Over 20 years ago, Clayton Christensen coined the term Disruptive Innovation to describe innovations that transform expensive, complex and sophisticated solutions into ones that are simpler, more convenient and affordable. When coupled with an innovative business model and a coherent network of partners, suppliers, and distributors, Disruptive Innovations have the power to change the performance dimensions upon which firms must excel in order to be competitive in a market. And in doing so, they ultimately reshape the dominant business model in that market. Examples of Disruptive Innovations include TurboTax tax preparation software, which disrupted accounting services; and Netflix, which first disrupted video retail, and is now changing the way films and tv content are produced and delivered.
Today, the term Disruptive Innovation is widely used across industries, including healthcare, in which complex, fragmented and costly services fuel the quest for better alternatives. But it’s often mistakenly applied to any solution representing a technological breakthrough. In reality, most healthcare innovations are what we call sustaining innovations—incremental improvements upon existing solutions in a traditional business model, which ultimately drive higher prices.
Examples may include big data analytics, advanced surgical techniques, new imaging technologies, and more effective drugs. Such innovations may enable safer and more effective care, but they can also increase the payments that insurers have to make to providers, and insurance premiums for consumers. As such, sustaining innovations reinforce, rather than disrupt, the market status quo.
Disruptive innovations, on the other hand, break with the status quo. They’re not just about novel technology or lower costs. They fundamentally change the way their users accomplish a goal, just as mobile phones have changed the way people use computing functionality; and they change the way firms make money. Despite their power to transform, however, they’re not as easy to anticipate or recognize as sustaining innovations—those bells and whistles that inevitably characterize 2.0 releases.
One way to spot them is to look for unsolved problems in a market that innovators are trying to address with new technology. These are usually problems that leading competitors don’t want to tackle because, viewed through the lens of their traditional business model, solving them doesn’t look like a sufficiently profitable opportunity. But where effective technologies are supported by an innovative business model and a coherent network of partners, suppliers, and distributors, they help firms siphon customers away from those leading competitors focused on mainstream market needs.
In healthcare delivery, a major unmet need is for new technology and delivery models that work in concert to maximize patient health over time, in a way that is financially sustainable for providers, payers and patients. So market watchers keen to spot disruption in healthcare healthcare delivery should keep an eye on innovation designed to address the following three problems:
Problem #1: Shifting care from hospital to home and community. Nobody wants to go to the hospital, and sometimes it’s too far away to make care there convenient or even logistically feasible. Hospitals also carry high overhead costs that make even the safest, simplest procedures expensive to perform there. Conversely, studies show that some care outside the hospital can be equally or more effective, and less expensive.
Innovations that facilitate care in the home or community (like telemedicine applications, or interoperable health information technology that enables appropriate data sharing across multiple care sites) could make care far more convenient and accessible. When deployed within an innovative business model—for instance, one in which standard care processes and profit formula require and reward their use—such innovations could trigger disruption of the whole market.
Problem #2: Enabling qualified non-physicians to play a larger role in care. In a traditional healthcare delivery setting, patients may expect most of their care interactions to be with physicians, rather than other health professionals such as nurse practitioners, physician assistants or health coaches. But physicians are costly talent, and in such settings, often stretched dangerously thin by large patient panels and administrative burdens.
Would-be disruptors are tackling this problem with innovations enabling qualified non-physicians to play a larger role in patient care, like care coordination software that facilitates alignment and data sharing across multidisciplinary teams. Coupled with an innovative business model, these enable physicians to spend more time on aspects of care that they are uniquely qualified to manage.
Problem #3: Increasing patients’ competence and confidence in self-management. For over 50 years, America’s predominant healthcare business model has rewarded providers for the number and nature of care interventions performed, rather than care quality; so the model has evolved to maximize the former. It’s no surprise, then, that as patients, many of us think of more physician-led care, like drug regimes and procedures, as better care.
But innovators will increasingly leverage innovations, like remote monitoring devices and digital patient community platforms, to help patients manage their own conditions better and more independently. When deployed with a business model that rewards physicians for quality over quantity of care, such innovations could truly be disruptive. And with experience, patients may become more comfortable trading off time with their physician for more convenience and better health.
New healthcare solutions often spark the question, “is it disruptive”? But no innovation is inherently disruptive. To fit that bill, it must solve a problem that leading competitors are ignoring, and operate within the context of an innovative business model and enabling value network. Healthcare providers, payers and policymakers who understand this will be able to see through the hype of the latest gadget, and throw their support behind innovations with real disruptive potential.