Executive summary
In the current healthcare environment, innovation is critical. Yet many organizations, particularly midsized payors and providers, do not have strong innovation capabilities. They lack the financial resources of larger players and the agility of smaller competitors. The good news is that innovation is becoming more accessible, through external players that are shifting their attention and resources to healthcare. External capital to fund innovation is flowing into the industry from venture firms and other sources, along with talent from the consumer and technology sectors. In addition, many regional markets now feature innovation communities, including venture capital players, startups, academic institutions, and other entities.
These outsiders bring fresh ideas and strong innovation capabilities, but they need the resources and access that payors and providers already have: relationships with customers, local market expertise, and realworld data about the effectiveness of new products and services. To access innovation through these new channels, midsized healthcare players need to become far more strategic in their approach. Specifically, they need to become “activist innovators”: organizations that bring resources to the innovation process and form alliances with strong innovators.
Success requires setting an innovation agenda — with a clear understanding of organizational gaps and strengths — along with clear objectives. Moreover, becoming an activist innovator requires leadership. Already, several organizations are applying this model to bring promising new ideas to market. In sum, the activist innovator model allows midsized payors and providers to capitalize on their strengths and tap into innovation without going it alone.
Key questions for management teams
As they develop their innovation agenda, leaders at healthcare organizations will need to answer a set of questions:
- Why do we innovate? To change our business model? To improve product offerings? To achieve financial diversification? To develop new technology? Some other reason?
- How well is our business strategy reflected in our innovation strategy?
- What are the best areas to focus our innovation efforts? How much innovation do we need?
- What types of innovation do we need — adjacent, breakthrough, or radical?
- Are the boundaries for innovation clear, and are they appropriate?
With the innovation agenda in place, companies next need to determine the right operating model to support their agenda. Key questions and considerations that management teams must address in designing the innovation capability:
- What operating model options match our goals and risk management requirements? How should they change over time?
- What key capability gaps do we need to address?
- How should the innovation footprint be set up (e.g., centralized, decentralized, networked)?
- How should we define and measure success?
Getting started
The U.S. healthcare market has never evolved as quickly as it is doing today, and innovation is now a baseline capability required to stay competitive, placing additional pressure on midsized and regional health plans and providers. In the current market, incumbent payors and providers need to develop innovative business models and products, and enter and exit markets faster than ever before. Yet midsized players need not take these steps on their own. With a record amount of capital and talent flowing into healthcare, innovation is more accessible than ever before.
By becoming activist innovators and leveraging internal capabilities and assets, regional payors and providers can tap into these external innovation networks, increasing the number of bets they can place while minimizing risk and maximizing their innovation investment. To do so, however, these organizations need to make key decisions regarding their innovation capability and objectives, and how those align to the larger enterprise strategy. Once they have the right strategic rationale in place, they must develop the appropriate internal infrastructure to be activist innovators. Those that get these measures right will give themselves a clear edge as they compete against larger national players. Those that don’t risk being left behind.
At the conclusion of the recent 180° Health Forum, an annual event organized by PwC, Don Tapscott, coauthor of Blockchain Revolution, had a powerful message for the attendees. The traditional model of healthcare in the U.S. — in which doctors wait in their office or hospital for sick people to come to them in order to be told what to do — “is really a crisis of leadership,” he said. Developing a robust and bold innovation agenda is a great way for a company to identify and empower the leaders within the organization and in surrounding communities. In today’s healthcare environment, these leaders are critical in helping the organization capitalize on innovation to transform, grow, and thrive.
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