Content area
Full Text
Coupling technological advances with appropriately matched business models is the right prescription for our ailing health system.
ABSTRACT: Disruptive innovation has brought affordability and convenience to customers in a variety of industries. However, health care remains expensive and inaccessible to many because of the lack of business-model innovation. This paper explains the theory of disruptive innovation and describes how disruptive technologies must be matched with innovative business models. The authors present a framework for categorizing and developing business models in health care, followed by a discussion of some of the reasons why disruptive innovation in health care delivery has been slow. [Health Affairs 27, no. 5 (2007): 1329-1335; 10.1377/hlthaff.27.5.1329]
IT IS ALMOST REQUISITE that any discussion about the future of health care begin with a reference to the unsustainable growth rate of U.S. medical spending. Charts and graphs expound on health care's accelerating share of gross domestic product (GDP), depicting a voracious beast that threatens to swallow what little money remains for other vital services. And yet, although deliberations about how to curb this dramatic increase in spending are imperative, a related, but equally important, question is often lost amid these debates.
In this paper we attempt to address this other side of the coin. Instead of asking how we can afford health care, we instead ask how we can make health care more affordable. We present a conceptual framework from the world of business administration that explains how other industries have coupled cost-reducing technologies with innovative business models to deliver increasingly affordable and accessible products and services. We call the process that drives these advances "disruptive innovation," and we believe that it is a necessary component to creating a high-performing health care system that is available to all.
Defining "Disruptive Innovation"
The theory of disruptive innovation helps explain how complicated, expensive products and services are eventually converted into simpler, affordable ones.1 Exhibit 1 portrays the performance of a product or service, which gradually improves over time. However, there are actually two different trajectories of performance improvement in every market, depicted in the graph by the solid and dotted lines.
The solid lines depict the continual improvement of a product or service that is introduced by companies over time. Although these innovations can be...