Redefining Success: Designing To Adapt In 21st Century Healthcare

Written by Dr. John Kenagy and posted on website on November, 24, 2017

Modern Healthcare has problems, and that’s our opportunity.

  1. All healthcare organizations are under pressure to maintain financial stability and some can’t. What if you had financial strength?
  2. A recent survey reported 85% of patients and providers say healthcare costs are disproportionate to What if your patients said, “My care is a great value!”
  3. Ninety-six percent of patients believe U.S. healthcare has problems. What if your patients said, “My healthcare system solves my problems!”
  4. An astonishing 80% of patients say their health has not improved in the last year. What if your patients said, “I have access to the Best Care! My health is improving! I can afford it and I love it!”

None of our great Centers of Excellence (CoE) can provide more access to the Best Care at continually lower cost. What if your organization differentiated itself by doing exactly that? You would become a Center of Value and Excellence (CoVE) and have competitive advantage in 21st Century healthcare.

How would that happen? I’ll explain… what is the surest path to success, 1 or 2?

  1. Management ideas, best practices, projects, consultants and technologies?
  2. Adaptive learning and internal innovation?

Most identify #1 as important, but see the key to redefining success is #2. Here’s why: most management ideas, best practices and technologies are readily available to be copied and implemented, and consultants will be overjoyed to have you pay them to do it.

Therefore, adaptive learning and internal innovation are your key sources of differentiation and competitive advantageSo, here’s what to do and not do…

  1. Don’t buy solutions! Our current system is perfectly designed to deliver all our woes. It’s a system problem to solve with no quick fix. We all have intelligent, talented, skilled, committed people. Why not empower them to create system solutions? Use Adaptive Design: the continuous improvement Operating System.
  1. Don’t Implement Best Practices! Multiply the power of your people and resources to develop your own new best practices. The goal is not to copy; it’s to be copied. That’s the objective of the Adaptive Design Online Learning System.
  1. Don’t do big, expensive projects! Think small, simple and safe; then, learn and In Adaptive Design, it’s one unit or service line (the Learning Line) that creates your first Center of Value and Excellence (CoVE).
  1. Don’t use consultants or technology except to solve specific, technical problems! Adaptive Design empowers your people (Learner/Leader/Teachers) to redesign the work, deliver the opportunity and then systematically replicate and scale
  1. Don’t implement solutions! Instead, leadership sets direction with a clear, consistent, meaningful Purpose (Ideal Patient Care), and then uses four simple rules to drive continuous improvement as part of everyone’s daily 

For example, an Adaptive Design Learning Line in a Midwestern community hospital just increased their HCAHPS scores 107%, and improved their Balanced Scorecard results from lowest to highest in the hospital, all in less than six months.

That’s success redefined: low risk, high reward, fast.

Seize the Initiative!

What: Going On Offense in the Chaos of 21st Century Healthcare Workshop

Timeline: Day 1

          8:00 am to 4:30 pm- Workshop (Lunch provided on site)

          5:00 pm to 7:00 pm- Dinner provided

         Day  2

                    8:00 am to 10:00 am- Workshop Review

Objectives:  What got you here, won’t get you there! This strategic workshop explores the transitional care space between acute/post-acute providers for opportunities to seize initiative and set a new line of departure for the 21st Century. For decision-makers from the C-Suite to the Frontline, workshop deliverables include how to rapidly:

  1. Develop self-diagnostic, self-sustaining systems that eliminate readmissions and maximize value across the acute/post-acute care continuum.
  2. Use three, real world, battle-tested, practical leadership tactics to immediately create competitive advantage in complex work environments: Commander’s Intent, the OODA Loop and Workforce Multiplication.
  3. Seize the Initiative! Move from defense to offense by enhancing awareness of opportunities in your community through actionable intelligence. Design, replicate and scale high value information and innovation systems that never stop increasing access to more effective, patient-centered care at continually lower cost.

Seize the Initiative” Detailed Workshop Description


This workshop is led by Dr. Kenagy in partnership with ABCM Corporation. If you are interested in attending or booking a workshop like this, please contact Dr. Samuel Stanton for questions at (641) 580-0562


Innovation: The Path to Superior OR Teamwork and Results

Printed in OR Managers Magazine for May 2017, Vol 33 No 5

Healthcare lags behind other industries when it comes to innovation. That’s partly because new treatments must be vetted for safety and efficacy, and partly because fee-for-service reimbursement sparked little incentive for creativity and efficiency. Under value-based purchasing, OR leaders have more opportunity to be innovative, but first they must understand what innovation is (and isn’t) and the ways in which they can promote it.

“Innovation is creating something completely new that doesn’t exist in the world,” says John Kenagy, MD, director of Kenagy & Associates in Longview, Washington, and a clinical professor of surgery at the University of Washington, Seattle.

Read the full article here


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How Health Care Can Innovate, Create Value

Successful organizations need to sense, respond and adapt.
Posted in H&HN on January 12, 2017 by John W. Kenagy, M.D.

Health care is an “attractive” industry. Everybody wants it. It is vital to people, families, neighborhoods, cities, states, countries and their governments. It therefore attracts an abundance of bright, motivated, caring people and some of the world’s most sophisticated technology.

Health care also attracts money. U.S. health care, in particular, has a great deal of financial resources and has attracted a continued inflow of capital. For example, U.S. health care spending was $3 trillion in 2014 and is predicted to consume 20 percent of U.S. gross domestic product in the next few years. That’s a lot of attraction.

But health care has a “value” problem. Managed care started in the United States in the late 1970s with the goal of providing better care at lower cost. Despite 40 years of dedicated effort using all these attractive forces and resources, everyone agrees we have a big value problem to solve.

I propose value in health care is easy to measure: more access to better, safer care, at continually lower cost. No large health care organization in America can consistently do that. If that’s the measure, despite our attractiveness, value has eluded us. We still struggle with the following questions:

  • Why, despite our great resources, does value remain so elusive?
  • How, learning from other industries, can we attract value rather than chase it away?
  • What does attracting health care value look like?

Relying on past success

Health care organizations, like those in every industry, suffer from what made them great. In the history of innovation, great capabilities can become disabilities when it is time to innovate and attract value. For example, take a look at the following lists of great, or formerly great, companies:

List 1 and List 2
Here is a difference: The list 1 companies were powerful leaders in their industries that failed to develop or attract simple innovations that list 2 companies, when they were smaller and weaker, used to create competitive advantage that changed their industry. They attracted value. When the list 1 companies discovered they were losing, they all failed to make a transition, even if it meant bankruptcy or extinction. They had great resources but failed to attract new value.

The companies on list 2 have profitability, customer satisfaction, staff engagement, innovation, growth and industry leadership; they attract value. List 1 companies attracted layoffs, downsizings, bankruptcies, closures and failure.

I studied this phenomenon working with professor Clayton Christensen as a visiting scholar at Harvard Business School. Christensen developed the theory of disruptive innovation — “great capabilities become innovative disabilities” is one of its principles. Perhaps that is why we fail to attract value in health care — our past capabilities have become innovation- and value-repelling disabilities.

But what are those value-repelling disabilities? And how can we create new, more attractive capabilities? The work of Stephen Haeckel, former director of strategic studies at IBM’s Advanced Business Institute, has helped me develop some “attractive,” strategic answers and solutions to our chronic value problems.

Improvement versus innovation

Organizations became great in the 20th century by developing capabilities to make, improve and sell products and services. They built hierarchical organizational structures to gather and analyze data, make decisions, implement solutions, cut costs and increase productivity. They implemented changes through projects, often using consultants, Lean/Six Sigma process improvement, new technology and training.

People were an important cost to control or eliminate. Key to success was standardizing work processes and holding people accountable to do their work as designed. Once the companies produced standardized products and services, companies expertly marketed and sold them to customers and end users.

Make/standardize/sell organizations are terrific at improving. They don’t waste time trying to reinvent the wheel. They just keep making that wheel better and better and better. If it works, don’t fix it.

But problems start to occur when it’s time to reinvent the wheel. Make/standardize/sell organizations know how to improve what they know how to do but find it almost impossible to do what they don’t know how to do, i.e., innovate. In Christensen’s database of thousands of companies, he discovered it was almost impossible for an established, successful company to take the lead in developing an industry-transforming innovation.

A recent McKinsey & Co. survey of CEOs across the world showed that 87 percent of them believed that “innovation is essential to our company’s future,” while an astonishingly small 6 percent were satisfied with their company’s innovation success. Make/standardize/sell companies have a hard time attracting innovation in any industry, not just health care.

Attracting greatness in 21st-century health care

The great health care organizations of the 21st century will make new choices that attract innovation. So what attracts innovation? Decades of well-accepted research across the globe and in many realms has shown that innovation requires a different set of capabilities: sense/respond/adapt.

Every successful startup has to sense, respond and adapt to succeed. My work has focused on the small number of successful make/standardize/sell companies that were also able to sense, respond and adapt: Toyota, Intel and Apple, for example.

Sense/respond/adapt requires different capabilities than make/standardize/sell does. Here are the characteristics of sense/respond/adapt success, whether in a new startup or an innovative venture inside a large, established organization:

  • A market or customer-centric value proposition focused on an unmet need. In health care, it’s easy: more access to better, safer care at continually lower cost. Leaders then translate the value proposition into a meaningful purpose to align the people attracting innovation.
  • A replicable, scalable, low-risk, high-reward system with these tenets: People with autonomy build mastery, simple rules match accountability to control, and self-managing teams rapidly prototype new value opportunities close to real-time work.
  • Sustainable, inspiring results that are low-risk, high-reward and fast.

Consider the case of the Mayo Clinic Health System. Mayo tested a sense/respond/adapt approach to diabetic population health at five different clinic sites. Within one year, the physicians in those clinics had improved their diabetic scorecard results by 122 percent compared with the cumulative results of the rest of the Mayo system.

That was a significant pay-for-performance benefit for the system, while the physicians gained the value of all the flexible, responsive teams that sense/respond/adapt thinking developed to support them. Four years later, the American Journal of Medical Quality (Jan. 11, 2013) documented that those sense/respond/adapt clinical teams continued to outperform the rest of their Mayo Clinic Health System peers.

Make/standardize/sell fails at innovation because it views the workplace as a machine with identifiable problems and implementable solutions. Innovation is seen as a technical “fix.” But innovation isn’t a mechanistic improvement because, by definition, it doesn’t exist. It’s new and yet to be discovered. Make/standardize/sell organizations are great at improving what they know how to do, but the data show that they find it almost impossible to do what they don’t know how to do. It is clear that value-driven health care is not a system fix, consulting engagement, new technology or implementation; it is something you attract value to and create.

The potential for innovation is everywhere. You have to attract its components and bring them together. Purpose; the ingenuity of people; simple rules focused on low-risk, high-reward discovery; and a safe place to work are the attractors. Once you start, it’s so attractive it’s difficult to get people to stop innovating to create new value.

Attraction creates the innovation, and the innovation closes the loop. Now, the parent organization has something new to make, standardize and sell. That’s the great advantage that the attractive 6 percent acquire. In the future of high-value health care, the choice is not either make/standardize/sell or sense/respond/adapt, it’s and.

That’s very attractive.

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Adaptive Design in Medical Education

Ohio University’s Heritage College of Osteopathic Medicine and OhioHealth Doctors Hospital in Columbus, Ohio are collaborating to explore creating Ideal Patient Care in both Undergraduate and Graduate Medical Education. Starting November 2016 in a single OhioHealth Doctors Hospital unit, the objective is to develop Adaptive Design throughout the hospital and simultaneously link to Ohio University’s medical student, resident and fellowship education programs.

For more information, contact us!


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Healthcare Innovation: Sense/Respond/Adapt series, part 3

Leading Healthcare in Value and Reliability

Parts 1 and 2 of this series showed how traditionally managed companies are Make/Standardize/Sell organizations – great at improving what they know how to do, but finding it difficult to do what they don’t know how to do. Innovation requires a different set of methods, skills, tools and a different level of thinking – Sense/Respond/Adapt.

This Part 3 is a high level view of how to create Sense/Respond/Adapt capability in any organization. Each step applies to both leadership and the frontline. The key to success is to take them together.

The first step is Awareness. Albert Einstein helps us:

“In the middle of difficulty lies opportunity.
The significant problems we face today require a different level of thinking
than we possessed at the time they were created.”

But are times really that difficult? Do we require a different level of thinking? Aren’t we OK? Can’t we just “try harder?” Take the following test and see. Score: 1 for Yes, 0 for No.

Screen Shot 2017-05-25 at 10.33.34 AM

  • Score = 5 or higher: These are classic Make/Standardize/Sell concerns and actions. You are doing the same thing over and over again and expecting different results. You need a different level of thinking to create new value.
  • Score = 3-4: If you are struggling, times are getting more difficult. Start thinking differently.
  • Score = 0-2: If you are succeeding, you are unusually adaptive. Keep it up!

If you scored 3 or higher, the data is clear, you are tightening down the screws on the Make/Standardize/Sell healthcare business model. This current level of thinking leads to increasing complexity, change and cycles of profit and loss.

To help with your Awareness, consider the following slide. Do the outcomes illustrated seem familiar? Was Jack Welch correct?

Screen Shot 2017-05-25 at 10.35.58 AM

The second step is to make it safe and easy to balance Make/Standardize/Sell and a new Sense/Respond/Adapt level of thinking in the same organization. It’s a step of what not to do that starts with leadership, but needs frontline engagement particularly for #3.

  1. Never make big bets. Never buy big solutions. Don’t implement expensive technology or someone else’s innovations and Best Practices.
  2. Don’t try harder at what hasn’t worked in the past. This is a difficult rule to follow because past experience deeply embeds conventional mindsets and methods in both leadership and the frontline.
  3. Don’t fight the current system. Your goal is not to eliminate Make/Standardize/Sell but rather to add Sense/Respond/Adapt. Leadership and the frontline need to work together to pick a place to start to work differently – small, simple, and safe.

The third step is to know HOW. Don’t reinvent the wheel. Adaptive Design is a low risk, high reward, Sense/Respond/Adapt system that is easy to replicate and scale.

Screen Shot 2017-05-25 at 10.36.23 AM

Unlike conventional consulting, Lean, Six Sigma and other project-based, project-reengineering methods, Adaptive Design is a self-sustaining system for designing, doing and improving complex work, both within and across disciplines. Here’s how:

Sense – Adaptive Design is highly sensitive to changes in complex work environments that open the door to innovation. It systematically creates an atmosphere of anticipation focused on identifying opportunities to improve.

Respond – It is an innovation system that accomplishes three important things:
1. Develops the capacity to rapidly identify, investigate, act on and validate new ideas.
2. Creates a flexible, responsive circulatory system for those ideas,
3. Grows a sustainable, purpose-driven culture that thrives on continual change.

Adapt – Adaptive Design builds institutional resilience by giving everyone a clear understanding of the circumstances that either favor or threaten the success of your organization and, simultaneously, linking that information to action as part of everyone’s daily work.

Consider the case of the Mayo Health System. Mayo sought to improve Pay-for-Performance metrics and Diabetic Population Health by having physicians meet Diabetic Scorecard goals. The following slide shows two groups of physicians: Mayo physicians using Adaptive Design (in blue) compared to all Mayo Health System physicians (in red).

Screen Shot 2017-05-25 at 10.38.41 AM

Sense – As you can see, conventional Make/Standardize/Sell management (e.g., meetings, consultants, projects, Lean, incentives, technology, Best Practices, monitoring, audits, etc.) failed to improve performance in either group prior to starting Adaptive Design.

Respond – Adaptive Design started (small, simple and safe) in five Mayo Health System clinics and hospitals in Minnesota and Wisconsin.

Adapt – In three months the Adaptive Design Mayo physicians separated their performance scores from all the rest of the system. At one year, Adaptive Design physician-led team scores were 122% higher than the average of all Mayo physician scores.

These clinics also sustained and increased this Population Health success. Four years later (as documented in American J. of Med. Quality, 11 Jan 2013), Mayo did another study focused on a bundle of therapies to improve hypertension in diabetics. Owatonna, one of the five Adaptive Design Clinics, had the lowest initial blood pressures (blue bar) and the greatest percent improvement with the new therapies (gold bar) in the entire Mayo Health System.

Screen Shot 2017-05-25 at 10.38.57 AM

In summary, Make/Standardize/Sell is great at improving what we know how to do. But the data also show that even the best struggle to do what we don’t know how to do – e.g., create more value in healthcare. That requires Sense/Respond/Adapt capability.

In Adaptive Design, the definition of “more value” is simple, clear, consistent and easily measurable. You prove you are value-driven when current resources generate:

  1. More access,
  2. To better, safer, more reliable care,
  3. At the same or lower cost.


What are your thoughts? I propose it is likely you work in a Make/Standardize/Sell organization. What do you Sense? How could your organization add a Sense/Respond/Adapt component?


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Healthcare Innovation: Sense/Respond/Adapt series, part 2

Why, How and What

Three weeks ago, Part 1 of this series described how, for the last forty years, we have invested heavily in consultants and technologies to make healthcare more predictable and manageable. The problem is, for all those billions spent, healthcare’s predictability and manageability have declined. Therefore, I proposed the solution is not more consultants and technology, but, identifying the right consultants and technologies.

But how would one differentiate the wrong from the right? That’s a change of mindset that requires awareness of new options and possibilities; an open mindset that can sense a new opportunity. Although that sounds easy, traditionally managed organizations find it difficult to challenge their status quo mindsets. The objective of this series is to take down that barrier and make it easy for you to sense. Only after this first step can you move on to respond and adapt, and really make a difference.

Sense/Respond/Adapt is “adapted” from the work of Stephan H. Haeckel, introduced in his book Adaptive Enterprise in 1999. As Director of Strategic Studies at IBM’s Advance Business Institute, Haeckel characterized most successful companies as Make/Sell organizations; efficient, predictable and excellent at improving.

Despite their success, Haeckel discovered Make/Sell companies commonly failed to innovate. Those few that did succeed in unpredictable new business environments had different characteristics, specifically, the capability to Sense/Respond to new opportunities. They succeeded because they were more adaptive.

I discovered Haeckel’s work last year and found it insightful to adapt his Make/Sell and Sense/Respond concepts to help solve our healthcare innovation problems. So, with a bow to Stephan Haeckel, let’s compare Make/Standardize/Sell to Sense/Respond/Adapt in the complex, dynamic, unpredictable world of healthcare.

Make/Standardize/Sell grew out of the successes of the Industrial Revolution. It’s a great way to manage and grow an efficient enterprise in any relatively predictable environment.

Table 1 – Characteristics of Make/Standardize/Sell Success

  1. Managers manage and workers work in hierarchical organizational structures.
  2. Leadership sets organization-centric targets and goals, g., you need to “hit your numbers.”
  3. Therefore, data is essential and is moved up to decision-makers in meetings for analysis and discussion.
  4. Problems and opportunities are then prioritized, advice obtained from experts and consultants, and solutions implemented by projects, initiatives and technology, commonly using process improvement and reengineering methods like Lean, Six Sigma or PDSA.
  5. Work is standardized as best practices. Workers are held accountable to do standard work by monitoring, measuring and auditing their performance.
  6. People are costs to be controlled and, if possible, it is best to replace people with automation and technology. Change is hard.
  7. “Hitting your numbers” is essential. In difficult times, layoffs, downsizing, consolidation, mergers and acquisitions restore profitability.

That’s the data-driven world of Make/Standardize/Sell. Sound familiar? It works in predictable and complex-technical environments. So, what could go wrong with these data-driven, machine-like, mindsets, methods, strategies, and structures? Well…

  • What if the work environment is constantly changing and data cannot be sent up fast enough to analyze and predict, then quickly have a solution brought back down to implement effectively in that changing workplace?
  • What if the work itself is inherently unpredictable? As Peter Drucker said in the Harvard Business Review, “The hospital is, altogether, the most complex human organization ever devised.”
  • What if your solution requires something new, g., an innovation? There is no data to be driven by because new doesn’t currently exist. You don’t implement innovations; you make them.

As Haeckel and many others have shown Make/Standardize/Sell organizations struggle to innovate. The elite, resilient, highly adaptive companies I studied as a Visiting Scholar at Harvard Business School (e.g., Toyota, Intel, Apple) all developed a Sense/Respond/Adapt capability to make the innovative difference.

For example, all successful start-ups are, by nature, Sense/Respond/Adapt organizations. Sense first, because you can’t move unless you first become aware.

To see, to hear, means nothing. To recognize (or to not recognize) means everything.
– André Breton

But to sense and not respond also means nothing, so it’s Sense/Respond/Adapt that makes the difference.

Screen Shot 2017-05-25 at 10.26.40 AM

Innovative organizations become expert at completing and repeating this cycle as quickly, simply and easily as possible. Here’s a graph that helps with context.

Screen Shot 2017-05-25 at 10.27.01 AM


The X- axis shows methods and technologies that extend from known (for example, we know how to do total hip operations and read EKG’s), through emerging to new methods and technologies. New means “did not previously exist.” That’s an innovation. For example, a simple, affordable, efficient, effective Electronic Health Record is a technological innovation that still does not exist. That’s a great adaptive innovation opportunity.

The Y-axis shows value ranging from known (for example, we know how to help patients and make money doing more total hip operations and reading more EKG’s) through emerging to new value. Changing from “volume-driven” to “value-driven” healthcare is an innovation we are still struggling to develop. That’s a great adaptive innovation opportunity.

Most successful Make/Standardize/Sell organizations are good at improving what they know how to do, and find it almost impossible to do what they don’t know how to do, e.g., innovate to create new value. Only a few (~5%) Make/Standardize/Sell can successfully innovate. Consider the following lists. What’s the difference between a List 1 company and a List 2 company?

Screen Shot 2017-05-25 at 10.27.21 AM


We can all see differences in products, innovation, customer satisfaction, employee engagement, profitability, bankruptcy, survival, etc. There is another difference you may not have noticed. The List 1 companies were the leaders in their industry that failed to compete with simple innovations, developed, not by new start-ups, but by the List 2 companies when they were successful Make/Standardize/Sell companies.

All six companies were excellent at improving their Make/Standardize/Sell capabilities. The difference was the List 2 companies’ ability to also Sense, Respond/Adapt to create new value.

Screen Shot 2017-05-25 at 10.27.43 AM

Now we can answer the question: How can we identify the right consultants and technologies? Here are your guidelines for making that decision:

  1. Understand the problem you seek to solve.
  2. If that problem is innovation, you won’t succeed by trying harder at what made you successful in the past.
  3. Specifically, Make/Standardize/Sell (see Table 1) is not the solution. It is not bad or wrong; just inappropriate to solve Sense/Respond/Adapt
  4. Understanding the characteristics of Sense/Respond/Adapt leads to success.
  5. Those characteristics will tell us what to do and enable us to identify the right consultants and technologies for success in 21st Century healthcare innovation.

Sense/Respond/Adapt is not rocket science. It is just different. It is low risk, high reward, and rapid way to innovate.

What are your thoughts? What are your experiences? Do you work in a Make/Standardize/Sell organization now? Can you Sense/Respond/Adapt? Can your organization Sense/Respond/Adapt? What’s the difference? Is it safe for you to challenge your organization’s status quo? What are your ideas?

The next edition of Healthcare Innovation: Sense/Respond/Adapt, Part 3 will focus on the success characteristics of Sense/Respond/Adapt organizations and will give you the information you need to:

  1. Identify what everyone from leadership to the frontline can do to create Sense/Respond/Adapt capability in any organization.
  2. Outline how successful innovation leaders make it safe and easy to balance Make/Standardize/Sell and Sense/Respond/Adapt inside the same organization.
  3. Describe what you could start to do now to Sense/Respond/Adapt and make a difference in 21st Century healthcare.


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Healthcare Innovation: Sense/Respond/Adapt series, part 1

More Consultants and Technologies? Or the Right Consultant and Technology?

 My years as a physician, healthcare executive, academic researcher and patient have taught me one thing for sure: in acute care medicine and management, although our predictions and estimates are usually correct, we really don’t know what’s going to happen tomorrow.

If you are a clinician, you know as soon as you say, “Boy, it sure is quiet tonight,” the ambulances from a crash of a busload of hemophiliacs arrive. For an executive, it’s always another unexpected cost, drop in volume, unfunded mandate, regulation, or audit that disrupts our best-laid plans. We live in an unpredictable world because unexpected, unpredictable things happen.

Most of us intuitively know that is true – but why is healthcare so unpredictable?

Maybe it’s because we don’t have enough rigorous, data-driven management systems in place (e.g., Lean, Six Sigma, Activity Based Costing, Compliance and Control); or we don’t have enough technology (e.g., EHR’s, Data Warehouses, Enterprise Resource Planning systems).

Are tighter management and more data systems the answers? How would we know? One option is to do a Root Cause Analysis. So let’s “Ask ‘Why’ five times,” using the mindset of a traditional executive decision maker.

  1. Why is healthcare unpredictable? Because our work is not standardized.
  2. Why is our work not standardized? Because we have too much process variation.
  3. Why do we have process variation? Because we haven’t gathered and analyzed enough data, done enough projects/Kaizens and implemented enough standard work, e., not enough project-based, process reengineering and control.
  4. Why not enough data, projects and implementations? Because that’s a lot of work requiring many experts doing lots of work to help reengineer processes.
  5. Why are too much work and not enough experts & technology a problem? Because we haven’t hired enough expert consultants and bought enough technology to standardize Best Practices and eliminate variation throughout the organization.

So, the answer must be: hire more consultants and buy more technology. Wrong!

This is exactly what we have been doing at steadily increasing rates and costs for the last forty years. Despite all our hard work and the diligent efforts of many committed intelligent people, no large healthcare organization can consistently provide more access to better, safer care at continually lower cost. That is the value-driven healthcare problem we must solve.

I’m not optimistic that “trying harder” with more consultants and technology is the answer. I see our current situation analogous to Dilbert’s:

Dilbert image

Think about your healthcare organization. Is Dilbert a cartoon, or a documentary?

If it is a documentary, you work in an organization that frequently hires consultants and uses technology to eliminate variation and implement new, machine-like, efficiency systems.

If that fits, don’t feel alone. These traditional “Mindsets, Methods, Strategies and Structures (M2S2)” are present in established organizations, both in and outside of healthcare.

In my four years as a Visiting Scholar at Harvard Business School, I discovered our data up/implement down M2S2 was built on management systems born in the Industrial Revolution of the late 19th Century and then brought to fruition with more consultants and technology in the mid 20th Century.

Now, the problem is our 21st Century world is much more complex, dynamic, and unpredictable, particularly in healthcare. So, should we hire more consultants, buy more technology and try harder?

The evidence shows that is not the right question to ask. Why? – Let’s put it this way: buying more forks will not make it easier to eat soup. It’s not more; it’s the right consultants and technology that will make the difference.

Here’s why (a quote from my book in Chapter 8),

“Exact medicine can no more be achieved than exact history. Because no human story with a foreordained plot can be anything but a fiction.”
Joseph Schumpeter

Traditional 20th Century consultants and technologies eliminate variation and increase control to effectively Make, Standardize and Sell profitable products and services. The objective was to implement “the plot” of standard work, compliance and control. In the simpler world of the Mid-20th Century, it worked and success was built on “Make/Standardize/Sell.“

In the unpredictably complex world of today, the compliance and control “plot” has become a fiction. We are great at improving what we know how to do, but find it almost impossible to adapt and do what we don’t know how to do: e.g., organically innovate. Harvard Business School and many other researchers’ data are clear; 95% of established organizations fail to innovate outside the framework of their current success. They fail to Sense, Respond and Adapt.

This is not a fight; Make/Standardize/Sell systems are still important, but most managers are pretty good at doing that already. It’s just that success in 21st Century, value-driven, healthcare requires a Sense/Respond/Adapt capability that traditional consultants and technology reengineering processes and standardizing work can’t deliver.

Like exact medicine, exact management can no more be achieved than exact history. Key to success in an unpredictable work is the ability to Sense, Respond and Adapt.

So, it’s not more; it’s the right consultants and technology. Fortunately, the history of innovation is clear about what the right consultants and technologies will do. They will:

  1. Support current Make/Standardize/Sell capabilities
  2. Simultaneously enable organizations to Sense/Respond/Adapt to create new value products and services.
  3. Understand the secret of success: it’s not either/or, it’s


What do you think? Do we need more consultants and technology or the right consultants and technology? And, if so, how would you identify them?

This is the first in a series of Agile, Adaptive Leadership Innovation M2S2 Guides designed to help you identify the right consultants and technologies to better manage in the present and Sense/Respond/Adapt to make the future.  In the next we explore the characteristics of Make/Standardize/Sell and Sense/Respond/Adapt in complex organizations.


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Adaptive Design Has “Teal” Characteristics

Many people sense that the way healthcare is run today has been stretched to the limits. And it’s not just a healthcare problem.

“In survey after survey, business people make it clear that in their view, companies are places of dread and drudgery, not passion or purpose. Further, it applies not to just the powerless at the bottom of the hierarchy. Beyond a façade of success, many top leaders are tired of the power games and infighting; despite their desperately overloaded schedules, they feel a vague sense of emptiness.”

This a quote form The Future of Management is Teal; a fascinating history of the evolution of human organizations from 10,000 years ago to the present day by Frederic Laloux in Strategy+Business.


Improving Excellence in Healthcare with Dr. John Kenagy

This interview originally appeared in the Blog

Dr. John Kenagy is a well-respected physician, executive, academic researcher and lecturer with a unique view of healthcare. Forbes magazine featured Dr. Kenagy as “the man who would save healthcare.”

Success in 21st century healthcare requires more than excellence,
it requires an organization to succeed seeking value rather than volume.

SPEAKING.COM: What are some of the common characteristics shared by successful healthcare organizations?

KENAGY: Excellent care is obviously important, but Centers of Excellence (CoE’s) have been around for a long time – it’s a 90’s term and times have changed. Success in 21st century healthcare requires more than excellence, it requires an organization to succeed in seeking value rather than volume. They work differently than traditional CoE’s, therefore I call them Centers of Value and Excellence (CoVE’s). Characteristics of a successful healthcare CoVE’s include:

a. A clear, consistent, meaningful and patient-centric Value Proposition. 

b. Flexible, responsive, interdisciplinary care teams with everyone working at the top of his or her license.