Disruptive innovation in Health Affairs

The first time I heard Clayton Christensen describe his disruptive innovation concept more than 10 years ago I was impressed. By the fiftieth or so time I heard it a year ago –complete with the same old anecdote about the Kaypro computer not being able to keep up with his typing– I was mainly impressed that he was able to be so successful using the same material for so long. He’s been talking about disruptive innovation in health care for a while, too. I first heard him apply disruptive innovation to in-store diagnostics at a conference in 2001. But now he’s really turning his focus to health care with an upcoming book and a section in the current edition of Health Affairs.

Christensen’s introductory article is more of the same: using the example of how the lousy but cheap PC disrupted the mini and mainframe and explaining that innovative business models are needed in health care in order to allow disruptive innovation to occur. Despite my comments above this article is interesting and worth a read.

Christensen’s article is followed by a nearly unreadable paper authored by his Harvard Business School colleague Richard Bohmer and ex-Kaiser CEO David Lawrence: Care Platforms: A Basic Building Block for Care Delivery. It seems like a lot of gobbledygook to me, but maybe you can figure out what they’re talking about and what it has to do with real life.

My favorite article in the whole section is by Mark Pauly from the Wharton School. In ‘We Aren’t Quite as Good, But We Sure Are Cheap’: Prospects for Disruptive Innovation in Medical Care and Insurance Markets, Pauly provides a solid critique of the Christensen and Bohmer approach.

[H]ow well does medical care fit the template of introduction of a disruptive innovation? The answer is that such occurrences are very rare –much more so than in other industries– but that there are reasons for this beyond failures of the imaginations of medical managers who are accustomed to moving in the same rut…

…[W]hatever might be true in the photocopying and computer industries, it is very hard to offer an innovation that explicitly or detectably lowers medical care quality, no matter how much it cuts costs. The trial bar seems ever vigilant for the idea that whatever is done elsewhere in life, no rational person could agree to accept somewhat lower expected health status in exchange for lower costs.

I think it’s consumers, purchasers and physicians who drive this behavior, not just the trial bar, but other than that I think Pauly is right on the money. Pauly describes HMOs as an example of a disruptive innovation, which inaccurately tried to proclaim themselves as equal or higher quality. He faults Christensen and Bohmer for a “wishful thinking” mentality because their health care examples promise lower cost and higher quality, which “confuses the application and devalues the construct” of disruptive innovation. In general Pauly is a lot more complimentary to Christensen than I am in this post, but read his article carefully and you’ll find a few zingers mixed in with the praise.

Pauly’s right that disruptive innovation is unlikely in the US. However, I think it is quite likely that disruptive innovations can occur outside the US and then be imported. An example is medical devices in emerging markets. For example, US medical device companies face a real dilemma in their approach to markets like India. That’s where the growth is, but they also face up-and-coming challengers offering affordable –if not leading edge– products. J&J has introduced an India knee, supposedly for the unique needs of the Indian lifestyle, but really as a source of price discrimination and to fight against low-end competitors. I don’t know the technical specs on these devices, but they are probably just variations on discontinued first-world products –similar to Pauly’s “heritage” Jeep Cherokee example.

The existence of medical tourism provides a pathway for disruptive innovation to reach the US. US patients who go abroad already receive a mixture of first-world and emerging market devices. One reason medical tourism savings can be so high is the lower cost of the device (sometimes lower cost for the same device, sometimes just a simpler “disruptive” device). Over time as these patients return to the US market and the adequacy of the lower cost devices is established –especially as those devices improve over time– there will be acceptance of these disruptive products for the US market.

By the time cost pressures reach the breaking point –in another 3-5 years or so– some disruptive products will be ready for prime time in the US.

Another intriguing article in the same issue, Lessons from India In Organizational Innovation: A Tale of Two Heart Hospitals provides another path to dramatic cost savings that seems to me to have little to do with the disruptive framework. Put the two concepts together and maybe we’ll really get somewhere.

October 29, 2008

One thought on “Disruptive innovation in Health Affairs”

  1. One way in which disruptive innovations can spread in health care is by increasing the ability of medical professionals to carry out higher level tasks than they could previously. A decade ago people dismissed nurse practitioners as less trained than doctors, but if you have a sore throat and have a choice between taking 2 hours to see a doctor or half an hour to go to MinuteClinic, which will you do? MinuteClinic uses well tested algorithms; they’ve never been sued for malpractice.

    Similarly, generalist doctors should and will be able to move up to somewhat more challenging problems by using decision support software, which is a good thing since generalists often have a broad view of the patient.

    There are a bunch of interesting examples in Christensen’s forthcoming book:

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