The healthcare industry has historically remained unaffected by the transformative impacts of exponential technologies, given heavy regulation and reliance on expert labour. However, even the most regulated industries are vulnerable to the effects of Big Bang disruption. In healthcare, Big Bang disruption will happen on a market-by-market basis, versus at a national scale. It will also initially present itself in pockets across parts of the healthcare value chain as new ecosystems form.
Change is already impacting parts of the healthcare value chain in different ways, making it difficult to detect major disruption.
Digital is driving change across industries, from shopping to entertainment to travel. The convergence of “exponential technologies” has increased the pace and scale of industry change to a level greater than ever before experienced Transformations driven by other exponential technologies, like electric power, automobiles and telephone, took more than 40 years to reshape industries. Even the impact of the Internet took over 10 years to drive change.
Today, these exponential technologies are the platforms enabling innovators to rapidly launch products and services that are Big Bang Disruptions—innovations which are simultaneously better, cheaper and more customised than current offers—and they’re putting major players out of business. Since 2000, 52 percent of companies in the Fortune 500 have either gone bankrupt, been acquired or ceased to exist. In addition, the life of a Fortune 500 company keeps shortening from 75 years to less than 15 years today.
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Exponential technologies are driving Big Bang disruption
The current wave of exponential technologies has contributed to two macro forces—digitisation of everything and liquid customer expectations—which make it possible for new technologies to be combined to deliver new layers of connected intelligence, changing our ability to create exciting and indispensable living services. These macro forces are bringing change to the fore in healthcare. A new model of industry transformation, the Shark Fin Model, is needed to inform strategy in the age of gradual—and then sudden—industry change. This era of Big Bang disruption requires businesses to rethink their strategy, marketing and innovation.
The healthcare industry is in the Singularity phase of the Shark Fin Model. In the Singularity, entrepreneurs, often from outside the industry, apply pressure to healthcare incumbents by providing consumers new offers that are better, cheaper and more customised than existing products. Many of these new entrants will fail, causing incumbents to ignore them as “distractions.” However, the reality is that they signal the big change that will come when the right new product offer is combined with the right business model and regulatory environment.
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Shark Fin Model
Payment model reform signals disruption
Comparative Diffusion of HMO and ACO Models
Seemingly unrelated market experiments are on the rise, but collectively, they signal impending industry change. There is parallel experimentation going on in healthcare based on open, user-funded, crowdsourced tools and techniques that have become the norm for high-tech products and services. Increasingly, it is consumers who are demanding innovations and more open approaches in healthcare.
Uptick in startup funding. Accenture research estimates that digital health funding will double in the next three years, growing to $6.5 billion by 2017. The continued increase in digital health funding is fueling a high volume of market experiments aimed at the heart of healthcare incumbent businesses.
Zombie startups. A majority of the market experiments funded by the increasing digital health investment will fail causing incumbents to ignore them as “distractions.” Accenture research estimates that more than half of digital health companies funded between 2008 and 2013 are not likely to survive, creating opportunities for incumbents to swoop in and give these investments new life.
More healthcare mergers and acquisitions. A tidal wave of mergers and acquisitions (M&A) is fundamentally reshaping the US healthcare landscape, reaching the highest year-to-date volume—ever. As traditional hospital acquisitions shrink, non-acute and digital acquisitions are on the rise with digital acquisitions projected to expand by a multiple of 8)—from 1 percent overall acquisition volume in 2014, to 8 percent by 2018.
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