Superbly written and inspiring article at Forbes about the health challenges faced by highly regarded author and Harvard professor Clayton Christensen. Christensen’s influential book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, is a must read for every business person, as it captures and explains the essence of the process of innovation, as well as its impact on competition. (I found this book to be far more useful in the context of developing and/or evaluating business strategies and investment opportunities than Michael Porter’s Competitive Strategy
The article documents the central role that his Mormon faith has played throughout Christensen’s life, but especially as he faced and overcame three of the deadliest diseases – heart attack, cancer and stroke – over the last three years. In addition, it also provides a window into Christensen’s insights into the US healthcare industry, obtained as both a patient and as researcher/author of The Innovator’s Prescription: A Disruptive Solution for Health Care
…that the fee-for-service reimbursement system, in which providers earn more by treating patients more aggressively, impedes the kind of disruptive innovation that would lead to better care at a lower cost. There are several systems we could adopt that would be better, but there isn’t a road map to get there. The business models of health are frozen in the hospital and the doctor’s office. The path to fixing the system is to disrupt those models. Here are some approaches:
Routinization. A hospital is really three business models under one roof, each of which manages a different type of medical practice. Intuitive medicine is the realm of highly trained specialists handling difficult diagnoses and treatment. Empirical medicine is the costly realm of chronic care and trial-and-error treatment. Precision medicine, the real goal for the system, is a case where diagnosis is known and so is the therapy. Then treatment can be routinized and moved off-site. Disruption will involve pushing more of medicine into the precision category, then automating that care to make it better and cheaper.
Consolidation. The best way to unleash disruption is if more health care providers combine, controlling hospitals, doctors and health insurance. Christensen makes an analogy to RCA in the 1950s. To get people to watch the first color programming on its NBC channel, RCA also had to manufacture color TV sets. A hospital loses money if it tells patients to go to an outside cheaper clinic. But if it owns the health plan and the clinic, disruptive ideas will flourish.
Precision. The kind of targeted therapies now used in cancer treatment, such as the drug Christensen received, will be applied more widely. Diseases will be subtyped more specifically and therapies tailored to work better. This will also save time and money as clinical drug trials become more focused. Specialty clinics will arise to implant devices more cheaply.
Do-it-yourself. Christensen predicts a rise in self-diagnosis and self-care, as tools that used to be stuck in the hospital reach patients and their families.
I had the good fortune of seeing Christensen speak in person twice at George Gilder’s Telecosm conferences and once at BellSouth, when he spoke at the annual executive management retreat. His presentations were compelling, yet entertaining. Interestingly, Christensen conducted the basic research that underlies all his books and thinking on innovation by studying an industry where failure was endemic – disk drive manufacturing. A friend had suggested it because it resembled the business equivalent of fruit flies, which were the most commonly studied species by geneticists because their life cycle is so short (one day) that cause and effect across generations can be readily observed. Through that study, Christensen developed his theory of disruptive innovation, whereby new market entrants initially introduce new a product or service in simple applications at the bottom of a market and then relentlessly move ‘up market’, eventually displacing established competitors. Bill Gates’ MS-DOS operating system, Job’s/Wozniak’s Apple computer, Jeff Bezos’ Amazon bookstore are a few of the many examples of disruptive innovation and market value creation that fit perfectly with Christensen’s theories of innovation.