Our conversations with 23 payer and provider leaders reveal that healthcare organizations are acutely aware of the tension between agility and affordability. On one hand, traditional players must become more agile to compete with nimble new entrants, adapt to changing consumer expectations and keep pace with technology-driven disruption. On the other hand, they must also control costs in a post-pandemic environment where affordability issues have taken on a new sense of urgency and complexity.
Herein lies the paradox. Payers and providers are caught between two competing priorities. Pursuing them seems like an either-or proposition. But agility and affordability in healthcare do not have to be mutually exclusive—if healthcare organizations fully harness innovation to create a future-ready business model.
In this unprecedented environment, healthcare executives have many choices to make in developing their innovation agendas. What we do know is that what’s needed is an innovation strategy that’s in lock-step with the business strategy so that organizations can use innovation with purpose to create resilient business models.
“The CIO is trying to pivot the organization to think about technology as a solution to business issues rather than simply a necessary infrastructure enabler.”
— Health systems senior vice president of strategy & innovation
What’s happening in healthcare innovation
Considering the pace at which innovation accelerated in healthcare during the pandemic, the results of our research are especially timely—and instructive for healthcare executives. Three important themes emerged.
Action starts with definition. When asked to define innovation, healthcare executives offered a range of conceptual definitions. Some were unable to define innovation at all. The lack of a clear, shared definition of innovation is more than a matter of semantics. It is a symptom of a larger problem. It underscores the difficulty that healthcare executives are having shaping an actionable innovation strategy and operationalizing innovation as part of a sustainable business model.
Value is being trapped. The healthcare executives we interviewed stated that most assets are tied up in the core business. Restricted access to capital has created new ways of working, such as standalone innovation centers and efforts to fully embed innovation into organizational DNA. These efforts include investments in radically re-architecting culture, building teams with “learning” mindsets, developing a human-centered approach to problem solving and supporting a spirit of experimentation.
Making bold moves pays off. Healthcare executives we interviewed feel the heat from non-traditional competitors like Amazon and Walmart that have the technology, agility and scalability to bring game-changing solutions to market fast. To respond to these pressures, health executives are seizing on technology as an enabler of holistic innovation, rather than as the sole solution to improving cost, accessibility or quality of care. They are also pairing technologies and breakthrough ways of working for “combinatorial innovation.”
Five fundamentals to power the innovation agenda
Healthcare executive teams can use innovation to build on the gains they have made to respond to the crisis. It’s about innovating to balance agility and affordability. Making it happen starts with these five fundamentals.
Develop strategic clarity and commitment led by the CEO.
Work backwards from the customer and use human-centered problem-solving methods.
Deliver value with an intelligent operating model grounded in human-machine collaboration.
Get results with agile ways of working as a product-focused organization.
Set clear, multidisciplinary governance in the organization and with ecosystem partners.