How Health Systems Can Innovate: A Winning Strategy That Creates Real Change
Innovation has become the buzzword of the past two decades in healthcare. Silicon Valley, technology providers, health plans and health systems all agree that this is the key to the future. Like Miss America contestants seeking world peace, “innovation” has become the standardized response of health care board members, executives and industry experts to the question: “How can we save the American healthcare system?”
But the overuse and generalization of the term “innovation” has led to a loss of understanding of what it really means. It’s not about “doing the same things a little better,” although that’s the common threshold for many healthcare companies. Instead, it should be about “doing new things that make old things obsolete.” The latter is much more difficult in the short term but it’s really the only way to achieve the fivefold goal in the long term. We should start talking about innovation as a set of distinct skills and behaviors that require a different type of leadership than exists in most healthcare organizations.
Admittedly, this is an overwhelming time for health systems. Although the Covid-19 pandemic has dramatically accelerated the adoption of digital technologies, many are still struggling to find an effective innovation strategy. It is common for health systems, compelled to innovate but not knowing how to implement change, to choose the wrong approaches to solve this problem. These are some of the flawed tactics that have been employed.
Put the wrong person in charge
It’s common for health systems to promote someone with limited experience in health care investing to lead innovation efforts and give them some cash to play with. However, success requires both healthcare experience and investment experience to move the process forward and make the right choices.
Another common tactic is to place innovation under the responsibility of the CIO. While CIOs are critical to these efforts and should always have a strong voice in the conversation, these leaders often don’t have time to focus on innovation and the process stalls.
The health system being the only investor in a deal
More than ever, health systems need collaboration to survive. They should invest with other like-minded organizations to shape startups and ensure they can scale. If they invest in the right solutions, they not only make a difference to their organization, but can also generate returns when implemented in other markets.
Partnership with a local “innovation hub” or “incubator”
While it’s nice to support a local entrepreneurship program, it’s often not necessarily helpful or aligned in any way with the needs of the healthcare system. While it is good to get involved and support these organizations, the entire strategy of a health system should not depend on them.
Don’t look outside your organization for a new perspective
Some of the most disruptive thinkers may not be inside the four walls of your organization. Often the most innovative thinkers emerge from female and minority ranks that have been, unfortunately, overlooked. These new early career leaders drive, define and design a better future through technological innovation.
Your organization should make a concerted effort to identify and consider tapping into this untapped talent pool of young, energetic leaders to help drive your organization’s most important innovation initiatives.
A careful look at digital innovation is the first step to success. Here are some guidelines for setting up a health system with a winning innovation strategy:
- Set clear goals for the program that align with your long-term growth strategy.
- Put someone in charge who understands healthcare, has experience with startups, and is familiar with venture capital or private equity investing.
- Establish an appropriate budget. A good starting figure is $25-50 million; $10 million probably isn’t enough – starting too small will under-optimize returns.
- Have a small but powerful strategy, IT, and operational leadership oversight group that can engage in regular meetings and likely lots of weekend and early morning calls. After all, innovation never sleeps.
- Give this committee the freedom to allocate capital as it sees fit (i.e., remove traditional bureaucracy from the healthcare system, although you must obtain board approval).
- Partner with experts who have experience in healthcare-specific investments so your organization benefits from large-scale deal flow and professional investment expertise.
This is perhaps the most difficult and exciting time in the history of our health care system. Creating real change is complex and requires deep experience, relationships and creativity to get it right. No matter where you are in the process, it’s not too late to adopt a structured approach that gets results.
Photo: HAKINMHAN, Getty Images