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Michelle Petrosky, RN, BSN – Graduate Student at Saint Louis University
Assignment 1:
A Summary and Critique of “The Innovator’s Prescription” by Clay
Christensen
Petrosky, Michelle
7-30-2018
1
Petrosky, M.
A Summary and Critique of “The Innovator’s Prescription”
Clay Christensen stated that disruptors make things simple and affordable. For example, Toyota
beat GM by slowly increasing quality of product; GM said that it didn’t make sense to make a lower
profit margin item when they could make a higher profit margin on a more expensive vehicle. According
the “The Innovator’s Prescription,” the pursuit of profit and differentiation in sustaining competition
amongst similar business models generally adds cost – especially in service industries. Competition
amongst healthcare providers (adding more services and equipment) serves to drive costs up instead of
down. Individuals coming in for minor care are essentially paying for the extras that they aren’t using (ie:
newest surgical equipment, trauma teams, etc.). I would argue that Christensen’s theories apply very
well to healthcare. Although his concepts were released over a decade ago, they are even more relevant
to healthcare today than they were then.
Christensen’s general theory about disruptive innovation has potential to lower costs while improving
care
Christensen asked, “Can healthcare become more affordable by expecting these giant systems
to become cheap? Can we ask specialists to take pay cuts? No.” We must drive decentralization. We
need to bring technology to outpatient clinics so that those clinics become more and more capable. We
need to bring technology to doctors’ offices to do the most simplistic of things that drive patients to
specialty clinics. PCPs can perform simple tests rather than refer to a specialist. NPs can do what is not
being performed by physicians. Enabling lower cost levels of care is the mechanism by which healthcare
can become affordable. Three enablers must fall in place for this to occur: simplifying technology
(decrease to rules based instead of expert analysis), embedded in a business model that can carry the
solution to the customer in a cost-effective way, and new value network is consistent with budget of
customers, distribution and suppliers. As trial and error problem solving occurs, probabilistic pattern
recognition can occur, rules-based behavior can be developed -software can be developed that will
follow the rules-based behavior and be better than the experts of yesterday.
Intuitive medicine is becoming precision medicine as empirical medicine continues amongst less
capable physicians. This allows the less competent physician to still precisely diagnose diseases.
Evidence-based medicine develops due to betterment of telecommunications technology. Imaging and
molecular diagnostics are solving the mystery of why patients need different treatment modality which
once existed in only infection disease.
Business Models
What is a business model and how is it built? The value proposition is a product that helps
customers do more effectively, conveniently and affordably a job they’ve been trying to do. The
company must develop resources that allows the delivery of the value proposition to the consumer.
Processes develop to address recurrent tasks in a consistent way through training, development,
manufacturing, budgeting, etc. These processes allow a profit formula to be calculated based on the
assets and fixed cost structure, and the margins and velocity required to cover them. Profit formula
allows the value proposition to develop. It becomes locked and becomes the business model when done
correctly. Business unit doesn’t evolve but by developing new units and models then the business can
evolve. The traditional general hospital is not a viable business model because the value proposition is
too broad, processes are very convoluted and overhead is extremely high due to the amount of
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Petrosky, M.
resources needed. Sequence of operations is different for every patient and is grouped per type rather
than the most common pathways. Solution is value added clinics or specialty hospitals because the
overhead is much lower.
Three types of business models seen in hospitals are solution shops, value-added, and facilitated
networks. Examples of solution shops are consulting firms, diagnostic and intuitive activities of hospitals.
Solution shop business models recommend solutions based on problems. They are compensated on a
fee for service because the outcome depends on so many factors. The value-added business model
occurs when a broken or incomplete product is brought in, processes are performed, and the finished
product is sent out. Examples of value added business models are manufacturing, education, food
services, medical procedures – these are compensated by a fee for outcome because it is very easily
predicted. The last business model discussed is facilitated networks which charge a fee for use or
membership. Facilitated networks can be seen in telecommunications, insurance companies, and
marketplaces such as EBay. Facilitated networks are great for long term illnesses such as diabetes care,
etc.
This was a great video to watch and I have the book in my shopping cart at Amazon! Christensen
is accurate in that healthcare doesn’t follow a single business model, let alone the best one for
healthcare. I feel that a lot of his ideas are very Lean based – something that has become more and
more important to the management of healthcare. Until we learn to think outside of the box, the
processes of large healthcare organizations are going to become increasingly difficult to manage.
References
https://www.youtube.com/watch?v=XffP0qkFUx0 (Accessed July 30, 2018).
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