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Unleashing innovation in Healthcare: What we can learn from SpaceX and Tesla?

nilesh chandra | health data management | 18 june 2015

With the industry-wide shift to accountable care and value-based payment models, many provider organizations are beginning to manage population health on behalf of private payers.

Old ways of operating, based on fee-for-service models, will simply not work in the future, driving the need for the development of new business models. However, many leaders are often frustrated at the slow pace of innovation in the industry.

Perhaps there is something to learn from Elon Musk, one of the true radical innovators of our time. His experience with SpaceX and Tesla are not just triumphs of technology development; they are also successful case studies in how to upend traditional business models in mature industries through the successful use of technology and innovation. As the healthcare industry looks forward to its own need for innovation, there is much to be learned from these successful 21st century businesses and applied to managing population health.

According to the findings of PA Consulting Group’s forthcoming innovation survey, 46 percent of senior executives describe their innovation activity as a “costly failure,” with 50 percent of organizations seeing a brilliant idea fail for reasons that could have been avoided.

Reusable, not custom

Before the advent of SpaceX, launching rockets was an expensive business because each rocket was custom designed and built with multiple redundancies to ensure fail-safe operation. In contrast, SpaceX takes a very modular approach with reusable components. This results in much faster development of products.

In healthcare, one of the common challenges in population health management programs is to take care of patients with complex, chronic conditions. Taking an evidence-based approach to designing care programs composed of reusable components will help reduce complexity and cost in delivering care.

Move much faster than your competition

SpaceX is unique in the aerospace industry because of its ability to conduct multiple tests on a single day. By contrast, its competition often takes multiple days to prepare between tests. As a result, SpaceX has been able to compress the development schedule on their rockets and lower overall program costs.

Most healthcare providers face increasing competition in their markets, and pressures on reimbursement and costs. Adopting an agile approach will enable organizations to move faster than the competition to bring out innovative services, enabling those that are able to move quickly to gain a competitive advantage in terms of market share and lower cost.

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Redesign and simplify the customer journey

When Tesla designed an electric car, they discovered that eliminating a gasoline engine and the associated mechanical components not only reduces the total number of moving parts in the car, it also significantly reduces the wear and tear on the car, and thus the need for maintenance. In turn, this enables Tesla to adopt a different business model that relies on direct sales and delivering a superior customer experience. That’s radically different than current auto marketing approaches, which rely on an independent dealer network that, after the car sale, derives its profits from repeat visits for maintenance.

New innovations in technology offer the potential to radically improve health outcomes. However, leveraging them will force organizations to rethink the patient journey and reinvent the entire business model. Just making incremental changes to the patient journey will not deliver the value that is needed to survive and thrive in the accountable care world.

Always keep the big picture in mind

Early on, Tesla faced significant challenges in building an all-electric car. The pressure to compromise and build a car based on existing technologies, such as hybrid gas-electric engines, was significant. However, by focusing on the overarching vision and investing in developing the needed technologies, Tesla has now emerged as the leading electric automotive manufacturer; it now licenses its technology to many of its competitors.

Developing population health management programs and bending the cost curve are not easy goals. The journey is filled with many forks in the road where there will be relatively easy choices vs. difficult choices. The difficult choices will require working against engrained habits acquired over many decades. For each decision, it will be crucial to remember the vision of the program and to continue working towards it.

What separates the best from the rest?

Innovation leaders excel at encouraging and nurturing innovation, and they are more than twice as likely to report EBITDA growth of 10 percent or more over the past 12 months. I’m sure Musk would fit into this category.

Here are some of the behaviors that separate the leaders from the followers.

  1. Make innovation a major focus for everyone in the organization: this is done by 65 percent of leaders, compared with 35 percent of others.
  2. Harness digital technology to improve the speed and efficiency of all innovation activities: reported by 55 percent of leaders, compared with 20 percent of others.
  3. Put innovation at the heart of culture and mission: this is reported by 71 percent of leaders, compared with 43 percent of others.
  4. Strive to be pioneers: done by 73 percent of leaders, compared with 45 percent of others.
  5. Learn quickly from mistakes in innovation: reported by 90 percent of leaders, compared with 60 percent of others.

Healthcare organizations need to embed innovation in their DNA. For most, this means challenging established ways of working, rapidly scaling up successful ideas, refining them and pushing for continuous improvement. For the few organizations that are already leading the pack – avoid arrogance at all costs, conquer complacency and constantly question your future existence.

PA’s new innovation report is based on an international survey completed by 750 senior business and government executives. To obtain the full report, click here.

 

Nilesh Chandra is a healthcare expert at PA Consulting Group

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