‭The Innovator’s Prescription; A disruptive solution for healthcare‬

‭ mong the many books that Clayton Christensen wrote, “The Innovator’s Prescription” is one of my favourites. The book highlights his‬
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‭thoughts on the challenges faced in the healthcare industry, and the need to improve healthcare through innovation. He argues that the‬
‭healthcare industry is in need of disruptive innovation, which involves creating new products or services that transform the market and‬
‭meet the needs of under-served customers. Here is a quick summary of this page-turner.‬

T‭ he three business models‬

‭Christensen starts off by explaining the three main areas where healthcare is ripe for disruption: diagnosis, treatment, and prevention.‬
‭These three areas are highlighted through 3 general types of job-focused business models coined by Professor Oystein Fjedstad of the‬
‭Norweigan School of Management and his colleague Charles Stabell:‬
‭1.‬ ‭Diagnosis - Solution Shops‬
‭2.‬ ‭Treatment - Value-Adding Process (VAP) Businesses‬
‭3.‬ ‭Prevention - Facilitated Network Business‬

S‭ olution Shops‬
‭Solution shops are institutions that diagnose and recommend solutions to unstructured problems. In the context of healthcare,‬
‭highly-trained experts synthesise data from a wide range of analytical and imaging equipment. These services are often centralised‬
‭laboratories filled with instruments to analyse blood and tissue samples, and radiology departments with imaging technologies such as‬
‭Computerised Tomography (CT) scanners, Magnetic Resonance Imaging (MRI) machines, and Positron Emission Tomography (PET) imagers.‬
‭From these tools, they distill hypotheses of the cause of the patient’s symptoms from the information obtained. At this stage, they can’t‬
‭definitely diagnose the problem but can develop a hypothesis to test out. Accuracy is important at this stage, ensuring that no money or‬
‭life is wasted to solve the wrong problems. Because of the JTBD, the profit formula for solutions is a fee-for-service, whereby a portion of‬
‭their fees is contingent upon the successful results of their recommendations.‬

‭ AP businesses‬
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‭Once a diagnosis is made, healthcare professionals should concentrate on finding a solution, which VAP companies can provide. VAP firms‬
‭convert resource inputs (people, materials, energy, equipment, information, and capital) into higher-value outputs. The ability to provide‬
‭value or outputs is typically integrated in processes and equipment. These hospitals handle the following jobs to be done: I've received a‬
‭definitive diagnosis, I know what needs to be done, and I need it corrected as quickly, easily, and affordably as possible. Ideally, processes‬
‭need to be in place that integrate the work of multiple specialists in a way that optimises the delivery of the value proposition. VAP‬
‭businesses are based on the ability to deliver value to customers embedded in equipment and processes rather than the individual‬
‭institution of people. As a result, they bill their clients for results rather than inputs, and the product/outcome is pre-priced and fixed (costs‬
‭and outputs are predictable).‬

F‭ acilitated Network Business (FNB)‬

‭The final business model is the FNB which are institutions that operate systems in which customers buy and sell, and deliver and receive‬
‭things from other patients. The companies that make money in network industries are the ones that organize, facilitate and maintain the‬
‭effective operation of the networks. An example of this is patient support groups whereby patients can compare their progress against‬
‭directly comparable patients and teach and learn from one another. Because of the JTBD, the profit formula for FNBs is often times‬
‭membership/transaction-based fees.‬

F‭ laws of the healthcare system and disruptive innovation‬

‭Although the business models are described separately, in reality, this isn’t the case in hospitals providing much of today’s healthcare.‬
‭Currently, the different business models (VAP business and solution shop activities) are co-mingled within the same industries due to‬
‭technological and scientific progress, which is why hospitals can’t be relied upon to transform the cost and accessibility of healthcare -‬
‭essentially, a flawed system. Because these business models are so different - their resources, the nature of the processes, and thus their‬
‭profit formulas - having them under the same institution creates extraordinary internal incoherence. Because the metrics of value in the‬
‭two different business models are so different, value cannot be measured.‬

I‭n order to break out of this issue, hospitals need to undergo disruptive innovation. They need to deconstruct their activities operationally‬
‭into different business models, organising them differently, and separating their cost accounting and pricing styles in ways that are‬
‭appropriate to each. It needs to transition towards a patient-centered, value-based model to address the inefficiencies and unsustainability‬
‭of the traditional fee-for-service model. Through disruption, the authors believe that this will result in the potential to reduce costs by‬
‭between 20-60% depending on the situation, while at the same time improving the quality and efficacy of care received.Throughout the‬
‭book, the authors also provide examples of successful innovative healthcare solutions, such as retail clinics and telemedicine. They also‬
‭provide insights into the challenges that healthcare innovation faces, such as regulatory constraints and resistance to change.‬

‭ verall, the Innovator’s Prescription provides a complete framework for healthcare innovation that may be applied to a variety of‬
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‭healthcare issues. It’s a great read!‬