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The Howard Hughes Medical Institute made news last week by announcing a $600 million grant to a fund a new pipeline of biomedical research. What makes this newsworthy is not the size of the grant, but how these hundreds of millions are being spent to fund an extremely ambitious, even risky portfolio of research.

The Hughes Institute follows the principle of investing in “people, not projects” — a significant difference from the way research philanthropies and businesses usually allocate innovation resources. At the National Institutes of Health (NIH), for example, grants are earmarked to tackle fairly narrowly defined disease categories such as colorectal cancer or osteoporosis. HHMI in contrast has apportioned their $600 million to 56 scientists from around the world who have been selected through a competitive application process as “investigators."

Here’s how Hughes describes the relationship they create with their investigators through their grants: Hughes Insitute investigators have the freedom to explore and, if necessary, to change direction in their research. Moreover, they have support to follow their ideas through to fruition — even if that process takes many years.

The investigator program is designed to attract and fund the most innovative researchers in the world without placing constraints on their research agenda.  For the $600 million announcement, Hughes Institute further loosened the rules of its competition to allow scientists to directly apply without the usual required sponsorship of a research institution. Their goal: encourage an even more divergent and diverse array of research interests to compete for an award.

Through its investigator program, Hughes is creating an innovation portfolio by investing in a portfolio of researchers. Past investigator competitions have focused on physician scientists. A future competition will target younger researches who are in the “angel” phase of their research careers. Hughes' investigator relationships currently number 300 researchers affiliated with 24 universities, and include 124 members of the National Academy of Sciences, and 12 Nobel Prize winners. Three hundred of the brightest and most innovative scientists in the world, well-funded to pursue their own interests and unconstrained by time limits or research boundaries … Has the Hughes Institute optimized their odds of a game-changing breakthrough? We think so, because their approach encourages an approach to innovation we describe as emergent strategy.

“People, not projects” is a great way to think about funding the furthest-reaching part of your innovation portfolio to target the boldest, most potentially disruptive solutions. Knowing that 90 percent of new ventures start off following the wrong strategy, it is important to make sure that your innovation resources are not operating under constraints that punish failure, learning, adaptation, and reorientation of the research agenda. Supporting an emergent strategy in your innovation portfolio means that you are able to deploy your innovation resources to encourage rapid iteration, maximize learning and re-direct the plan to pursue the right strategy as it becomes clearer. An emergent strategy is one where your innovators are actually rewarded for failing as long as they fail relatively cheaply and generate useful learning from that failure.

By placing unconstrained bets on people who are proven divergent thinkers, nimble performers, and highly risk-tolerant, you encourage a test-and-learn mentality that is critical to supporting emergent strategy. A Hughes investigator might begin investigating a question like, “Which genetic changes alter behavior throughout evolution?” Along the way, they may unlock a clue to preventing the common cold. Supporting an emergent innovation strategy means that investigator has the freedom and incentive to follow the new lead and potentially develop a very different, but high-impact solution. This is precisely what Hughes Medical Institute is banking will happen with its 56 newly minted investigators.

In January, Apple CEO Steve Jobs introduced the companys latest innovation: The wafer-thin MacBook Air laptop. Jobs proudly touted how it was the worlds thinnest laptop, measuring just three-quarters of an inch at its thickest point. Commercials show the laptop coming out of a thin manila envelope.

Is the MacBook Air a good product? We get asked this question in different guises a lot. Is this a good product? A good service? A good business opportunity? A good process? A good idea?

The answer is always the same: It depends.

Quality is a relative term. You can only assess quality by looking at an idea through the eyes of a potential customer. Will they deem it to be a good product, service, business opportunity, or process?

Consider MinuteClinic, a leading provider of diagnostic services that is owned by CVS Caremark

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Through July 18, enter an open source competition to identify "Disruptive Innovations in Health and Health Care: Solutions People Want," a competition funded by Robert Wood Johnson Foundation's Pioneer Portfolio and run in collaboration with Changemakers, an initiative of Ashoka that promotes enterprising solutions to social problems.

The Changemakers unique, open source competition platform provides a more dynamic and participatory means for the Pioneer Portfolio to engage innovators. Through July 18, entrants post their ideas on the Changemakers site, where a global network of social and private sector entrepreneurs gather and provide feedback and comments that the whole community can review.

A panel of judgesincluding Margaret Laws, director of the California HealthCare Foundation's Innovations for the Underserved program; Jason Hwang, Harvard Business School Fellow at Innosight; Sonal Shah, Global Economic Development, Google.org; and Nancy Barrand, RWJF senior program officerwill narrow the entry pool to 12 finalists. The Changemakers network will then vote on three winners, each of whom will receive $5,000 awards from Changemakers.

In addition, RWJF's Pioneer Portfolio will review competition entries and has up to $5 million available to support ideas that show potential for far-reaching impact.

We hope you will take part in this exciting opportunity either by submitting your entry for disruptive transformation, sharing your thoughts on the competition topic, and/or reviewing and responding to already-posted ideas. Entry guidelines, conversation threads and additional details are available at http://changemakers.net/en-us/competition/disruptive.

More information from the RWJF blog entry at: http://rwjfblogs.typepad.com/pioneer/2007/04/back_in_january.html

According to a survey from the University of Tennessee Health Center, an estimated 40 million Americans suffer from allergies. For those 40 million, a story in the New York Times today has another example of "good enough health care just in time for that seasonal ritual of watching pollen counts and allergy forecasts.

Diagnosing allergies has long been the province of specialists using a labor-intensive skin prick test to isolate and measure patients reactions to specific allergies. For the uninitiated, the test involves injecting small amounts of allergens under the skin of the arm or back dozens of times and judging the severity of the reaction by the size of the red bump that results from the patients antibodies attacking the allergen. A full panel of tests can last hours and cost hundreds of dollars.

A radically different testing method involving a simple blood test has been around since the 1970s, but initially lacked the level of sensitivity afforded by skin prick tests. Ongoing research and development has improved the sensitivity and precision of blood testing, but the industry has been slow to adopt the new method. One factor, according to the Times, is that endorsing the now "good enough blood testing method threatens the lucrative testing business many clinics have developed. The revenue from skin prick testing goes to the allergist, while the money for a blood test goes mainly to the lab. Also, blood testing does not require the experienced eye to judge a skin reaction, meaning that patients could be tested by their general practitioners, another factor sure to alarm the specialists who dominate the industry.

So what does the theory of disruptive innovation suggest for the future of allergy testing? First, in the end simpler and cheaper almost always trumps the high end solution. The prospect of a single blood test sent out a lab for processing is appealing for both patients and insurance providers. Second, subjective tests and treatments offered by specialists are eventually supplanted by rules-based diagnosis. Recent news is filled with examples of medical procedures migrating from the specialists office to the general practitioners practice to (eventually) the home remedy. Allergy testing seems poised to repeat the pattern. In fact, MinuteClinic has already started offering $60 allergy testing with their quick service model. Finally, "pain in the market is a good indicator that consumers will be amenable to alternative solutions. Large numbers of un-diagnosed or self-diagnosed allergy suffers have been scared away from the doctors office by the prospect of skin testing. Speaking from personal experience, 50 pin pricks followed by a few days of freaky looking arms, constitutes pain in the market.

February is American Heart Month. In honor of this we thought we'd pick up on an Innovator's Insight written by Scott Anthony in April 2005 on the Philips home heart defribillator. The home defibrillator is a $1k home-version of the technically-sophisticated defibrillators used in hospital emergency rooms to restart the heart of Sudden Cardiac Arrest victims. The device gives regular untrained people ("nonconsumers of the professional versions) the ability to save a persons life. Heartwarming Automatic External Defibrillator (AED) success stories have been in the news lately as offices, gyms and schools are beginning to require installation of the devices.

A natural extension of this home kit is providing AED/CPR training to this new group of consumers. Philips Medical doesn't seem well positioned to provide such training as a company that sells medical equipment through sales reps to hospitals and medical professionals. Creating a low-end training program targeted at homeowners and office workers is not part of Philips business model. Recognizing the importance of the training, Laerdal Medical and the American Heart Association created The Heartsaver AED Anytime program. It is a self-directed learning product designed to provide condensed, science-based training to get more people trained in CPR and the use of an AED in just 2 hours. The course includes device-specific training on the full line of Philips HeartStart Defibrillators. The kit sells for anywhere between $34-$70 online. Philips is able to distribute the training program by innovating their business model. Instead of selling a Philips-branded high margin durable through sales reps to medically-trained professionals, they are distributing low-end training that is produced and marketed by another company. By partnering with another company and distributing the product online, Philips is able to provide a valuable services to a group of customers in a market that it traditionally does not serve.

Yesterday Steve Case (of AOL fame) announced the launch of a new healthcare web portal, revolutionhealth.com, that will, in his words, "transform a broken industry by putting health care back into the hands of the consumer.

The offering aims to bring web 2.0 features to healthcare ratings, smart search, discussion boards, social networking, shopping tools for health insurance and health products, and so on. "Isn't it crazy that we have ratings to help us pick movies, restaurants and hotels, Case wrote in an introductory letter quoted by CNN.com, "but no comparable tools to help evaluate doctors, hospitals and treatments?

The main site will be free and ad supported, primed to take advantage of lucrative targeted advertising opportunities in the health and wellness vertical (initial front page content on the site references new kinds of sunscreen, yoga, links to product-laden tips and advice, and a free e-newsletter that will essentially be a targeted direct-to-consumer lead generation vehicle).

Unsurprisingly, WebMD, the leading online health info portal, is hot on its heels. It immediately announced a site revamp that will incorporate many of the same web 2.0 features as Revolution. The Wall Street Journal sums it up like this: "Mr. Case faces not only the challenge of changing an industry that is both highly fragmented and deeply entrenched, but he also faces heightened competition right off the bat from the most-successful health site on the Internet.

Sound like fun?

Luckily for Mr. Case and his backers who in this venture include Colin Powell, Carly Fiorina (HP), and Jim Barksdale (Netscape) the success of the site will not rest on web 2.0 healthcare content alone, but on a much bigger and more interesting bet. In addition to its health info portal, Revolution plans to offer a remote, subscription-based, quasi-concierge service for healthcare needs. For under $100 a year, subscribers will be able to access customer service agents to help unsnarl health insurance claims, get doctor and treatment recommendations from healthcare consultants, and store and manage electronic medical records online (these premium services will be offered free for one year in an initial promotion).

Messaging on the site emphasizes the value proposition "When youre sickthe last thing you need is another healthcare hassle. What with the rise of consumer driven healthcare and spiraling costs throughout the system, many Americans are finding it increasingly difficult to navigate more and more complex relationships in the quest for affordable and effective healthcare. There is certainly a very large, very important, and frequently frustrated Job to be Done in simplifying healthcare for the average consumer, and Case is betting that a concierge service combined with web 2.0 ratings, reviews, and networking will be the way to do it.

The Journal points out that web-based subscription efforts have rarely worked in the past, since consumers dont seem to like to fork over cash for content when they can find similar stuff elsewhere on the net for free. But this critique may be missing the point: if positioned correctly, this service will not be competing against free online information, but rather against the frustrating experience of attempting to self-manage labyrinthine records, infuriating customer service calls to insurance companies, and devastatingly important treatment decisions. Private Banks tend to provide such concierge services to their ultra high net worth clients; for $100 a year Revolution is offering a similar low-end service to the masses.

Of course, Revolution will have to deliver. Its customer service agents, consultants, and medical records software will have to make things markedly easier and less stressful for consumers. If it does work, revolutionhealth.com figures to join Cases burgeoning retail health venture, RediClinic, as an effective compensatory solution targeted at easing the frustrations of the healthcare system.

See:

"AOL co-founder unveils Web health service. CNNMoney.com; January 23, 2007.
"The Doctor's Office Gets Crowded on the Web. The Wall Street Journal. January 22, 2007; Page B1

This month, Toyota opened the largest corporate clinic in the United States, a $9 million facility at a new assembly plant in Texas. Toyotas facility is an outlier in terms of its sheer size, but it is illustrative of how providing healthcare at the workplace is growing rapidly. This kind of benefit used to be reasonably commonplace in the 1950s and 1960s, as people joined large employers for long careers, and then they fell out of favor in recent decades due to cost cutting. Why the resurgence? First, technology has enabled relatively less skilled providers to deliver adequate quality care for an increasingly large range of conditions. Diagnosing strep throat or flu, for instance, takes a swab and an easy-to-read test, not a complex analysis of symptoms. In tandem with advancing technology, the supply of nurse practitioners has grown rapidly, at around 10% annually since 1990. Nurse practitioners can deliver these services for significantly less cost than a Medical Doctor. This combination of circumstances has enabled the creation of walk-in clinics in retail stores, such as MinuteClinic, and has the same impact in the corporate setting. Second, employers are motivated to provide on-site care to reduce usage of expensive emergency rooms and specialist providers. Health insurance premiums continue their rapid increase, and keeping simple conditions in a low-cost, primary care setting allows the employer real savings. Indeed, a health benefits manager at Florida Power and Light recently estimated that his company saved $1.50 for every $1 spent on its three company clinics. Third, employees time can be very valuable. Wall Street firms, for instance, provide on-site care to avoid having employees take time off for doctors visits. As the incomes of rich and poor continue to bifurcate, it will make even more sense for firms to save the time of their highly compensated employees. Last, company clinics can stress preventative care in a way that many primary care physicians simply are not incented to do. Insurers are notoriously stingy in reimbursing doctors for the time they spend counseling patients on issues such as diet and exercise. Given that the average employee in a health plan stays with the insurer for only eight years, it just doesnt pay to invest heavily in prevention. However, some employers have longer timeframes in mind, and many will also see the financial impacts of prevention materialize before the health costs do (e.g., fewer days off sick, more productivity, etc.). It is curious that some physician groups see company clinics as a threat. In reality, they present an outstanding growth opportunity, albeit one that requires a significant change in business practices vs. operating the sort of doctors office to which they are accustomed. Predictably, rather than seeing local doctors seize the opportunity, we are witnessing new specialists such as CHD Meridian and Whole Health Management ride the disruptive wave. Source material for this posting was taken from "Company Clinics Cut Health Costs, New York Times, January 14, 2007

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.