clayton christensen8

8/11/2019 Clayton Christensen8

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3/30/12 Copyright Clayton M. Christensen

7%

12%

18%

SteelQuality

19801975 1985 1990

Rebar

Angleiron;bars&rods

Structura

lSteel

Sheetsteel

2530%

The pursuit of profit drives companies up-market. Moving

towards affordability and accessibility seems less profitable.

1995


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Surgical

suites

High-speed

multi-channel

testers

Imaging: MRI,

CT, PET

Scanners

Specialist physicians

Personal physicians

Nurse practitioners

Pharmacists

Clinics

Offices

Homes

The decentralization that follows centralization

is only beginning in healthcare

1. Bring the problem to the solution. 2. Then bring the solution to the problem.

RetailClinics

Familycare


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3/30/12 Copyright Clayton M. Christensen 5

Enablers of Disruption

A new value network a new system

of suppliers and distributers

Business model innovation

Lower-cost venues of care

Lower-cost care givers


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Probabilistic

pattern

recognition

Rules-based

Intuitive,

trial-and-error

problem-

solving

Synthetic

fibers:

Nylon

Polyester

Acetate

Kevlar

Infectious

diseases;

Cervical

cancer

Bipolar

disorder;

Seizures

asthma

Scientific progress that commoditizes expertise

plays a critical role in disruption

Empirical

medicine

(Evidence-basedmedicine)

Precision

medicine

(Personalizedmedicine)

Intuitive

medicine

(symptoms < diseases)


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PROCESSES:

Ways of working together toaddress recurrent tasks in a

consistent way: training,

development, manufacturing,

budgeting, planning, etc.


REVENUE FORMULA:

Assets & fixed cost structure,

and the margins & velocity

required to cover them

THE VALUE PROPOSITION:

A product that helps

customers do more effectively,

conveniently & affordably a

job theyve been trying to do

RESOURCES:

People, technology, products,

facilities, equipment, brands,

and cash that are required to

deliver this value proposition

to the targeted customers


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2007 Innosight LLC8

7%

4%12%

8%

18% 22%

% of tons

SteelQuality

19801975 1985 1990

Rebar

Angleiron;bars&rods

StructuralSteel

Sheetsteel

2530%55%

Evaluating investments on marginal rather than full costs biases incumbent

leaders to leverage what they have, instead of building what they need

$350

285

65

Minimill

$350

15

335

Marginal

$350

340

10

Existing

Price

Cost

Net

3/30/12 Copyright Clayton M. Christensen


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Integrating forward to the decoupling point

Heads &

Disks

Disk

DrivesComputers

Applications

SoftwareService

Heads &

Disks

Disk

DrivesComputers

Applications

SoftwareService

Heads &

Disks

Disk

DrivesComputers

Applications

SoftwareService

Heads &Disks

DiskDrives

Computers ApplicationsSoftware

Service

Heads &

Disks

Disk

Drives

ComputersApplications

SoftwareService


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Government-paid systems are similarly stymied by their silo

structures: Canada, Germany, Netherlands

The structure for 90% of Americans drives caregivers to defend

and strengthen their silos. They cannot drive care towards

lower-cost caregivers and lower-cost venues of care.


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Kaiser Permanente, Intermountain, Geisinger

Employer-provided care

Sweden, Finland

Those with a system perspective find that patient health

and the drive to lower-cost venues of care and lower-

cost caregivers improve profitability.


12/30

Dave Snow, asthmaCEO, Medco

National Jewish Medical Center

Pulmonary & Respiratory Diseases

No model can

do everything

for everybody.

Fee for service

"#$%&'($) *+,%

-./ #+)0$120(#$%

/10)$#%(3 . 1$4&1(56

03(51(6% #7 8#%9140'%

Solution Shops


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We need solution shops for disorders that today

are determined by symptom, not the cause:


Type II diabetes

Obesity

Depression

Schizophrenia

Bipolar disorder

Epilepsy

Parkinson

s

disease

Crohn

s disease

Arthritis

Chronic back pain Ulcerative colitis

Alzheimer

s

disease

Multiple sclerosis


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1101

General HospitalShouldiceHospital

(hernia repair)

$970$700Cost of supplies & direct labor

$6030$1600Overhead burden

$7,000$2,300Total cost for equivalent

length of stay

Service families offered


Sources & magnitude of cost differences:

process vs. general hospitals


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Business models for ongoing care

Degree to which behavior change is required

Minimal Extensive

Motivationto

adheretoth

erapy

Strong:

quickly feelconsequences

Weak:

Complications

are deferred

=>96 ? #910 "+#8$

%


17/30

Better science and the pursuit of profit will enable

pharmacies to provide more and better care.


Minimal Extensive

Motivationto

adheretoth

erapy

Strong:


Weak:

Complications

are deferred

=>96 ? #910 "+#8$

%


18/30

Business models for adherence in chronic care


Minimal Extensive

Motivationto

adheretoth

erapy

Strong:


Weak:

Complications

are deferred

!"#$ & '()*$+$,

-..(/012,!"#$ && '()*$+$,

-,+34)

5126$,07$

3$)8+ 9)(:;8$


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Integration

Fasting and

prayer for

modularity

A common language and a common

way to frame the problem

Fourwaystotackleregulatoryc

hange


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Well do

anything for

anybody.

Overhead =

85% of total

Overheadincreases 30%

for each

doubling of

complexityVariablequality


PolishingDep

t.

Annealing

furnace

Turning machines

Tapping

equipment

De-burringCut-offsaws

Shipping Department Office areaStorage

Hobbing department

Boring

machines

Stamping

machines

Assembly


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The Resource

Allocation Process:Decisions about what

gets resources: what

to do & what not to do

Intended Strategy:Analytical project

followed by

implementation

Emergent InitiativesResponses to

unforeseen opportunities

and problems

Stream of new

products, services,

processes and

acquisitions

Actual strategy

that is implemented

Processes of Strategy Formulation and Implementation

Prioritiesembedded incompanys

profit model

Bad money demands that new

businesses become very

big, very past


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Diabetes companies typically have targeted customers who

dont own the job of keeping healthy.


Familycaregivers

Help him feel

that hes in

trouble!

Patient

Productivity

Absenteeism

Disability

Health RetentionProfitability &

competitiveness

Employers

B i d l i i i k


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Business model innovation is key to

improving quality and reducing costs.

Hospital industry wasestablished when:

Transportation was costly

Doctors were inexpensive

Each community needed ahospital

Though they were called

General Hospitals,they

actually were focused becausemost diseases were acute

The world has changed. Theindustry

s paradigm has

not.

Transportation is cheap and

pervasive.

Doctors are costly

Most diseases are chronic

Most hospitals try to doeverything for everybody

90% of all costs in the hospital are

overhead inherent to the businessmodel

3/30/12 Copyright Clayton M. Christensen24

B siness model liq idation occ rs b helping


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Business model liquidation occurs by helpingcustomers to get their job done: Profits

Mother boards

Computer assembly

Supply chain& logistics

Product design

BrandDell AsusTek

Simple circuit boards

Mother boards

Computer assembly

Supply chain& logistics

Product design

Brand

3/30/12 25Copyright Clayton M. Christensen


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Three levels in the architecture of a job


What

s the job-to-be-done?(Each job has functional, emotional & social dimensions)

What experiences in purchase & use

must we provide to do the job perfectly?

What and how to integrate?

i j


28/30

Integrating correctly to help customers get the job

done is the essence of defensible differentiation

IKEA Federal Express

SAS

Zara

Microsoft Office

TurboTax; QuickBooks

V8

OnStar



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Targeting the job enables precision

in product development


Product

category

Too manyfeatures;

wrong

features

Customercategory

One-size-

fits-none

product

Job to be done

Proper

integration

of all needed

experiences

Outsourcing often sets in motion disruptive


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Wall Street Analysts

Pharmaceutical Cos.

Petroleum Majors

Auto companies

IT departments

Customer Supplier

Bloomberg

CROs.

Halliburton,Schlumberger

Tier One Suppliers

TCS, Infosys, Wipro

Physicians Pharmacies

Outsourcing often sets in motion disruptivebusiness model liquidation

3/30/12 30Copyright Clayton M Christensen

clayton christensen8

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