WHAT IS DISRUPTIVE HEALTH TECHNOLOGY?
The term "disruptive technology" has been widely used as a synonym of "disruptive innovation", but the latter is more widely used, because market disruption has been found to be a function usually not of technology itself but rather of its changing application. Disruptive innovation, a term of art coined by disruptive innovation theory pioneer Clayton M. Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in a new market and later by lowering prices in the existing market.
An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.
Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.
Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge.
Indeed, thought leaders in disruptive innovation have long identified the innovator-to-investor step as the first of a set of resistive barriers in health care. As Clayton M. Christensen put it in a 2000 Harvard Business Review article co-authored with physicians Richard Bohmer of Harvard and John Kenagy of the University of Washington, “Powerful institutional forces fight simpler alternatives to expensive care because those alternatives threaten their livelihoods.” The article details the chain of formidable barriers facing innovators looking for approval and investment to bring new healthcare ideas to the marketplace: regulators who withhold approvals, professionals who create the licensing standards those regulators enforce, and insurance companies that approve reimbursements only for established, licensed procedures and technologies.
In teaming with Carnegie Mellon, Highmark has taken the unusual position of replicating the process of mining automobile insurance data to identify and solve critical problems in health care, along with a financial investment, so innovation can take a path around the traditional barriers that have often kept good ideas away from patient care. That data can help researchers sidestep these barriers by identifying the problem—and hence the market for an innovation—and then creating a solution, rather than the other way around.
If ever there was an industry in need of disruption, it is health care. Medical costs can be better contained and patient care can be improved. These ideas are complementary, not mutually exclusive. Careful, targeted, meaningful medical innovation is the key.