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First Look – Using Innovation Centers to Reduce Emerging Technology Solution Risk

The Problem: Emerging-Vendor or Large Legacy-Vendor Solutions – Which Is Best?

As healthcare is being transformed with new digital technologies, several emerging technology solutions are being developed and funded to enable successful care delivery. The digital healthcare market is seeing a decline in funds from venture capitalists[1], which likely signals their caution to invest in new start-ups relative to the number of companies currently in the market. The emerging vendors represent vendors using new technologies and approaches to solve operational challenges that providers face as they focus more on preventive medicine. These companies add a layer of acquisition risk to providers because they have a higher probability of failure over the near term. Even if these companies succeed, they may be acquired by legacy vendors that have a tenuous record for successful acquisitions.

Large vendors are continually drawn to the trillion-dollar healthcare market. The industry is ripe with examples of large nonhealthcare companies failing in their efforts to create successful products (e.g., Google Health[2] and Microsoft HealthVault[3]). Even large Fortune 100 companies have a track record of failure for launching healthcare partnerships to compete in the emerging technology market (e.g., Microsoft Amalga and GE Caradigm[4]). Large vendors can fail as often or as fast as emerging-technology vendors, which poses a risk for providers seeking emerging technologies to solve their operational and financial pain points. How do providers create an investment strategy for emerging technologies that factors in the potential for failure with the initial implementation efforts of these solutions?

The Solution: Innovation Centers Provide Risk Mitigation for Emerging Technology Solutions

Providers can fund and implement innovation centers to help mitigate the risk for testing and implementing emerging technologies. Several organizations have robust innovation centers, and many not only partner with emerging vendors but also create solutions they later commercialize for the market (e.g., UPMC, Mount Sinai, and Intermountain Healthcare). Innovation centers provide an environment for controlled experimentation and evaluation of emerging technologies. The scope of innovation center activities can also include medical devices, pharmaceutical development, and precision medicine. Many provider organizations establish a venture capital funding organization to supplement the innovation center. This funding can be used to support emerging-technology partnerships or the development of internal healthcare solutions that may or may not be patented or commercialized.

The success of innovation centers is associated with organizations’ cultures, integration and adoption success models, and executive support. Organizations with cultures that readily adopt and execute change have the most success with innovations. But as we all know, change management is challenging for most organizations. The ability to create models to implement and extend the use of the innovation solution in an organization is also a key foundation for innovation center success. In many cases, the innovation solution may be oriented to a specific operation and not the entire enterprise, which reduces risk. Lastly, innovation centers cannot be successful unless the executive team is on board and supports the innovation center. This is more likely to occur if the chief innovation officer reports to the CEO.

The Justification: Reduce Risk and Create an Early-Adoption Culture

Organizations that have established innovation centers are likely to reduce their risk for adopting emerging technologies that enable new healthcare-delivery capabilities. The risk is further reduced when organizations create a model for implementing new solutions and change management functions that are needed to drive successful adoption. Innovation centers can pursue solutions via vendor partnerships (legacy or emerging vendors), or they can develop digital technologies with their own teams in highly controlled environments. Either way, organizations can establish a path for success for their digital healthcare projects while also reducing their risk.

The Players: An Example of Legacy- and Emerging-Vendor Digital Risk

One example of digital health risk for organizations is the advancement of NLP for generating physician notes and extracting discrete data to support procedure coding. Microsoft and Nuance have announced a partnership in this space. Meanwhile, emerging vendors are driving adoption of their solutions in provider organizations (e.g., Suki). Who should you trust to deliver, legacy vendors or emerging, innovative vendors?

Success Factors

  1. Provider organizations should create or continue to support their innovation centers with the highest level of executive support.
  2. Innovation centers must establish trust with the provider staff to deliver and support innovative digital solutions and support high levels of adoption.
  3. Innovation must be established as a foundation of the provider culture to best position the organization for success as healthcare-delivery transformation proceeds.

Summary

Healthcare organizations will be challenged to successfully adopt new digital healthcare solutions that are rapidly meeting emerging operational needs. In this environment, we are seeing legacy vendors either create or partner to create new digital solutions for these needs. On the other hand, we are seeing emerging vendors who are driving market innovations with digital technologies. Will Microsoft and Nuance be more successful in delivering solutions than emerging vendors such as Suki? Will Comcast and Independence Health Group (i.e., Quil Health) be more successful in providing patient engagement healthcare support than emerging vendors such as Luma Health, TigerConnect, or Relatient? Or should providers create their own solutions? An innovation center can establish the best approach for success relative to the organization’s culture and budget. Establishing a close working relationship between the innovation center and the organization’s operations will likely yield many successes in the adoption of new digital technologies.