Are you tired of the word “disruption?” Some are. We are inundated with the trendy terminology in lectures, conferences, podcasts, and most of all in descriptions of new companies or services. Each new entrepreneur touts their company as a disruptor for the purpose of company brand-building and founder lore. Disruption has been gospel to describe changes in the tech industry, and now every other industry is embracing the term “disruption.” (asamonitor.pub/3l5RNK6; asamonitor.pub/3yQmXdy). As a result, the term can be overused, misused, and watered down (asamonitor.pub/3yQmXdy). Nonetheless, the original theory of disruptive innovation has value that we cannot ignore. It is an influential model useful in understanding the process of market competition with new products and services, and it describes how large, established firms may fall during this process. It provides a framework to understand and approach upcoming changes in a particular industry from the entrance of new technologies or business model organization. As anesthesiologists, we should understand and utilize this original model to evaluate new technologies and new approaches we see in our specialty. Many have already used this framework to describe novel approaches in anesthesiology, but it is important for every practitioner to contextualize new technologies and approaches with the accurate lens of disruptive innovation versus the trendy nomenclature found in daily business headlines (Singapore Med J 2019;60:108-9; Anesth Analg 2015;120:1155-7; Anesth Analg 2015;120:1158-62).
Back to basics: The Clayton Christensen description of disruptive innovation
What is disruptive innovation? It is a theory described formally in 1997 by the late Harvard Business School Professor Clayton Christensen, in which a smaller, less-resourced company offers a novel but more affordable product or service targeted at the low-end of the existing market (The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. 2015; The Innovator’s Prescription: A Disruptive Solution for Health Care. 1st edition, 2009). These smaller firms end up obtaining a foothold of demand among an often neglected set of customers to eventually displace a strong incumbent company in the same industry. Take smartphones, for instance. The modern smartphone can conduct the functions of a laptop computer with reduced price and arguably twice the portability, thereby giving individuals who may not purchase and use a laptop the ability to “compute” at the same level. Some smartphone owners may not even end up buying a laptop at all as the functions of smartphones reach the reliability of laptops and may take over the customer base of major laptop manufacturers. Disruptive innovations usually begin in low-margin market segments or even among neglected customers where low prices are a prerequisite. Then the technology adoption expands upmarket to typically higher-paying customers who reap the rewards of lower-prices for comparable quality. As higher-paying customers become converts to the new the technology, the disruptive company can eventually usurp customers from existing, incumbent, competitors.
Most disruptive technologies have been described in the digital high-tech sector. Christensen originally described the process with the trajectory of personal computers (PCs) – a disruptive technology that offered lower margin and more affordable products than large mainframe computers. The low price of the PC eventually gained a foothold in the lower end of the computing market, created entirely new customer sets, and it ultimately displaced the mainframe computer in the majority of the market. Thus, when we label a technology as “disruptive,” it can’t be merely novel and innovative to improve the way consumers normally use products or services. Disruptive technologies need to create new customers altogether. Take cell phone cameras, for instance. At first, cell phone cameras were lower cost and lower quality than digital cameras, but they created a new group of digital photographers. As the camera quality improved, adoption spread upmarket to attract not only digital camera buyers but those who would purchase single-lens reflex (SLR) cameras as well. Contrary to how many view disruptive innovation these days, according to Christensen’s original theory, disruptive innovation is a process rather than an individual technology or service – although the originating technology may catalyze the process of disruption (asamonitor.pub/38QruCe).
It’s not enough to just have a disruptive technology to realize disruptive innovation; it must be coupled to a disruptive business model as well. According to Christensen, disruptive technologies must be able to transition one of three forms of business models – solution shops, value-added processes (VAP), or facilitated networks – into another form.
- Solution shops are companies or firms that diagnose unstructured problems and solve them with multidisciplinary expertise and intuition. Examples include management consulting firms for business strategy and chronic pain clinics for complex etiologies of pain. Solution shop businesses commonly bill for the costs of the inputs (fee-for-service pricing).
- VAPs are entities where repeatable and controllable processes are used to solve structured problems thereby reducing overhead prices, such as robotics in automobile manufacturing raising engine reliability or the treatment of streptococcal pharyngitis with a rapid test and an algorithmic antibiotic regimen to move treatment out of the emergency rooms and into the office or retail clinic. VAP processes can be algorithmic and follow a standard operating procedure and thus open avenues for automation technologies to obviate resource-intensive steps. A transition to a VAP often requires an introduction of a disruptive technology that can make outcomes for a particular process predictable and with comparable quality to effectively lower the overhead costs of that process. Uniquely, VAP businesses largely bill for the value of the outputs (transparent pricing).
- Facilitated networks create a platform for a new marketplace to emerge and are often priced with a recurring membership pricing model. Such examples are Amazon Prime in the retail marketplace, or One Medical’s primary care network in the medical space.
The Table illustrates the differences between solution shops, value-added processes, and network facilitator businesses across retail and medical examples.
What will disrupt anesthesiology?
Health care, including anesthesiology, still operates largely with a solution shop business model. Assessing the patient’s comorbidities in relation to anesthesia, optimizing the patient’s health for surgery, and developing a custom anesthetic plan require the intuition and expertise of an anesthesiologist or a CRNA and fees are assessed in a fee-for-service manner. Kain et al. describe innovations such as the Perioperative Surgical Home as a potential disruptive innovation in anesthesiology (Anesth Analg 2015;120:1155-7). Yet, this innovation itself needs to articulate a specific revenue and pricing model to spawn a disruptive process – in this case, either a transparent price or a membership pricing model to organize care coordination from the preoperative to the post-discharge epochs. There are instances where anesthesiology may be able to add value to its services by transitioning certain standard activities from a solution shop business model to a VAP, allowing the potential for transparent pricing of outcomes. There has been a recent shift to focus on value-based medicine, as cost has become an important topic of consideration. Generally, value can be enhanced either by increasing the quality or decreasing price while keeping quality constant (N Engl J Med 2010;363:2477-81). Anesthesiology can naturally focus on the latter given its already high level of quality and near six-sigma outcomes for ASA Physical Status 1 and 2 cases (Ann Intern Med 2005;142:756-64). However, it often requires disruptive technologies to catalyze that transition. Focusing on particular surgical service lines and pathways, disruptive innovations can steer solution shops toward VAPs. Enhanced Recovery After Surgery (ERAS) pathways fit this transition quite well. ERAS pathways have strict inclusion criteria for the patients; they use articulated pathways to make the anesthetic processes repeatable and reliable and utilize repeatable postoperative management algorithms. Such a transition was successfully described in cardiac surgery at the Mayo Clinic, where they used information technology to segment cardiac surgery patients into a VAP for the service line. With this method, the authors demonstrated a decreased length of stay by one day and a 15% reduction in total cost (Health Aff (Millwood) 2014;33:746-55). This marked some of the beginning experiments to introduce bundled and transparent pricing in anesthesiology. Technologies that scale transitions from solutions shops to VAPs are ripe to spark disruptive innovation in our field (Anesthesiol Clin 2021;59:12-21).
How do we apply the framework?
Many will describe their innovation as disruptive. However, just changing the direction of the field is not enough. If you want to contemplate and analyze an innovation as truly catalyzing disruptive innovation, you must judge the innovation with the following questions in mind:
- Does the innovation focus on a problem in a low-margin area of anesthesiology with decreased costs and thus open increased access and new customers?
- Does the innovation fundamentally change the business model from a solution shop to a value-added process or to a facilitated network?
- Is the innovation priced appropriately for the type of business model it is pursuing?
If all three of the answers align to “yes,” you may be seeing the tectonic plates of disruptive innovation move the field in a novel direction.