Why Your Innovation Center Will Fail

by Arlen Meyers

If you work for a big, established company, you’ve probably been noticing the sudden rise of a new trend: the innovation lab. Companies as diverse as Delta Air Lines, Target, Google, Pfizer, Marriott, Autodesk, Fidelity Investments, Ford, Verizon, and Stanley Black & Decker are jumping on the bandwagon. Most don’t deliver.

Open innovation labs like this bring The Garage Experience inside the four walls of the corporate business environment – freely available for everyone to use and experience.

Univerisities have joined the parade, creating undergraduate and graduate innovation and entrepreneurship centers, despite the fact that there is scant evidence that they work.

The new thing in sick care administration is to create healthcare innovation centers, modeled somewhat after other industry R/D and skunk works. Their goal, ostensibly, is to innovate our way out of the sick care and health care mess. They focus mostly on quality, cost, process improvement, patient experience, sometimes doctor experience and access to care and range in size, scope and vision. A recent review identified 50 hospital innovation centers. Steve Blank calls it innovation theater

Here is an example of one that is successful. Some have combined designers and, can you imagine, are also asking patients what they want.

Here is a building dedicated to sick care innovation in Denver. Now,even the AMA is in the game and has anted-up $15M.

As you would expect, there are now conferences, webinars and white papers about health innovation centers, best practices and their impact to date. Accelerators are changing to accomodate the realities of the sickcare industry.

Corporations are creating innovation outposts to stay ahead of the curve.

Sick care (over 90% of the US “healthcare” spend is for taking care of sick people) innovation center leaders and participants will need to address some issues to be effective and deliver impact:

1. The last mile. All the systems engineering in the world won’t make a difference until we crack the code on how to change human behavior.

2. The rules. Most will have relatively limited impact until and unless the reimbursement rules substantially change. Rules drive ecosystems that create business models that deploy and scale innovation. Right now innovation centers are trying to use new tactics but can only deploy limited innovation strategies without a new playing field. They are living in the no man’s land between the now and the new.

3. Systems thinking overcoming silos. Healthcare is notoriously siloed at almost every level, from department to department to one sick care system to the next.

4. Patient willingness and ability to engage. The assumption is that more patient “engagement” will be mean better outcomes. That needs to be validated and we need to do a better job of targeted patient segments who want to take responsibility for their care and assume the consequences for the results.

5. Shifting value factors. Medical care is becoming commoditized. Patients can’t judge quality and cost since they are so opaque so they use service, speed, convenience and experience as proxies. There is relatively little correlation between satisfied patients and the quality of care they receive.

6. Data integration and interoperability. Resolving the protect but share dictum will be challenging.

7. Measuring and defining innovation. Big orbit change is necessary, not incrementalism. Innovation is a measure of the multiple of user defined value that results when compared to the existing competitive offering.

8. Lead innovators, don’t manage innovation. We need leaderpreneurs and followers with an entrepreneurial mindset willing to fail at low cost.

9. Innovation management systems. There are many ways to foster, package, test, validate, prioritize and deploy components of an R/D portfolio. The process needs to efficient, effective and transparent to the users .

10. Execution. Inspiration and perspiration. In the end, no idea, invention, discovery, or process is worth much without a team who can execute or deploy it.

11. Long sales cycles prolonged processes of decision making.

12. Different business models to develop digital health and process improvement products

13.Overcoming the main barriers to physician adoption: a)evidence based safety and effectiveness, b) concerns about liability, c)getting paid to do whatever you propose that d) will not interfere with workflow, take more time and further abbreviate face time with patients.

14. Entrepreneurs outperform intrapreneurs

Here is an example of a “different” model. We need scalerators, not accelerators.

Healthcare innovation centers seem to have a different focus than community based entrepreneurship centers. Yet, they should both be focused on the same thing: transfering value to patients. Physician centered value centers should have the following features:

1. Focus on creating value transfer to patients, not startups

2. Create a separate value proposition for the different kinds of physician entrepreneurs: private practitioners, technopreneurs, intrapreneurs, investors, consultants.

3 Include rapid prototyping facilities

4. Integrate non-MDs from other industries to create a larger, more eclectic community of interest

5. Include patients and others who might help with the customer discovery and development process

6. Include human subjects trial support

7. Accomodate the schedules of practicing clinicians

8. Use state of the art teaching technologies

9. Have an active and effective mentoring process

10. Create a business model that doctors will buy

A recent study provides details for the 10 top success factors for hospital innovation:

1. Use a clear step-by-step innovation method

2. Establish an Advisory Group to guide innovation concepts and proposals

3. Focus on consumer needs, rather than technologies to direct the innovation

4. Generate Big ideas by focusing on core outcomes, not the symptoms

5. Minimize early funding by focusing on a minimal viable product

6. Support projects with innovation experts ( design, engineering, business)

7. Utilize an iterative prototyping to quickly build and test the best product

8. Nurture publicity and storytelling to raise visibility, excitement and funding

9. Include industry experts/ vendors/ investors to support commercialization

10. Develop power users to give hands-on training and coaching for innovations to build key behaviors and practical experience

“What is the source of this hostility to innovation?”, “Is the under-performance in innovation episodic or systemic?” and, “What is causing this value-destroying gap between stated intent and actual reality?” Here are 3 reasons.

In fact, like many industry innovation centers, my guess is that few sickcare innovation centers are creating much impact and should be closed, particularly if they are just high priced, high tech suggest boxes. Here are five reasons why they should be shuttered.

In addition, the establishment of university-affiliated incubators is often followed by a reduction in the quality of university innovations, according to a new study co-authored by a Baylor University entrepreneurship professor. Here are some reasons why it is so hard for BIG MEDICINE to innovate

Most don’t and that’s part of the reason doctors have been disintermediated and marginalized from the value creation process.

We need to rethink accelerators and incubators given their marginal success record of creating scaleable companies. Scale up expert Sherry Coutu believes that most innovation facilities today are failing in their duty to help startups and corporates work effectively together and bring products to market at scale. Whether in terms of running successful proof-of-concepts, giving access to talent and finance, or even providing the hardware required to scale up their work, these things are traditionally lacking from the modern incubator.

The challenge for enterprises looking to make strides then is to back up their innovation strategy with the organizational capability to scale up the experiment i.e minimally viable pilots.. Hagel and Seely Brown advocate a seven-step process:

  1. Locate your edge, which is likely to be an emerging business opportunity that has great potential to scale up rapidly.
  2. Identify your changemaker/s who fully understand and will embrace this opportunity.
  3. Position this individual/s outside the core of the organization.
  4. Take a lean startup style approach and experiment relentlessly in order to accelerate learning.
  5. Deprive the team of much in the way of support or resources.
  6. Encourage the team to connect and partner with other parties outside of the organization to gain the support they need.
  7. The new venture should look to create a new product or service and not cannibalize the core business, at least to begin with

Sick care organizations can also learn some lessons from other industry corporations that are trying to partner with startups.

Sick care innovation centers might be a fad or an important tool for fixing what’s broken. We’ll have to see. In the meantime, enjoy yourself at all those conferences.

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Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs at www.sopenet.org and co-editor of Digital Health Entrepreneurship


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