Health Care Industry Poised for Disruptive Innovation
A new Harvard working paper* projects a revolution in the health care industry driven by disruptive innovation. American health care’s challenges are not new. Many business types, from personal computers to automobiles, have struggled with finding ways to provide affordable and convenient products and services to consumers. The health care industry is poised for a similar fundamental shift.
The transformational force that has brought affordability and accessibility to other industries is disruptive innovation. Today’s health-care industry screams for disruption.
Disruptive innovations typically have three crucial characteristics: a simplifying technology, a business model innovation, and a disruptive value network. Each characteristic exists in the industry but there are three key lessons that need to be integrated to achieve innovation:
- Business model innovation is almost exclusively driven by new entrants to the industry. Government regulators must be aware of leading institutions trying to lobby and outlaw these new business models. New business models may be detrimental to leading firms but will be beneficial for society.
- Disruptions are rarely developed independently and fit into existing systems. More commonly, they require entirely new networks and models. This will require a higher degree of integration between new business models and disruptive innovations than those that existed in the past.
- Disruptive innovations solve the simplest problems first. The majority of industry talent and funds are focused on the most difficult, high profit issues. Innovations always start on the simple end of the industry. Once they have gained a foothold they improve, gain momentum, and replace the older high cost issues one at a time.
Innovation and disruptions provide an extraordinary growth opportunity. Both existing firms and new entrants will contribute new ideas, business model enhancements, and new ways of simplifying the health care industry.
* How to Revive Health-Care Innovation – Clayton M. Christensen, Jerome H. Grossman, Jason Hwang
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