Insight

Disruptive Innovation in the Provider Space

Some of the most difficult problems in today’s world get solved because they can be easily framed up, well-defined and attacked. However, the most pressing problems of our time, those such as climate change, collapsing institutions, and high-quality affordable healthcare are not easily framed because at their core they are systems problems. Systems problems require cross-disciplinary convergence, innovation, and rare levels of collegiality to resolve.

Providers associated with academic institutions are in a unique position to solve major pieces to the affordable health care puzzle, especially affordability and quality. Why? They are epicenters of cross-disciplinary collaboration and are insulated enough from politics to innovate new approaches to care. These providers associated with academic institutions need to form innovation platforms built on the concept of disruptive innovation.

“Academia is great at discovering. It’s a cauldron of activity that has led to Nobel prizes and game-changing technological advances. And the private sector – biotechnology and pharma – have been very good at executing. I believe what we need to do is to really have the two be better integrated to have academia also be in a position to execute. So in our Cancer Moonshots program what we’ve developed are professional platforms so that if a discovery is made, we can systematically convert that discovery into a new end-point – a new law, new educational material, or a new drug, or a new device, or a new diagnostic.”

– Dr. Ronald Depinho, President of MD Anderson Cancer Center

Understanding disruptive innovation is critical to not only creating new and better approaches to care or lower cost care, but also to providing new sources of profit. Before looking at an example of disruptive innovation, let’s define what disruptive innovation is:

  • A disruptive innovation may be a product, a service, or a business model that aims to unseat an incumbent by competing on different dimensions of value or unmet needs.
  • It doesn’t aim to add more bells and whistles to satisfy the most demanding of customers. Most often, the disruption happens with a low cost, simple product that creates new and different value, garnering new customers or previous “non-consumers”, while rapidly improving its performance over time.
  • Incumbents often have different motivations than the disruptor. Incumbents are motivated to move up-market with increasingly sophisticated products targeting increasingly sophisticated users in order to capture higher profits. The disruptor’s product is often ignored by the incumbent because their model looks less profitable, does not appeal to their target market (yet!) or the incumbent does not know how to handle the pending cannibalization of their higher-end product. This is called the asymmetry of motivations.

Parkinson’s Voice Initiative – An Example of Disruptive Innovation

Recently, a novel approach to diagnosing Parkinson’s disease was proposed by Max Little at MIT. Mr. Little started the Parkinson’s Voice Initiative (PVI) whose goal is an ultra-low-cost way to diagnose whether someone has Parkinson’s Disease whereby someone can call into an 800 number and say “Ahhhh” for as long as they can. An algorithm then analyzes the voice recording for vocal tremors and about 130 other aspects of the voice. The lab has 99% accuracy, but the question is whether you can get that accuracy over the phone, which is a much less controlled scenario.

How is PVI a disruptive innovation?

PVI is disruptive because it competes with high-cost, time-consuming, in-person neurology exams and “non-consumption”. PVI offers different dimensions of value, such as convenience – the patient only need only dial an 800 number from their home, avoiding unneeded appointments. Further, changes to the patient’s condition over time can tip-off the physician to schedule an in-person exam. In terms of quality, disruptive innovations may not be as good as the incumbent’s product in terms of performance when they first come to market, but they improve over time. This is likely the case here. PVI may not be as accurate as a complete neurological exam, but is already 99% accurate in lab conditions and will improve over time. And lastly, neurologists have asymmetrical motivations vis-à-vis PVI. That is to say,

PVI will take away the number of profitable (yet unneeded) exams from neurologists. Neurology practices are, therefore, unlikely to adopt this technology immediately, unless pushed by an integrated provider or ACO. Lastly, PVI competes against non-consumption – those patients who have avoided seeking out a specialist due to the high-cost of care can now enter the market for this diagnostic service.
How are the best providers handling disruptive innovations?

The best providers:

  • Disrupt their own business models through investing in innovation platforms, so they can capture the profits of the emerging model
  • Integrate academia with the private sector to commercialize new advances in technology

For example, Mayo Clinic’s Center for Innovation harnesses the knowledge capital within their network and provides funding for good ideas to create new services and better care. Recently, they introduced a new app on iTunes called Anxiety Coach, a simple app that helps individuals with anxiety disorders monitor their stress levels and provides ways to overcome situations they fear the most. Wake Forest’s Institute for Regenerative Medicine is discovering new ways to apply 3D bioprinting in the hopes that one day they’ll be able to literally print a new organ from biological tissue.

These investments require understanding how to manage innovation to create commercial successes. Are you the disruptor or the disrupted?