Clayton Christensen left the business world to go back to school for his Ph.D. when he was 40. As he studied businesses, he had two basic questions:
- Why do so many companies, once prominent, fade into oblivion?
- Why do so few innovations succeed?
He says principles of good management actually undermine successful innovation, because companies have difficulty rationalizing diverting resources from their core businesses to pursue simplifying technology. They don’t want to cannibalize their profitable businesses or invest in low-margin, lower-quality that make products simpler and more affordable, to produce products their best customers don’t find useful.
Christensen says head-on competition among businesses with similar business models actually increases prices. It takes a disruptive competitor to drive the costs lower. In his model, we need to take technology from the big hospitals to the outpatient clinics and then to the primary care physician and then to nurse practitioners and physician assistants, just as mainframes were disrupted by minicomputers which were disrupted by PCs which were disrupted by notebook computers which are being disrupted by handheld devices.
Christensen says there are three enablers of disruptive innovation:
- Simplifying Technology
- Business model innovation
- New value network of customers, distribution and suppliers
Scientific progress that commoditizes expertise plays a critical role in disruption. It enables industries to go from intuitive, highly expert solutions to commoditized, rules-based solutions that can be implemented by less-trained individuals.
In healthcare, he says we need to move from “Intuitive Medicine” to “Empirical Medicine” to “Precision Medicine.” Molecular biology will be the technological enabler that will move diseases from the high-cost, intuitive side to the commoditized.
Christensen says the traditional general hospital is not a viable business model because it is an “expensive conflation” of three types of business models:
- Solution shop: diagnoses problems and recommends solutions. This is the intuitive medicine. Almost always fee for service.
- Value-adding process business: Fee for outcome. Manufacturing, Education, food services.
- Facilitated Networks: Telecom, Insurance, EBay, D-Life. These are Fee for Membership or Fee for Use.
Christensen there will always be a need for a few Mayo Clinic-type organizations, but he believes the general hospitals need to be divided into Value-Adding Process Clinics (e.g. Orthopedics, hernia repair, eye, etc.) and Coherent Solution Shops.
It’s extremely difficult to capture the essence of Christensen’s presentation and thinking in a single post, but I highly recommend you check out his book on health care innovation, The Innovator’s Prescription. Here is a related video from one of his previous presentations. I haven’t watched it, but I expect it covers many of the points made this morning.
Visiting your Blog today. Thanks for this information. Nice to meet you again.
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I really like Clayton’s Innovator’s Prescription book. The book goes in details about every aspect of health care and asks how will those in health care be disrupted and surpassed by other providers that offer better convenience, lower cost, and higher quality.
The point you make about businesses competing with the same business models actually driving prices up is a very interesting one. So it’s not competition that drives prices, it’s innovation. And that same innovation drives the quality of service delivery also. Interesting article. Thanks
Hello:
I am hoping for your help or your staff’s help to allow the children in the hospital in your area the chance to talk directly to Santa, Rudolph, Mrs. Claus and the elves directly at their North Pole workshop via the magical business band radio the hospital maintenance personnel uses.
I organized such an event in 2003, and have developed a new, valuable, innovative way that I hope your talents can help countless children improve their spirits and self esteem while they are in the hospital. I hope that one day soon, you will read about this in my Blog at : http://duanewyatt.wordpress.com. I first started working on this project to help hospitalized people ten years ago. Several months ago, I started searching for someone who can move the five new ideas forward clinically- with no success this far.
Best regards,
Duane Wyatt
You should try applying for the CODE FUNDS. The application is closed for 2010, but watch out for the 2011 application. If selected, you will receive the funding and assistance you need to get your project afloat. Good Luck!
Whatever Christensen says, IMO healthcare should never have become a viable business (model)
But, I understand things cost. And, therefor, the business is just around the corner, not, or not anymore caring about the people who need health care.
Thanks for posting the video.I will check it out.
Working with schools in the area of healthcare is getting more and more difficult with funding being decreased year by year.
It is a tough business world out there, and if there is an advantage to be gained, then you can be sure that your competitor will try and gain it.
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I think it is a bad idea to put health care under a vague business model but I guess they have to make money as well
interesting, kindly have similar topics…
Really this work of Clayton Christensen Keynote on Rethinking Roles is very helpful in my business class.I would like to appreciate this work to others .
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Again this work of Clayton Christensen Keynote on Rethinking Roles is very helpful in my business class.I would like to appreciate this work to others .
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Hello,
We also shared Christensen’s work and quoted in this paper.
Thought your organization might be interested in our new semantic use case scenario– excellent response so far, but our reach is limited:
Diabetes and the American Healthcare System
http://www.kyield.com/images/Kyield_Diabetes_Use_Case_Scenario.pdf
I think that simplifying innovative technology and making it interface with other’s technology is a good start.
Healthcare. Now there is a really big issue that it appears no politician has the ability to handle correctly.
Is it really possible to take the things that make a long lasting viable company in the private sector and actually have them work in the government sector as well. Unfortunately, I’m not sure that the leaders in politics would ever buy into that philosophy…but one could hope.
I agree that healthcare should never have become a “viable business.”
In the usual race-to-the-bottom following Christensen’s framework, the health insurance industry cuts their costs by simply not paying claims. Their cheaper implementation of their business involves writing exceptions and clauses that “allow” them to not pay.. not do what their customers pay them to eventually do.
I prefer to get in shape and get fit. I actually used that Vince DelMonte No Nonsense Muscle Building course to get back into great shape at 48…
My health is excellent, and I now rarely use any part of the entire health “care” industry.
Claytons books and insight are brilliant, just read his book The innovator’s precription. Everybody should be aware about health care.
Healthcare should be about bringing the over-all well being of the people to a greater level. So far, everyone’s health has been declining and the government’s becoming more in depth. Solutions, such as the one in this post, need to be established.
I was fortunate to find this post, as I am involved in the health insurance part of the health care equation. Unique paradigms for studying complicated problems provide a new starting point to allow critical thinkers to redefine problems in order to create “outside-the Box” solutions. I look forward to reading the book. I am not sure that I will agree with the author, but I am sure that it will stimulate my thinking.
innovation is always a threat to people who have a position to protect.
Nice post..such a nice story for everyone who’s looking for this like me..
thank you for sharing this one…
I really like Clayton’s Innovator’s Prescription book
Interesting. Capitalist structures are not yet dead in the water but we need to find a new way of making them work in a more equitable fashion.
Thanks for this information…
This article really good. It’s my first visit to this blog but i love it. Thanks.
Fx15 laat u een natuurlijk dieet uitvoeren. U hoeft zich niet aan een speciale programma te houden. Bij een regelmatig gebruik kan je op je ideale kilo komen.
Fx15 is geen medicijn. Door het druivenpitten extract wordt er snel verteerd. Als uw een maagklacht heeft dan is het juist goed voor uw. Het verminderd ook het bloeddruk.
Wij raden uw aan om te gebruiken tot uw ideale kilo. Het wordt aangeraden om het 60 dagen te gebruiken. Als uw nog meer kilo’s wilt geven dan kunt uw doorgaan.
Het aandacht besteden aan wat uw eet is heel goed. Het wordt steeds moeilijker dat het vet uit je lichaam komt. Daarom wordt er aangeraden om doorlopend te gebruiken.
Albert ;
I think you’re right
I read a awesome book on this From Good to Grate and Freakonomics these are a must read thanks for sharing.
What you’re saying is completely true. I know that everybody must say the same thing, but I just think that you put it in a way that everyone can understand. I also love the images you put in here. They fit so well with what you’re trying to say. I’m sure you’ll reach so many people with what you’ve got to say.
Thanks, very informative
I agree with Albert, healthcare should never be about making money it is there to look after the public.
I’ll keep on track on your blogs. Keep blogging.
This was a very interesting article. There are some very factual points to this as far as disruptive innovations. Things can be simpler and cheaper, not simpler and more expensive based on the technology. That’s how one can remain competitive in the industry. This challenges us all to think outside of the box!
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The focus at least in this blog was on new ways of caring for disease as disrupters; but it seems like improved prevention makes a valid disrupter as well. If we can ever turn around people’s interest in eating WELL, rather than MORE; if we can raise interest in healthy lifestyles, including less stress, adequate sleep, more exercise, etc. … and even as technology gets people telecommuting (less driving stress, perhaps healthier lunches, etc.) … there are a lot of ways that we can reduce disease in the first place and disrupt some of the need for medicine.
I know this is so lately comment, but I always loved following the Clayton Christensen’s steps
That’s an interesting perspective, though I am not totally convinced that head-on competition will increase prices.
Right now I see large supermarkets in direct competition and their advertising is all about who has the lowest prices. One is intentionally driving prices down to gain a larger market share because profit comes from an increased customer base.
Increased prices can result in lower profits because some of your customers will desert you and that seems to be what is happening here.
I don’t necessarily agree with the idea that innovation drives prices up (at least in the long term) or that competition among businesses with similar business models actually increases prices. Don’t you think that history shows evidence that innovation and competition ultimately create lower prices?
I really am not an expert on health care but know a thing or two about businesses and why they (and even whole industries) may eventually become unprofitable or even go out of business. I believe one of the biggest reasons is what I call in breeding. In other words, these businesses only advertise and hire people with experience in their industry. This is the case for the auto industry and the airline industry. The health care industry has plenty of challenges (now and in the very near future with the new health care law) that I hope this M.O. is not also going on.
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You’re right Albert – putting health care and business model in the same sentence just contradicts what such a service should be about. The best hope is that the business model focusses on the patient in the end – not the profitability.
A lot of business’ succeed because they give something that people want. However with the health care industry the key word is health care. People need to stop treating health care as a business in order for it to succeed.
Nobody wants to be “force fed” something that is expensive just because a private company says it’s good.
Treat health care with people’s health in mind and the business aspect of making money will follow appropriately. Instead of putting business first.
I am an insurance agent in the US and since we don’t have free health care here I just help people get affordable life and health insurance to avoid going into debt with medical bills.
Thank you for all of this information. I will definitely be looking into more about Clayton Christensen. Thanks!
Excellent article. Look at successful companies like Apple. Look at how much resources they put into R&D for new and truly innovative products compared to the more traditional companies who are afraid to innovate.
Profit before all else, brings society as a whole down the hole. I agree business needs to make a profit but we have to ask; at what cost and how much is enough?
Wow, I really liked that idea for divided clinics within the hospitals. It would surely get experts placed correctly and also get patients in and out quickly. It would be a great idea to implement in the coming years.
I like how this was explained. In terms of technology and innovation being the driving force of competition. Because it’s true, the longer a certain technology exists, the more widespread it becomes. Then the competing businesses must adapt, to make up for the lower costs of existing technology. And this covers all aspects of business. Like in my catering business in columbus, we’ve had to swap out marketing strategies, to newer forms that are less expensive. I would think the the yellow pages are feeling a hit from all of these new marketing formats. The process has just been broken down to a smaller, more attainable task. I see how this principle could be applied to health care centers.
Your statement that “Molecular biology will be the technological enabler that will move diseases from the high-cost, intuitive side to the commoditized” couldn’t be more true. We are heading in that direction, but not nearly fast enough for my liking. I hope you can bring about positive change in that area. Best wishes.
I agree with you totally. This is a great work.
nice blog ………….:-)
The point you make about businesses competing with the same business models actually driving prices up is a very interesting one. So it’s not competition that drives prices, it’s innovation. And that same innovation drives the quality of service delivery also. Interesting article. Thanks
Part of the innovations problem is patent rights that other companies or organizations may claim on the innovation and the lack of support.
Something could be a fantastic breakthrough, but if it doesn’t get support from the right people… no one will hear about it and the innovation will go nowhere.
Innovations in the medical field can be compared to what happened with Tesla. (No support, funding or backing).
Very interesting research on the oblivion of good ideas and companies!
The reason why so few innovations succeed is that in fact that few of them are actually innovations.
Thanks for this information. Nice to meet you again.
So it’s not competition that drives prices, it’s innovation. And that same innovation drives the quality of service delivery also. Interesting article. Thanks
I’ll check out his book. We certainly need innovation in health care. Thanks.
I love Clayton Christensen and his books, he is a brilliant teacher!
Excellent brain clearing information.
Why do you need it and what are your goals?
Simple and direct. Thank you (and the picture of the Rottie is also nice)
Everyone needs to set goals and then go out and achieve them! 95% of people fail because they can not set goals or set them but do nothing to try and achieve them. Taking action is what will help you succeed in this world!
There is no lack of research that has gone into determining how and why medical costs and insurance costs have continually increased, and dramatically so. It would be quite valuable for someone of Clayton Christensen’s business and academic stature to analyze the innovation-competition dynamics of the health care industry with the goal of identifying the cost-value drivers in health care. Is there a model that will drive ongoing medical innovation while promoting cost cutting competition? Is this possible? If it is, how could such a model be implemented over time? Our health care innovation is second to none, yet its economic non-viability is destroying itself. Can we identify a model that will keep costs down while rewarding valuable innovation?
I’ve asked myself those same important questions and have usually come to one conclusion. The company who can answer “the why” the best, usually succeeds most.
- Why do you do what you do
- Why are you different
- Why people should pay attention
Why would anyone want to invest in something that’s lower quality? Simple and of equal or better quality would be more profitable, I would think.
And, I wish there was an example of how competing business models increase prices. You can only increase the price if your product is superior to your competitors, and that is only accomplished by introducing a diverse range of products, which is good.
Plus, when there is a need for something that is unaffordable for the consumer, isn’t that an opportunity for some other business to tap into that segment of the market?
Just some thoughts provoked by your post.
Thanks!
I agree with you. I will check out his books.
These companies fail because they treat all but a few of their employees like Chattel. Not treating your employees is a certain formula for failure.
Everyone needs to set goals and then go out and achieve them! 95% of people fail because they can not set goals or set them but do nothing to try and achieve them. Taking action is what will help you succeed in this world!
I agree with this post innovation initially drives the cost up. Being in direct mail marketing for over a decade now, the transition of new methods of sending information and marketing data drove up the costs initially. Overtime, the costs eventually come down and even out increasing the profitability with the new more efficient ways.
I am surprised to learn that Clayton Christensen went back to school at the age of 40. I especially liked his theory of three enablers of disruptive innovation.
Christensen way of rethinking roles has absolutely got something real think abouts in them. will dive deeper into his material as soon as I have the oportunity.
Best regards
Butterfly Marketing
I have already seen the video presented by Clayton. He always makes very poignant and acute points on how to manage people and businesses so that he is able to get the best from them
I think the mayo clinic are a model that will always work.
And the division of the hospital into 2 sectors will give the patients overall better care
I’ll keep on track on your blogs. Keep blogging.
thank for the sharing.
I appreciatethe update, now lets see if comes to fruition
its cool. i agree with ur thought.plz keep up
its cool posting.plz keep up
Nice post, it reall makes you think. Thanks
Clayton Christensen is the architect of and the world’s foremost authority on disruptive innovation, a framework; He received the Global Business Book Award for the Best Business Book of the Year in 1997. He is a Great Teacher.
Thanks,
Great Post!!!
Keep it Up.
With all the innovations in regards to the equipment used in health care, there is only going to be price increases. I think that there is a diminishing ROI in regards to most of the technology. Maybe if the health industry was put on a budget they themselves could drive down the cost and maybe increase effectiveness. But when will that ever happen?
And continue to share their successes through social media, mailing lists, telemarketing, and direct marketing. Everyone needs to set goals and then go out and achieve them!
Health care innovation is one of the hottest topics on the table today. It is interesting to see a different perspective like “general hospitals need to be divided into Value-Adding Process Clinics” brought up as a topic. I look forward to reading the book.
I think all industries including direct mail marketing and advertising has to focus on innovation with todays economy.
thanks…. very useful and enter this beautiful and useful. worked for me too. A thousand times thank you for the beautiful unshared. good that you share with us these beautiful writings. I continue to follow you …
I think the problem with business is they focus way too much on cost and not on the customers needs. Please your customers and your business will be profitable.
The main thing is that if every firm will commit to a life-long innovative principle. Consider the story of ford motors that ruled the market in the early 20th century but lost due to lack of …I. I wish every business will learn from them.
Really good post on Clayton Christensen. It inspires us all.
Great post.Nice to meet you again.
I have to admit that I didn’t necessarily understand everything Christensen was saying, but from what I could tell, he is suggesting some significant changes to our thought process regarding health care. Changes like that will always be a tough sell even if it would make life…health care treatment better and more affordable with consumers.
I really like the post as it is very educational ad informative. I’ve learned a lot of things in this blog as it is full of information. Thanks for posting it.
yeah and the value to the reader is great, i never really thought of it that way. thanks
Mayo Clinic is a not-for-profit organization and run by NGO in contrast to General Hospital which is fund by the government. Generally, private hospital (capitalist hospital) is run by the private sector. In third world country, the management of private hospital, in the case of emergency, will simply let you died at the hospital entrance unless you pay them a huge sum of cash as a deposit.
I think companies often forget that their product or service is only as good as the demand for it. If you ask customers what they want and then provide it to them you will survive. If you don’t set yourself apart on quality/service then you will compete on price.
Thanks.. Good article..
The article has quite good informatin and well written. Usefull in my country the treatment is so costly. if you dont have enough money you could not even get good treatment
I think that certain corporate structures, spend money to loosely, compensate execs too much and do not respect their “workhorses” at the bottom of the ladder.
This is a pretty decent weblog. I have been back once or twice within the last 7 days and wish to sign up for your feed making use of Google but can’t work out how to do it very well. Do you know of any instructions?
You can subscribe in the right navigation, email subscription.
Great site with a good
essential information.
I have bookmarked your blog
for future reference.
Innovation is very necessary in various fields of work. For example in the health field we know the technology radiology technology which in former times it does not exist. Hopefully a lot of innovation that is created in the future. Thanks for sharing – Healthy
You are absolutely right.
Your article reveals the reality of health care industries.
Looks like an interesting approach on tackling health care-related issues.Looking from a businessman’s point of view does present innovations an ordinary individual would not perceive.
Something needs to be done about healthcare the world over. Too many business people involved and governments aren’t health professionals – they’re all on a different wave length to each other which is probably what the problem is.
I really like Clayton’s other book called Disrupting Class.
Dr. Christensen is one of the treasure of Harvard Business School. I have read his book on The Innovator’s Dilemma given to me by my colleague and it just intrigued me how a business should grow while innovating.
Yeah it is ironic that the need for current profit stifles future innovation. Which is why it’s a tragedy so much R&D is moving from public to private money
Absolutely agree, good points are made here.
In a world which evolves so quick, with financial crisis, Etc. a good management, creativity and innovation do the difference.
Great article. Well worth the read.
Great Information. Creativity is whats going to drive the success of a new company for sure. Thanks again.
Awesome post on being innovative. The cost of creativity is definitely over-looked when new companies emerge.
Great post I agree with Christensen’s model.
Interesting read and I think a great post.
Thanks for the post. Great read.
I will be checking out
The Innovator’s Prescription
Excellent article – thank you. Over the past ten years I have seen companies who previously had managed to stay ‘static’ and survive have to wake up and realise that whatever the nature it has to be run as a business and to do that make money. Unfortunately I guess that is true of the Health Care system. I hope that in doing this that the standard of patient care does not become just a case of a statistic and the clinical staff are allowed to do what they do best and care for their patients.
thanks for the good article
Christensen has some good ideas that I like. I have read The Innovator’s Prescription and agree that it is a very good read.
Thank you for sharing this information.
James
nice post and great info.I hope i can come again here with new great post
Great site with a good
essential information.
I have bookmarked your blog
for future reference.
Interesting ideas about commoditization in health care. He’s right, molecular biology will be a key, combined with data availability. I think the future will bring us diagnostic machines in pharmacies that will replace a lot of current doctor/inpatient care. Quick blood sample/dna scan, patient history lookup and diagnostic database, then pick up prescribed treatment at the counter. The value in hospital healthcare will be in trauma, and serious illness and the scarce resource in health care generally will be human intuitive/empathetic contact.
Your article truly picked my attention! Carry on the fine work!
I, too, would like to see a business model that drives innovation and yet lowers cost. One other comment I saw discusses customer service. That is the third side to the equation. How do you improve customer service and keep costs down? We strive for excellent customer service in our clinics but that takes hiring and constantly training our staff: very real costs.
Thank you for bringing the work of Clayton Christensen to my attention. I will check out more of his stuff.
Best wishes,
Imogen
Clayton wonders why so many innovations don’t succeed, in my opinion it is because of lack of action. People can find a new way of doing things or an invention that will help them out but never act upon it.
They say that most of the great possible inventions are found in the gave yard from people who don’t fulfill them. so many business fail due to lack of action or just lack of good thinkers to get them going.
Jim Collins explains this in his books, good to great, built to last and how the mighty fall. Give them a good read and the answer will present itself. Best of luck!
Nice post. Thanks for information!
We always enjoy your posts. Thanks for sharing and Merry Christmas!!
Those 2 questions are excellent to ask. I wonder how this presents itself for small local business owners in the Pilates industry specifically? I agree with Seattle, Jim Collins is a phenom author..
Thanks for information. I have been meaning to find out more info on this subject earlier in the year but glad I read it today.
Christensen’s views on business are certainly worth considering.
“The Innovator’s Prescription” is officially on my “must read” list for 2011!
Thanks for reminding me!
Cliff
As a business writing consultant, I find that innovation can be extremely threatening, which often makes my job difficult and challenging.
I think I love the humility that Clayton Christensen displays by going back to school at 40 years of age in his quest for answers to some of the most pertinent business questions.
It shows that it is never too old to learn. I have however learnt some hard core principles from this post.
Thanks for the nice article.
Having spent years as a ward sister in the UK’s NHS service, I would really like to think that the move from “intuitive” medicine was, for the most part at least, accomplished some years ago.
Just my opinion though.
Some really informative content. I’ve subcribed to your RSS feed and looking forward to your next post.
Very intersting article. And thnaks for the link to The Innovator’s Prescription !
Technology and health care is a good fit.
Very interesting insight on good management. I think we still have a long way to go when it comes to fully using technology in health care.
I have been searching for some information about it almost three hours. You helped me a lot indeed and reading this your article I have found many new and useful information about this subject.
Clayton Christensen’s Innovator’s Prescription book is exceptional. He has covered every detail regarding health care and the disruptions it brings, but explains the consequences that providers will bring in terms of covenience, lower costs and the possibility of offering a higher quality.
As a psychologist i need to stress that rethinking roles should not only be bind to business life but it should include individuals role in influencing people which is part of the business circle.
Found this on Google and I’m glad I did. Well written article.
Way back when I first read Christenson’s “The Innovator’s Dilemma” I was mesmerized but also a little skeptical. I wondered to what extent the principles he indentified were truly principles, and which were simply industry specific issues. However, the more time that passes, the more I see that his observations hold true in a wide range of industries and economies. No small business owner, or large business management team, can afford to ignore the realities he presents, nor their presecriptions.
I have really enjoyed reading this and learned a lot too. I’m now subcribed to your RSS feed and waiting on your next great post.
I’m very curious about how the commoditized treatment of disease will effect the way our doctors and nurses are trained. Will medicine become even more specialized than it is today?
Clayton,
I really enjoyed your post. Since this is the first time I have seen someone approach the subject of how to drive down the cost to the end user by changing the business models. I like it, makes good sense.
I hope your ideas are getting some serious consideration by Health Care policy makers.
Prevention would be the best way of keeping healthy.Though I believe americans`eating habits are changing little by little, there´s still a long way to run to achieve an ideal. It´s not only about the type and quality and quantity of what we eat, but also about changing our lifestyles.
Well that are the modern day economics…
It is all about profit, people get lost in the chase of profit and loose track of the things that are the most important.
Gentlemen, thanks for sharing your ideas. From the communication between the two of you I think I can say that I wish I had a teacher like Mr. Glogowski and I wish I had a student like Phil.
Very nice article,
keeping post
cheers,
Big
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The important thing to consider when handling a business is making sure that each role is met and tasks are completed. I am sure many companies will consider your idea.
I really like the article.
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Reading this blog, I can’t help but think about Steve Jobs. One of the things that helped him make Apple (and Pixar) great, was that he never settled for what he had, he always wanted to innovate and create new products and features.
Always interesting to try and understand why some businesses fail while others succeed.