Innovation ambition at healthcare organizations does not match up with execution, and it’s hindering innovation’s impact on creating value.

According to Accenture’s 2016 Healthcare Innovation Research, leaders of healthcare companies are increasingly likely to view innovation as an enabler of long-term success, with 79 percent of providers and payers stating they are extremely or very dependent on innovation to determine organizational strategy.

Companies are thinking big—exploring new and novel approaches, offerings and services. The problem is, their innovation output is low, focused on incremental product and service improvements. Sixty-seven percent of participants report their organizations fail to produce disruptive innovation. Both payers and providers want a big breakthrough, but many are going about it all wrong.

The fundamental issue is that organizations are looking for innovation but focusing on renovation.

A majority (84 percent) of healthcare organizations are looking for the next “market shifting innovation.” In other words, they are seeking disruptive innovation, yet only 26 percent say that their primary goal for innovation is to disrupt the current market by creating a new process or business model. Organizations are taking innovation baby steps, as opposed to big leaps, because they are not fully committed. Seventy-one percent say they tend to pursue product line extensions rather than new innovation. Half say their organizations struggle to learn from their mistakes, and 68 percent say their organization is risk averse with new ideas.

When good ideas go nowhere

Innovation is so vital that more than half (54 percent) of healthcare organizations are increasingly appointing chief innovation officers to be responsible for innovation across the organization and for establishing formal innovation management systems. Kaiser is among the provider organizations that have appointed a chief innovation officer, and Humana and Independence Blue Cross are among the payers. Processes for exploring new ideas also are becoming codified, with 66 percent of companies having established a formal innovation process.

These are all important steps forward. However, at the same time, potential game-changing innovations are slipping through the cracks. Outcomes fall short of ambitions for a number of reasons, including:

Process

77% of healthcare organizations apply the same development process for simple line extensions as they do for creating disruptive innovation.

Investment

Current financial support for innovation does not allow nascent market opportunities to mature.

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Leadership

Healthcare Innovation leaders feel that innovative ideas fail to flourish due to a lack of organizational ownership and long-term financial support.

Small innovation often centers on the core business and is therefore inherently not disruptive. Big innovation is a bigger, bolder bet that also has a long-term horizon of paying off in higher value. This type of innovation requires a unique level of vision, engagement, budget and oversight, and should therefore be treated differently.

Renovation, or “small” innovation, might be adding a button on a website or other features to an existing platform, whereas “big” innovation could be redefining healthcare payment processes leveraging blockchain technology, or simply starting a greenfield business, taking a solid idea from concept to completion (see Figure 1).

Is your engine running out of steam?

To increase market share and add value to the organization, innovation leaders must make a shift.

Rather than following one path for all innovations, a two-engine innovation approach can help healthcare organizations achieve their innovation ambitions in the short and long term (see Figure 2).

Accenture research has shown that innovation leaders using these approaches follow an accelerated path that is yielding higher rewards: between 3 and 7 percent annualized revenue lift and a corresponding growth in operating model income with their industry peers.1

All successful innovation requires speed, risk management, measurement, portfolio management and skills, but not all innovations are created equal. Small innovation may be more comfortable, whereas big innovation involves risk, and may push the organization beyond its comfort zone. Thus, approaching each key component differently will allow organizations to achieve greater gains.

Leading companies are achieving success using a two-engine approach. For instance, a large pharmaceutical company established a venture fund to dedicate funding to the pursuit of innovation outside of the business’ core offering, while maintaining focus on incremental innovation among existing product lines.

Gassing up the innovation engine

For the two-engine approach to work, healthcare organizations must commit to innovation, creating specific processes and metrics to support and measure innovation efforts separate from established businesses and products. Adequate funding is critical. Innovation funding should span a portfolio of opportunities—big and small—and include funding for incremental innovation to mediate the risk-averse nature of most healthcare organizations. Last, innovation leaders need clear accountability for commercializing these opportunities.

By taking these steps and fueling innovation through both engines, organizations will not just “think” innovation, but also reap its rewards.

1 Accenture, "Beyond the Product: Rewriting the Innovation Playbook"

Brian Kalis

Managing Director – Digital Health


Benjamin Vick

MANAGEMENT CONSULTING MANAGER

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