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Analytics Innovations

Analytics in healthcare is a paradox. On the one hand, healthcare is immersed in analytics. It is far ahead of other industries in using science, for example, to understand diseases and develop new cures and treatments. But the translation of the science into practice has been disappointingly incomplete. U.S. healthcare faces major challenges, not the least of which are its low standing in the world on key health outcomes, efficiency, cost, disparities, and affordability. And research shows that the odds of getting the right medical service are just a bit higher than 50/50.1 In a word, the science has just not been put into clinical or business practice sufficiently.

The fact is that we know how to address these challenges, and analytics can be a tremendous support; but there’s a blockage. This is due to a number of factors, including the seemingly overarching prerequisite to digitize the business before anything else can be harvested from analytics. This forestalls other forms of analytics that can lead to real benefits for business today. But it is more complicated than that. There is an amalgam of contributing barriers, including the lack of good coordination among actors in the ecosystem, a perverse payment system that does not reward value, complex products and services, ambiguity about who the customer is, professional autonomy, convoluted market dynamics, multiple vested and powerful interests, and a pervasive, risk-averse culture.

In spite of these challenges, the field must innovate to make change happen. Innovation is critical to the success of any business. A recent MIT survey of 3,000 executives across many industries and countries found that the top business challenge is “innovating to achieve competitive differentiation.”2 This was far ahead of the usual business challenges to grow revenue and reduce costs. Innovation rises to the top at this time because the Great Recession required businesses to address all possibilities for cost reduction, and many have developed very lean organizations. Businesses recognize that they need to grow the top line, and not just by extending the old line. And to grow the top line, they have to transform the business.

This is especially true in healthcare. For example, health insurers face commodity prices for premiums, the demand for transparency, and a flip of the business model from business-to-business to business-to-consumer, among other pressures related to healthcare reform. Similarly, providers are facing market and government pressures to improve outcomes, lower waste, and change the underlying revenue model from fee-for-service to global payments. In response, the leading companies are dramatically changing their identities. For example, some health insurers are becoming health companies, and others are viewing claims processing as one of many product lines as they become information companies. The industry archetypes are eroding and innovation is charting a new path.

Innovation is tricky. It is a necessary but a high-risk/high-reward strategy. Companies that do not take the risk can set themselves up for a death spiral. And those that do take the risk need to overcome many challenges, not the least of which is the complexity and unpredictability of implementing innovations. Few innovations succeed. Even with good execution, the innovation might be too early or too late relative to market demand and competitor actions. Or it might prove to be too weak to produce a worthwhile benefit relative to the cost. But for those that do succeed, it can be a game changer and propel the company to new heights.

Innovation starts with creativity. Creativity, whether in art or science, involves looking at things in new and different ways that result in fresh ideas that others regard as beautiful or useful or both. It involves breaking out of established patterns and connecting and rearranging current knowledge. Steve Jobs said that “creativity is just connecting things” like one’s experience and knowledge and then “synthesizing new things.”3 There are many methods for generating new ideas, including taking on a different role, for example, of a patient in healthcare, combining ideas from different disciplines, or challenging current paradigms. And, of course, businesses in one industry can learn from businesses in another. Paul Plsek, an expert on complexity and “directed creativity,” says that “when we open up our thinking to receive ‘fresh knowledge’ from outside the healthcare system about customer flow, we may notice the concepts of drive-through windows in the fast food industry, or Internet-based services in banking. This fresh knowledge might feed a creative generation process that results in ideas about how drive-through windows and Internet sites might be used to serve patients in a new primary care clinic.”4

Ideas begin a process that can ultimately lead to innovations that can make a positive impact on people’s lives and the bottom line. Success depends on the wisdom of the idea, the translation of the idea into a design and related strategy to carry it out, excellence in implementing it, and eventually reinventing it.

Ideas can come from comfortable places and unfamiliar places. This book concentrates on the latter, not because they are better, but because they are often ignored. They are ignored because they do not necessarily fit our beliefs about how the world works. We tend to seek out information that confirms our positions and ignore the rest, what is referred to as confirmation bias. So outside-in thinking has an inherent hurdle at the outset. But ignoring outside-in thinking can lead to blind spots. For example, there are legions of dedicated professionals that concentrate on the problems within healthcare with the intent to improve them. The blind spot of this process might be characterized this way: “Removing the faults in a stage-coach may produce a perfect stage-coach, but it is unlikely to produce the first motor car.”4

When the healthcare industry has looked to other industries for ideas and solutions and subsequently adapted these to healthcare, it has often produced impressive results. For example, quality improvement leaders like Don Berwick from the Institute for Healthcare Improvement and Brent James from Intermountain Healthcare have provoked and worked relentlessly to inspire and educate the field to use process control methods from other industries including the teachings of Deming and methods like six-sigma. And they have demonstrated significant improvements. The frustration has been the slow spread of the innovations that have been proven to be so effective.

Another need for creativity, derived from connecting knowledge from other industries, is to prevent a “Kodak moment.” Perhaps you remember the old Kodak moments. These were absolutely beautiful photographs derived from Kodak film products that were published in magazines like LIFE decades ago. But the new Kodak moment of 2012 is a not-so-pretty picture of the company filing for bankruptcy. The bankruptcy was due in part to the disruptive technologies of the digital camera and later of smartphones that upended the company’s value proposition about its film products. Both digital technologies took good pictures, virtually eliminated cost, and ended the inconvenience of waiting for the pictures to be developed. The other reason for the bankruptcy was that Kodak thought its products were perfect and did not see or subsequently adapt to the threat. However, a competitor in the film business, Fuji, did adapt and thrived. It rethought the use of the chemicals used in the film production business and discovered that they were rich in antioxidants, which are the mainstay of facial makeup products, and it went into the business. There are three issues pertinent to creativity: (1) the need for organizational receptivity to new ideas, (2) the ever-present danger of game-changing, new technology that can make an existing product or business obsolete, and (3) the need to adapt through innovation.

Are there Kodak moments looming for healthcare, and might these be knowable through the sensing of developments in other industries? Of course! And especially in the area of analytics. These are described throughout the book, but here is a glimpse of what’s to come:

  • Democratization of data, which results in the availability of new data from public “open government” databases and from private “data snatchers”
  • Change in the locus of power of data due to mobile technologies and social media
  • Deep reliance on predictive modeling to address behavior change
  • Allegiance to the customer

Each of these insights could lead to ideas that might flower into innovations, which in turn could result in breakthroughs for business success.

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