S O R AYA G H E B L E H

DISRUPTIVE INNOVATION IN HEALTHCARE

WHAT IS DISRUPTIVE INNOVATION?

•  Disruptive Innovation involves turning expensive, difficult, inaccessible products and services into simpler and more affordable ones

innovations can be either small and incremen-tal or dramatic breakthroughs, we have chosento call them all “sustaining innovations” be-cause they sustain the existing trajectory ofperformance improvement. Sustaining innova-tions result in better products that can be soldfor higher profits to the best customers—aprevailing mantra of the business world thatcan offer prudent guidance for businesses andentire industries for many years.

However, the dotted lines in Exhibit 1 re-flect a different trajectory: customers’ demandfor and usage of ever-improving products andservices. The spectrum of customers’ desire forincreased performance is represented by themultiple dotted lines, butwhat is interesting isthat these lines, beginning with the least-demanding tier of customers, eventually inter-sect with the trajectory of product improve-ment. These points of intersection are thegraphic representation of the fact that compa-nies upgrade their products with featuresmuch more quickly than most customers canuse them. Andwhen products begin to pack inmore functionality than customers need or de-sire, a different type of innovation occasionallyemerges—a disruptive innovation.

In contrast with sustaining innovations, adisruptive product is actually not as good aswhat existing customers are already using, andhence it does not appeal to many customers inthe existing market. However, because the

new product is usually simpler, more conve-nient, and more affordable, it enables the par-ticipation of a new set of customers who werepreviously ignored by the market or shut outcompletely. As shown in the exhibit, not onlydoes this type of innovation take root in a por-tion of the market that is least demanding ornot consuming at all, but it also targets cus-tomers who are least attractive to the marketleaders. Successful incumbent firms will al-most always choose instead to focus on offer-ing sustaining products to their higher-paying,performance-hungry tiers of customers.

Because disruptive products do not appealto the best customers paying the highestprices, they are almost always introduced bynew entrants rather than the dominant in-cumbents of an industry. Yet once the disrup-tive product establishes a foothold in the mar-ket, it too begins to improve over time, and,one by one, customers of the sustaining com-pany find that their needs can be met by thedisruptive innovation. Before long, the leadersfind themselves bereft of customers.

Impact Of Disruptive Innovation OnValue

Disruptive innovation explains how up-start companies, in an effort to deliver more-affordable and -accessible solutions, are able tosweep away once-dominant firms with alarm-ing regularity, often before the incumbents

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P e r s p e c t i v e s

WHAT DOES DISRUPTIVE INNOVATION DO?

•  Disruptive innovation gives consumers access to products and services that were otherwise not affordable or accessible •  This brings in a new consumer base •  Disruptive innovation does not necessarily provide a

better product or a better service than those that already exist in the market •  It does, however, appeal to new consumers

because it is simpler and can provide close to the same effect

WHY IS THIS IMPORTANT FOR HEALTHCARE?

•  Healthcare costs are unsustainable, expensive, and often unnecessarily high without providing increased value •  Healthcare is not changing and innovating at a

pace necessary to provide all those who require services from healthcare providers •  Dr. Jason Hwang provides two definitions for

disruptive innovation in healthcare: •  The transference of skills from highly trained but also

expensive personnel to more affordable providers, including technology-based care.

•  The shift away from traditional health care venues like hospitals into clinics and office settings, and, in some cases, into patients’ own homes.

WHAT DO THESE DEFINITIONS MEAN?

The transference of skills from highly trained but also expensive personnel to more affordable providers, including technology-

based care.

•  Utilizing mid-level providers, care coordinators, and nurses more effectively in conjunction with technological advances has the potential to save the healthcare system money and provide more value to patients •  Telemedicine is an example of a disruptive innovation that has increased access and can improve the quality of care and lines of communication between patients and providers

WHAT DO THESE DEFINITIONS MEAN?

The shift away from traditional health care venues like hospitals into clinics and office settings, and, in some cases, into patients’

own homes.

•  The emergence of patient-centered medical homes, minute clinics, concierge medical practices, and increased outpatient services is transforming where healthcare services are delivered •  Many of these innovations can provide huge cost savings to the system and can improve patient experiences

INNOVATION AS PART OF THE PATIENT EXPERIENCE

•  Patients are becoming more savvy and aware of what healthcare services exist and the variations in healthcare delivery services provided •  With healthcare reform, any costs associated with

healthcare will be more closely paid attention to by consumers •  Patient advocacy groups will have increased

power to demand better services at a reduced cost and the healthcare system is now understanding that they must stay in line to remain competitive

SOME EXAMPLES OF DISRUPTIVE INNOVATION IN HEALTHCARE TODAY

•  Minute clinics at pharmacies •  Concierge medicine •  Medical tourism •  Technology-abled self care •  Retail clinics •  Patient-centered medical homes •  Outpatient facilities instead of hospitals •  Self management tools •  Telemedicine •  Lean management in healthcare process

improvement

PROMISE FOR THE FUTURE

•  Disruptive innovation is necessary to move modern medicine and healthcare delivery forward •  To remain competitive, healthcare providers need

to understand the changing demands of the population and work within the Triple Aim of reduced cost, increased access, and improved quality •  Disruptive innovation extends into creating new

reimbursement mechanisms, provider interactions, and practice design

CITATIONS

1.  https://wiki.umms.med.umich.edu/download/attachments/118335374/disruptive-innovations-cure-health.pdf

2.  http://medicalcenter.osu.edu/pdfs/cphc/harvard_bus_review_disruptive_inn_phc.pdf

3.  http://www.nytimes.com/2009/02/01/business/01unbox.html?_r=0

4.  http://www.beckershospitalreview.com/strategic-planning/disruptive-innovation-in-healthcare-examples-from-3-top-health-systems.html