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.
- 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?
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.
- Never make big bets. Never buy big solutions. Don’t implement expensive technology or someone else’s innovations and Best Practices.
- 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.
- 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.
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).
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.
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:
- More access,
- To better, safer, more reliable care,
- 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?
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.
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.
- Why is healthcare unpredictable? Because our work is not standardized.
- Why is our work not standardized? Because we have too much process variation.
- 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.
- 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.
- 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:
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.”
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:
- Support current Make/Standardize/Sell capabilities
- Simultaneously enable organizations to Sense/Respond/Adapt to create new value products and services.
- 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.
This interview originally appeared in the SPEAKING.com 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.
We commonly hear that “implementing Best Practices” is one of the solutions for creating new value in healthcare. I recently came across a social media exchange describing research that shows: ‘it takes an average of 17 years for discoveries about best practices to become part of everyday clinical care.”
17 years?! Yes! It is a well-documented fact. Continue reading