INNOBLOG

In their recent Harvard Business Review article "Disruptive Innovation for Social Change, Clayton Christensen, Heiner Baumann, Rudy Ruggles, and Thomas Sadtler argue that the same forces underlying innovation in the corporate world impact the sociopolitical sphere. Just as disruptive innovations reshape markets by beating reigning solutions on previously underappreciated measures of performance think of Southwest making flying more convenient and cheaper, in exchange for no-frills service so called "catalytic innovations can transform social spheres by alleviating longstanding frustrations in areas like healthcare, education, and economic development. The key to both disruptive and catalytic innovation is finding good enough solutions for important Jobs in peoples lives.

Christensen et al. lay out "Five Qualities of Catalytic Innovators:

1. They create systemic social change through scaling and replication.
2. They meet a need that is either overserved (because the existing solution is more complex than many people require) or not served at all.
3. They offer products and services that are simpler and less costly than existing alternatives and may be perceived as having a lower level of performance, but users consider them to be good enough.
4. They generate resources, such as donations, grants, volunteer manpower or intellectual capital, in ways that are initially unattractive to incumbent competitors.
5. They are often ignored, disparaged, or even encouraged by existing players for whom the business model is unprofitable or otherwise unattractive and who therefore avoid or retreat from the market segment.

There are a number of compelling examples provided in the article; Ill focus on one, a non-profit called KickStart, here. They provide low-cost "appropriate technology solutions to accelerate economic development and alleviate poverty in central Africa. One of their most successful products to date is the MoneyMaker Pump (pictured above), a simple, foot-powered tool that draws water from nearby wells, ponds, or streams for micro-irrigation. Since its launch in 1996, over 45,000 pumps have been sold, creating as much as 10-fold increases in wages for their users, some $37 million per year in new profits and wages overall, 29,000 new jobs, and an entire value chain to manufacture, distribute, and retail the machines.

Why has this product been successful, and what lessons can be transferred to other non- and for- profit initiatives?

The pump has been successful because it provides accessible, low cost, and good enough functionality to an underserved market, thereby solving critical consumer Jobs. Many Africans farm small, non-irrigated plots that do not yield enough to pay for school fees and healthcare. They carry water from nearby sources in buckets an arduous, inefficient, and time-consuming task. Modern irrigation systems would do wonders for their crops, but the technologies in use in the developed world are simply inaccessible to these farmers; they are way too expensive, not sold locally, and if, say, an NGO airlifted a system in it would be impossible to run it, since there is no electricity. The pedal powered, limited range MoneyMaker Pump, then, is not competing against irrigation systems but against schlepping water in buckets or not irrigating at all. It is locally assembled and distributed, and relatively affordable. It would be of no use to a Western farmer, but it is definitely good enough for the population it serves. It has catalyzed economic development and alleviated poverty for many in a desperately underserved part of the world.

These factors Jobs to be Done, non-consumers, underserved populations, good enough functionality, accessibility, low-cost are central to market changing innovations. Keep them in mind when assessing the potential of new products and services.

See:

Christensen, Clayton et al., "Disruptive Innovation for Social Change, Harvard Business Review, December 2006.

www.kickstart.org

In the most recent New England Journal of Medicine, a study illustrates the vast differences in quality of care provided by highly experienced gastroenterolists in a single Illinois practice. The study examines detection rates of polyps during colonoscopies, and reveals that the doctor who took the longest time looking for polyps found them TEN TIMES more frequently than the doctor who took the least amount of time. This is disturbing for patients, who have no idea if the right amount of time is being expended. Similarly, insurers do not distinguish in their payments between those physicians who take the recommended six minutes vs. those who are more speedy. And it makes no difference to equipment suppliers -- or does it? It is only natural to expect physicians, who are reimbursed based on the number of procedures they perform, to try to work fast. It's just human nature, as is the potential for mistakes. Insisting the doctors take the full six minutes is difficult to enforce, and may not lead to more care being taken in the procedure. Rather, there is great potential for suppliers to create new, less error-prone means of polyp detection. It would be a bonus if these tests did not require a specialist physician to administer. And indeed we see that happening. New, accurate, non-invasive tests for bloody stool are being marketed by firms such as Helena Laboratories and Biomerica. These tests lack the precision of a full colonoscopy, but can screen patients with likely risk factors so that their colonoscopies are performed with much greater rigor. Given that only 2-15% of patients undergoing colonoscopy actually have colon cancer, there is also significant potential to reduce healthcare costs by concentrating these procedures on the right patients. The broader principle at work is that firms should spend less energy perfecting tests that require great human skill -- and attention -- to interpret, and more energy on creating screening exams and black-and-white diagnoses that allow less specialized providers to deliver the care in a higher-quality and lower-cost fashion. Patients whose conditions are more complex can then be seen by specialized providers. Oftentimes these innovations actually increase utilization of specialized providers -- the impact of portable ultrasound on radiologists comes to mind -- and they create wins for the patient, insurer, and supplier.

In a recent article ("More Doctors Turning to the Business of Beauty), the New York Times illustrated how physicians not trained as dermatologists are increasingly adding cosmetic procedures to their service offerings. Botox and Resylane injections, hair transplants, and vein removal are just some of the procedures moving into the medical mainstream. This process is symptomatic of a larger trend medical procedures are steadily moving from more specialized to more general practitioners. Why is this occurring? The proximate cause is that family doctors can be relatively poorly compensated compared to scarce specialists, and moreover they are being squeezed by health insurers (including Medicare) who are seeking to contain the spiraling cost of healthcare provision. At a higher level of abstraction, three phenomena are coinciding. First, lower-end providers almost always try to move upmarket. Low cost airlines are now flying all business class flights from New York to London. Wal-Mart is carrying organic groceries. It is inexorable business logic that the high-end will always be attacked, and insurers as well as physician groups are increasingly amenable to seeing this happen with medical procedures. From angioplasty enabling cardiologists to compete with thoracic surgeons, to your family doctor applying a bit of Botox, the medical professions are not immune from low-end disruptive threats. Second, service provision can move to non-specialists because it is becoming de-skilled. One advantage of a robust industry supplying drugs and medical devices is that these firms will compete to make their products easy to administer. In doing so, they can expand the market considerably, as downstreaming service delivery allows patients to consume treatment from providers they trust and are already visiting. Last, the locus of profitability in the value chain of medical care may be evolving, as it does in other industries (think of IBM outsourcing its PC operating systems to Microsoft because historically little money was made there). Revenue is concentrating at the link of the value chain which is still not "good enough for customers. As care provision becomes less risky, that link is increasingly not at the specialist level where highly-trained physicians can ensure effective treatment. Rather, it is at the level of patient convenience and trust these are buying criteria that are almost never "good enough. Care providers would do well to focus on winning in this way. The proliferation of new and simple services they can provide, from Botox to automated nerve tests, pave the way to create a deeper relationship with their patients.