Causes and Consequences of a New Blue-Print for Innovation in Healthcare

There have been numerous calls for advancing innovation in healthcare. Healthcare reform is causing innovation around the country, and based on TIGI’s analysis there is a simple and coherent framework that provides a blue-print for providers and suppliers to ignite innovations.

Why innovation?

Innovation is essential for the progression of growth, human development, and quality of life. Companies seek, cultivate, and celebrate innovation; shareholders reward, pursue, and demand it from managers; peers and competitors admire, study, and imitate it; academics study and analyze it.

Fortunately, innovation has a fundamental structure, process, and outcome. Innovations are novel and appropriate solutions to sometimes unknown or known deficits or problems. Consequently, a substantial innovation appears obvious in retrospect because it illuminates a problem, and provides an intuitively appealing remedy.

What has changed for innovation in healthcare? 

Based on our analysis of the provider and supplier segments of the healthcare industry, three conclusions can be made:

1. Innovation for competitive advantage is not one dimensional anymore.
   Faster, or cheaper, or easier leads to commoditization instead of differentiation. Worse, because we have reached near enough to theoretical limits in many areas of technology, further progress has had diminishing returns. For example, a production car can now go 250+MPH (400+ KPH), and it costs $1.5 million more to make than the sticker price. Does knowing that VW makes that car cause anyone to want to buy a VW sedan?
   In healthcare, having the most advanced equipment does not guarantee market adoption for manufacturers. Instead, once thresholds of capabilities are met, further advancements are seen as “additional capabilities” with diminished economic value. New devices need to show more than an incremental improvement in clinical utility to maintain pricing power. Increasingly therefore, to justify a change or technology adoption, there has to be something else, something more than the stand-alone improvement, i.e. other dimensions of value.
2. Beyond multiple dimensions, innovation today requires a balance between somewhat opposing forces; things like efficiency, cost-benefit, and other blends of capabilities. In healthcare this is the need to reduce cost and improve quality at the same time; in the automotive industry, it is power and efficiency; in Microchips it is higher transistor density and lower power consumption; in diagnostic imaging it is dose reduction and resolution improvement; in clinical laboratory it is smaller system size and higher throughput.
   This causes innovations to be more difficult to explain, secure regulatory approval, and commercialize. Even when these hurdles are cleared, providers remain somewhat ambivalent. For example, when providers buy a surgical robot, the action does not guarantee patient volume growth, sustained competitive advantage, or higher reimbursement for providers. It does increase cost, and as a result, the majority of the market will not adopt the technology.
3. Finally, the core of innovation in the healthcare marketplace has shifted from Technology to Process, and from Suppliers (Manufacturers R&D) to Providers (Hospitals/Health systems). Having more slices on a CT is not nearly as compelling as it used to be because having better images is expected. The market has difficulty justifying the expense of incremental gains in this area because the cost of process change and implementation is large. Similarly, minimally invasive surgical product sets, and implants are only valuable to hospitals if they facilitate techniques that speed recovery time, improve OR and hospital patient flow, and enhance the productivity of the operating room. New drugs need to create improvements in patient compliance with therapy to avoid substitution for a slightly less efficacious generic options. Beds and furniture need to be sturdier and function in a way that maximizes patient comfort, while improving access for nurses and other caregivers.
   In healthcare today, innovation is about managing disease in multiple settings, not just in the hospital. Innovation is focused on treating chronic diseases versus advanced Acute care delivery. Acute injury and disease treatment is simple; diagnose, treat, follow up and collect. Chronic disease is complex and multi-dimensional; diagnose, treat, affect lifestyle, manage complications, avoid adverse events, maintain patient compliance, adjust therapy, monitor and adjust, follow-up, and try to collect.

The blueprint for Innovation in Healthcare

Because of these changes, the industry needs a more realistic model for innovation and technological advancement. This model needs to be able to integrate the changes in innovation into something we can use.
The COF^SM model (Clinical, Operational, Financial) does this by linking Clinical Utility requirements and advances to Operational Efficiency requirements and advances, and to Financial Performance requirements and metrics.

How others are using the blueprint

In one company, the COF^SM model is being used to drive the marketing communications process toward customer deficit illumination and awareness creation. Rather than pointing out that providers don’t have a clinical capability, this company has created messages, case studies, and proof statements that show how the absence of a clinical innovation leads to process inefficiency and how that translates into imperiling the financial health for the provider. The outcome of these efforts has increased return on Marketing investment, as well as revenue growth in a declining market.

Another company is using the COF^SM model to segment the market based on externally visible indicators of clinical risk elevation, and process inefficiency. Using these criteria, the company is sending specific and tailored messages to individual targeted customer buyers to clear the path for their sales team. The sales team uses the model to build a business case for the adoption of their recommended solutions. The result of this effort has been increased sales pipeline velocity, and reduced price erosion.

Yet another company is using the COF^SM model to de-commoditize their product offerings. Unique terms and conditions specified in their service agreement have been monetized and connected to the clinical missions of their customers. What was once an objectively described commodity has been transformed into a vehicle to create supplier-provider partnerships for clinical integration, patient satisfaction improvement, and simultaneous cost reduction and revenue increases. Using this approach led to the largest market share gain in one year in the company’s history.

If you’d like to know more about the blue print for innovation in healthcare, send us a note or leave a comment here.

Healthcare reform is causing innovation around the country, and based on TIGI’s analysis there is a simple and coherent framework that provides a blue-print for providers and suppliers to ignite innovations.

TIGI’s latest blog post addresses the changes for Innovation in healthcare, explains the Blueprint for Innovation and shows how others are using that Blueprint to gain an advantage in the market.

By:

Sam O’Rear
Total Innovation Group Inc., Senior Partner

and

Gunter F. Wessels, Ph.D., M.B.A.
Total Innovation Group Inc., Practice Principal, Partner