In this morning’s opening keynote at the Partners Connected Health Symposium, Dr Jason Hwang, co-author with Clayton Christensen of the Innovator’s Prescription spoke about the application of disruptive innovation on the healthcare industry.

Disruptive innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market’, eventually displacing established competitors. This disruption allows new consumers to begin to use the technology whereas in the past it was inaccessible to them. This can be seen in the computing industry where the technology has moved from mainframes to mini-computers to PCs and to smart-phones, which has also moved the location of the technology from a central location to being accessible anywhere it is required. This decentralization through disruption leads to increased accessibility but it is important to note that companies often add functionality through innovation faster than consumer wants or needs the technology

In healthcare this same move to centralize everything, can be seen with the co-location of multiple services and technologies all under the same roof in a big hospital. The emerging trend however is to move this care provision from a central location out into the community and into the home. This also means that different people will be able to deliver the care such as nurses and empowered patients themselves, supported by new technologies.

This in-turn requires us to look at the dominant business model in healthcare where everything is centralized on the general hospital. This implies that many different types of technology and specialities in one location. The business model then has to support all of these resources but with the number of hand-offs that result, it can be prone to error and forces increased costs to maintain profitability.

Hwang asserted that hospitals are expensive conflations of three specific types of business models:

1)      Solution shops – typically very dependent on people offering diagnostic and intuitive activities on a fee for service basis

2)      Value-added process businesses – typically process dependent where a certain task is repeated enough times to where it becomes possible to accurately predict the outcome, for a fee.

3)      Facilitated Networks – where users, both providers and patients, transact and interact with one another on a fee for membership basis.

As disruption occurs in the healthcare industry, Hwang believes that a number of changes will occur to these business models

-          Specialist hospitals will emerge to address the solution shops model, bringing together a number of different specialties to reach a diagnosis sooner

-          Treatment centers focused on a particular procedure, e.g. heart by-pass, where technicians can be involved in delivering the treatment, rather than doctors, as they have been specifically trained on parts of the procedure and repeat it on a daily basis

-          Social networking through sites such as PatientsLikeMe, empowering individuals to do more for their own care delivery

Dr. Hwang concluded however, that each of these new propositions will require new value networks to gain traction in the market and for this to happen, having the right partners will be key to success.