Disruptive innovation

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  • Title page.
  • My task today is to report to you on work done by the IHE team to provide background for today's program. First, I will summarize the framework regarding disruptive innovation as presented by Clayton Christensen of Harvard Business School in his 2009 book, The Innovator's Prescription. The term disruptive innovation is used more frequently in the academic literature than the more informal "game changing" terminology but for our purposes they are equivalent. "Disruptive" does not have a negative connotation here but simply is descriptive of the type of change that results from the innovation. Second, I will give a brief overview of the literature review we carried out.. Third, a few examples from the literature on innovations thought to be game changing will be discussed. Of course, the literature reflects things as they were in the recent past or perhaps the present. The examples we use will be familiar to you. Innovations of the future are the subject of speakers to follow. Our goal is to suggest a conceptual framework useful for thinking about those innovations.
  • Technology here is defined broadly, including not just machines or devices but methodology, scientific knowledge and anything else affecting the way production is carried out.
  • The Christensen framework includes four basic elements. First, a change in technology occurs which is an enabler for a change in business model. Second, the emergence of the new business model disrupts the existing arrangements for providing a specific type of health care service. Business model in this context refers to the service delivery model but also the organization, financing and management of the unit delivering the service. The disruption may mean that existing providers carry out their functions in an entirely new way, e.g. by using personnel with different skill sets, new capital equipment and new forms of organization and management. Alternatively entirely new types of providers may come into existence which replace the previously existing organizations. Third, supporting networks such as equipment suppliers, providers of services, new types of funding mechanism or trainers of personnel must be put in place. Often it is not possible to disrupt just one part of the existing system but rather a whole series of inter-linked changes are needed. Finally, the exact way in which all this plays out is importantly dependent on the government regulations and policy environment relevant to health services.
  • What makes an innovation disruptive is not just the magnitude of the advance. An innovation could represent a major scientific accomplishment but if it works to sustain the existing business model it is not disruptive. It is the change in business model from the existing one to a new one which is more efficient and/or better addresses the demands of consumers that is the key. Because the disruption threatens the existing business model, those leading or profiting from the existing model are likely to oppose the innovation. Of course disruptive innovation is only one type of possible innovation. The cumulative effect of small, non-disruptive innovations can be very large. However, since game-changing innovation is the topic of today's session, that is where we focused our work.
  • Christensen sees type of medical care as falling along a continuum with precision medicine at one end and "intuitive medicine" at the other end. In precision medicine it is well known that a specific treatment works well and clear rules can be written to specify appropriate care. In intuitive medicine diseases are poorly understood and treatments are often trial and error. In between, evidence based medicine is appropriate; guidelines here can be developed based on existing understanding about what works.  
  • This diagram from Christensen shows medical care as falling along a continuum with precision medicine at one end and "intuitive medicine" at the other end. The continuum idea can be applied to both diagnosis and treatment. The position of a particular disease need not be the same for each. For example disease mechanism may be poorly understood but once diagnosis is made, treatment is straightforward. Alternatively a diagnosis might be made with precision, but treatment efficacy is uncertain and choice of treatment has a significant intuitive component.  
  • It is important to understand where innovations apply across this continuum. Christensen concludes that…
  • The type of medical care is important because it largely determines the business model. Generic types of business model include the Solution Shop, the Value Added Process business and the Facilitated Network business. A solution shop model involves the application of expertise by intuitive methods to fairly unstructured problems. Each unit produced is essentially unique. Multiple specialists working together in an academic medical center to diagnose a rare disease would be an example. A value added process business involves production of a specifically defined service in a structured way. After diagnosis, many surgical treatments are suitable for a value added process approach. Christensen argues that significant cost reductions are achieved by moving these treatments out of the general hospital to a separate organization. He cites as an example the Shouldice Hospital in Ontario which does only a particular type of hernia operation and has lower costs and better results than other providers.   The value added process model in health care is perhaps more visible in the U.S. with its greater reliance on private markets for health care. On a recent flight from Edmonton to the U.S. I found full page ads in the airline magazine for places that would cure you of snoring, fix your hand problems due to carpal tunnel syndrome, eliminate joint pain, provide a very specific form of breast reconstruction after cancer surgery, and do a heart transplant. With the exception of the last one, which was a hospital within a hospital model, these businesses did not seem to be associated with any general medical center. The high volume the ads were seeking is important for the business to be economically successful, but there is also evidence that high volume in medical procedures is associated with better outcomes.   The Facilitated Network Business model is suggested to be most appropriate for dealing with some chronic diseases. Where lifestyle modification and self care are important a network connecting patients with others with similar conditions can help them learn from each other and provide support. Alcoholics Anonymous is a long standing example but advances in communications technology enables creation of other such groups where members are geographically dispersed.
  • The literature review carried out by the IHE included search of published sources and gray literature over the last 10 years. We limited our attention to articles which dealt with disruptive innovation. That is, if the article title or abstract specified disruptive innovation as a focus we included it. We also included sources which discussed disruptive innovation even if that specific terminology was not used by the authors. Sources about technological innovations which had only a technical or clinical focus without any consideration of implications for health services organization were excluded. A complete summary of our findings is included in your conference packet. Here the intent is to give only a brief overview.  
  • The search produced -------- published articles and -------documents from the gray literature. The summary tabulations presented here rely just on the articles and the percentages may add up to more than 100% because an article may be categorized in more than one group. The articles classified as conceptual (-----%) attempted to extend, modify, supplement or replace the Christensen analytical framework. They also included a few which critiqued the concept of disruptive innovation, either as a useful analytical construct, an accurate representation of trends in health care or a desirable path to follow. Many articles (--------%) described an innovation and argued that it was, or was likely to become, disruptive. Another large group of articles (-----%) offered the author's thoughts in the form of a general commentary and/or advice to particular groups on how to work in a world of disruptive innovation. Conspicuous by their relative absence were articles which relied on data to perform evaluations or assessment of innovations or to test hypotheses
  • Most (-----%) of the authors who considered specific innovations thought they would disrupt hospitals (and of course the doctors who work in them). Another group of articles (-------%) argued that the innovations they discussed would disrupt outpatient physician practice. Smaller numbers of articles focused on disruption of pharmaceuticals (-----%) or medical/nursing education(----%)  
  • In terms of the type of clinical activity affected, innovations in ----% of articles reviewed were said to be disruptive of diagnosis and -----% related to treatment. Prevention and chronic disease management were the primary focus of smaller groups of articles. Of course many articles were about technologies, e.g. electronic and communications innovations, which affected multiple areas since their initial effect was on health system integration and coordination.  
  • Many specific areas of innovation were represented but some of the ones which were the subject of large numbers of articles were hospital care and surgery (although often the disruption was moving surgery out of the traditional hospital setting), primary care, diagnostic imaging, personalized medicine based on genomics, and information/communication technology.
  • A few examples can illustrate the application of the disruptive innovation concepts. Many articles identified retail clinics as an innovation disruptive of primary care physician practice. Such a clinic may be located at a mall, a drug store or retail store and is generally staffed by nurse practitioners. It offers to treat a specific list of common ailments with a flat price for each one. Conditions on such a list might include things like ear infections, wart removal, athlete's foot, allergies, seasonal flu vaccine, sinus infections and minor burns. It likely is open from early morning until late evening and takes patients as walk-ins without appointments.   The conditions treated by retail clinics are clearly toward the precision medicine end of the spectrum, i.e. can be effectively dealt with by a rule-based approach. This is the right condition for a value added process business model and the retail clinic is based on that. Patients who go to retail clinics typically know what they have and how to treat it. They are looking for a confirmation of their self-diagnosis and access to treatment in a way that is quicker and more convenient than making an appointment with a primary care physician. Many users of retail clinics in the U.S. do not have insurance coverage or a relationship with a primary care physician. A certain regulatory environment is necessary for this model to work. A jurisdiction that did not permit nurse practitioners to practice without close on-site physician supervision or payers who were not willing to pay for care from independent non-physician providers would constitute an environment hostile to retail clinics.
  • Various surgical technologies were also mentioned.. Often computer guided imaging or surgical devices were associated with these innovations. Laser eye surgery is perhaps the best known example. It clearly disrupted hospitals by moving many eye operations to the value added process model of the outpatient eye surgery center from the solution shop model of the hospital surgery department. Not only did the physical location change however. The resources needed in terms of equipment, the skill sets of the surgeons and support staff, the costs and outcomes, the time required of patients all are different. Much less surgical skill is needed for LASIK than for the procedure it replaced. As Christensen puts it, surgical skills are in effect "embedded in the machine". One implication is that profits flow more to the machine makers than to the physicians.
  • Remote patient management was identified as an innovation disrupting the management of chronic diseases. Developments in technology for physiologic monitoring and telecommunications have made it possible to provide information about a patient's current status to care providers who are at a different location than the patient and at a time different from when the measurement was taken. This can facilitate earlier identification of problems and, where appropriate responses are protocol driven, care can be provided by the patient himself or a non-clinical care provider. Savings from decreased use of emergency departments, inpatient hospital care and skilled nursing facilities can result.
  •   In closing, return for a moment to the "game changing" metaphor. When a sportswriter refers to a game changing play she is probably talking about the grand slam home run in the bottom of the ninth inning or the brilliant power play in the second overtime which determines the winner of the game. Game changing innovation is more than that however. It is not only about who the winner or loser is. It changes who the players are and the rules of the game. Knowing who the players are is helpful for predicting where resistance or support for an innovation will arise. For Alberta health care you, the people in this room, are to a great extent, makers of the rules of the game. Our review suggests that a good way to approach a coming disruptive innovation is to understand who the players will be and how business models are likely to change. Then make rules that direct the changes in a way such that the health of Albertans will be the winner.  
  • The application of the disruptive innovation conceptual framework by health system managers might be aided by an attempt to answer the following series of questions when a new technological or delivery model innovation is being considered
  • The application of the disruptive innovation conceptual framework by health system managers might be aided by an attempt to answer the following series of questions when a new technological or delivery model innovation is being considered

Transcript

  • 1. DISRUPTIVE INNOVATION ANALYTICAL FRAMEWORK AND BACKGROUND STUDY JOHN RAPOPORT, PHD
  • 2. OUTLINE
    • The Innovators Prescription (Clayton Christensen et al, 2009)
    • Literature review on ‘disruptive’ or ‘game changing’ innovations
    • Illustrative examples from the past or present
  • 3. CHRISTENSEN’S “TECHNOLOGY”
    • “ Technology” in Christensen et al (2009) is defined broadly, including not just machines or devices but methodology, scientific knowledge and anything else affecting the way production is carried out
    • Technological (or methodological) enablers allow problems to be addressed on smaller scale, with lower costs, and with less human skill than was historically needed
  • 4. ELEMENTS OF DISRUPTIVE INNOVATION Christensen et al (2009) p. xx
  • 5.
    • It is not just the magnitude of the advance
    • If it works to sustain the existing business model, it is not disruptive
    • A change in business model from the existing one to a new one which is more efficient and/or better addresses the demands of consumers is the key
    WHAT MAKES AN INNOVATION DISRUPTIVE?
  • 6. TYPE OF MEDICAL CARE - CONTINUUM
    • Precision medicine is the ability to precisely diagnose the cause of a patient’s condition rather than just the physical symptoms. It allows for standardized therapy that is predictably effective.
    • Empirical medicine is where data is amassed to show that certain ways of treating patients are, on average, better than others
    • Intuitive medicine is where highly trained and expensive professionals diagnose and treat medical problems through intuitive experimentation and pattern recognition
  • 7. TYPE OF MEDICAL CARE - CONTINUUM Adapted from Figure 2.4 Current Map of Common Conditions Adapted from Christensen et al (2009) p. 63
  • 8. TYPE OF MEDICAL CARE - CONTINUUM
    • “ If regulators, policy makers and executives do not seek business model innovation for diseases that move toward the upper right region in this chart, the potential returns, in terms of reduced cost and improved accessibility, for society’s massive investments in science and technology, will be small .” (Christensen et al, 2009, p. 64)
  • 9. TYPES OF BUSINESS MODEL
    • Solution shops are structured to diagnose and solve unstructured problems using highly trained experts. E.g., diagnostic work in general hospitals.
    • Value added processes generally take incomplete inputs transforming them into complete outputs of greater value. These procedures are possible after a definitive diagnosis has been made . E.g., laser eye surgery.
    • Facilitated networks are enterprises where people exchange things with one another. E.g., web-sites to connect people living with a chronic disease .
  • 10. LITERATURE REVIEW
    • Published and gray literature
    • Time range from 2001 – 2011
    • Disruptive innovation in health care (even if that was not the specific terminology used by the authors)
    • Excluded technological or clinical innovations that did not have implications for the organization of health services (i.e., the business model)
  • 11. TYPE OF ARTICLE
    • Conceptual articles that attempted to extend, modify, supplement, replace or critique the Christensen analytical framework 20%
    • Articles that described specific innovation(s) that were disruptive or likely to be disruptive 60%
    • Articles with general commentary or advice re: disruptive innovation 40%
  • 12. WHAT IS DISRUPTED
    • Hospital care 25%
    • Physician outpatient care 50%
    • Pharmaceuticals 7%
    • Medical/nursing education 5%
  • 13. CLINICAL ACTIVITY PRIMARILY AFFECTED
    • Diagnosis 15%
    • Treatment 25%
    • Prevention 1%
    • System integration 15%
  • 14. AREAS FREQUENTLY MENTIONED
    • Hospital care and surgery
    • Primary care
    • Diagnostic imaging
    • Personalized medicine (genomics)
    • Information/communications technology
  • 15. EXAMPLE: RETAIL CLINICS
    • May be located at a mall, a drug store or retail store and are generally staffed by nurse practitioners. Take patients as walk-ins and offer to treat a specific list of common ailments.
    • ‘ Disrupt’ one aspect of primary care physician practice: straightforward diagnosis and treatment of disorders
    • Near precision medicine end of spectrum
    • Value-added process model using rules-based diagnosis and treatment
  • 16. EXAMPLE: LASER EYE SURGERY
    • Disrupts hospital-based surgery requiring high degree of expertise
    • Move from solution shop model in general hospital to value-added process model in an outpatient eye surgery centre
    • Medical equipment innovation as enabler requiring less surgical skill than procedures it replaced
  • 17. EXAMPLE: REMOTE PATIENT MANAGEMENT
    • Enabling technology: physiologic monitoring and telecommunications
    • Shift from hospital or home care to self care and/or care by non-clinical providers
    • Savings from reduced ED, inpatient, skilled nursing facility use
    • Applicable: Chronic disease, post-hospital stay recovery
  • 18. ELEMENTS OF DISRUPTIVE INNOVATION Christensen et al (2009) p. xx
  • 19. USING THE FRAMEWORK - QUESTIONS
    • Does it change the position of diagnosis or treatment of disease on the continuum from intuitive medicine to precision medicine?
    • What is the current business model for provision of the service (Solution Shop, Value Added Process or Facilitated Network)?
    • What is the business model likely to arise after the innovation is adopted?
    • How are the skill sets needed by providers changed by the innovation? Are changes in training needed to provide a suitable labor supply?
    • Is the legal, social and cultural environment consistent with, and supportive of, the new business model?
  • 20. USING THE FRAMEWORK - QUESTIONS
    • How well do the existing business model and the likely new business model address specific consumer demands? Is "moderately lower quality and much lower cost" an attractive option?
    • Is the new business model likely to be introduced within existing organizations or within new organizations?
    • Are there suppliers of equipment, supporting or complementary services, needed by the new business model which do not now exist?
    • Is the existing funding mechanism consistent with the new business model?