Why Healthcare Innovation Often Fails

Today, health systems require an increased focus on innovation to achieve their strategic goals. With major forces of change at play — including consumerism, retail healthcare, risk-shifting, new entrants, and uncertainty resulting from a new administration — hospitals and other providers have begun evaluating new business models, diversifying their business, and searching for new revenue streams to stay relevant and competitive in their markets. Igor Belokrinitsky © ASC COMMUNICATIONS 2016

However, deciding to pursue innovation is far easier than actually making it work.  We have found that connecting innovation efforts with Diversity & Inclusion initiatives is a win-win between business strategy and H.R. strategy.

There  are a few common themes that are beginning to come to light in failed innovation attempts. Fortunately, all of these can be mitigated through thoughtful and purposeful design of an innovation operating model that includes enabling diverse ideation from a diverse talent pool.

1. Treating innovation like any other project. Treating innovation like any other investment is one of the most common mistakes we see. Measuring the financial return on innovation projects alongside other projects decreases their attractiveness, as most new ventures’ payback period is protracted. This may result in organizations shelving otherwise high potential opportunities, or myopically focusing on incremental opportunities with near-term payback. Furthermore, funding innovation via traditional budgeting processes (those used for traditional business planning) does not pull capital from dedicated innovation funds, and forces ongoing innovation efforts to compete for funding against other projects, operating units, and organizational priorities. In times of austerity and budget cuts, innovation efforts can be perceived as non-essential, and are at greater risk of falling subject to the axe. Using Diversity and Inclusion engagements as a catalyst for driving diverse innovation and tapping D&I budgets through H.R. or individual business units can be the key to avoiding this problem.

2. Measuring the wrong things. Measuring progress of innovation efforts is significantly different from, and more challenging than for traditional business units. Measuring your innovation portfolio through financial reporting processes may not provide full transparency into an initiative’s performance — progress towards milestones should be defined by metrics appropriate for pre-revenue and early-stage growth companies (e.g., engaged users, downloads), not strictly by financials. Measuring innovation efforts strictly by financial projections may be misleading, as financial projections for early stage and start up businesses are subject to significant uncertainty, and are easily missed.  Qualitative metrics as well as financial metrics related to inclusion efforts pay off in unanticipated dividends.

3. Not understanding the talent market. Successful intrapreneur leaders are a special breed of talent that have both entrepreneurial tendencies and experience, but are comfortable navigating the processes and politics of larger corporations. Not only are these leaders different in profile from traditional corporate hires, the teams they require to support their innovation efforts (e.g., design, development) are different as well. These leaders are in high demand from start-up or growth stage organizations, and field offers with compensation that includes cash and significant equity — attractive components of a total package. Leveraging traditional HR functions that don’t understand the profile or motivations of the right talent can significantly impair your innovation effort, the success of which is largely determined by having the right leaders to drive it.  HR transformation that recognizes diverse talent as more than just “visual diversity,” but actually hones in on diverse thinkers can make all the difference.

4. Borrowing from the corporate playbook. Many fall into the trap of assuming that existing resources and shared services can support innovation in a “plug and play” manner. However, it is exactly this thinking that will stifle your innovation effort. Incubators and other innovation operating models that heavily rely on matrixing to parent resources (e.g., IT, marketing, legal, procurement, D&I, HR) are subject to the same prioritization processes and corporate cost reduction efforts that can hamper the speed of traditional projects. Furthermore, without embracing an entrepreneurial culture (e.g., focus on building MVPs, employing lightweight contracting), the innovation effort risks over-building and over-contracting products for enterprise clients without first having established product-market fit.

5. Failing to keep “fit.” Designing and consistently executing an innovation process that aligns to your overall strategy is hard, and requires commitment and constant vigilance. It is easy to become complacent in enforcing strategic alignment, pursuing attractive business cases despite their failure to align with your organization’s core mission. However, focus is paramount in innovation. A coherent portfolio that supports the organization’s overall strategy, from its innovation strategy to it’s D&I strategy and everything in between, not only ensures executive and board alignment, it can yield positive benefits by enabling your organization to create a compelling case to outside philanthropists, grant-providing organizations, and strategic partners.

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