In most markets, it’s easy to accept that higher quality means higher prices. In healthcare, however, voices from every angle are calling for better care in terms of improved patient experiences, fewer errors as well as superior outcomes at a lower cost—ideally at a radically lower cost. Despite the fact that healthcare is crippling major portions of the U.S. economy with skyrocketing costs, overall quality and customer satisfaction are pitiful compared to most other industries. Decades of effort have resulted in little progress in solving this seemingly paradoxical equation.
In a recent issue of The New Yorker, surgeon and Harvard Medical School professor Atul Gawande offers some hope by outlining a future vision of healthcare delivery that’s modeled after the rigorous process deployed by The Cheesecake Factory. The 150-restaurant chain manages to serve 80 million reasonably-priced meals annually. Yet, as Gawande observes, it’s able to change its 300-plus item menu every quarter while adhering to a standard of quality, efficiency, and customer satisfaction that our health system finds unattainable.
Making unconventional trade-offs
Gawande’s perspective strongly matches the one expressed in The Innovator’s Prescription, Innosight co-founder Clayton Christensen’s 2009 book on healthcare innovation. Christensen and his physician co-authors argue that the answer to the healthcare crisis will come from adopting innovative approaches that make unconventional trade-offs—the type of innovation Christensen termed “disruptive” over a decade before—and then standardizing the business model that delivers these innovations wherever possible. While a substantial improvement over typical “family restaurants,” The Cheesecake Factory is arguably a disruptive innovation to traditional fine-dining establishments. That’s because it forces its customers to give up certain aspects of a “special” dining out experience in order to gain access to a range of carefully crafted, high-quality entrées at $14.95 and below.
That’s exactly what’s starting to happen in healthcare. Indeed, Gawande posits that this nascent trend will inevitably take over large swaths of the system. In the future world of large and standardized healthcare juggernauts that Gawande describes, the patients and the physicians who are employed by them will be forced to make trade-offs by asking which dimensions of performance they are willing to give up to achieve the outcomes, experiences, and prices that everyone seems to want.
For example, as a patient, are you willing to give up being seen by a provider with an “M.D.” behind her name in return for the assurance that you would never wait more than five minutes and would have all your questions answered every visit? Or a bit further along the disruptive spectrum, how about forgoing clinic visits altogether if you can connect with an expert via FaceTime whenever you wish and have every preventative test scheduled in your home or workplace at your convenience? As a physician, are you okay giving up most of your decision-making autonomy for your routine patients if you’re invited to spend as much time as it takes to crack your most complex cases? How about not seeing the vast majority of your patients at all if you can gain complete confidence that “the system,” with its integrated technology and powerful data processing engines, will provide them with higher quality and significantly cheaper care than you could ever hope to offer on your own?
Some patients and physicians will surely find a standardized, disruptive innovation-heavy approach to healthcare anathema, especially relative to the idealized image of the Norman Rockwell doctor carefully crafting treatment plans to each patient’s unique circumstances. Indeed, we would all prefer Le Bernardin at Cheesecake Factory prices. But the question we have to ask is what are we willing to give up in order to obtain the quality and experience we need at the prices we can pay?
Overcoming resistance to change
Unfortunately, even if healthcare leaders are fully convinced the trade-offs are worth making, those who wish to take up Gawande’s call to action are not likely to find it an easy path. The reason is that even the most successful, well-regarded organizations tend to resist fundamental changes to their business model as the processes, systems, culture, rules, norms and metrics that have made them successful in the first place often aggressively support the status quo, even when the change in question seems highly compelling or inevitable. All too often, the most promising and potentially transformative ideas are shut down well before they have a chance to prove themselves—sometimes before they even get started.
The good news is that several major healthcare companies that Innosight has worked with have demonstrated that transformative innovations can be incubated and scaled successfully despite the many pitfalls that exist. We’ve found that the fate of new innovations often rests not in the strength of the idea itself, but in how the project is approached and structured relative to core operations. While a complex topic, there are three primary guidelines we would suggest to healthcare leaders based on a multitude of innovation case studies across a broad range of industries:
Developing a portfolio of innovations
First of all, hospital and healthcare system executives hoping to adopt the “innovator’s prescription” are most likely to succeed by pursuing a diverse portfolio of new innovations instead of hoping for a single panacea. By making many small bets, they will be able to iteratively find those that are both effective and worth the trade-offs. Doing this well typically means establishing formal processes and systems for selecting, managing, and governing the innovation portfolio – our guess is few healthcare systems have yet to take this foundational step.
Protecting disruptive innovation
Secondly, healthcare leaders will need to realize that it is critical to keep truly disruptive efforts largely separate from ongoing operations. When the right time comes, you can carefully consider how to integrate the two streams of activity. This requires diplomatically moderating the interface between the two. Time and time again, we’ve found this structure is superior to combining the “existing” and the “new” prematurely, as separateness allows the new business model to be tested in isolation while protected from the “antibodies of the core.” Yet, new ventures can be supported with valuable core resources as necessary.
Testing and learning
Finally, it will be essential to apply a “test and learn” mindset and approach to innovative efforts rather that moving directly “from idea to launch.” Truly transformative innovation is often elusive at first. The typical entrepreneur changes his game-plan four to five times before meeting with success. That’s why you should adopt a systematic approach to identifying the individual assumptions that must be true for new innovations to be successful. Then it comes time to test those assumptions as quickly and cheaply as possible. In doing so, healthcare leaders can “de-risk” the efforts and allow the ideas to evolve as learning occurs.
Whether or not Gawande’s Cheesecake Factory vision ultimately comes to fruition, it is clear that a systems-approach to innovation in healthcare delivery is badly needed. Healthcare leaders should start by identifying those innovations that make the right trade-offs. Only then can they apply the best practices of leading innovators to ensure potentially transformative innovations are given every chance of success.
Tim Gustafson is a principal at Innosight who has worked with companies in all sectors of healthcare.