As the healthcare environment grows more complex and uncertain, the imperative to innovate becomes stronger as it opens the door to becoming more distinct, reducing waste, improving public health, and creating new revenue streams. Until recently, innovation, usually in the form of a massive research and development enterprise, has been the privilege of the largest and the best-funded players — with its own budget and its own box on the org chart.
The good news is that innovation in healthcare is "democratizing" — by becoming more accessible to ever smaller providers and diffusing through the organization.
External capital to fund innovation is flowing into the industry from venture firms and strategic investors, along with talent from the consumer and technology sectors. In addition, many regional markets now have "innovation communities," comprised of venture capital firms, startups, academic institutions, the public sector and other entities.
Hospitals, health systems and physician groups have something unique to bring to the table in these "innovation communities:" relationships with customers and patients, local market expertise, and real-world data about the effectiveness of new products and services. However, in order to access innovation through these new channels, mid-sized healthcare players need to become far more strategic in their approach. Specifically, they need to become "activist innovators:" not content to make purely financial bets, but seeking to set the direction of the innovation efforts in a way that brings benefit to their patients and communities.
The change will not come easily. Small and midsize providers that have historically focused on creating a stable, efficient and compliant enterprise will need to evolve their culture, and embed the new, more creative and risk-taking attitude in core processes such as capital planning. Below we outline three steps any organization can take in order to get started:
1. Set the innovation agenda — The path to becoming an activist innovator begins with defining a strategy for innovation — one that plays to the organization's strengths and aspirations. Management teams need to determine how they will measure the impact of innovation on the overall enterprise goals, which could include direct and diversified financial benefits, stronger community and employee engagement, and appeal to the philanthropic givers. The innovation priorities have to be specific enough to arm the organization with a clear framework so that opportunities can be evaluated, prioritized and eliminated. Organizations going through this process for the first time are always surprised to find that the hardest part is not coming up with one brilliant idea but staying disciplined and focused. Ask yourself this: Are you killing enough ideas?
2. Embed innovation — Before adding boxes to the org chart and buying modular furniture and whiteboards for the "innovation floor" in the administrative building, there is merit to evaluating the different innovation operating models available. Clarity around the innovation objectives will help set the key parameters such as the size of the desired portfolio, the number and type of initiatives, the stage to which you will take them before commercializing them, and the performance criteria. With this knowledge, it becomes easier to determine the size of the innovation function, the degree to which it should be concentrated or diffused, and the role that partners will play. Partnering considerations should be baked into the process from the beginning — an "activist innovator" is not a "lone wolf" innovator.
3. Learn by doing — By nature of operating in a high-precision, high-stakes environment, health organizations believe in thorough vetting and testing of any new processes and technologies. However, spinning up an innovation process need not turn into a longitudinal randomized double-blind study. Health organizations can build their innovation muscles by taking a set of ideas, running them through the initial prioritization screen, and seeing what it takes to turn the highly ranked ideas into actual opportunities. In the next go-around, the idea list will be longer and higher-quality, the prioritization screen will be stricter and more robust, and the resulting opportunities will be more transformative and realistic. And, critically, more people in the organization will feel more empowered to participate.
For those interested in learning more about becoming an activist innovator, an expanded white paper can be found through the following link: http://www.strategyand.pwc.com/reports/activist-innovator-in-healthcare
Igor Belokrinitsky and Edward Yu are principals with Strategy&, PwC's global consulting team, and John Petito is a manager with the firm.