Setting the stage for innovative action. (Innovation).

THE CONTINUED GROWTH of health care as a leading component of the U.S. economy points to an urgent need to bring innovation to our organizations, operations and services.

Business luminary Peter Drucker once said that a firm has only two priorities: to innovate and to market. In other words, we need to develop new sources of value and then apply them to a customer's needs.

Innovation is often thought of as the inspired acts of individuals, working against a tide of corporate conformity.

Another model imagines a dedicated group of nonconformists who seek to break out of past assumptions and constraints. This "discontinuity" model supposes that true innovation cannot take place within existing structures and must come from the outside.

However, while most organizations get the importance of innovation, few are able to get it done. Innovation has to translate into a set of concrete business practices.

Incumbent managers, especially successful ones, often have the hardest time thinking the unthinkable and harnessing the forces of systematic, strategic innovation.

We have arrived at a situation where physicians are too busy, hospitals are too complex, practice too highly regulated, insurance companies too powerful and individual patients too confused with the system for us to be able to continue without adopting innovative ways of caring for patients.

Process of innovation

Creativity occurs daily at all levels of an organization.

Innovation--creativity applied--is not necessarily a function of technology. Innovation depends on individuals and committed groups who want to better their working conditions, improve their productivity and enhance the products or services they deliver.

Innovation is a significant tool for motivating employees and lowering costs of doing business. The alternative to innovation, routine and stagnation, is often a precursor to economic failure.

Management's role

Accenture, an international consulting firm, recently conducted a global research project interviewing more than 800 executives in the private, public and non-profit sectors.

Innovation and entrepreneurial behavior were considered key to the overall success of their organizations. (1) However, only 40 percent thought their organizations are sufficiently innovative today. The study found:

1. 75 percent of executives from medium and large organizations blame their lack of innovation on internal structural problems.

2. 55 percent of the leaders of larger organizations fault their company's slow decision-making process.

3. 71 percent of executives say aversion to risk and fear of failure stops people in their organizations from acting like entrepreneurs.

4. Over half of the executives admit that their organizations lack entrepreneurial role models and that leaders don't encourage taking risks.

Organizations develop operating rules that can stifle innovation, inhibit innovators and punish people who try to make changes. In some cases, this is a natural, unintended side effect of the management controls that we necessarily create to sustain and administer our organizations.

Creating a working environment that encourages innovators can create risks for managers. We have often seen top managers who encourage programs that stimulate new ideas and practices in the organization, while middle managers, concerned with meeting rigid operational goals, stifle the same employees who step out of line.

Some managers are easily threatened by change. Change can create excessive demands on worker's time and energy, impose impossible resource demands or threaten existing authority.

In doing innovation audits for an organization, it is easy to discover groups of employees discouraged by multiple rejections of their efforts to improve things who have literally given up trying to change anything.

Fortunately, we know a lot about what kind of individuals and what corporate processes foster innovation. You don't have to wait for random inspiration or hire idiosyncratic geniuses in order to create a climate that fosters innovative thinking and dynamic change within your institutions. (2)

Creating the appropriate conditions, allowing groups time to produce new ideas, allocating resources to innovative efforts and training teams to use innovative processes can all stimulate the pace of change within a health care organization.

New ways of thinking

Business leaders must accept that a commitment to innovate is also a promise to tolerate business practices that are challenging, threatening and uncomfortable.

A stimulating view of this can be found in the recent book by Robert Sutton, who teaches at the Stanford University School of Engineering, called Weird Ideas That Work. (3)

He explains the differences between process engineering, which utilizes many small innovations to produce greater efficiency, and product innovation that is dependent on market forces and involves greater leaps of creativity.

Sutton's book has many good examples of companies that have made a commitment to develop the creative abilities of managers and employees. It also examines the impact this can have on a company's growth and profitability.

Managers, in his view, must learn to tolerate uncertainty, accept risk and be willing to accept failure. This is clearly difficult, particularly for managers who have built their own careers on stability, reliability and predictability.

Innovators often have difficult personalities that don't fit the corporate culture. They are seen as pushy, intolerant and challenging. Innovators don't fit the mold precisely because they are trying to create a new one.

Sutton suggests that companies interested in fostering innovation may need to change their usual patterns of hiring, motivating and rewarding employees. Looking for people whose ideas are edgy, challenging and uncomfortable are not the usual criteria a manager seeks when interviewing new employees.

Yet these people may be just what your group needs to boost it to a new level of functioning. Business history is filled with stories of outsiders whose dissatisfaction with the status quo helped to create new industries and products.

At the same time, don't overlook your current employees as sources of significant innovation. Given opportunity and encouragement, many long time employees show remarkable creativity and willingness to lead change.

Putting the team in place

There are many strategies to successfully encourage innovation and overcome resistance to change within organizations. Some basic steps include:

1. Establishing an innovation management team

2. Conducting innovation audits

3. Actively seeking sources of innovation both inside and outside the company

There is a real gap, however, in translating ideas into successful programs and building competence in continuous innovation. Overcoming this gap is the result of a continued emphasis on training employees, both new and old, in the desirability and practicality of innovative work practices.

Along with that training, the company should have access to technological resources that enhance exploration, experimentation and testing. This requires teamwork.

Teams need to include members from multiple departments to coordinate integration and adoption throughout the organization. Teams also must include employees from multiple levels within the organization to communicate at the senior management level and reinforce new methods by using traditional levers of management.

Innovation should be tracked in the organization like any other project or activity. The goals, timetables and team members of an innovation project may be more flexible than a standard team.

Innovation is a great team builder because it elicits enthusiasm creativity and a sense of shared mission among team members. These teams can be highly motivated.

Innovative tools

Tools are available to assist organizations willing to invest in innovation as a strategy.

Begin with an assessment of current activities and attitudes within the organization. Most companies will already have some ongoing efforts. It is part of the human condition to seek to improve our working conditions and decrease wasted efforts.

Identifying these existing individuals or groups and encouraging their growth can shorten the implementation time significantly.

Equally important is deciding what projects to support. Scenario analysis, decision trees and economic value calculations can help this effort. Sometimes consensus must be supplemented with insight. Not all risks can be quantified, nor all rewards foreseen.

As with all management initiatives, clearly established goals for innovation should be communicated throughout the health care organization. Goals vary among organizations but could include:

1. Lower health system and individual cost

2. Improve flexibility, increase customization and personalization of the medical interaction

3. Increase control over process by the patient and the physician

4. Develop new markets and increase market penetration of existing products or services

5. Improve compensation systems that reflect corporate and individual goals

Once an organization begins to flex its innovation muscles, positive side effects will occur.

Employees will begin to search for new opportunities and creative solutions to problems. Managers will develop and reward teams for extraordinary accomplishments, creating beneficial effects on morale, compensation and retention. Leadership will be challenged to provide resources for new undertakings and will be forced to actively focus on the future.

Perhaps the most impressive result of adopting innovation as part of the culture of the organization is the stimulating effect of challenging people to come up with new answers to problems. This puts the fun back into their work and energizes the workplace.

References

(1.) Liberating the Entrepreneurial Spirit, Accenture, 2001. http://www.accenture.com/xd/xd.asp?it=enWeb&xd=ideas\entrepreneurship \entre home.xml

(2.) Kao, J. Jamming -- The Art and Discipline of Business Creativity New York, N.Y., Harper Collins, 1996.

(3.) Sutton, R. Weird Ideas That Work. 11 1/2 Practices for Promoting, Managing, and Sustaining Innovation. New York, N.Y., The Free Press, 2001.

(4.) "The Productivity Growth Spurt in the United States," Remarks by Governor Edward M. Gramlich Before the International Bond Congress, London, U.K. February 20, 2001 www.federalreserve.gov/boarddocs/speeches/2001/20010220/default.htm (current as of May 2002)

RELATED ARTICLE: Example of Innovation

Patient visits

Physician/patient interaction is stuck in the traditional mode. The patient visit is modeled on the classic "consultation" that consists of an interview, a physical examination, a series of diagnostic tests and a discussion with the patient about the findings, treatments and prognosis. This lengthy interaction has become a luxury that neither patients nor physicians can afford.

Many of the components of this model can be replaced with interactions of equal or higher quality at a lower cost and shorter time requirement.

Innovation allows us to create new units of care. This includes restructuring the elements of the health care interaction into segments that are scalable and can be shifted in time.

Common waiting rooms, physician's offices, and testing or treatment areas are designed to maximize physician productivity with a continuous stream of patients through a limited number of time slots.

Creative configuration of medical offices allows multiple simultaneous streams of patients through functional areas. Some interactions proceed at patient-centered pace, such as history taking, disease education or pre-op instruction.

Patient education

Patient education today demands significant amounts of a practitioner's time, is not compensated and varies in quality.

Printed material can be converted to animated presentations and Web-enabled. This information is inexpensive to maintain and can be highly effective in modifying demand for services. It's useful for educating patients with complex diseases and it improves compliance.

Rising costs of malpractice and "defensive practice" can be addressed by quantifying a patient's level of competence in understanding and following medical recommendations.

Also, patients in a pressured office visit often cannot recall the details of their interaction with the physician. Now health care organizations can deliver this information by telephone, Internet or printed handouts.

Customization is also available based on patients' age, language and other important considerations. Pre-operative counseling can be done in a quantitative fashion that reduces opportunities for miscommunication and tests patient comprehension.

Singapore Biopolis

A good example of a platform for innovation is Singapore's BioPolis project. While many countries have identified biotechnology as a core driver of future economic growth, Singapore is one country that is putting its money where its mouth is.

With the drive to develop the biomedical sciences industry, Singapore is increasingly becoming a popular location for biomedical sciences companies as they penetrate Southeast Asia.

Singapore has a strong university and corporate research base and pro-business climate. It has also placed emphasis on the protection of intellectual property rights. Scheduled to be up and running from the third quarter of 2003, Biopolis is a 170,000 square meter facility that will gather some of the biggest names in the biomedical world, complete with state-of-the-art facilities and a full spectrum of support services.

Biopolis will become a center of talent and research in Asia, propelling Singapore into a hub position for the biomedical sciences industry in the region.

Anytime, anywhere health care

The ability to access health services 24 hours a day from almost any location would be a great improvement for physicians--and a disaster for providers.

From a patient care viewpoint, a constantly available medical practice operation should be able to increase efficiency, decrease waiting time and potentially decrease morbidity.

Patients who seek advice, prescriptions or scheduling in the evening can be handled by centralized service personnel in a call center that have been delegated this responsibility from a number of practices.

Real-time follow-up of urgent and emergent conditions can prevent serious morbidity. This is available from a Patient Relationship Management System, automated e-mail and voicemail.

Geographic limitations can also be overcome. National referral centers (Dana Farber, Sloan Kettering) are now offering second opinions and cancer treatment consultations online, directly to patients and through their own physicians.

Providers in small communities can be backed up by national research centers using digital consultation or telemedicine.

This will create a national market in diagnostic and therapeutic services that may lower the system-wide costs and improve service. Current state and federal barriers to interstate practice are being addressed by several professional organizations.

Gary Melter, MD, MBA, FACPE is with The HealthCare Group, Inc. in Fort Lauderdale, Fla. He can be reached by phone at 954/728-8567 or by e-mail at [e-mail].

John Kao, MD, MBA, is managing partner in Kao & Company and is known for pioneering new approaches to corporate innovation, developing ventures, and thinking imaginatively about the future. Kao is also author of Jamming, a BusinessWeek bestseller translated into 20 languages. He can be reached by phone at 415/561-2420 or by e-mail at [e-mail].