How health systems can get innovation right: A winning strategy that creates real change

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How health systems can get innovation right: A winning strategy that creates real change


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Innovation has become the buzzword of the past two decades in healthcare. Silicon Valley, technology vendors, health plans, and health systems all agree that it is the key to the future. Like Miss America contestants seeking world peace, “innovation” has become the canned response of healthcare board members, executives and industry pundits to the question, “How do we save the U.S. healthcare system?”

But, overuse and generalization of the term “innovation” has led to a loss of understanding of what it actually means. It’s not “doing the same things a bit better,” though this is the common threshold for many healthcare companies. Instead, it must be “doing new things that make old things obsolete.” The latter is much more difficult in the short term but is really the only way to achieve the quintuple aim in the long term. We should start talking about innovation as a series of separate skills and behaviors that require a different kind of leadership than exists in most healthcare organizations.

To be sure, this is an overwhelming time for health systems. Though the Covid-19 pandemic accelerated digital technology adoption significantly, many are still struggling to find an effective strategy for innovation. It’s common for health systems, pressured to innovate but unsure how to implement change, to choose flawed approaches to address this conundrum. These are some of the flawed tactics that have been employed.

Putting the wrong person in charge

It’s common for health systems to promote someone with limited healthcare investing experience to lead innovation efforts and give them a little money to play around with. However, success requires both healthcare experience and investment experience to move the process along and make the right calls.

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Another common tactic is to put innovation under the CIO’s responsibility. Though 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 be investing with other likeminded organizations to shape startups and ensure they can scale. If they invest in the right solutions, these not only make a difference for their organization, but they can also show returns as they are implemented in other markets.

Partnering with a local “innovation hub” or “incubator” 

Though it feels good to support a local entrepreneurship program, this often is not necessarily helpful or aligned in any way with the health system’s needs. While it’s fine to be involved and support these organizations, a health system’s entire strategy should not hang on it.

Not looking outside of your organization for a fresh perspective

Some of the most disruptive thinkers may not be inside the four walls of your organization. Often, the most innovative thinkers emerge from the female and minority ranks who have been, unfortunately, overlooked. These new early stage leaders are driving, defining and designing better futures through technology-enabled innovation.

Your organization should make a concerted effort to identify and consider leveraging this untapped talent pool of energetic young leaders to help drive your organization’s most important innovation initiatives.

Taking a thoughtful 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 objectives 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.
  • Set an appropriate budget. A good starting number is $25 to $50 million; $10 million likely isn’t enough—starting too small will sub-optimize returns.
  • Have a small but powerful oversight group of strategy, IT and operational leadership that can commit to regular meetings and probably lots of weekend and early morning calls. After all, innovation never sleeps.
  • Give this committee freedom to allocate capital as they see fit (i.e., remove the traditional health system bureaucracy, even if you need to get board approval).
  • Partner with experts who have experience in healthcare-specific investing so your organization benefits from broad-based deal flow and professional investing expertise.
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This is perhaps the most challenging and exciting time in the history of our healthcare system. Creating real change is complex and requires deep experience, connections 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



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