Innovation in Healthcare: Why It’s Needed and Where It’s Going

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Innovation in HealthcareOver the past several decades, thanks to improved diagnostic and therapeutic options, healthcare has experienced an explosion of innovations designed to improve life expectancy and quality of life. As healthcare organizations face unprecedented challenges to improve quality, reduce harm, improve access, increase efficiency, eliminate waste, and lower costs, innovation is becoming a major focus once again. Under our present system, just doing our best or working harder will not be enough. The healthcare industry is on the brink of massive change.

Big Drivers for Healthcare Innovation

There are many forces driving the need for innovation. The traditional encounter-based care delivery model is being overwhelmed as a result of the growth in demand driven by retiring Baby Boomers and the rapidly increasing prevalence of chronic disease. There are looming shortages of key providers. Costs are too high and rising. Even our productivity is suffering. A McKinsey study from February 2014 demonstrated that the productivity of the U.S. healthcare industry dropped by 0.8 percent annually in the 1990 to 2007 period, while the productivity of the U.S. computer and semiconductor industry grew by 7.6 percent each year. These factors, plus additional socioeconomic forces, mandate a focus on innovation.

Healthcare Innovation Defined

The Department of Commerce Advisory Committee on Measuring Innovation in the 21st Century Economy has defined innovation as “the design, invention, development, and/or implementation of new or altered products, services, processes, systems, organizational structures, or business models for the purpose of creating new value for customers and financial returns for the firm.”Viewed comprehensively, innovation represents the implementation of new or significantly improved products, services, or processes. It can also imply new organizational models, methods of service delivery, ways of relating to customers, and approaches to marketing.

Innovation can be categorized by its impact on stakeholders as either non-disruptive or disruptive. Non-disruptive innovation, also referred to as evolutionary, incremental, linear, or sustaining innovation, improves something that already exists in a way that supports the realization of new incremental opportunities or solves known issues. Disruptive innovations, also called radical, revolutionary, transformational, or exponential innovations, refer to innovations that fundamentally disrupt old systems, create new market constituents and new markets while marginalizing old ones, and deliver dramatic new value opportunities to those who successfully implement and adapt to the innovation. A compelling case can be made that healthcare will experience substantial disruptive innovation over the next few years.

More Disruptive Innovation Is Needed

In recent decades, the majority of innovation in healthcare has been centered on the development of new diagnostic procedures, therapies, drugs, or medical devices — something the U.S. has excelled at over the past few decades. These advances range from new pharmaceutical agents and procedures (e.g., stents) to more precise diagnostic scanners and surgical robots. While these innovations have produced some stunning results, they have been relatively narrowly focused and mostly incremental in nature.

Going forward, the emphasis on innovation promises to accelerate rapidly and produce exponential change in important areas including prevention, more personalized care tailored specifically to a patient’s genetic profile and needs, more efficient and proactive technology-enabled care models, more integrated and comprehensive delivery organizational designs, and additional creative technology-enabled options for effective health encounters (e.g., patient to provider, provider to provider, and patient to patient).

Over the past two decades, innovation has become critical to economic growth and progress in all industries. To the casual observer, technology-induced innovation can seem random and linear, but if one stands back, a more dramatic pattern becomes apparent. The pace of innovation is accelerating exponentially and often is exogenous to the economy. Entrepreneurs and scientists do not think or create more slowly during recessions. Innovation is often easier during downturns and difficult times. This is especially true of digital innovation.

The Exponential Growth of Innovation in Healthcare

For a model of the pace of digital innovation, consider Moore’s Law, e.g., the annual doubling of computer power or data storage capacity one can purchase for one dollar. As Ray Kurzweil has demonstrated, digital innovation has increased exponentially from 1890 (with Herman Hollerith’s punch cards) to 2010 (increasingly powerful and tiny microprocessors). The impact has been realized despite sociopolitical events and it has impacted innumerable other technologies, processes, and business models with breathtaking speed, particularly over the past decade.

More recently, we are beginning to see Moore’s Law in the life sciences, from genomics and organ replacements to medical imaging, sensors, and robotics. Technology’s nonlinear pace of progress will almost certainly create substantial market disruption in healthcare, spawning wave after wave of opportunities for traditional healthcare organizations, and new startup companies alike.

Technology has always played a crucial role in healthcare innovation, and this will be no different in the future. However, the pace and focus of technology-enabled innovation is likely to change. Consider these recent predictions by the International Data Association:

  • With an eye toward improving the consumer experience, 65 percent of transactions with healthcare organizations will be mobile by 2018, requiring healthcare organizations to develop omni-channel strategies to provide a consistent experience across the Web, mobile, and telephonic channels.
  • The need to manage cohorts of patients with chronic conditions will lead 70 percent of healthcare organizations to invest in consumer-facing mobile apps, wearables, remote monitoring tools, and virtual care. This in turn will lead to more demand for big data and analytics capability to support population health management initiatives.
  • Big data will become commonplace, with more than half of organizations managing it with routine operational IT by 2018, reducing the need for specialized resources to support big data projects.

Advances in digital technologies will create enormous new possibilities and opportunities. The wise will recognize and ride this trend. Those who ignore it will do so at their peril.

Peter Drucker, the widely known management consultant and theorist once said, “all organizations require one core competency: innovation.” The aggressive rate of change facing healthcare calls for leaders who understand and possess this key competency, and know how to instill it throughout their respective organizations.

This is the first of a series of blog posts that will focus on innovation in healthcare, with future posts focusing on specific areas of innovation and their implications for analytics including wearable sensors, drug delivery systems, robotics, genomics, mobile computing technologies, social networking, remote patient management systems, and telehealth.

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