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Sunday, March 20, 2011

Creative destruction and enduring institutions

One of my colleagues once stated "You cannot have change if everything remains the same". While obvious, it does underscore a truth which is not often explicitly recognized. Change means that someones cheese will be moved and perhaps someone's ox will be gored.

There are alterations in technology and process which result in incremental changes in what we do or how we do what we do. They may represent improvements (or not) but these are not really innovations. True innovation invariably means we change what we are doing in some fundamental way. Innovations are by definition disruptive of someone or something. They may make some process simpler, faster, or cheaper which is a good thing for the public at large, but these "improvements" are always disruptive to someone or something which has profited from the previous, more expensive or difficult approaches.

What are the characteristics of enduring and unchanging entities? They could be perfect and require no change. That is unlikely. They could be entities which benefit from consistent incremental improvements where not disruptive innovations are needed. Although not as unlikely as the perfect institutions, history does not seem to be marked by many of these entities. No, it appears that everything can be the target of disruption from innovation.

At the simplest level, innovation can come from outside an entity or come from within. When an entity such as a business looks to the future, they can have many different perspectives. A start up does not care if it disrupts the current business environment. They likely can best survive by causing a reshuffling of the deck.  However, a successful business is much more risk averse since it likely views that any innovation that disrupts its profitable product lines should be viewed as a threat. Threats also can come from either internal or external sources. The reality is no matter whether the source is internal or external, it will be viewed as a threat. What this means is that for the most part, innovations which disrupt present business practices will not come from current successful players.

What does this mean for medicine? It is simple. Disruptive innovations which will change the health care delivery business will not come from mainstream health care delivery systems. We simply perceive that we have too much immediately at stake to want to disrupt our current business models. However, the most enduring institutions are ones that realize that they need to reinvent themselves on a regular basis, embarking upon creative destruction, in order to survive in the long run. Can we get past our fear of change to become the drivers of innovation or will we follow the common pattern of being displaced by innovation and change?

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