Author Q&A
Q: The Innovator’s Prescription examines the health care system
using a concept from the world of business management called
disruptive innovation. Can you describe what disruptive innovation
means?
A: A disruptive innovation typically combines a simplifying technology with a novel business model in order to transform expensive and complicated products and services into affordable and conveniently accessible ones. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when measured against traditional performance metrics. However, because disruptive innovations are typically affordable, simpler to use, or more convenient, they often appeal first to pockets of “non-consumption” – groups of customers whose needs are not fulfilled by existing product offerings (and who therefore do not consume them). By initially taking root in a less-demanding or non-consuming market segment, disruptive innovations can then improve from that foothold and gradually begin to steal customers away from the dominant, incumbent players.
Q: Disruptive innovation usually applies to business. How does it apply to health care?
A: The early history of most industries tends to yield expensive and complicated products or services that can only be used or delivered by individuals with a lot of wealth or expertise. In this respect, the current problems of high cost and inadequate access in health care are really not unique. Likewise, by coupling disruptive technologies with innovative business models to create affordability and convenience, the same process of disruption that eventually transformed myriad other industries can have the same dramatic effect on health care. Disruption will bring new providers of care, create new venues of care, enable more patients to access care, and change the way we insure and pay for care.
Q: What do you see as the major problems in the current health care system?
A: The United States spends far more on health care than any other nation, but the value received in return is unacceptable. Quality and safety are inconsistent, and medical errors occur at a frightening rate. Rising costs have simultaneously diminished the global competitiveness of American companies and increased the ranks of the uninsured at home. The list of problems could go on and on, but the root cause of most of them is the fact that our health care system remains mired in outdated business models that fail to capitalize on the disruptive nature of innovative technologies. By creating new business models to supplant the old ones, disruptive innovation has the potential to transform the nation’s health care system in its entirety into one that effectively cares for all Americans by making care both affordable and conveniently accessible.
Q: How will disruptive innovation address these problems crippling the health care system?
A: Health care delivery remains dominated by the business models of general hospitals and physician practices – both of which rely heavily on expensive, highly-skilled experts to create value by diagnosing and treating the most complex medical problems. Until now, this has largely been done through what is essentially a trial-and-error process that is costly, error-prone, and inconsistent. However, little by little, molecular and imaging diagnostics is slowly transforming the practice of medicine by removing much of the uncertainty involved in clinical practice. As a result, diseases can be diagnosed more precisely, and patients can be prescribed predictably effective treatments. As parts of health care reach this realm of precision medicine, new disruptive models of care delivery can arise that employ new types of providers and different venues of care that are affordable and accessible. Understanding this natural progression of an industry over time allows innovative companies to predict where new areas of growth will be in the future and to ensure their business models will appropriately match the inevitable changes in technologies and the needs of customers.
Q: Once disruptive innovation occurs, what will the new system look like?
A: Disruptive business models must still be surrounded by suppliers, distributors, and other partners in a system that we call a value network. Unless an entirely new value network can displace the old one, however, any attempt to introduce a disruptive product or service may be co-opted to create sustaining, rather than disruptive, growth. What this means is that several disruptions throughout the health care value network need to be orchestrated simultaneously. While this is a tall order for most, there are a few entities discussed in the book that could play this role. Nevertheless, the new value network will need to incorporate new models of care delivery, including coherent solution shops to diagnose complex cases, value-adding process hospitals and clinics to deliver procedural and rules-based care, and facilitated patient networks to take on a growing share of chronic disease care. All of these new modes of care delivery will require coordination using electronic health records and health savings accounts controlled by patients.
Q: When can we expect to see these transformations begin?
A: The truth is that these changes have already begun. Coherent solution shop hospitals (or divisions of hospitals) that focus on multidisciplinary approaches to complex care, focused specialty hospitals and ambulatory surgical clinics that only perform a limited set of procedures, and retail clinics in which nurse practitioners deliver basic care in convenient locations are all examples that have grown rapidly in the past decade. Health savings accounts and personally-controlled electronic health records are gaining users as well. On the other hand, many more disruptions are waiting to be introduced, and, not surprisingly, many incumbent health care organizations have lobbied against their threatening intrusion. Thus, it is important to note not simply when we can expect to see these disruptions, but also where we might expect them. And it will be in areas of significant non-consumption where obstructive regulations will be easiest to relax or circumvent, simply because the next best alternative for patients usually is to receive no care at all. This means that individuals living in developing nations will likely be the first beneficiaries of most future disruptive innovations in health care.
A: A disruptive innovation typically combines a simplifying technology with a novel business model in order to transform expensive and complicated products and services into affordable and conveniently accessible ones. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when measured against traditional performance metrics. However, because disruptive innovations are typically affordable, simpler to use, or more convenient, they often appeal first to pockets of “non-consumption” – groups of customers whose needs are not fulfilled by existing product offerings (and who therefore do not consume them). By initially taking root in a less-demanding or non-consuming market segment, disruptive innovations can then improve from that foothold and gradually begin to steal customers away from the dominant, incumbent players.
Q: Disruptive innovation usually applies to business. How does it apply to health care?
A: The early history of most industries tends to yield expensive and complicated products or services that can only be used or delivered by individuals with a lot of wealth or expertise. In this respect, the current problems of high cost and inadequate access in health care are really not unique. Likewise, by coupling disruptive technologies with innovative business models to create affordability and convenience, the same process of disruption that eventually transformed myriad other industries can have the same dramatic effect on health care. Disruption will bring new providers of care, create new venues of care, enable more patients to access care, and change the way we insure and pay for care.
Q: What do you see as the major problems in the current health care system?
A: The United States spends far more on health care than any other nation, but the value received in return is unacceptable. Quality and safety are inconsistent, and medical errors occur at a frightening rate. Rising costs have simultaneously diminished the global competitiveness of American companies and increased the ranks of the uninsured at home. The list of problems could go on and on, but the root cause of most of them is the fact that our health care system remains mired in outdated business models that fail to capitalize on the disruptive nature of innovative technologies. By creating new business models to supplant the old ones, disruptive innovation has the potential to transform the nation’s health care system in its entirety into one that effectively cares for all Americans by making care both affordable and conveniently accessible.
Q: How will disruptive innovation address these problems crippling the health care system?
A: Health care delivery remains dominated by the business models of general hospitals and physician practices – both of which rely heavily on expensive, highly-skilled experts to create value by diagnosing and treating the most complex medical problems. Until now, this has largely been done through what is essentially a trial-and-error process that is costly, error-prone, and inconsistent. However, little by little, molecular and imaging diagnostics is slowly transforming the practice of medicine by removing much of the uncertainty involved in clinical practice. As a result, diseases can be diagnosed more precisely, and patients can be prescribed predictably effective treatments. As parts of health care reach this realm of precision medicine, new disruptive models of care delivery can arise that employ new types of providers and different venues of care that are affordable and accessible. Understanding this natural progression of an industry over time allows innovative companies to predict where new areas of growth will be in the future and to ensure their business models will appropriately match the inevitable changes in technologies and the needs of customers.
Q: Once disruptive innovation occurs, what will the new system look like?
A: Disruptive business models must still be surrounded by suppliers, distributors, and other partners in a system that we call a value network. Unless an entirely new value network can displace the old one, however, any attempt to introduce a disruptive product or service may be co-opted to create sustaining, rather than disruptive, growth. What this means is that several disruptions throughout the health care value network need to be orchestrated simultaneously. While this is a tall order for most, there are a few entities discussed in the book that could play this role. Nevertheless, the new value network will need to incorporate new models of care delivery, including coherent solution shops to diagnose complex cases, value-adding process hospitals and clinics to deliver procedural and rules-based care, and facilitated patient networks to take on a growing share of chronic disease care. All of these new modes of care delivery will require coordination using electronic health records and health savings accounts controlled by patients.
Q: When can we expect to see these transformations begin?
A: The truth is that these changes have already begun. Coherent solution shop hospitals (or divisions of hospitals) that focus on multidisciplinary approaches to complex care, focused specialty hospitals and ambulatory surgical clinics that only perform a limited set of procedures, and retail clinics in which nurse practitioners deliver basic care in convenient locations are all examples that have grown rapidly in the past decade. Health savings accounts and personally-controlled electronic health records are gaining users as well. On the other hand, many more disruptions are waiting to be introduced, and, not surprisingly, many incumbent health care organizations have lobbied against their threatening intrusion. Thus, it is important to note not simply when we can expect to see these disruptions, but also where we might expect them. And it will be in areas of significant non-consumption where obstructive regulations will be easiest to relax or circumvent, simply because the next best alternative for patients usually is to receive no care at all. This means that individuals living in developing nations will likely be the first beneficiaries of most future disruptive innovations in health care.
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