Five transformation trends in healthcare

Fundamentally, healthcare goals have not changed. Simply put, healthcare is about improving patient outcomes, containing low costs (for society) and improving access to healthcare for everyone. However, the context in which this is happening is forever changing. The healthcare industry is being shaped by rapid technological advancements, increased demand for chronic care for an aging population, and digital natives (patients and healthcare providers) expecting a personalized approach. This evolving context is challenging the way business has been done traditionally in healthcare. Companies are faced with the choice of improving their organizational capabilities or being left behind.

We identified five transformation trends which are putting pressure on companies to begin their transformation journey. The healthcare industry is a broad and specialized industry. These trends affect different sectors within the healthcare industry to a different extent.

These trends included:

1. More complex and patient-centric needs
2. Pressure to innovate cost-effectively
3. High competitive pressure
4. The spread of smart medical devices
5. Centralization of digital capabilities

Healthcare has shifted from a “one-size fits all” approach to personalised healthcare. Customers are looking for solutions that are tailored to their age, genders, lifestyle. As patients become more empowered, they expect care to come to them rather than them going to the solution. If healthcare companies are not keeping up to provide customer centric solutions the customers will look to its competitors.

While this trend is ubiquitous across all industries there are nuances in healthcare which make delivering customer centric value tricky. Healthcare companies find themselves in a unique and complex web of customers that includes a mix of the healthcare triangle (Health Care Insurer, Health Care Provider, and Citizen/Patient) and regulators (government). Due to the diversity and complexity of this customer base, there are different definitions of success and value.

Their value chain makes stakeholder mapping and priority setting difficult, but not impossible and even more important. Healthcare companies should invest in stakeholder and value stream mapping as their multidimensional stakeholder base holds many opportunities. In the words of another manager, working in the analytics’ department at a large pharmaceutical: “no metrics on value means no measure of progress”.

The pressure to innovate quickly has never been stronger. The COVID-19 pandemic set a new precedent for innovation in healthcare. During this time of extreme turbulence new ways of working were adopted in the healthcare industry. Companies that flourished were not set apart by technologies but by their organizational capabilities that allowed them to quickly respond to changes in the market. At the same time, public scrutiny of the price tag of such innovations sparks debates worldwide. This will continue as most mass-volume diseases have found their cure and healthcare companies shift R&D focus to niche disease areas.

One manager working in the pharmaceutical industry mentioned that “healthcare companies want their employees to all be entrepreneurs” but reflected that the culture of many is procedure-based and do not allow for experimentation. The incentives to innovate cost-effectively have also not been there.

To succeed in innovation whilst bringing costs down, healthcare companies need to balance science and vision, adopt a minimum viable product (MVP) approach and a process allowing fast review cycles. Benefits include quickly finding out where investments are more likely to yield better results at lower cost.

“There has been a change in how our way of working is benchmarked. Beyond our direct competitors, we are now benchmarked against highly personalized commercial companies such as Netflix. We all fight for the attention of our target audience”. This was mentioned by a player in the commercial side of a big pharmaceutical company. While this was specifically aimed at communication tactics towards healthcare providers, it highlights the complex landscape in which healthcare companies operate.

The healthcare industry is notorious for lagging behind in responding to customer demands and innovating swiftly. Some of this is driven by constraints (i.e., regulations), some of it more by complacency based on comfortable demand/ supply dynamics. To keep up with the new players in the industry legacy companies must transform.

For legacy companies to match their lean competitors they should not only partner with or acquire their products and assets. They should also learn and adopt their agile methodologies and bring them to scale to maintain competitive advantage. Examples include working with multidisciplinary teams (something healthcare professionals are no stranger to), being client centric when delivering value and a continuous effort to improve the cost and speed of innovation.

Medical devices – from wearable devices to diagnostic equipment – are becoming increasingly smart. The age of advanced data analytics has created an interconnected medical ecosystem which can track, predict, and prevent healthcare needs. Smart medical devices are worn daily by more than one billion people generating volumes of big data (Joaquin Ballesteros,2020). With people becoming more health conscious as well as an increase in the prevalence of chronic disease the demand for smart medical devices will continue to increase.

Healthcare providers will need to create strategies that address the amount of valuable data that these devices generate, the management of product portfolios, and the integration of hardware and software.

From experience we know the difficulties of maintaining short development cycles in hardware development. Integration with software requires additional coordination effort in product design and delivery. For a few teams this can translate into synchronizing integration points, co-location of teams and advance testing and modelling (including 3d printing) capabilities. At larger scale, additional alignment on development priorities is needed to balance focus with the agility to respond to new information. It is the type of agile portfolio system some of our high-tech manufacturing clients have gained experience with over the last few years.

Did you ever play this game where you make a drawing of a face and you and your friend each draw a different section without seeing each other’s parts? The results are usually quite comical because the different sections often do not align and therefor a distorted funny looking face is what would appear. The same can be seen when you look at digital capabilities in healthcare companies. Historically, healthcare companies have integrated digital capabilities when the need arose one piece at a time. Because of this decentralised influx of digital solutions, often in parallel and independent to strategy, companies are left with a fragmented digital ecosystem supported by multiple suppliers. Managing those suppliers is time consuming and costly.

As time passed, the necessity for internal digital capabilities has increased. Nevertheless, healthcare companies have a tough time shifting their business models to include digital and organisational capabilities. Many healthcare companies have, because of the pressure to integrate medicine and health with technology, acquired their technological capabilities. However, to integrate these capabilities in their organisations successfully, they need to change and align their culture, leadership styles, and working habits.

One of our interviewees mentioned that the healthcare industry’s relationship with technology remains immature and superficial when compared to other industries. To reap the full value and capabilities from technology, companies must find ways to build the necessary internal dialogue, prioritize initiatives continuously, and carefully manage the outcomes. But, as many decentralized, multinational organizations have found before them, such alignment is not easy to achieve. Healthcare companies can learn from examples in retail, banking and Platform-IT of how to maintain a balanced, yet common demand funnel for centralized services.

“All healthcare/ pharma organizations see the need and feel the pressure to transform but are often times not sure what to do and how.” This was the sentiment of a professional who supports healthcare and pharma companies in digital transformations. This is a common feeling as there is no one-size fits all approach and transforming companies does not happen overnight.

Successful digital transformations are supported by building organizational capabilities. This can include changes to the organizations processes, its structures, and its culture and requires leadership support. Many healthcare companies have benefited from incorporating agile methodologies in their ways of working. Some of these results include better alignment, transparency, and cost effectiveness.

Transforming the way companies run is a journey and requires dedication and a willingness to change. Overall, healthcare companies that are willing to make the investment will be better position to improve patient outcomes and stay competitive in the rapidly evolving healthcare industry.