By: Phil Gibbs, Principal, The Disruption Lab
Healthcare is approaching 20% of the US economy. It has become extremely complex and difficult to access. It is dangerous, unintentionally injuring and killing thousands. And it is expensive, even as many provider organizations struggle to survive. While staffed by highly skilled, dedicated and caring professionals, the system is broken. Washington is totally incapable of fixing it. And money is not the problem.
We all know that pouring more resources into doing what we have been doing is not going to solve the problem. We have to shift our approach.
A strategic shift is always hard, but now is the time for healthcare. The steps outlined below by no means reflect the total shift required. Ultimately there has to be a realignment among the consumer of healthcare, the payer and the provider to start approaching a rational system. Fortunately, there are steps in that direction today with the expansion of population health and at-risk contracting.
Individual providers, hospitals and health systems unfortunately are limited in their ability to fundamentally change the payment system to create the needed alignment. They can advocate for this change. The steps outlined below, however, are strategic shifts that providers do control and can start acting on today.
- Shift the mission from primarily providing sick care to health and wellness.
- Shift the concept of growth from acquiring market share to expanding market opportunities.
- Shift the focus from searching for shiny objects to wrapping new business models around existing and new technologies.
- Shift the organization from a provider of a product or service to a platform for continually creating new products and services and new revenue streams.
- Shift the focus of innovation from cost cutting and efficiency innovation to include disruptive, market creating innovations that drive growth.
You can’t do just one or two of these shifts and be successful. They reflect a systemic shift that requires a new mindset and real leadership.
1. Shift the mission from primarily providing sick care to health and wellness. From individual providers to mega systems, unless this shift happens, nothing else of significance can happen. While for some this is already happening, for most the real action is still treating the sick. The reason this shift is foundational is that it is the key to growth, an energizing but almost forgotten concept in healthcare. It is what other troubled industries, like the auto industry, are doing. Ford and Nissan are transitioning from car companies to mobility companies, opening up vast market opportunities. Wait, isn’t healthcare different? Advances in autonomous vehicle technology and ride sharing business models will flatten or reduce the number of cars needed, just as clinical and business model advances in healthcare will flatten or reduce the number of hospital beds, surgery centers and procedures needed. There are many similarities in shifting from just selling cars (hospital beds and surgery suites) and fixing broken cars (clinical procedures) to supporting mobility (health and wellness) to what needs to happen in healthcare. Taking care of the sick will remain an important job of healthcare but shifting the focus of the job, as with cars, will open vast markets and position healthcare to move from a defensive, survival mode to a growth mode.
2. Shift the concept of growth from acquiring market share to expanding market opportunities. This naturally follows from the shift in mission to health and wellness. It is a fundamental shift in mindset from an epic battle among providers over a fixed-pie to a race to innovate products and services that will address market opportunities limited only by the imagination of the providers. Virtually the only mode of growth for aggressive healthcare companies today is to “steal” market share from competitors through performance, marketing or pricing strategies, or to acquire the competitors. When the pie is not limited, however, growth takes on an entirely different meaning. Again, lessons can be learned from other industries such as the commercial office space industry. I know, healthcare has nothing in common with commercial real estate. But wait, if you redefine the mission from selling and leasing “space” to serving the needs of people for a place to work, meet and connect, you open up real growth opportunities. Part of the reason is there were millions and millions of people who were not “consuming” the traditional office. They had been working out of home “offices” and coffee shops but are now flocking to coworking spaces like E|SPACES and WeWork. This redefined concept of officing is more accessible and affordable, driving real growth from nonconsumption. The same opportunity is waiting in healthcare. Growth can again be a topic on every healthcare meeting agenda when the mission is expanded to health and wellness and nonconsumption is seriously addressed.
3. Shift the focus from searching for shiny objects to wrapping new business models around existing and new technologies. There are plenty of shiny objects—breakthrough technologies that promise to change everything—to distract executives and boards from the real jobs people need healthcare products and services to do. The shiny objects are exciting, and they check the innovation box. The problem is they are rare and, in a sense, random—that is why they are shiny objects. It is hard to build a growth strategy around what is rare and random. Plus, they generally exclude 99% of healthcare professionals from contributing to transforming healthcare—few of us will create a nano surgical robot. The history of market creating innovations and growth across industries is more about wrapping new business models around existing and sometimes new technologies. Outside of healthcare, Uber and Airbnb are classic examples. Neither were breakthrough technologies but were new business modes that integrated mapping and scheduling technologies. While every healthcare organization must continue scanning the environment for new technologies, it is not a substitute for a serious commitment to transformation. Shifting the focus to new business models tied to existing and new technologies is something all of us can participate in and offers endless opportunities for transformation and growth in healthcare.
4. Shift the organization from a provider of a product or service to a platform for continually creating new products and services and new revenue streams. This goes against traditional management thinking that emphasizes focus. Many of the most successful, fastest growing companies of the last decade, however, have not envisioned themselves as having a narrowly defined product offering. Otherwise Amazon wouldn’t be in the cloud computing business; Google (Alphabet) wouldn’t be in the autonomous vehicle business; FedEx wouldn’t be in the 3D printing business; and Apple wouldn’t be in the health and wellness business. Amazon and other companies that are the envy of healthcare tend to operate as platforms that continually experiment with new offerings and then scale when a new opportunity is validated, creating new revenue streams and growth. With the speed of change and product life cycles becoming shorter and shorter, this strategy may no longer be optional. Fortunately, most healthcare organizations already have amazing platforms consisting of facilities, supply chains, human resources, technology infrastructures and distribution systems, not to mention great brands and credibility in the communities they serve. With an expanded mission and concept of growth, moving from a restricted view of providing only sick care to a platform that continually experiments and creates new offerings and new revenue streams should be natural.
5. Shift the focus of innovation from cost cutting and efficiency innovation to include disruptive, market creating innovations that drive growth. To date, most of the improvement and innovation work in healthcare has been focused on efficiency and cost cutting. The human and financial capital devoted to these efforts has been and continues to be enormous. At the recent HIMSS19 conference in Orlando there were approximately 45,000 registrants and a tradeshow larger than many cities, almost all of which was devoted to efficiency and cost cutting. And of course, there were breakthrough technologies. There have been tremendous achievements and advances and this work must continue. But in spite of the resources expended and the progress made, we have to go back to where we began—the healthcare system is broken, it is injuring and killing thousands of people a day, and it is approaching 20% of the economy. We all know that just throwing more resources at doing the same thing is not the solution. Healthcare organizations have a choice. The choice is not to stop working on cutting cost and efficiency. Amazon is still working on improving selling books; Google is still improving search; FedEx is still improving overnight delivery; and Apple is still improving computing. The choice is to transition from an almost total focus on efficiency and cost cutting to a strategic allocation of at least some resources to disruptive, market creating innovations. This is not about abandoning the present and focusing on something different. It is about creating something different that may make us realize we are expending tremendous resources trying to improve something that either should not have existed in the first place or is a much lower priority. When patients pay for care with cash or tokens, improving the claims adjudication process is waste. When more surgeries are performed in doctors’ offices, innovating surgery suite scheduling is less of a priority. When hospital care is delivered in the home, some of the hospital system improvements that are consuming significant resources today may no longer be relevant. This transformation cannot happen without expanding beyond sick care to health and wellness, without wrapping new business models around existing and new technologies, or without reimagining the organization as a platform for experimentation. But it is a choice every healthcare organization can make.
These steps for transforming healthcare can be adopted by any healthcare provider or organization. They are not dependent on reimbursement schedules or restricted by Washington. The platform is already in place. The brand is there. The market is there. Existing and new technologies are waiting to have new business models wrapped around them. And, as in any organization, when done well, the new revenue streams will provide funding to more aggressively attack major efficiency challenges and even identify some real shiny objects.
Phil is the founding Principal of The Disruption Lab, where he focuses on disruptive innovation and corporate growth. For over a decade, he led Executive Learning, one of the country’s leading firms supporting continual improvement (sustaining and efficiency innovation), particularly in healthcare, and including work with industry leader HCA and the Institute for Healthcare Improvement (IHI).
His entrepreneurial experience includes co-founding multiple companies, including E|SPACES and LifeFilez. In addition to his startup experience, Phil has served as a principal in an early-stage investment firm and worked in/consulted with multiple large organizations, including the Oak Ridge National Laboratory early in his career. His interest in innovation began with his doctoral research at The Ohio State University focused on understanding how organizations achieve both high productivity and high innovation.
You can connect with or ask Phil a question through The Disruption Lab community at https://thedisruptionlab.community/.