Selecting an Innovation Strategy

New Perspective

Selecting an Innovation Strategy
by Paul Plsek, MS, Paul E. Plsek & Associates, Inc.; Former Member, Innovations Exchange Editorial Board

By Paul E. Plsek, MS, Paul E. Plsek & Associates, Inc.; Author, Accelerating Health Care Transformation with Lean and Innovation: The Virginia Mason Experience; Former Member, Innovations Exchange Editorial Board
Innovation offers many potential benefits to heath care organizations, including improvements in the patient care experience, better health outcomes, increased market share, reductions in costs, and improved ability to attract and retain highly qualified staff. Given the importance of innovation and its potential benefits, an organization should plan the process of innovation in a way that reflects a deliberate strategy. In general, the selection of an innovation strategy should be based on the answers to three key questions:

In what focus areas do we want to innovate?
Where do we want to be on the innovation curve?
What is our internal strategy for generating and executing innovative ideas?

Focus Areas

A health care organization is unlikely to have the time and resources required to be innovative in all areas. When selecting an innovation strategy, it is therefore important to choose focus areas for innovation, selecting from activities such as new models of care delivery, new lines of business, novel revenue sources, partnership arrangements, organizational development, and internal processes and workflows. Although clinical innovations are outside the scope of the Health Care Innovations Exchange, an organization also could pursue innovations in areas such as basic research, treatment protocols, surgical procedures, or medical devices. Options for further refinement of the innovation strategy include focusing on clinical conditions or activities (e.g., cancer care, primary care), patient groups (e.g., elderly patients, executives), or geographic regions (e.g., Florida, the southwestern United States). Here are some examples:

One organization might decide to create new lines of business for executive health—including development of new revenue sources, partnership arrangements, and models of care delivery—without trying to be innovative with regard to standard treatments and procedures.
Another organization might focus on internal innovation aimed at reducing the cost of standard care, with attention to organizational development, internal workflows, and patient-centered delivery of services.
A third organization might seek to be innovative in providing patient-centered care, as well as in clinical areas such as cancer-related basic research, treatment protocols, and surgical procedures.

Innovation Curve

Another important part of selecting an innovation strategy involves deciding whether to be a true innovator or to wait and adopt an innovation after it has been introduced successfully in other settings. In his widely cited book, Diffusion of Innovations¹ (first published in 1962), Everett M. Rogers used a bell-shaped curve to illustrate the adoption of innovations, and divided the population of innovators in a given topic area into five groups, using roughly one and two standard deviations above and below the average as category boundaries. The Rogers model therefore suggests that 2.5 percent of the total population of innovation adopters are the true innovators (or “first movers”) who generate new ideas. Early adopters (or “fast followers,” 13.5 percent of the population) are among the first to pick up an innovation and try it themselves. Most people, however, wait to see if the innovation will prove to be useful; these constitute the early majority (or “industry best-practice adopters,” 34 percent) and the late majority (34 percent). Finally, the “laggards” (16 percent) are the last to come on board. When the cumulative number of adopters is plotted over time, the result is a classic “S curve” that represents slow initial adoption of an innovation, followed by a period of rapid spread, then a leveling off as adoption of the innovation approaches the saturation level.

An organization that wants to operate in the early part of the innovation curve can choose to be a first mover, a fast follower, or an industry best-practice adopter, all of which are valid strategies. Each strategy has potential benefits and risks:

The first mover may benefit by earning a reputation as a true innovator, capturing increased market share, and attracting top-quality staff. However, the first mover also runs the risk of investing in something that may not work, and payment and reimbursement may lag far behind.
The fast follower (early adopter) avoids investing in bad ideas (which get weeded out by first movers) and can bolster its reputation and its share in a local market by being the first adopter in a region. However, to identify promising innovations, the fast follower must do extensive environmental scanning and networking to learn what first movers are doing. Again, payment and reimbursement may lag behind new practices.
The industry best-practice adopter uses a conservative strategy, applying innovations that have been tested elsewhere. This approach involves waiting until an innovation has been identified as an industry best practice, which offers the advantage of investing only in proven ideas and learning from others’ experience. This strategy can save time and lead to solid performance, but makes it difficult to claim a reputation as an innovator. Also, an organization using this approach may miss out on early payoffs and benefits, including the ability to promote staff engagement.

An organization might choose to pursue two of three of these strategies in different target areas. For example, an organization might seek to be the first mover in basic research and surgical procedures, to be a fast follower of ideas for patient-centered care, and to be among the industry best-practice adopters of new internal processes and workflows. In any case, competitive market factors may influence an organization’s decision to do something that is truly innovative and potentially impressive, and to accept the risks involved in getting out in front of competitors.

Internal Strategy

The third consideration in selecting an innovation strategy involves deciding how to generate ideas and execute innovative practices. The key question is the extent to which the organization will pursue an innovation as a centralized effort versus a decentralized activity. The possible approaches span a spectrum that runs from innovation that is a separate function directed by a central part of the organization, to innovation that is fully integrated into the daily work of front-line leaders and their staff. Different considerations arise along the spectrum:

On the centralized end of the spectrum, an organization might have an innovation center that comes up with ideas, proves the concepts in pilot areas selected to maximize the chance of success, and then packages successful ideas for line leaders to implement more widely. If that handoff doesn’t go smoothly—perhaps because line leaders see the ideas as coming from the central program, without their input—promising innovations may not get widely implemented within the organization.
In the middle of the spectrum, an organization might have a central innovation-facilitation program that coaches and works alongside line leaders in a joint effort. In this approach, ideas may originate either from the central program or from the line leaders. Here, the potential drawback is that if goals and expectations are not well aligned, the central program and the line leaders could end up pursuing incompatible approaches, thereby undermining the innovation effort.
On the decentralized end of the spectrum, line leaders and staff are expected to initiate and develop innovations, perhaps with some help from a small central resource that offers a limited amount of training and assistance. In this approach, however, innovative ideas must compete with the demands of the day-to-day work; thus, minor innovations may win out over really big ideas that could have a greater impact.

Given this wide range of options, it is important for an organization to decide how it is going to be innovative. An innovation strategy can be initiated within any level—by senior executives, middle-level department leaders, or frontline staff. Because any strategy requires focused attention and resources, influence and power play a role in obtaining support for innovation efforts. With a top-down strategy, senior executives and the board of directors must exert influence at lower levels of the organization to engage middle managers and front-line staff, thereby gaining support for sustainable innovation. With a bottom-up strategy, front-line leaders must exert influence at higher levels to get enough organizational focus and resources to ensure that innovations will succeed.

Action Steps

An organization seeking to cultivate a culture of innovation should consider all of the options outlined in this article. By choosing preferred focus areas for innovation, deciding where on the innovation curve to concentrate innovation efforts, and developing an internal strategy for nurturing innovation, a health care organization can define an overall innovation strategy that is suitable for achieving the organization’s goals.

About the Author

Mr. Plsek is an internationally recognized consultant on innovation in complex organizations. A former research engineer at Bell Laboratories and director of corporate quality planning at AT&T, he now operates his own consulting practice and is the developer of the concept of DirectedCreativity™. His health care clients have included the National Health Service (NHS) in England, Kaiser Permanente, the Veterans Health Administration, the SSM Health Care System, and the Mayo Clinic. Mr. Plsek is the Chair of Innovation at the Virginia Mason Medical Center (Seattle), an innovator-in-residence at MedStar Health (DC–Baltimore), Director of the NHS Academy for Large-Scale Change (UK), a former senior fellow at the Institute for Healthcare Improvement, an active research investigator, a popular conference speaker, and a former member of the Innovations Exchange Editorial Board. He is the author of dozens of peer-reviewed journal articles and seven books, including Creativity, Innovation and Quality; Edgeware: Insights from Complexity Science for Health Care Leaders; and Accelerating Health Care Transformation with Lean and Innovation: The Virginia Mason Experience.

Disclosure Statement: Mr. Plsek is an independent management consultant who advises health care organizations on innovation strategy.

¹ Rogers EM. Diffusion of innovations. New York:Free Press of Glencoe; 1962.

Last updated: December 04, 2013.