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
- Managers manage and workers work in hierarchical organizational structures.
- Leadership sets organization-centric targets and goals, g., you need to “hit your numbers.”
- Therefore, data is essential and is moved up to decision-makers in meetings for analysis and discussion.
- 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.
- Work is standardized as best practices. Workers are held accountable to do standard work by monitoring, measuring and auditing their performance.
- People are costs to be controlled and, if possible, it is best to replace people with automation and technology. Change is hard.
- “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.
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.
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?
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.
Now we can answer the question: How can we identify the right consultants and technologies? Here are your guidelines for making that decision:
- Understand the problem you seek to solve.
- If that problem is innovation, you won’t succeed by trying harder at what made you successful in the past.
- Specifically, Make/Standardize/Sell (see Table 1) is not the solution. It is not bad or wrong; just inappropriate to solve Sense/Respond/Adapt
- Understanding the characteristics of Sense/Respond/Adapt leads to success.
- 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:
- Identify what everyone from leadership to the frontline can do to create Sense/Respond/Adapt capability in any organization.
- Outline how successful innovation leaders make it safe and easy to balance Make/Standardize/Sell and Sense/Respond/Adapt inside the same organization.
- Describe what you could start to do now to Sense/Respond/Adapt and make a difference in 21st Century healthcare.