Innovation, Strategy and Market Disruption – Re-thinking Health Care in a Post-Reform Environment

Innovation

During these changing times, health care organizations within almost every sub-sector (hospitals, managed care, long-term care, allied health care, etc.) must focus on innovation.  So innovation was the subject of this year’s annual Willis Health Care Forum keynote address, delivered by Dr. Michael Raynor, author of The Innovator’s Manifesto, The Innovator’s Solution, and The Strategy Paradox.

Innovation, Raynor began, is fundamentally the act of introducing something new. In health care these days, it connotes “more for less” not the “more for more” of the recent past. In this sense, to innovate is to overcome constraints or tradeoffs, such as the cost-performance or quality tradeoff. This is one of the biggest challenges all health care organizations must face today:  improving health care with better quality and better outcomes (more) while also providing cost savings (less).

The Centers for Medicare & Medicaid Services  has suggested ways to innovate via its Innovation Center, including Medicare- and Pioneer-model Accountable Care Organizations, bundled payments and other payment-changing methodologies. This provides guidance as well as applicable regulations, but each health care organization must create its own “disruptive innovation” to truly change the game in the new era of health care.

How Two Companies Innovated to Succeed

Innovation is establishing a new frontier on the conventional plane in which you and your competitors operate. Technology often is the driving factor in determining the pace of strategic disruption.

Raynor gave the example of the Sedasys’ computer-assisted personalized sedation system.  This first-of-its-kind technology delivers Propofol without the aid of an anesthesiologist or nurse anesthetist. In this new system a machines replace a human with precision, enabling an overall less costly procedure—a disruption to the normal procedure of its kind.

In a different industry, Southwest Airlines innovated and changed their strategy during a time of dramatic regulatory changes. Their growth came from three key things necessary for market disruption:

  • A marginal consumer segment – For Southwest this is their smaller, niche customer base and limited flying routes.
  • Enabling technology – The Boeing 727-500, which allows for longer flying distances due to increased fuel storage and efficiency.
  • New business model – The strategic plan to deploy and operate flights for the new plane.

Which Innovation Will Win?

Due to the huge amount of strategic uncertainty inherent in health care, said Raynor, it is difficult to innovate and choose the best strategy that will ultimately succeed. The strategies among health care organizations vary greatly indicating that some are trying to innovate but no one has come out on top yet. We don’t know which strategies will win, but we do know that organizations that stand still will certainly lose.

 


Danielle Carr Guest blogger Danielle Carr is a Health Care Risk Analyst with Willis’ National Health Care Practice, based in Atlanta. Having started with the company in 2010, Danielle supports clients by analyzing the prospect universe, developing benchmarking reports, completing research requests, reviewing insurance program design, analyzing policies.

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