostics will become
more profitable relative to therapeutics,
and pharmaceutical companies will realise
that where they have been outsourcing
the management of clinical trials and
development of precision diagnostics, they
have been ridding themselves of the part of
the business that will be most profitable in
future. Also, companies that manufacture
generics at the moment will move upstream
into proprietary products.
With medical devices and diagnostic
equipment, says Christensen, there will be
a move to decentralisation. During the early
phase of most industries, the expensive
technical nature of equipment means that
people travel to the equipment, rather
than bringing the equipment to people. So,
documents to be photocopied are taken
to a centralised photocopying room. But,
as technology improves, and costs come
down, so the machines used are closer to
the consumers – a photocopying machine in
every office. And so it will be with medical
devices and diagnostic equipment.
Medical training will also need to change
in the future. Current medical training,
says Christensen, reflects the healthcare
of the past. When medicine was more of
an intuitive art than a rules-based science,
doctors were trained to work individually,
and to work intuitively. Also, most diseases
were acute and could be observed in
hospital. In the future, however, in a time
when there is more precision medicine, more
healthcare will be provided by people other
than doctors; nurses, for example.
Fit for purpose
And, while expert surgeons and doctors
will be required in the solution shops, says
Christensen, although possibly fewer
than are needed today, more expertise
will be required in the area of process and
equipment knowledge and improvement.
For most nations, the challenges of
providing adequate, effective healthcare are
considerable. Christensen and his co-authors
provide a well reasoned and thoughtprovoking
prescription to help policymakers
and managers ensure that healthcare
systems of the future are fit for purpose.
As might be expected from someone who
is both a leading management academic
and bestselling author, The Innovator’s
Prescription is an extremely interesting,
persuasively argued and insightful book.
For Christensen fans, it is another fascinating
exposition of the innovator’s dilemma as
applied to a specific market sector. For
anyone working in healthcare, particularly
in a managerial or leadership role it is a
must read.
The Innovator’s Prescription: A Disruptive Solution
for Health Care will be published early in 2009.