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Innovating for the future.

Nearly every health care organization believes it innovates. Few, however, have the infrastructure for highly developed innovation.

It is unusual, for example, to see a specific budget for innovation or to find a strategy for nurturing innovators in the strategic plan. Look at the compensation system and there will likely be no reward for innovation. Attend a board meeting and there will certainly be metrics around financial performance and clinical quality. But where are our metrics for innovation? Although innovation occurs, it is informal and implicit.

Even the word innovation causes confusion. Although innovation is related to performance improvement, it is not the same and involves more than doing what we already do more effectively. Innovation can't even be limited to the actual medical service or product.

Many of the most powerful innovations may be in things such as the business model, business network (how you work with suppliers and other partners), patient experience, or other dimensions of innovation.

Innovation is really the art and science of how we evolve ourselves for the future. To do it well, we need to design systematic approaches and create a culture where innovation is explicit and imperative.

Fund innovation

Innovation can die of starvation unless carefully nurtured with both time and money. This is rarely easy to do. And, ironically, it is most important in the very times when it is most difficult--when an industry or organization is pressed economically.

The complexities and operational challenges within our health care organizations are great. So it is natural for our attention to be drawn to immediate needs and to put off investments in innovation for another day. Often we feel we cannot afford anything unrelated to the immediate needs of our current business.

A magnificent myth pervades our field, the myth of "innovation as extra." Health care is one of the few industries where it is common for organizations to have no budget for research and development (R & D) or, as we often now describe it, innovation and development (I & D).

An I & D budget is a separate, second budget set apart from the operational budget to fund the innovators and ideas that shape tomorrow's business. It embodies a different philosophy, may involve different people, uses different ways of measuring success and embraces greater tolerance of risk and expectations of return.

Fortunately we now have leaders showing us how to do this. One of the first hospitals to create a specific budget for innovation was Memorial Hospital of South Bend, Indiana. Every year it takes 1 percent of net operating revenues and puts it into a Center for Innovation.

The Center for Innovation comprises three innovation pathways:

1. Equipping all employees to function as innovators

2. Developing new business ventures

3. Working in community health (1)

A separate budget such as Memorial's accomplishes several important things for the physician executive.

First it protects innovation funds from disappearing into general operational needs. Secondly, and even more importantly, it makes possible the creation of a distinct philosophy for these funds. When ideas come up for consideration in operational budgeting, we often want assurances. Where else has this been tried? What were the results? What returns can we expect and by when? We are hesitant to fund those things that are risky or unknown because unknown potentials compete with known needs--even if these needs are of less long-term strategic importance.

Typically in our operational budgets we place known bets for businesses already understood in currently existing markets. In innovation we move into the unknown, although we can do this strategically. The approach is necessarily more risk-tolerant, entrepreneurial, and focused on attaining big wins rather than eliminating small losses. The innovation budget is our budget for the future. Although vastly smaller in terms of size, it is no less important than the operational budget.

Prototype innovation

The physician executive designing for innovation creates environments where innovation can be demonstrated inexpensively, rapidly and rigorously. This reverses the common pattern of waiting too long before doing anything, investing too much once we decide to act, and delaying an exit from those things we should discontinue.

Prototyping can be very simple. Walk into 2 South at Kaiser Permanente Roseville Medical Center, for example, and you see a whiteboard listing the various prototypes under way. As one of the hospitals engaged in the national Transforming Care at the Bedside initiative, they are creating a culture where nurses make instant changes from one shift to another.

"One test, one nurse, one day" is the core idea. At the end of the week they evaluate their prototypes and decide which ones to continue, refine or discontinue.

Some innovations have been simple, elegant solutions such as the Journey Home Board that provides a visual map in patient rooms of key milestones, physicians and appointments. Other prototypes address ubiquitous health care problems such as patient falls.

The unit at one time had the highest number of falls in the hospital, averaging one every two days. Now because of an innovation that came out of the prototyping process it has gone as long as 102 days with no patient falls. (2)

Prototyping can also be much more elaborate, even involving an allocated space and team within the organization. This is the case with the SPARC innovation program at the Mayo Clinic in Rochester, Minn. SPARC stands for see, plan, act, refine, and communicate.

SPARC is a live clinical laboratory dedicated to identifying, developing and measuring the impact of innovations in the ambulatory setting. Its mission is to lead innovation in health care delivery by incorporating design methodologies such as prototyping.

The SPARC innovation unit is, in part, a physical space comprising two sides of a corridor, one half of which is a support space and the other half a clinical practice space. This provides a tight coupling between the innovation and the real world.

Innovations are conceptualized, developed and evaluated as patient care is being delivered. Recently, for example, the metabolic clinic was lifted up and moved into the SPARC Innovation Unit to test the impact of an innovation related to decision making in chronic diseases.



SPARC is also a methodology and a dedicated team including a program coordinator, director of operations and design, medical director, director of research and an innovation core team consisting of designers, researchers and project managers.

There is much internal collaboration within the Mayo Clinic, such as information technology, facilities, quality, nursing, marketing and engineering, as well as external collaborations with industry, academia, topic experts and customers.

Prototyping is essential to SPARC. At times prototypes within SPARC may be built in as little as two days. The idea is to build a prototype just good enough to answer the question, but not over-invest in making it perfect on the first iteration. The very roughness of early prototypes encourages questions, interaction and the ease to discard what is not useful because little investment has been made. (3)

When we prototype, we build the future on a small scale. We create environments of inquiry, openness and curiosity. The way people interact around prototypes leads to breakthroughs. The prototype is not simply a means to demonstrate an innovation that is already complete. Rather it is a way of thinking and interacting, and the process itself generates the innovation.

Engage partners

Innovation occurs primarily on the interfaces between organizations or sectors that may seem so different as to be irreconcilably separate. Part of what limits innovation in hospitals, health systems and clinics is isolation and homogeneity. Physician executives who lead innovation must be able to integrate things that appear unrelated or even oppositional.

What happens, for example, when you put together the best of conventional medicine with one of the world's leading health spas? Such is the nature of the collaboration between the Cleveland Clinic and Canyon Ranch. (4)

Or imagine a medical clinic combined with the world's largest retailer of natural and organic foods. Columbia St. Mary's, a four-hospital system in Milwaukee, announced in 2005 that a Whole Foods Market will occupy the ground floor of its medical office building--54,000 square feet. (5)

Many other innovations are emerging through combinations of young and old, rich and poor, local and international, home care and institutional care.

Innovation is not about diversification, which can lead an organization out of its core business. Yet there is also a temptation to see too many things as unrelated and irrelevant. Much of what happens related to health in the future will not resemble the clinic, hospital or insurer of today.

Innovation was once an internal affair and could be done in relative isolation. Today isolation is the enemy of our ability to evolve for the future. Physician executives, with their dual clinical and administrative backgrounds, are in ideal positions to build partnerships. Some physician CEOs have already re-allocated their time and energy from the internal affairs of the organization into the external interfaces.

It is easier, of course, to focus on improving quality in what we already do in organizations. Yet as we are seeing with clinics in Wal-Marts and Targets or health plans through Costco, new connections and players are proliferating.

At the same time as we place more emphasis on transparency and clinical outcomes, these alone will not adequately prepare us for the future. We must also continually re-invent our form and pay attention to the places where others are entering health care.



Analyze innovation opportunities

One of the discouraging aspects of innovation the way it is currently approached is its ridiculously high failure rate. Only about 4 percent of innovations succeed, and this is true across geographies and industries. It may be possible, however to dramatically increase this--potentially to the range of 35 percent to 70 percent.

Pioneering work in this area is being done by Doblin Inc., a Chicago-based consulting firm that has worked with many of the world's largest companies in innovation strategy. Doblin categorizes innovation into 10 types and has analyzed innovation efforts across the types. Although most organizations focus their innovation on the product offering (see graph #2) the greatest value creation arises from innovations in the business model, networks, enabling processes, and customer experience (see graph 3)

Doblin also developed a proprietary algorithm for analyzing innovation activity in a particular industry or sector. From these algorithms they generate Innovation Landscapes[TM] depicting the areas where innovation is and is not occurring. A typical landscape involves hundreds of thousands, or in some cases millions, of specific data points.

The VHA Health Foundation commissioned Doblin to create landscapes specific to health care. With these detailed innovation patterns, we can see exactly where hospitals, managed care, physicians, pharmaceutical companies, medical equipment companies, home health care, complementary and alternative medicine providers and others are innovating and where they are not.

Physicians, for example, are improving, though admittedly from a very low historic base. Some innovation is emerging in the customer experience (see graph #4), but this may apply more to focused surgery centers that doctors own, rather than to general hospitals.

One of the highest rates of innovation is in pharmaceutical companies which are innovating at 3-5 times the rate of hospitals and physicians put together. Pharmaceutical innovation is also intensely complicated with more sophistication and layering (see graph #5)--almost certainly a result of their very high degree of regulatory oversight and compliance. Over time, this suggests that pharmaceuticals will "out-innovate" other parts of health care.

The full research and its implications for health care will be published by the VHA Health Foundation later this year. (6) With this data, the physician executive can innovate explicitly in the "valleys" and dramatically increase the likelihood of innovating in ways that succeed and return value to the organization.

Leanne Kaiser Carlson, MSHA, is a health futurist with Kaiser Consulting. She can be reached by phone at 303 659-8814 or by email at


1. Personal communication with Phil Newbold, CEO, Memorial Hospital of South Bend, Indiana.

2. Personal communication with Charles Meek, Department Manager, Kaiser Permanente Roseville Medical Center, California.

3. Personal communication with Alan Duncan, Medical Director of the SPARC Innnovation Program, Mayo Clinic, Rochester, Minnesota.


5. "Better Eats." Modern Healthcare, 35 (16), April 15, 2005.

6. For more information, contact the VHA Health Foundation at 877-847-1450.

By Leanne Kaiser Carlson, MSHA
Graph 1 Process for health service innovation

SPARC methodology


See: User research provides access to countless opportunities for better
ways of delivering care, through access to latent knowledge

Plan: A process of brainstorming, synthesis, and generation of
conceptual frameworks for solutions.

Act: Create prototypes based on conceptual solutions. Gather rapid
feedback from users.

Refine: Iterate prototypes. Gather data, both qualitative and
quantitative, on prototypes.

Communicate: Provide a case for dissemination throughout the
organization. Help leaders understand the importance and impact of the
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Article Details
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Title Annotation:Innovation
Author:Carlson, Leanne Kaiser
Publication:Physician Executive
Article Type:Author abstract
Geographic Code:1USA
Date:May 1, 2006
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