Jul 29, 2013
As frequent readers of the blog may have noticed, many of our recent posts are based on health care applications of Disruptive Innovation theory pioneered by Clayton Christensen. While we live and breathe this stuff every day, we realize some who are discovering it for the first time might feel like we’re speaking in code! Thus, this post is intended to be a decoder ring of sorts that readers can refer back to for refreshers on terms and links to additional reading on specific topics. We will update this on a periodic basis and hope it is useful! Please let us know if there are other terms you come across that you’d suggest we cover in the future.
| Term | Definition | Additional Reading |
|---|---|---|
| Disruptive Innovation | The theory that explains how companies with cheaper, lower performing technologies target non-consumers or low-end customer segments and grow to eventually kill larger competitors. These innovations make complex, expensive technologies affordable and accessible to the masses. | Key Concepts: Disruptive Innovation Blog: Disruption in Health Care Blog: Disrupting Health Insurance Blog: Why EHRs Are Not Yet Disruptive |
| Jobs to be Done | People hire products to solve jobs to be done in their life. Our demographic backgrounds don’t ever cause us to purchase anything. Rather, in the everyday circumstances of our lives jobs arise for which we hire products. All jobs have a functional, social, and emotional component to be fulfilled, including jobs to be done in health care. | Key Concepts: Jobs to be Done |
| Business Model | Every company has a fundamental business model composed of four key parts: value proposition, resources, processes, and profit formula. There are only three fundamental business models in any industry: a solution shop, a value added process, and a facilitated network. Conflating multiple business models within a single business is a recipe for out of control overhead costs and significant operational complexity. | Blog: General Hospital Business Model Blog: Cleveland Clinic & Solution Shop Business Model Blog: Facilitated Network Business Model |
| Value Network | In every business there are upstream and downstream partners. This is your value network. A coherent value network results when all of the upstream and downstream players make more money when you make more money, and vice versa. An incoherent value network results when you have win-lose dynamics between upstream and downstream players. | |
| Commoditization | As technologies improve, the basis of competition eventually shifts from reliability and performance in the early days to speed and flexibility once the technology is good enough. When the basis of competition flips from reliability and performance to speed and flexibility the product is beginning to be commoditized and needs to be offered in a modular, plug-and-play mode going forward. | Blog: Commoditization of Diseases |
| Interdependence & Modularity | When product performance (functionality and reliability) is not consistently good enough for a given market, companies must compete by making the best possible products. They achieve this by proprietary interdependent architectures, where the companies control most aspects of design and production. When pieces are reliable and interdependencies well-defined, modular architectures advantage by competing based on price and convenience rather than performance. They shift value to the companies that define interfaces between parts and to those that manufacture the scarcest, highest-performing independent components. | Blog: Plug and Play Medical Devices Blog: Retail Clinics Are Poised For Explosive Growth |
