The Disruptive Innovator in Healthcare
A conversation with author/MD Jason Hwang on barriers to innovation in healthcare, disruptive innovation in health and technology, big versus small companies, medical education, and baseball.
In 2021, I conducted eight podcast interviews with seven great thinkers in the fields of healthcare and technology: [1] TEMPLE GRANDIN, animal scientist and world-famous autism icon. [2] TEMPLE GRANDIN again. [3] PRADHEEP SHANKER, Ohio radiologist and statistical slayer of COVID mythology. [4] DEVI SHETTY, legendary cardiac surgeon and pathbreaking hospital entrepreneur in India. [5] ERIC TOPOL, cardiologist and medical innovation visionary. [6] KEITH SMITH, anesthesiologist and healthcare pricing revolutionary. [7] JASON HWANG, internal medicine physician and co-author of the 21st Century’s most important book on healthcare innovation. [8] DAVID GOLDHILL, healthcare CEO and documentarian of America’s healthcare failures and opportunities. The podcasts were originally housed at the Mercatus Center at George Mason University and will all be reposted at Bastiat’s Window.
In this seventh installment of that series, I spoke with Dr. Jason Hwang about healthcare innovations such as the MinuteClinic and telemedicine, the history of disruption in healthcare and other industries, the need for change in medical education and much more. An internal medicine physician and entrepreneur, Jason co-authored The Innovator’s Prescription: A Disruptive Solution for Health Care with the late Clayton Christensen and Jerome Grossman (who died before the book was published). He is an internal medicine physician who obtained his MD from the University of Michigan in Ann Arbor and his MBA from Harvard Business School. Jason is currently Founder and co-CEO at Polyview Health, which “deploys cutting-edge design and cloud AI services” for telehealth.
THE DISRUPTIVE INNOVATOR
Conversation between Robert Graboyes and Jason Hwang, MD, October 8, 2021. Click below for the full audio and/or for the complete transcription of the conversation. Excerpts from the podcast follow below.
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EXCERPTS FROM THE PODCAST:
WHAT IS DISRUPTIVE INNOVATION?
GRABOYES: Could you explain what the book is about and why the concept of disruptive innovation became such a catchphrase in the business world?
HWANG: [It] was [Clayton Christensen’s] attempt to explain why products seem to evolve into things that were more convenient, simpler to use, but also more accessible and affordable over time. It also helped him answer the question why good companies seem to fail at some time or another, oftentimes, on the surface, without explanation. … [It] states that good companies follow a basic mantra in decision-making, which is you always try to build better products that almost inevitably become more complex as they become more powerful, and more expensive as they become more powerful, and become less accessible to people with less demanding uses.
That opens the door for what Clay called the disruptive innovator. It was typically a new entrant to the industry, a startup or somebody from the outside coming into the industry for the first time that came up with a new product or service that did deliver on some of those areas of convenience and simplicity and affordability, that then grabbed hold of the marketplace and then grew from there and started to take over the industry.
The Innovator’s Prescription … was our attempt to apply these business principles that had been developed by observing and researching myriad other industries, but to apply it to healthcare because all of the things I’ve just mentioned—the need for access and affordability, simplicity and convenience—were sorely needed in healthcare.
EXAMPLES OF DISRUPTIVE INNOVATION
HWANG: One of my favorite examples that Clay used, and I, myself, use in presentations, is the story of computing and how computers have evolved in our own lifetimes through disruption to become very affordable, very accessible and portable. And yet, it wasn’t that long ago, when you think about the original computers, big giant mainframe computers or even the mini-computers that followed—they were much more complex, very expensive and really housed in their own rooms, and were typically not operated by non-experts like myself but were the domain of expert engineers and technicians that usually ran computing jobs for us. …
[T]hese very expensive, complex machines were not very convenient and were clearly out of the purchasing power of the typical individual or family. It really took new devices that came into the fold, such as the personal computer or the tablet, or today the smartphone, that brought successive waves of innovation that made computing ever more accessible and affordable. But it only did so, not because the originators of the mainframe computer decided that that was a good thing, nor was it the originators and dominating companies of the mini-computer era that decided to bring in these more portable or personal devices. It was, again, new entrants. …
[T]ranslating that to healthcare was challenging at times because regulations were different; it was a public need. There were a lot of entrenched incumbent companies that ruled healthcare, and so trying to see pockets of disruption was, again, challenging at times. One example that we were really eager to explore in the book was this business model of retail clinics.
JASON HWANG’S TEDMED TALK
More information on Jason can be found at his Speaking.com webpage.
PRECISION, NOT BLOCKBUSTER
GRABOYES: One of the really important characteristics … is that often the disruptive innovation, at the beginning some people assume, well, this is some blockbuster brilliant new creation, but really, it’s often a lesser product than what’s on the market. It’s not as good, but it’s incredibly cheaper. An iconic example would be when Apple came out with its Macintosh. … Certainly, the Macintosh could not compete with the capabilities of an IBM mainframe or some of the other mini-computers that were out there, but it could do quite a bit, and it was really cheap. … [I]t’s now decades later and the Apple that sits on my wife’s desk can do things that probably the mainframe could never have done. …
HWANG: [T]his is one of the challenging problems that we ran into when trying to apply Clay’s concepts from the business world into healthcare. Because exactly the dilemma you had just tried to explain—it’s not actually a diminishing of quality. We had to really reframe what disruptive innovation looked like in healthcare because we would not really accept a decrease in quality. … In healthcare, that’s a death knell for a lot of disruptive innovations that perhaps could do something disruptive but just can’t match up in quality, and that’s unacceptable in most areas that we looked at. The term we came up with was precision. If you could come up with a more precise way of doing the work—in the case of retail clinics, it was precision diagnostics; instead of having the diagnosis filter through a doctor’s brain and all the knowledge that they have, if we could embed that into a simple-to-use diagnostic tool that gave you the answer right on the spot, well, that was a precise way of coming up with the same answer. That’s tied to a specific treatment, and then it becomes a very precise roadmap for care, almost like a recipe.
HOW TO UNSETTLE DOCTORS
GRABOYES: [I] had a conversation with someone from a … well-known national healthcare company. He was talking about a particular sliver of business … He said, “We have just done some exhaustive studies. … They’re going to be explosive whenever we release it. We were a little bit afraid of releasing it because what it showed was that everything in that space, the nurse practitioners score higher than the doctors, on every dimension.” … [The doctors are] not going to like that, but those were the data.”
THE IBM EXCEPTION
GRABOYES: There was one really interesting exception to what you said. You were saying that these are generally upstarts, new entrants into fields, but your book had one … the IBM PC. You’d made a point in the book that disruptive innovation almost never comes from large or established entities, and yet IBM somehow managed to break the mold on that. And they did it basically by building a PC unit, sending it off to another state—and I may be slightly exaggerating—but basically said, “Don’t tell us what you’re doing. Just tell us when it’s all done because if you tell us, we’ll stop you. Just do it.” …
HWANG: You’re actually alluding to the other reason why I love using computing as the introductory model for people to understand disruptive innovation. Because yes, there was one very major exception to that rule that incumbents always fell by the wayside when a new entrant came into the industry and came up with a better way of doing things, that exception being IBM. As you mentioned, we highlighted IBM in the book as the stalwart innovator that had somehow figured its way out of disruption time and time again, because not only was it a mainframe computer company that became a mini-computer company, it then became a PC company and now is really out of hardware largely, and it’s mostly a services company.
It has transformed itself time and time again. It remains a one of a few dozen companies that have done it at least once. From my recollection, it’s still the only company that I know of that has done it multiple times. It is exceedingly difficult to disrupt yourself—as we described this—and that is to compete with yourself by coming up with some autonomous business unit or an autonomous spinoff or some Skunk Works team that is allowed to operate independently, basically working as a startup within the mothership.
IS UBER A DISRUPTOR?
HWANG: I know there are colleagues of mine—I believe Clay also wrote that Uber was not a disruptive innovation. … I myself actually have always thought of it as a disruptive innovation. The question is, what is it disrupting? Was it disrupting taxi drivers? Well, you could make an argument, not really because you’re still using drivers. Maybe if Uber’s dreams of a self-driving taxi service, if that ever comes to fruition, that would be disruptive to traditional taxi drivers. The other argument is Uber was disruptive to the taxi licensing model and the dispatch model; that now you have an app that took over all of that, so now it’s all software driven and automated, and everybody was being directed to the most efficient point. I would argue that element of disruption absolutely makes me think of Uber as a disrupter. Yes, there is some debate here.
DISRUPTION IN HINDSIGHT
HWANG: Even though disruptive innovation is a theory that I and many others have looked at for quite some time and apply to a lot of examples, when we encounter one of these new ones, it can be difficult. I think one of Clay Christensen’s most famous misses was that he did not recognize the iPhone as disruptive when it first came out. … It was because we didn’t recognize the iPhone as a computer; we recognized it initially as a phone. Because that was the format it took, it was what we saw it as. As phones were just beginning to add on text messaging and photo capabilities and music players, we started to think, “Are they just packing in everything they can into this handheld device just for the fun of it,” because it’s really taking the shape of a classic sustaining innovation, which is you pack in more features and performance, and the product becomes more and more expensive and out of reach of more and more people.
We thought, “Well, as a phone, it’s not disruptive. It’s adding in these features that a lot of people don’t really care about.” A lot of people said, “Why would I want to take a picture with my phone when I already have my camera? The picture on the phone is so much worse in quality, why would I do that?” We thought it was initially a sustaining innovation in the phone market. An iPhone was really just the top-of-the-line phone that people who could afford it would buy.
Of course, the miss was it was really disrupting computers at the very bottom; it was a very portable, affordable computer that replaced a lot of the things that we used to have to head home and work on our desktops or laptops to do. Yes, I would argue that the Uber debate is probably similar, where some of it will just take time to figure out what is Uber really doing and what industry is it disrupting, and it may be something that we’re just not seeing.
DISRUPTIVE MEDICAL EDUCATION?
GRABOYES: [I] published a paper, co-authored with a doctor from Mayo Clinic, Arizona—Murray Feldstein. Murray and I were writing about something that was very much influenced by your book, which is on medical licensure, medical education. I think one of the areas where my prediction would be “Your book will eventually have hit it out of the park but hasn’t yet, at least in the United States,” is in the disruption of medical education.
You had fascinating models there of essentially restructuring medical education, something like the training programs that Toyota uses in its factories. Another of the podcasts I did earlier this year was with a great physician, Dr. Devi Shetty, CEO and founder of the Narayana system in India, which has gotten very close to many of the things that you discuss, and we talked at length about the future of medical education in India.
I suspect the model that you describe will come to be a dominant model, but in the United States, there’s an awful lot of resistance to changing the education model that we’ve had for basically 111 years or so.
HWANG: Yes, and you’re pointing to, again, a lot of the regulations and red tape that prevent disruption from really taking hold in the U.S. or really any area that has a fully developed, matured healthcare industry. It’s because, again, it’s very difficult to allow startups that come in to do things differently because the immediate response is, “You’re sacrificing quality here.”
I remember interviewing an executive who was working with Aravind Eye Hospital in India, which does cataract surgery and other eye surgeries for a very, very low cost. They were trying to import that model to the United States. And he said one of the biggest barriers that eventually proved insurmountable was the fact that in India, they were using healthcare professionals and healthcare support personnel that didn’t exist here or would never be allowed to do the things they were doing, based on their licensure and accreditation, in the U.S. that they were being allowed to do in India. … [W]hen I talk about regulations, I often point out that a lot of them are well-intentioned. You can see the reason why you wouldn’t necessarily want a non-clinician directing the activities and behavior of a clinical provider, because you want the clinical provider making the best clinical judgment, not necessarily being driven by any business needs. Again, well-intentioned, but again, it ends up putting a stranglehold in areas that we didn’t anticipate.
BASEBALL
Jason explains how he has a habit of moving to cities just as their down-in-the-dumps baseball team is about to win the World Series.
CLAYTON CHRISTENSEN EXPLAINS DISRUPTION
Here, Jason Hwang’s mentor and co-author, the late Clayton Christensen, explains disruptive innovation.
OTC hearing aids are a disruptor. I've mentioned I'm using Apple Airpods as hearing aids to my ENT/audiologist twice, and they are dismissive that they are OK. There is a market here for an audiologist to embrace OTC devices and charge for setup, etc. But other than Costco, I haven't found a provider to do that yet. Those "$64,000 Question" sound booths are expensive and $3000 for a hearing aid is a nice revenue source. Kardia mobile devices are a disruptor. To his credit, my electro-cardiologist told me to get a Kardia device to check my ECG (I have aFib), but if it indicated I had aFib, they would get out the "industrial-strength", "FDA-approved", ECG machine to double check it -- and get the billable hours....