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Disruptive innovation: Does the theory work in healthcare?

June 25th, 2014

by Kent Bottles

As the uncertainty and anxiety about how to respond to healthcare payment reform increases daily, many hospital leaders turn to Clayton Christensen, a Harvard Business School professor, for guidance.

In "The Innovator's Prescription" and in many keynotes, Christensen proclaimed how "disruptive innovation" can ambush successful organizations that ignore how new technology creates cheaper alternatives. In one of the many stories he tells to support his theory, he describes how mainframe computer manufacturers did a good job selling and refining their product. However, they were blind to customers' desire for personal computers, which eventually replaced the mainframe and caused many company failures.

Christensen provides a theory of disruption that gives hospital leaders and physician executives a road map for how they need to respond to change brought on by healthcare reform and the transition from fee-for-service to value-based payment programs.

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It is not only healthcare that has been influenced by this analysis. The New York Times' 2014 Innovation Report summarized how leading newspaper needs to change. "Disruption is a predictable pattern across many industries in which fledgling companies use new technology to offer cheaper and inferior alternatives to products sold by established players. ... Today, a pack of news startups are hoping to 'disrupt' our industry by attacking the strongest incumbent--The New York Times."

But what if Christensen's theory is just plain wrong?

Harvard historian Jill Lepore in an upcoming New Yorker article titled "The Disruption Machine: What the Gospel of Innovation Gets Wrong" provides a devastating critique of Christensen's theory. If "The Innovator's Prescription" or one of his other books was handed in as a term paper in one of Professor Lepore's Harvard classes, he would receive a failing grade.

"Disruptive innovation as a theory of change is meant to serve both as a chronicle of the past (this has happened) and as a model for the future (it will keep happening). The strength of a prediction made from a model depends on the quality of the historical evidence and the reliability of the methods used to gather and interpret it. Historical analysis proceeds from certain conditions regarding proof. None of these conditions have been met," Lepore wrote.

All hospital leaders and physician executives should read Lepore's article. The following are just some of her main objections to the disruptive innovation theory of change:

  • Christensen's disruptive innovation analysis of the disk-drive industry is faulty. The companies he identified as disruptive went out of business, and the firm he thought was challenged (Seagate Technology) thrived.
  • Christensen's example of how cable-operated excavators were disrupted by hydraulic excavators is flawed.
  • Christensen's theory, which he states is predictive, flopped when he launched the Disruptive Growth Mutual Fund that failed to pick stocks that went up.
  • Christensen's method of research cherry picks case studies and is "a notoriously weak foundation on which to build a theory."

Lepore's conclusion should make all of us in healthcare pause before we decide to map the future of our hospital systems with Christensen as our only guide:

"Disruptive innovation is a theory about why businesses fail. It's not more than that. It doesn't explain change. It's not a law of nature. It's an artifact of history, an idea, forged in time; it's the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it's blind to continuity. It makes a very poor prophet," she wrote.

Kent Bottles, M.D., is a lecturer at the Thomas Jefferson University School of Population Health and chief medical officer of PYA Analytics.

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