Disruptive Innovation: “What Starts Out Bad Always Gets Better”
This statement was the primary point at the opening keynote of the KMWorld/Intranets Conference in San Jose, CA. Steve Wunder, Partner, Innosight, delivered a variety of compelling stories that illustrated why business managers and executives must think differently about how they deal with new products or services that - at the outset - appear benign. Because even innovations that seem as if they will only take a small share of the market - or that don't have the polish or panache of "incumbent" ones - can eventually come to bite you.
Take VoIP - 10 years ago, the sound quality was horrible. But it was cheap. Early adopters grabbed it, but telecom giants never thought it might eat their marketshare. Today, Vonage is chomping off bigger and bigger bits.
Or discount airlines. In the early days, they locked into routes like Houston to San Antonio, or Islip to Dallas. Today, they've eeked into markets like Chicago to Tucson - Boston to LA - and are taking away profits for the bigger carriers.
And how about camera phones? In the beginning the photos were terrible, but they continue to improve and consumers love the convenience of shooting and sending photos in a flash. Maybe someday, the camera will no longer be a stand-alone device at all.
According to Wunder, "if you're stuck in a pre-existing business model, you'll get stuck if you don't think innovatively about what's going on around you." The telecoms and airline giants blew off impending innovators using the status quo stuff of business school curriculums. They thought Vonage, or Southwest, or the camera phone would never bite off more than a small chunk of market share with a select number of consumers. They figured they could lose that small segment because after all - they wanted to focus on their bigger customers. The ones who brought in the highest margins.
There's a lesson here for healthcare. MinuteClinics were on Wunder's list of disruptive innovations 'in process.' While most hospitals and health systems continue to focus on negotiating better managed care contract rates and courting physicians do more knee replacements, drug-eluting stents, and laminectomies at their hospitals - MinuteClinics are starting to eat their lunch. These conveniently located health shops - with convenient hours and friendly customer interfaces like registration kisoks - are popping up everywhere. The fact that they only provide a small number of services today is irrelevant. They are offering what consumers want: easy, fast, access to healthcare. No doctors office hours. No long ED wait times. MinuteClinics and other retail health brands are giving people what they need in a way they want it. And they are happy to pull out their credit card to pay. I did, in fact, just a couple of months ago.
If Wunder's hypothesis is right - and I think his theory is sound - hospitals better get busy collaborating and innovating in an effort to deal with what the MinuteClinics of the world are about to bring. Rally the troops and amass your ideas. Collect these innovations virtually or in real-space, but start thinking in new ways now. Those who think MinuteClinics couldn't possibly deliver care like a hospital should take a lesson from the CEO of Digital Equipment in in 1970 who said, "people have no use for a computer in their home."