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The Innovator’s PrescriptionThe Innovator’s Prescription:An Examination of the Future of Healthcare th h th L f Di ti I tithrough the Lens of Disruptive Innovation

Jason Hwang, M.D., M.B.A.

E i Di H l hExecutive Director, Healthcare

jhwang@innosightinstitute.org

The Disruptive Innovation Model

Incumbents nearly always win

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Incumbents nearly always win 

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Disruptive  Entrants nearly always winpinnovations

Entrants nearly always win

Time

3/19/2009 Copyright Jason Hwang and Clayton M. Christensen

Disruption is driven by an asymmetry of motivation

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Large markets of HIS non-consumption are sources of growth for disruptive productsg p p

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eClinicalWorks

Personal EHRs

Time

3/19/2009 Copyright Jason Hwang and Clayton M. Christensen

Centralization followed by decentralization: Computing

Centralization followed by decentralization is common

Long-distance telecommunicationHigher educationHigher educationMusic recording & distributionMovies / videoRetailingG bliGambling

The decentralization that follows centralizationis only beginning in healthcare

Surgical 

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The Three Enablers of Disruption

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Business modelI ti TimeInnovation

Technology is moving diagnosis and treatment from unstructured problem solving to a rules-basis

E i t tiExperimentation& problem‐solving

rapy

Pattern Recognition

nosis an

d ther

Rules‐Based

plexity of diagn

Comp

Time

The Three Enablers of Disruption

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Ti

Diff

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Of P

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Business modelI ti TimeInnovation

What is a business model, and how is it built?

THE VALUE PROPOSITION:RESOURCES:

People, technology, products,A product that helps customers do more effectively, conveniently & affordably a job they’ve been trying to do

People, technology, products, facilities, equipment, brands, and cash that are required to deliver this value proposition 

they’ve been trying to dop p

to the targeted customers

PROCESSES:

Ways of working together to PROFIT FORMULA:

address recurrent tasks in a consistent way: training, development, manufacturing, b d i l i

Assets & fixed cost structure, and the margins & velocity required to cover them

budgeting, planning, etc.

The Traditional General Hospital Is Not a Viable Business Model

Value Proposition:Don’t know what’s 

wrong? We can address  Resourcesany problem you bring

ProcessesProfit formula

Turning machines Polishing Dept.Turning machines

Hobbing departmentTapping equipment

rtmen

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Boring machines

Annealing furnace

ing

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Boring machines

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Storage

De-burring machines

Pat

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B starts hereOffice area

Stamping machines

Hospitals are expensive conflations of three types of business models

Solution Shops Value-adding process businesses

Facilitated Networks

• Consulting firms• High‐end law firms

• Manufacturing• Education

• Telecommunications• Insuranceg

• R&D organizations• Diagnostic & intuitive activities of hospitals

• Food services• Medical procedures

• eBay• PatientsLikeMe.com 

Fee for service Fee for outcome Fee for Membership

activities of hospitals

Disruption of the Hospital Business Model

Coherent Solution Shop

Stage 1

Disjointed 

TodayCoherent Solution Shop

Hypo-thesisj

Solution ShopTreat-ment

dDisjointed VAP Clinic

Value‐Adding Process ClinicsValue Adding Process ClinicsOrthopedic, hernia, eye, etc.

It is often futile to cram new technologies into old business models

Major Established Electronics Markets: Tabletop radios floor standing

Performan

ce

Tabletop radios, floor‐standing televisions, computers,telecomm.equipment, etc.

P

Portable TVs (1959)

Pocket radios (1955)

Hearing Aids (1952)Path taken by

established vacuum

Time

g established vacuum tube manufacturers

Technological Enabler: Transistors vs. vacuum tubes

The Three Enablers of Disruption

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Business modelI ti TimeInnovation

Appliance Stores

New propositions often require newvalue networks to gain traction

orman

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Component suppliers

re ceferent m

easur

Of P

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Discount retailers

TimeDiff O

Sony, Panasonic

Time

Componentsuppliers

3/19/2009 Copyright Jason Hwang and Clayton M. Christensen

General Hospitals

New value networks are developingin health information systems

orman

ce HIT Specialists

Perfo

Traditional EHR suppliers

re ceferent m

easur

Of P

erform

anc

Retail Clinics, PCPs

TimeDiff O

Wal‐Mart, Dell

Time

eClinicalWorks

3/19/2009 Copyright Jason Hwang and Clayton M. Christensen