Disruptive Innovation – fundamentally transforms a sector by replacing expensive, complicated, and inaccessible products or services with much less expensive, simpler, and more convenient alternatives.
Steve Jobs didn’t disrupt, he adapted. So should healthcare.
July 30, 2014
Healthcare is poised for disruption, and if the leading theory on disruptive innovation holds true, the leading organizations in the industry today will not be the ones to bring about that disruption.
But as I’ve written previously on this blog, that doesn’t mean all existing organizations will perish. In fact, as I read more on Clay Christensen’s theory of disruption and change management in general, the less I believe in the idea of ‘disrupt or die.’
The industry will no doubt be disrupted, but it’s false to believe that all but the disruptor will be relegated to failure.
Instead, those that succeed and those that fail will be distinguished by one thing: how they adapt in the face of disruption.
As disruption changes the industry, the organizations that will continue to thrive will be those best able to adjust their business models and practices to industry changes and external threats.
Consider Apple and Microsoft. Today, Apple is known as the disruptor, maker of such innovative technologies and the iPhone and iPad. Microsoft, which had decades of success as a software stalwart, recently announced it will lay off 18,000 workers as it shifts from a “devices and services” strategy to a “productivity and platform company.”
Yet, Apple wasn’t always on top. In the 1990s, after the departure of its founder Steve Jobs, Apple was faltering. Microsoft, on the other hand, was the bell of the tech ball, having launched its Windows 95 in 1995 with 7 million copies sold in five weeks.
Jobs was brought back in to revitalize Apple, and revitalize the company he did. In 1998, Apple launched the iMac — the first personal computer without external storage, and a fun, colorful design. Some would argue the iMac was disruptive, and in some ways it was. In other ways, it was simply the next iteration of the personal computer — an adaptation, albeit a bold one, to its Macintosh introduced some 14 years prior.
Adaptation is a word that is used often by John Kenagy, MD. Dr. Kenagy has become a prophet of sorts for the power of adaptation in healthcare, studying under Clay Christensen at Harvard and later introducing the theory of “Adaptive Design.” The theory is essentially a set of principles, specific to healthcare, to help organizations successfully adapt in the face of change — and do so in a way that delivers exactly what the patient needs, all while lowering the cost of care.
A practicing physician for many years, Dr. Kenagy didn’t worry too much about organizational culture and processes until he broke his neck. Yes, you read that right. After a fall while climbing a tree with his young son, Dr. Kenagy’s months-long recovery allowed him to observe breakdowns in healthcare firsthand. He entered management after the accident, and while studying management at Harvard, was exposed to the principles of the Toyota Production System — the principles of which serve as the foundation for Adaptive Design.
Two pathways of innovation
Disruptive innovation and adaptive design are different ways of approaching the same idea: innovation. They represent “two pathways of innovation,” says Dr. Kenagy.
“Rather than calling innovation disruptive, I believe innovation is an adaptive process,” he explains.
When disruption comes from an outsider, an adaptive culture can adjust its organization so it can continue to find success, even if it’s under a new world order.
What separates those that can adapt from those that fail?
The answer, according to Dr. Kenagy is quite simple: Successful organization learn to do what they don’t know how to do. In short, they are what the human resources department would refer to as a ‘learning organization.’
“Legacy organizations are great at optimizing what they know how to do, and this is true is 95 percent of established organizations, they find it very difficult to do what they don’t know how to do,” Dr. Kenagy explains. The true success stories are great at optimizing, but can go beyond that. “Adaptive capacity enables them to do what they don’t know how to do.”
He points to Intel, which he studied closely in developing the theory of Adaptive Design. In the late 1980s Intel made“painful” decision to exit its original business of making dynamic-random access memory products to instead focus its resources on microprocessors — something it didn’t automatically know how to build. But, with company resources behind it, by 1992, Intel had become the No. 1 semiconductor supplier in the world.
While Intel did exit one memory business for another, the change is more iterative than disruptive. Intel reacted to disruption in its environment by adapting its business in a big way — something many businesses wouldn’t have the guts to do.
So, how do you learn things you don’t know?
Move the learning — the decisions, the changes — to those on the front lines — those that most closely understand the work being done.
“Organizations do not adapt. People adapt. It’s the organization’s ability to increase the adaptive capacity of the people that’s important,” says Dr. Kenagy.
Oh, and, move away from project-based processes and management.
Leadership must empower frontline workers to adapt processes as they encounter breakdowns or workarounds, even when those breakdowns occur as the result of major disruption.
Organizations that use Adaptive Design don’t spend hours and hours deciding which process improvement project to tackle next, based on ROI or other factors. Instead, they tackle the next problem they come across, no matter how big or small.
As a result, the organization adapts, instead of planning how to adapt.
Your future success is all about the ability to adapt. Charles Darwin would certainly agree.
While we are going to have disruption in healthcare, you can still thrive, even if you’re not the one introducing it. Just make sure your employees are empowered to respond.
“Your future success is not dependent on what you have done in the past or are doing now, but rather on how you adapt what you are doing to a constantly changing environment,” says Dr. Kenagy. “Innovation in healthcare will happen. For you and your organization, that innovation will be either disruptive or adaptive. It’s your choice.”