Why do some companies manage to find their way in the face of competition, internal and external changes, and other challenges, while others struggle and even perish? How can companies proactively set themselves up for success? The most popular, almost cliched answer is “innovation.”
With the COVID-19 crisis, the debate on innovation has resumed on a higher pitch. In the US, healthcare is one sector where this voice is being heard the loudest. The fragmented healthcare business model driven by procedures, where patients have been left to manage their care, is finally unraveling as all elective procedures have been postponed. In all likelihood, the insurance premiums will shoot higher once this is all over due to the economic fallout, which will stress the individuals even further. Increasing unemployment is raising the awareness and necessity of a national health insurance system. Basics like PPE have not been available, putting the healthcare workers at risk. We see healthcare workers being furloughed and laid off at the time of the most severe healthcare crisis. Private practices are shutting down. The biopharma sales force is sitting at home, while the digital promotion is taking off. And while telemedicine has been a boon at this time for patients stuck at home, it only leads to a depression in the overall economic value of the healthcare market. The stories are endless.
In my multiple interactions with senior corporate leaders, I have noticed that they understand the need for innovation well and are vested in moving the agenda on the same. Lately, the innovation agenda has included digitalization and business model innovation. However, so far, their primary focus has been on executing their core business models efficiently. Risk-taking has been minimized, standard operating procedures have allowed minimal deviation, efficiency has overruled experimentation. Pre-defined metrics drive performance, and incentives have been tied to near-term financial returns. Even if market pressures constrained their ability to sustain the core business models, incumbents felt more comfortable with transformation focused on relatively minor modifications to their current business model, rather than increasing investment in business model innovation and identifying new sources of growth and sustained viability.
So, will COVID-19 represent the breaking point where we will see an unleashing of widespread, transformational innovation in the healthcare market?
As discussed before, the current pandemic has exposed multiple gaps in our healthcare system. We now have an opportunity to embrace the possibilities and reinvent the future. We already realize the potential of telemedicine, precision medicine, 3D printing, smart integrated medicine, wireless technology, just to name a few. Social distancing in the foreseeable future will accelerate innovation focused on reducing the physical footprint, and building the technological footprint of healthcare — where care can be provided where people are, not where the hospitals and clinics are. Companies like Ping An in China already have a head start. Here is a video with my thoughts on future possibilities in healthcare.
However, the greatest barrier to transformational innovation will be us, humans. It boils down to the limited capacity of the human brain to disrupt the status quo. Our brain is programmed to perceive the environment as an existential threat and tends to respond to changes by doubling down on the desire to maintain the status quo. We all want to get back to the “normal life”, even if there are elements of a “new normal”. And businesses are essentially the collective intelligence of multiple human brains — and react similarly. They inherently look to maintain the status quo. So, while the cry for “transformational innovation” and “true reform” will be elevated for some time, and we may even see an appetite to invest in the same, I sense that the change may come more slowly than we anticipate.
To overcome this primary barrier to transformational innovation, we in the C-suite should first clarify our vision, our risk appetite, and our ability to embrace and drive change. Each organization will land in a different place in terms of their risk appetite to embrace transformational change, and that is okay. However, this examination should enable our organizations to shape an innovation agenda that is executable. Some of the questions we should ask along this journey include:
• What is our core business model? Is it sustainable? Should we invest in innovation beyond the core?
• Where should we invest in innovation to maximize our core business value?
• If we invest beyond the core, what is our innovation agenda, process, and system for governance? What are our core assets that can be leveraged to innovate beyond the core?
• How do we simplify, optimize, and manage our innovation portfolio for maximum Return on Innovation?
For those willing to truly innovate, the 80–80 Rule governing how to adjust thinking and behavior: “Being 80% confident that you will only be 80% right the first time should feel normal” might help. Introduced in our recently published book— The 80–80 Rule is not a statistical methodology for predicting success in business, but a guiding principle to enable a required philosophical shift to enable incumbents towards challenging the status quo in just about every aspect of a business and embrace a spirit of innovation.
Beyond their role as the good Samaritans during the COVID-19 crisis, healthcare has the potential to continue to amaze the world. Let us embrace the opportunity and come together build the “new normal.”