| June 15, 2018

Op-Ed: 10 Reasons the Healthcare Industry is Still Not Innovating in 2018

Codrin Arsene

Codrin is the CEO of Digital Authority Partners, a NextGen digital consulting agency headquartered in Chicago, IL. Digital Authority Partners... Codrin is the CEO of Digital Authority Partners, a NextGen digital consulting agency headquartered in Chicago, IL. Digital Authority Partners specializes in building and launching digital experiences (mobile/web/IoT/VR) that wow and delight millions of customers all over the world.
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In a recent radio interview, I talked about why the healthcare industry is in an excellent position to disrupt itself from within by leveraging emerging technologies like artificial intelligence, blockchain, machine learning, predictive analytics, and personalization techniques.

In that interview, I focused on the reasons why the healthcare industry has the potential to be innovative.

But that was only half the story.

In this article, I’ll cover the reasons why innovation still continues to be an illusive dream for many executives in the healthcare industry. Why “can innovate” abruptly becomes a “won’t innovate” in reality.

This isn’t an attempt to blame the industry for its predicament. On the contrary. I believe that recognizing the problem is half of the solution. Which is why every executive in the healthcare space should look for the following signs within their organization—and be actively trying to solve them.

But first, what exactly is innovation? Sure, we hear the term thrown around to the point that it’s become a much-hyped buzzword, but what does it really mean in practice?

According to a new report submitted to the Secretary of US commerce titled “Innovation Measurement: Tracking the State of Innovation in the American Economy”, the definition of innovation is as follows:

“The design, invention, development and/or implementation of new or altered products, services, processes, systems, organization structures or business models for the purpose of creating new value for customers and financial returns for the firm.”

This is a great, all encompassing definition that covers the main points behind any innovative endeavor.

So, why is it so hard to innovate in the healthcare space?

 

1. Executives are too afraid to fail

Big healthcare companies are too afraid to fail. But all companies are made of people. Which only means one thing: people at big companies, who are in key positions, are too afraid to fail. What I love most about startups is that they are fearless. Failure is not only an option, but an accepted risk worth taking.

If founders at a startup fail, they do something else; they pivot their idea or they go back and work for the man. However, every time I meet an executive in the healthcare space, their questions about new ideas and strategies are almost invariably tied to the “what ifs” of failure.

What if the idea doesn’t work? What if users won’t like it? What guarantees can you give me that the product will be adopted by users?

These are all legitimate questions. But at the end of the day, any new idea is risky. No one can predict the future. But an idea shouldn’t be shutdown just because of its perceived risk. If there’s enough value in it, try it. And healthcare executives should learn to embrace failure, to cherish failure for the same reason startups are comfortable with it—because out of failure comes incredibly valuable lessons.

 

2. Executives continue to believe they can innovate only with their existing resources

In the healthcare industry, more than any other industry I’ve worked in, there is a structural desire to keep work in-house. It’s what we call “innovation from within.” Many executives in the healthcare space share an inherent belief that using their current resources is what will lead to true innovation.

There is a myth that innovation only requires the reorganization and retraining of current resources which, under the right conditions and with the right leadership, can produce better results.

This is simply not true.

Again and again, studies on this topic have reached the same conclusion: most innovative ideas come from companies working with outside vendors and partners.

Whereas each company has a set of people who can come up with great ideas (more on that below), executing those ideas in a way that is conducive to actual results is never guaranteed with only internal resources.

Ideas are cheap. It’s execution that makes or breaks the bank. That’s a reality every healthcare executive should come to terms with. Look outside what you currently have—ideas, people, processes—and bring in fresh talent to really take your company to the next level.

 

3. Many executives do not always listen to their own employees

Remember how I said executing great ideas requires outside partners? Well, the following statement may seem like a contradiction (though it isn’t): listen to your existing employees when deciding which ideas to invest in.

My argument is simple: outside vendors and partners are, typically, in a better position to execute great ideas and to provide user experiences that are top notch and in line with what your customers will likely adopt.

However, the seeds of great ideas often come from within your organization. Even if your current employees may not be able to turn an idea into a business case or product requirements, they are best equipped to understand and articulate the problems your company is dealing with.

For example, some of your key employees interact with customers on a regular basis. They’ve heard negative feedback that can be fixed through innovative solutions. They know, from their day-to-day job, what’s working and what is not.

Listen to them. Understand their frustrations. Take their feedback into account. And then find a team that can turn all their ideas into solutions that will help your organization get better over time—and in turn, become more innovative.

 

4. Some executives have an inaccurate (read: dead wrong) system of reference

This one is probably the most frustrating problem I’ve had over my entire professional career, both as an employee and now as a CEO.

You come up with an out of the box idea. And that idea is immediately shut down by healthcare executives because none of their direct competitors does something similar.

If you spend your entire career innovating in an industry that is slow to adapt to change, and only innovate if other competitors are innovating, you’re caught in a catch-22 situation.

This is why the most innovative products in healthcare are the ones borrowing ideas from outside the industry. Oscar Health has the most beautiful and intuitive user interface of any insurance company on the internet. And their process is fully automated and done online.

Outcome Health, Chicago’s largest healthcare unicorn, has deployed over 140,000 devices all over the US that are used to educate patients about their condition through visual and interactive displays on tablets, TVs, and other devices.

What both of these companies have in common is that they didn’t necessarily build something on top of other solutions in the healthcare space. Instead, they borrowed technologies and user experiences from other industries and brought them directly to point of care.

That’s innovation from the outside. And it’s no surprise that both companies are now valued at over one billion dollars. They’re providing outside the box solutions based on the learnings from other consumer sectors, versus what is currently being done in the healthcare space.

 

5. Many executives think their initiatives are customer focused (but they’re not)

If I had a nickel for every time a company executive claimed his organization was customer-centric when in fact it wasn’t, I could buy myself an all-inclusive trip to a 5-star hotel in Hawaii.

I mean it.

Especially in the healthcare space, executives have adopted the customer-centric lingo without the structural cultural shift needed to actually become customer focused.

Healthcare companies have largely remained unchanged in how they do business because they could get away with it. It’s typically a high profit-margin business with customers who are generally held hostage to specific rules and regulations and have little incentive to go elsewhere.

In other words, there are only so many insurance companies, so many hospitals within reach, so many clinics, and so many digital products in healthcare to engage with.

For that reason, healthcare companies have become complacent. Small changes are happening here and there, but nothing revolutionary. And more importantly, companies continue to think about their business and interactions with customers through the lens of “what is best for my business” versus “what is best for my customers.”

That needs to change. Until you actually prioritize what’s best for the customer before anything else, the likelihood for innovation is low.

 

6. Many healthcare companies are not attracting the right talent (or, they’re not able to keep them for the long haul)

Digital Authority Partners works with various healthcare organizations all over the US. And our clients, regardless of company size or title, typically have one thing in common: they are brought in by healthcare companies that realize they cannot innovate with their current talent.

While they start building out their digital team, they hire us to get some quick wins and additional buy-in from their own stakeholders.

Our clients work for big healthcare companies because they believe in the mission. They’re idealists and have big ambitions. But what we often see is that they almost never get the support needed to really reshape their organizations.

Healthcare executives need to realize that even when you bring in the right talent, it’s not enough to change the internal culture. And that even the most successful and brilliant executives won’t be able to succeed unless you actually empower them to make the changes needed to innovate.

In other words, you need to really listen to these talented people, while helping them navigate internal politics and antiquated processes to truly invest in their success.

 

7. Healthcare companies are stuck in too much “analysis paralysis”

Here’s the mindset of an entrepreneur: come up with a great idea, execute it quickly, deploy a digital solution, test it, measure the impact, then react according to the results.

When it comes to the healthcare space, this process rarely works as smoothly.

Last year, we created an amazing application for a Fortune 100 healthcare company. The product was delivered in 8 weeks and completed in October 2017. It’s been 9 months and the app is still not live. The internal process of getting buy-in from all the relevant stakeholders and the company’s legal department is so tedious and slow that this mobile app may never actually see the light of day.

And that’s just one aspect of the problem. The reality is that the healthcare industry is over regulated (sometimes with good reason). Because of legal liabilities, the industry has put so many checks and balances in place that, while often well-intentioned, it ultimately inhibits innovation.

Like with anything in life, the solution is to balance the pros and cons of current processes and to define a new process that is better optimized for innovation. That being said, executives in the healthcare space should really consider enabling quicker decision-making across the board. Which also brings us back to the issue of executives needing to become more comfortable with failure.

 

8. Healthcare executives must move beyond “security concerns” paranoia

Data security is no laughing matter.

We all know of the huge fails in this space over the last several years. Just think of the Target, Equifax, Yahoo fiascos.

But the healthcare industry has had its own disasters recently. In 2016, Banner Health exposed the records of 3.7 million patients, with hackers stealing personal information and patient records. In April 2018, the California Center for Orthopedic Specialists notified 85,000 patients that a recent ransomware attack got access to encrypted patient data. Unfortunately, there are dozens of other examples.

That being said, there is such a thing as taking security concerns to the extreme. Now, I’m the last person to suggest that companies shouldn’t be serious about security. But I also think that innovation can happen without access to patient data, even for companies that store PII in their systems.

Healthcare companies and executives need to treat innovative ideas at their face value. What’s happening today is that every idea is hindered by security concerns. At the highest level, executives need to be able to recognize and triage between products and services which absolutely need to undergo a serious security audit before being deployed to production, and those that do not.

The projects that won’t impact customer or patient data should be allowed to proceed accordingly, at a pace different than those where PII is involved.  

 

9. Executives should stop investing in the wrong ideas

Another trend we’ve seen in the healthcare space is innovation for the sake of innovation. This occurs when executives feel the pressure from their bosses to engage in “flashy ideas” that do nothing for the bottom line of the business, but are perceived internally as forward-looking ideas.

These ideas do not serve a culture of innovation. In fact, they do the opposite.

At a company we did business with last year, an executive insisted on enabling voice search on the mobile version of the company’s website. This executive thought that this feature would be perceived by his boss and the rest of the organization as being “ahead of the curve.”

The problem was that no one else in charge of the implementation of the feature believed there was any backbone to the idea. Product managers hated it. The user experience team thought it was useless. Even the development team thought it was a waste of time. Rather than focusing on impactful features, the entire team became demoralized.

This is an extreme example, but a relevant one nonetheless. Executives need to be careful about what they have their teams work on. There needs to be a common idea, message and vision if employees are to follow their leaders. Building the wrong features is not good for business or employee morale.

The most important asset a company has is its people. Fail them, and everything else falls apart like dominos.  

 

10. Healthcare companies must set up the proper metrics to measure success

If you don’t know where you’re going, how will you know when you get there? Nowhere is this more true than in the healthcare industry. The problem with being comfortable is, well, that you are comfortable.

Startups are never comfortable. Executives who are ambitious and knowledgeable are never comfortable. They’re starving for data. They want to track what they’re doing. They want to prove their work is having a meaningful impact on the business.

But the healthcare industry, as a whole, is more comfortable than ambitious. It often seems that time skips a beat inside healthcare. For example, one of our recent clients had hundreds of thousands of active users on their platform, yet had no idea of what these users actually did when using the digital product.

Let me be clear. There’s no innovation without insight. Real innovation is not about opinions (as we all know, every stakeholder has one). It’s about what people like and don’t like. It’s about what users will do and won’t do. It’s about behavior and personas.

None of that can be gauged without a proper analytical mindset. And without the proper tools and methodologies that will inform and energize every single employee in the healthcare space to work more, to care about customers more, to do the right thing and, ultimately, to innovate in the process.

 

Summary:

At the end of the day, I am still bullish when it comes to innovation in the healthcare industry. I have no doubt that five years from now, we’re all going to have better, higher quality and more accurate care. And this will come as a result of what companies, both within and outside of healthcare, build and deploy in an effort to fix the industry by making users’ needs the primary catalyst for change and new solutions.

But until this happens, executives at healthcare organizations should be mindful of the current shortcomings that are preventing many incumbents from succeeding.

As we have pointed out, the following are the main reasons why the healthcare industry hasn’t yet become as innovative as it should be. These include:

  1. Executives who are too afraid to fail
  2. Executives who continue to believe they can innovate only with their existing resources
  3. Executives who do not always listen to their own employees
  4. Some executives who have an inaccurate (or completely wrong) system of reference
  5. Many executives who think their initiatives are customer focused (but they’re not)
  6. Healthcare companies that are not attracting the right talent, nor keeping the talent they do have for the long haul
  7. Healthcare companies that are stuck in too much “analysis paralysis”
  8. Healthcare executives who must move beyond the “security concerns” paranoia
  9. Executives who need to stop investing in the wrong ideas
  10. Healthcare companies that must set up the proper metrics to measure success

Trying to fix too many issues with a patient at once will kill the patient. That’s why doctors often choose to treat the most life-threatening issues first. Executives in the healthcare industry must follow the same practice. Even if your company suffers from every shortcoming listed above, trying to fix them all at once is not feasible in the short term.

But of course, fixing none of the issues will also kill the patient. So with surgical precision, start somewhere. And soon enough, you will lead the path towards a better healthcare industry.


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