The Christensen Institute's new guide aims to help leaders make difficult business model transformation decisions.
Many companies still make important decisions without the benefit of not only data but also a strategy—fitted to the best business model for innovation and consistently executed and updated for the best results. To quote the film Apollo 13, it's a bad way to fly, and it happens every day.
"Fail fast, fail often" is the storied mantra of tech startups that has filtered into the innovation arms of major corporations, joining another widely practiced approach: building the plane while flying it. But should healthcare stakeholders address significant transformation this way? A new decision guide from The Christensen Institute delivers a firm 'no' while giving healthcare executives a "three-step strategy guide and decision tool" to address innovation.
Specifically, the guide—Improve or Transform—helps leaders choose the right business model to address value-based care (VBC) and drivers of health (DOH), the institute's term for social determinants of health. And while the guide focuses on integrated health system case studies, it includes a key callout for payviders, with added insight from HealthLeaders' interview with Ann Somers Hogg, the guide's author and the Institute's senior research fellow in healthcare.
First, a breakdown of the guide and decision tool, which Hogg describes as a first-of-its kind "to help leaders determine the right path for their business model redesign."
The first three steps
While business model development is not one-size-fits-all, there is a single question leaders must answer: is the objective to improve or transform? "One strategy is likely to lead to more success in the short run (improve), while the other will lead to greater success in the long run (transform)," per the guide.
The answer depends in part on understanding context, which helps leaders avoid "unknowingly applying a misaligned and misdirected strategic approach to their model." Executives can uncover context via the Institute's three-step strategy guide:
- Articulate beliefs about the future, the mission, and the vision.
Executives can complete this step via a "thorough scan of current and emerging market trends, consumer behaviors, competitor dynamics, and futurist predictions" that helps articulate "three to five beliefs about the future."
The guide notes that step one "should also affirm that the existing mission and vision are still
the purpose and desired destination for the company. If this is no longer the case, leaders should dedicate time to articulating these grounding principles."
- Map the business model and determine its viability.
Executives can then map their business model using a "four-box framework" consisting of the organization's value proposition and its RPPs:
- Profit Formula/Priorities
The guide notes: "To assess the business model's continued viability, leaders should look at both current and projected revenues and expenditures to accurately evaluate whether their model has a viable trajectory."
Adding that VBC business model maturity varies, the guide advises leaders to assess where their organizations are and where they want to be before moving to step three.
- Determine the strategy for change while accounting for risk.
Whether to improve or transform is a question that doesn't get asked unless an organization believes that its current business model lacks long-term viability, sustainability, or the ability to deliver what the market wants.
As part of completing step three, the guide offers a peek down the improve or transform decision paths. To advance DOH priorities, for example, an organization may be able to choose the improve path. This would mean that "the measures of success of an organization's DOH efforts, how the efforts are funded, and the people and processes needed to carry out the new value proposition are fairly close to those that are currently delivered."
Alternatively, transformation is the path "when leaders are seeking to deliver on a new value proposition that is fundamentally different from that of their current core business model"—an approach that requires an independent team (autonomous business unit, or ABU) that can create and execute the new model.
The decision tool
Steps one and two of the guide are the basis of the Institute's innovation strategy decision tool (image below), which leads executives to an improve-or-transform inflection point, with future steps depending on the viability of the organization's current business model.
Source: Improve or Transform: Choosing the right business model to deliver health. The Christensen Institute.
Improve or Transform extends findings from Institute's white paper You Are What You Treat, released in May 2022 to introduce why DOH requires business model transformation.
Specific guidance for payers
The key takeaways section of Improve or Transform notes: "Providers and payviders have a core capability that should be leveraged in their innovation efforts, which payers do not: real-time clinical data. Leaders in these organizations should recognize this critical asset as something to leverage when developing new growth engines."
Speaking with HealthLeaders, Hogg adds: "Payers should seek partnerships with providers who are leveraging clinical data to power value-based solutions. They can also ensure that the providers they own (because they all own at least one now) are leveraging this data to provide higher value care."
“Payers should seek partnerships with providers who are leveraging clinical data to power value-based solutions. They can also ensure that the providers they own (because they all own at least one now) are leveraging this data to provide higher value care.”
Ann Somers Hogg, senior research fellow in healthcare, The Christensen Institute
Laura Beerman is a contributing writer for HealthLeaders.
Innovation requires the right business model, a complex determination for organizations to make.
Improve or Transform from The Christensen Institute provides a three-step strategy guide and decision tool for the process.
In an interview with HealthLeaders, author Ann Somers Hogg provides specific additional advice for payers.