10.11.2016People

The innovator's path to the future

By: Jason Moriber
A conversation with Spencer Nam of the Clayton Christensen institute on how innovation happens and the future of healthcare

The vision for this series is to surface and share the experiences, trends and insights of thought-leaders, trail blazers, and subject experts who either live at the cutting edge of technology and/or seek to make the world a better place. We can each learn from these experiences and potentially take the first steps towards making the innovations that matter to us.

The train ride north, from Newark, N.J., through Connecticut, Rhode Island, and up to Boston is a beautiful tour through old towns and waterfront countryside. The train ride is a form of time travel, speeding through the scenery, identifying the architecture, seeing the boats on the water, briefly witnessing people in slow motion go about their daily tasks. I hadn’t taken this train trip in years, it was a soothing filter, a quieting of the frenzy many of us experience with waterfalls of emails and work fire drills. Though many of my fellow travelers on the train had their heads tilted down into their laptops, the sun, water and green of our surroundings elevated the mood.

The train ride was a needed clearing out of cobwebs and loose ends, especially since I was on my way to visit with the Clayton Christensen Institute. The home of “Disruptive Innovation,” and the “Innovators Dilemma.” I wanted to be as open minded as possible, to be able to soak up as much of the brilliance as possible.

The Christensen offices are tucked away in a modest office park in Lexington, Massachusetts, surrounded by trees and parking spaces. It took me a few minutes to find the front door. My appointment was with Spencer Nam, a Senior Research Fellow of their Health Care practice.  Spencer is gracious and serious at the same time. Devotion to the topic of innovation requires a fearless humility that gives birth to moments of joyful insight. There is a lot of digging beneath the surface, mining into data, and not always being fruitful. My conversation with Spencer mirrored this sentiment, though Spencer was able to cut to the chase, and provide the key levers that make innovation happen, take hold, and thrive. Our Q and A is below. You’ll see that Spencer is a great communicator, a welcome and contrite sharer of his experience. He has a genuine joy in pointing the way forward. Our conversation was a foundational lesson on how innovation happens.

The three buckets of innovation

Spencer: I categorize innovations, including the mobile technology, into three buckets. These categories are based on characteristics that can be evaluated according to value created for consumers.

The first is technology, which includes algorithms, devices, platforms and the like.

The second is the business model; how one creates and delivers value in a product or a service. The term “business model” implies that there is a business process, and it is sustainable. If I am losing money then I don’t have a business model. You want to have a process of utilizing different technologies that provides financial returns that can sustain growth.

The third bucket is the network. I often call it a network business.

The three steps of innovation:

  • A technology is invented
  • A business model is designed that enables the use of the technology
  • A network is established that allows the use of the technology to flourish

 

The examples of network I often use are the railroads in the late 19th century and the Internet in the late 20th century. The railroads essentially brought the age of trains and a new method of transporting goods and people. The Internet definitely has changed and continues to change the world. But, the railroads and the Internet by themselves do not create value for consumers. They need the technology and business models that can be put to use.

Having said that, without the network, there wouldn’t be technology or business models in the first place. So it’s a bit like the chicken and the egg dilemma, which tells me that technology, business model, and network are closely related in creating consumer value. In fact, trains and railroads emerged together, and the Internet, e-mails and websites also came together concurrently.

This way of segmenting innovations provides a new way of defining businesses. For example, I view Apple to be running a network business. The network of apps store, iPhone, and computers enables consumers to develop, buy and sell the software and contents using various business models existing within the Apple network. I think my view of Apple is a bit different but it is a much clearer description of how consumers today view and adopt technology, and how companies deliver value. So, categorizing innovations this way can be a valuable tool for new insights. 

Jason: How the three buckets work as a process and ecosystem

Spencer: My view is that most people tend to focus just on technology. Thinking about technology; using technology. Technology is defined as the source of innovation. But, I think real innovation happens because of the business model. That is how we experience the world. The business model enables a company or a person to make an innovation more accessible and affordable. A car used to be very expensive and affordable only for the wealthy, but nowadays it is affordable to everyone. The basic design of a car has not changed, but the business models of manufacturing and selling a car have. Now, even that’s changing with emergence of Uber and other riding services. So I believe it is the business model that shapes the landscape of technology. Then, the network is the road system that connects different landscapes. It’s glue that connects different technologies and business models, and it is what allows technology and business models to evolve.

I think real innovation happens because of the business model... The business model enables a company or a person to make an innovation more accessible and affordable.

Spencer: So, going back to this chicken and egg problem in innovation, what do you build first, the technology, the business model or the network? Usually it’s the technology that is built first and then people think about how to make a business case for the network.

The internet people will say the internet came about… internet was technology in of itself, and then a network ecosystem emerged. Same thing can be said about the telephone. It was initially a technology that was one-to-one, between Mr. Bell and his assistant Mr. Watson. Today, a phone is viewed more like a network. So I think technology is the initial foray into a new ecosystem and what really keeps it moving is the business model. As the model evolves, a network emerges and becomes more sophisticated, and eventually new networks start forming from that. This is how I view the expansion of mobile technology and how it is affecting different areas of our life canvas, if you will.

Fertile ground for new innovations

Spencer: From the perspective of technology causing business models and networks to emerge, there is a dynamic; you can describe how it will play out over time. Let’s look at communications for example. The first place where we’ve seen rapid changes has been basic communications. Simple phone stuff, right? It’s really… video phones and new communication tools. Now that we’ve gotten pretty good at that, we’ve started thinking about how to share contents. Then we see growing expertise in applying it to education or healthcare – transportation, even. This is branching out into secondary and tertiary areas, where you wouldn’t naturally expect new communications technology to make an impact. How could a phone technology change the way we educate or consume healthcare? For example, let’s look at adopting mobile solutions in healthcare. Some may say that mobile healthcare is not the same as human-to-human interactions between a doctor and a patient. They are right in some ways, but technology is rapidly closing that gap. We now think some virtual consultations are more effective than in-person interactions.

Nikola Tesla in the beginning of the last century was already talking about wireless communications, but it took a while for his dream to become a reality.

If you are a history buff, you’d know that Nikola Tesla in the beginning of the last century was already talking about wireless communications, but it took a while for his dream to become a reality. In order for the wireless technology to be broadly adopted, a network had to be developed first. Developing a network can take a while, sometimes decades. Technology alone is insufficient. The evolution of technology in healthcare has been rapid, but the business models have been evolving more slowly. Because of this, building networks has been lagging. But, we can see the landscape is finally changing as new types of technology emerge. So basically two main thoughts: segmenting based on how innovations happen; technology, business model and network. And understanding how a network built on technology and business model can transform secondary and tertiary industries like education and healthcare where the same technology can introduce a whole new way of doing things.

Jason: Do you see a general timeframe from when a technology becomes an ecosystem? Within those frames what is the catalyst for change?

Spencer: Timing is a hard question to answer. I don’t have an exact answer on when a technology will be ready to expand into an ecosystem, but I do have a framework that helps us think about this. The framework I use is the concept of interdependency and modularity. In order for a technology to fuel a formation of an ecosystem or a network, it needs to become modular, such that parts of the technology can be optimized by different players in the market and these independently optimized pieces can be seamlessly integrated back to technology’s existing architecture. For example, the ecosystem of personal computers was established, once putting together a computer became a modular process.

Generally, when a new technology is introduced to the market, its architecture is fully integrated, meaning the components of the technology are interdependent. For example, the first airplane had to be entirely put together by the Wright brothers, and they were the only ones who knew how all the parts of the plane came together. At this stage, no one else can replicate or optimize any part of the product. Because of this, there is no need for an ecosystem supporting manufacturing and usage of airplanes. But, once technology evolves and its architecture is better understood, everything from manufacturing to selling becomes modular. This is when an ecosystem emerges and a network can take technology to the next level.

Modularity versus Interdependency

A modular product is a plug and play. A modular product can be rapidly adopted because it can be easily grafted to an existing network. But, an interdependent product is a bit different. Its adoption takes longer, because a network needs to be built around the product first. When we evaluate innovation, we often ask, “Is it a washing machine or a refrigerator?” A refrigerator is modular; it is plug and play. A washing machine is interdependent; it requires plumbing, water access, drains, and public sewage system. Like a washing machine, an interdependent product can transform our lifestyle, but it needs a network to be built around before a mass adoption can begin.

Jason: Like a car?

Spencer: Yes. An automobile is an interdependent product. It needs fossil fuel. It also needs nicely paved roads and gas stations. In fact, we’ve invested so much in the infrastructure and the fuel technology of cars that it is extremely difficult to abandon them. This is why Elon Musk is building charging stations all over the country. He realizes that without these stations, Tesla’s electric vehicles cannot go very far from customers’ homes. But, more importantly, he understands that building a network of charging stations creates an interdependent system that will be difficult to replace, if Tesla’s electric cars were more broadly adopted. Just as fossil fuel cars are hard to replace, a network built around electric cars would make it extremely costly to switch to an alternative, such as hydrogen or solar vehicles.

…more and more companies are realizing record profits, but most of them avoid investing in innovations that create new markets and industries

Jason: Do you see a trend that things are moving towards modularity?

Spencer: I think so. Generally, momentum favors the trend towards modularity, because modularity implies simpler, faster, less costly and less risky. It begins with investment decisions. Clayton Christensen, the HBS professor who coined the term “disruptive innovation” and founded the Christensen Institute, points out how more and more companies are realizing record profits, but most of them avoid investing in innovations that create new markets and industries. The same goes for the wealthiest individuals. Everyone is investing in assets and opportunities that can deliver the safest returns in the shortest time possible. What Christensen is observing is that more and more companies are avoiding investments in interdependent products and technology. Creating an interdependent product or a system is complex, risky and time consuming. Building a new ecosystem can be highly rewarding, but it is also very difficult to succeed. So, more innovations are focusing on better plug-and-play solutions. I am not sure if this trend is good for the long-term health of the economy, but I expect the trend to continue for the foreseeable future.  

Jason: Can you imagine healthcare becoming more modular? Is that a trend you see?

Spencer: Healthcare is a complex beast, so its trend can be viewed in many ways. In fact, I’d say that the healthcare system is highly interdependent, but innovations in healthcare tend to be more modular. Our healthcare system is a loose network of powerful stakeholders who have agreed to live together despite their differences. So, their activities are highly interdependent, and that creates challenges and conflicts that lead to inefficiency. Healthcare is highly regulated. A third party insurance pays all the bills. Doctors are powerful. The government has strong influence. It is very difficult to have stakeholders agree on issues of costs and quality.

…when you have that kind of inefficiency in the network, the natural tendency is to go down the path of least resistance…

So when you have that kind of inefficiency in the network, the natural tendency is to go down the path of least resistance - modular solutions are preferred. Changing the interdependent system is almost impossible, so people are just looking for better plug-and-play options. And that’s one of the reasons why healthcare has become so expensive - there is no centralized body that decides, “This is what needs to happen.” Instead, costs from stakeholders are just added up. 

There is very little coordination between hospitals, doctors, insurance companies, and patients. You add FDA and CMS to this, and you can imagine the difficult dynamics. Given that, we do not see too many products or services that try to promote better coordination between stakeholders. The Affordable Care Act is attempting to force the issue, but the process has been expensive and painful. So, healthcare from technology standpoint is already very modular, and the trend will likely remain that way. But, if we are serious about reducing costs and improving quality, we need more interdependent solutions that address systemic inefficiencies and coordination across the stakeholders.

Mobile is perfect for coordinating healthcare modularity

Given the challenge in healthcare to navigate the interdependent system using modular solutions, mobile technology might be perfect for bridging the two. Mobile solutions in healthcare can be introduced as modular tools that can improve systemic processes between stakeholders with minimum disruption. At the same time these solutions can form a network and a new ecosystem outside of the existing brick-and-mortar boundaries. As long as mobile solutions satisfy regulatory requirements such as protecting patient data, they can be deployed to enhance care services and exchange of data. The mobile solutions can pull healthcare services out of isolated silos into a virtual, interdependent ecosystem. It can easily achieve what the stakeholders have not been able to do, and it’s also a very low-cost solution, because these innovations are emerging out of non-healthcare industries where pricing is more sensitive.

We are already seeing consumer product companies like Apple and Fitbit aggressively entering the healthcare market. Both of them are developing consumer technology solutions, but they are building strong user networks that they hope to leverage to address consumers’ healthcare needs. I’ve also seen Hyundai at a healthcare innovation conference. They envision automobiles of the future to play a more significant role in consumers’ daily activities, including healthcare. They expect cars to serve as hubs of personal mobile data. So they are showing keen interest in integrating mobile healthcare solutions with their future automobiles. On the other hand, Uber seems to have the exact opposite view. Hyundai thinks automobiles will be integral to managing personal data, but Uber thinks no one will own a car. It is a bit early to tell whose view will be proven correct, but it is clear that mobile technology’s potential value in healthcare will remain a hot topic for debate.

Healthcare will continue to get more expensive because it will just keep stacking more modular solutions

Healthcare’s traditional camp looks at mobile technology as a tool that will improve the existing system, such as interacting with and monitoring patients. But, we at the Christensen Institute think that using mobile technology to improve the current care delivery might actually exacerbate the cost problem. If mobile technology doesn’t transform how care is delivered, healthcare will continue to get more expensive because it will just keep stacking more modular solutions. In order for modular solutions to lower costs, they need to enable a new business model. Innovations need to bring new ways of delivering healthcare instead of just improving the status quo. So, both the stakes and expectations are high for mobile solutions.

Jason: Could it be that one of these specific modularities becomes a new business model for a network?

Spencer: Telemedicine is a strong candidate for a new ecosystem. All the pieces of the puzzle already exist. We already have a reliable broadband network. We also have the necessary video technology. Historically, care providers have argued that a virtual care model cannot be as good as an in-person model, but this bias is based on established care delivery models. If telemedicine solutions were deployed under new care delivery models, they might prove to be superior to existing processes. There is growing evidence of telemedicine care being more effective than in-person care in treating behavioral and mental disorders. On top of that, a virtual solution can be more cost-effective compared to brick-and-mortar models. What is exciting about telemedicine is that its network can expand without disrupting the existing brick-and-mortar model. Eventually, I see a potential of telemedicine being the standard of care for most of the primary care interactions and many other specialist consultations such as dermatology, ophthalmology, oncology, and behavioral health. For those of us who are still skeptical of the future of telemedicine, I’d like to remind us that only a decade ago, we thought virtual check-ins at the airports were not realistic for a variety of reasons, but today, it’s become a second nature.  

It’s only a matter of time before mobile technology becomes second nature in healthcare. Mobile technology has the ability to decentralize the healthcare system that has remained centralized over the last 100 years. Instead of patients going to the hospital, it can bring medical care to people. But the establishment will feel threatened. The incumbents will fight tooth and nail to make sure mobile does not disrupt the current model. For example, many claim that hospitals are getting smaller, but I don’t see that. They’re actually getting bigger. General hospitals across the country continue building new state-of-the-art facilities. Hospitals also have started building out urgent care centers, but this is far from hospitals getting smaller. Urgent care centers are just satellites sent out to collect more patients for the “mother ship.” So, the empires of hospitals are trying to get bigger, and feeding this machinery is only going to get more expensive. This is the dilemma.

Today, what we call healthcare is just disease management. You wait until something goes wrong, and then you try to deal with the problem. But, healthcare really means managing your health and trying to stay healthy. From that perspective, I believe mobile technology’s unique quality of bringing medical solutions to individuals has a potential to transform the current disease management environment to a truly health-focused environment.

Preventive health is the future

Jason: So pre-disease is the area for opportunity?

Spencer: I think so. Let me start with a personal story. A couple of years ago, I had 100+ degree fever for five days. I usually don’t have fever when I get sick, so I went to see my doctor after three days of fever. He told me he was pretty sure that I had a flu, but there was nothing he could do. Then he said I should come back and see him in three days, only if I still had fever. Sure enough, my fever broke two days after my visit. When I got the bill, he had charged me $500 for my visit, where he told me nothing I didn’t know.

What is wrong with this picture? The bottom line is, there needs to be a way to deal with these issues without dragging my sick body into doctor’s office and told nothing for $500. This is where mobile technology comes in. It can bring the care to one’s phones or computers. Or you can have much easier access to the network where you can easily get information on prevention and monitoring, so that you don’t have to end up in an inefficient disease management environment.

What are some of the key challenges facing physicians these days? One of their biggest complaints is their patients getting wrong information by researching on the Internet. Too many patients show up at doctor’s office with time-consuming irrelevant questions. This is inefficiency that can easily be avoided if healthcare providers could offer valuable on-line information when and where patients need them.

The current system is well developed to deal with acute problems. People can’t perform sophisticated diagnostics or surgeries at home. Those types of care will always be tied to professional care services at the hospitals. But, the preventative or routine care is where there is very little amount of reliable information and solutions. This is why the Theranos scandal was a big deal. Many people thought that what Theranos was proposing was extremely compelling. Everyone is looking for ways to get reliable information and data to keep oneself healthy and disease free. There’s a huge appetite to find effective solutions that will address this need.

As I’ve already said before, this where Fitbit, Apple and Google are headed. These are not healthcare companies. Yet, I have a pedometer on my iPhone and iWatch. More and more people are buying wearables, which are essentially monitoring tools. But, we cannot focus on technology alone. I often read industry analysts claiming, “By 2020, there will be a hundred million wearables in use worldwide.” If you think about that statement, it’s saying that almost every adult in developed countries will be using a wearable device. That’s a lot of devices. That is not going to be sustainable. We are not going to be wearing multiple devices to collect health data. These wearable technology companies will have to demonstrate the value of data being collected. At the same time, there will be a consolidation and integration of technology, so that we won’t have to wear a watch, a bracelet, a pair of glasses, and a ring to collect different sets of vitals.

Unfortunately, you can’t write a software program without understanding the processes first.

These initial baby steps of mobile technology we are taking will lead to decoupling of health management from disease management. Eventually health management will be its own ecosystem. Disease management will steadily shrink and only deal with the most serious advanced clinical cases.

A little more theoretical about how innovation happens

Spencer: I studied mathematics as an undergraduate, and it is a subject that is very different from what most people imagine it to be. People think math is about solving a bunch of problems. But it is actually about recognizing patterns. For example, a donut is equivalent to a coffee cup because both shapes have just one hole. Then math tells us that studying a donut can tell us everything about the coffee cup, because they are equivalent. It turns out that we can apply this same principle in understanding technology. How mobile technology evolves in healthcare can be a model for its evolution in other industries and countries. Although each industry or country is faced with unique circumstances associated with its respective environment, if we can identify common patterns existing across these environments, we can predict how mobile technology will evolve. Studying the path of an innovation in a particular industry can tell us a lot about what it can do in other industries.

Studying the path of an innovation in a particular industry can tell us a lot about what it can do in other industries.

So, we shouldn’t be too worried about spending a lot of time deeply thinking about a problem in one industry, because if we can fully understand the problem in one environment, we can apply our learnings from that environment to another exhibiting similar characteristics. As an innovator, I can take my learnings from studying the healthcare industry and apply them to other industries. To that end, mobile technology is a very interesting topic for us here at the Christensen Institute, because we believe it is a solution that can be applicable in industries and nations beyond the realm of healthcare.


After my conversation with Spencer I can no longer look at the world the same way. I believe that’s an outcome of speaking with a genius. I now perceive the ideas and trends I study as components of three-part ecosystem: a technology/invention, the business model for that invention, and the network that allows that invention to be adopted at scale. I now also think about these ideas as either modular pieces seeking to be part of a current network, or as new interdependency concepts, meant to create a new network, a new and highly impactful shift on our lives. I am greatly thankful to Spencer for sharing these clear and wise insights with us.

Jason Moriber is a creative communicator with a background in social and digital for CSR, tech and start-ups. He’s working within the Communications team at Verizon, charged with developing a new model for corporate and brand communications. Connect with him on Twitter @jasonmoriber or on Instagram @designinginnovation