Tuesday, December 3, 2013

A Positive Spin on Disruptive Technology

Our readings this week painted a pretty negative light on disruptive technology. It was portrayed as unprofitable to leading manufacturers and unwanted by existing consumers with unruly effects to the industry's status quo. Essentially, disruptive technology is a wily trouble maker for profitable industries. My experience with the simulation demonstrated how disruptive technology can unwind a profitable existing company whether it tries to pacify the new technology or fully embrace it as the future of its profits.

Yet, not everyone feels the same way. One notable example happens to be a organization right under our noses: a Heinz Endowment product called the Carnegie Mellon University Disruptive Health Technology Initiative (DHTI). This initiative is a collaboration between CMU, Highmark (a dominant health insurance company in the area), and the Allegheny Health Network (a network of Pittsburgh-area health care providers and facilities). The purpose of this joint effort is to "create an initiative aimed at increasing the affordability, simplicity, and accessibility of health care."[1] 

The website for DHTI makes a point to embrace the often negative impacts of disruptive technology. It emphasizes that the disruptive nature "allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill... Because these lower tiers of the market offer lower gross margins, they are unattractive to other firms moving upward in the market, creating space at the bottom of the market for new disruptive competitors to emerge."[2] Certainly given the financial payment structure for health care that essentially pays for quantity of care rather than the quality of care and the many issues surrounding access to care, health care is a ripe field for disruptive technology.

CMU's DHTI aims to identify disruptive technologies for Highmark and Allegheny Health Network to capitalize on to bring much needed cost reductions and quality improvements to the health care industry. At first glance, one would question why these entities would ever willing join such a partnership. It is an interesting position for Highmark and Allegheny Health Network to take because disruptive technologies have the power to take down the established and thriving players in the market. However the time for this partnership could potentially not be better. These organizations could follow the advice of our readings and create a spin-off company to compete in this area in the form of an accountable care organization (ACO). An ACO is a coordinated network of payers and providers with aligned financial incentives to improve quality, reduce cost, and increase care coordination that receive additional funding for reducing cost in the form of a shared portion of their annual cost savings. DHTI can help Highmark and Allegheny Health Network to take advantage of the financial incentives and infrastructure support of early ACO adopters with the strategic use of disruptive innovation.

[1] http://www.cmu.edu/news/stories/archives/2013/july/july18_lynnbrusco.html
[2] http://www.dhti.cmu.edu/dhti/

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