Tuesday, July 31, 2012

Disruptive Innovation in Health IT: A Path to Acceptance (Part 1)

In this next series of posts, I’m going to focus on my experiences with introducing disruptive innovation in health information technology (HIT). I trust you'll find these discussions both enlightening and troubling.

Let’s start with defining the concept of disruptive innovation and its importance to healthcare.

What’s Disruptive Innovation

There are several types of innovation as depicted in figure below:

  • Sustaining innovation delivers gradual improvements like enhancing software processes; it brings about gradual evolution rather than a revolutionary change. It does not create new markets or value networks, but rather only evolves existing ones with better value, allowing the firms within to compete against each other's sustaining improvements. Sustaining innovations may be either "discontinuous" (i.e. “transformational" or "revolutionary") or "continuous", "i.e., "evolutionary.
  • Disruptive innovation (as defined by Clayton M. Christensen) turns the conventional paradigm of the market on its head, not by improving on competitors’ offerings, but by actually reducing functionality. That is, disruptive innovations make products simpler and less costly. This wreaks havoc within many industrial sectors, where, sensing opportunities at the bottom of the market, large companies will frequently choose to ignore it, dismissing it as “not competing in their space.”It helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. They are generally technologically straightforward, consisting of off-the-shelf components put together in a product architecture that is simpler, more convenient and less expensive than prior approaches. They offer a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream. 

What’s the Importance of Disruptive Innovation in Healthcare?

Disruptive innovation can play a significant role in solving our healthcare crisis by challenging the status quo.

According to Deloitte Development LLC: “You can feel it happening in the marketplace around us. Retail clinics, medical tourism, technology-enabled self care — disruptive innovations in the U.S. health care system challenge the status quo. These and other new phenomena zero in on unmet needs, leverage new technologies and business models, and deliver enhanced value throughout the health care supply chain. When they work, they change the game.

Make no mistake: the U.S. health care industry is in crisis…Health care delivery is convoluted, expensive, and often deeply dissatisfying to consumers…We believe that a whole host of disruptive innovations, small and large, could end the crisis—but only if the entrenched powers get out of the way and let market forces play out. If the natural process of disruption is allowed to proceed, we’ll be able to build a new system that’s characterized by lower costs, higher quality, and greater convenience than could ever be achieved under the old system…Attempts to use regulation to stave off disruptive attacks are quite common…Unfortunately, regulators are inclined to be...protective of the entrenched professions and institutions in health care…The links between those institutions, federal and state regulators, and insurance companies are strong; they are wielded to preserve the status quo…Government and health care industry leaders need to step forward—to help insurers, regulators,… hospitals, and health professionals work together to facilitate disruption instead of uniting to prevent it. If they do…health care providers will realize the opportunities for growth that come with disruption—because disruption is the fundamental mechanism through which we will build a higher quality, more convenient, and lower cost health care system. If leaders with such vision do indeed step forward, we will all have access to more health care, not less.
In my next post, I discuss my personal experiences of how government regulators and HIT vendors respond to the introduction of disruptive HIT innovations.
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