Clay Christensen: How to Bring Disruptive Innovation to Health Care

Disruptive innovation seems to have bypassed the health care industry.

Harvard Business School professor Clay Christensen's theory predicts that entrenched companies, products and services are often "disrupted" from below by competitors who are able to meet the needs of most current customers with products that do less (but just enough) and are much, much cheaper.

So why has health care been on this rampant march of incredibly escalating costs that seem impervious to competing forces? Where are the disruptive innovators?

Writing in the new issue of Harvard Business Review, Christensen and colleagues Richard Bohmer and John Kenagy paint the portrait of an industry with such inbred systemic interests that it has slowed (but not erased, thank goodness) the inevitable march of disruptive innovation. For example, thanks to progress, diabetes patients now monitor their blood sugar levels with portable detectors rather than by ordering expensive tests through an expensive doctor. That's the direction that disruptive innovation takes: from do too much to do just enough, operated by generalists (or consumers themselves) rather than by specialists, from more expensive to less expensive.

But when new innovations such as a $5 pair of custom eyeglasses or a low-intensity, low-cost X-ray machine try to get into the health care market, they are almost inevitably beaten back by outdated regulations, doctors and supply-chain providers protecting their established incomes, and VCs who would rather invest in high-end rather than low-end solutions.

"Enabling less expensive people to do things that were previously unimaginable has been one of the fundamental engines of economic progress--and the established health care institutions have fought that engine tooth and nail," the authors write.

1. Create--then embrace--a system where the clinician's skill level is matched to the difficulty of the medical problem. "Rather than fight the nurse practitioners who are invading their turf, primary care physicians should move upmarket themselves, using advances in diagnostic and therapeutic technologies to perform many of the services they now refer to costly hospitals and specialists. They should, in other words, disrupt those above them rather than fight a reactionary and ultimately futile battle with disrupters from below."
2. Invest less money in high-end, complex technologies and more in technologies that simplify complex problems. "History tells us that major new growth markets coalesce when products, processes, and information technologies let less highly paid groups of people do things in more convenient settings. To truly disrupt the health care system, venture capital, entrepreneurial energy, and technology development need to flow toward these enabling initiatives. Rather than focus on complex solutions for complex problems, research and development need to focus on simplification."
3. Create new organizations to do the disrupting. "The health care industry today is trying to preserve outmoded institutions. Yet the history of disruptive innovations tells us that those institutions will be replaced, soon enough, with new institutions whose business models are appropriate to the new technologies and markets."
4. Overcome the inertia of regulation. Instead of working to preserve the existing system, regulators need to frame their jobs differently.