Healthcare innovation has become a buzzword with diminishing substance. True innovation is “a new or changed entity creating or redistributing value”. Innovation is necessary for long-term enterprise value. For anyone that didn’t believe this, hopefully, COVID has demonstrated the necessity of change.
So why isn’t innovation happening in health care tech? Why is it lagging behind other industries and not catching up? With COVID, you may think that healthcare is evolving, but I believe it is temporarily shapeshifted. Once COVID has passed, I think it will revert to stagnation. My theory is innovation isn’t happening in health care tech because organizations are not flexible enough to allow it.
Full-time employees aren’t incentivized to innovate
Owning a consultancy means I hunt for jobs a lot. A lot. Hunting is an effective way to understand the real-time health care tech landscape. I spend days listening to founders tell me about their upcoming products, new platforms, strategies, and pivots. I respect their ambition and believe some will reach their potential and some will not. Those that likely will not tend to share a common deficiency. Hunting painfully exposes how many med tech companies will fall short of their goals due to their approach to recruiting.
The most common scenario I see is where a company does some internal analysis to figure out they have a need for an uncertain amount of time, but they can’t see far enough to know how long exactly. To be on the safe side, the company advertises the need as infinite. In reality, the need lasts until the company evolves and layoffs happen. But the company has decided to create a nice, neat box to fit that temporary need. The position passes finance, HR and now recruiting fires up their engines.
But now the company looks around at how many boxes are available: some of these boxes are palatial! So the company decides to cut a window in the box wall and purchase a pillow and blanket for the bottom of the box. They even sponsor an employee’s trip to live in the box. After all, the company has to offer similar boxes to the ones already on the market. Now the box is comfortable and competitive – the race to fill it begins! But is the box built for lasting innovation?
An employee gets hired, draped in the down comforter, with a cool breeze flowing through the window, and begins work. Many people excel and thoroughly enjoy fitting inside nicely furnished boxes. And why shouldn’t they? They are often integral to the operations of the business. Longitudinal understanding of an organization and cultivation of a company culture is valuable.
The issue comes when we understand that the “box perks” the company bought (albeit with good intentions) can become a prison. Health insurance, for example, can make an employee stay with a company far beyond their interest or skill. Other times companies build a compensation scheme that emphasizes benefits derived later (like vesting of stock options), often called “the golden handcuffs”. Sponsorship of international candidates makes it so they cannot leave for several years. I find these arrangements odd as if time spent working for a company creates intrinsic value. I agree with these Harvard Business Review (HBR) authors that “inertia” often becomes why employees stay.[1] If the employee’s next pay raise or promotion is just enough, they will stay. It is this type of “inertia” that is stagnating the health care tech market.
Ironically, the company is also held hostage to the “box perks”. The average cost of an employee is about 1.4x the employee’s salary.[2] There are mandatory federal payroll taxes and unemployment responsibility if the employee were to leave the company. The company must insure all of its employees, and offer perks like unpaid medical and family leave. Firing any employees can devastate company culture. Oh, and by the way, the company is now responsible for creating and maintaining a “company culture” that makes those people who are unhappy not be unhappy. On average, it takes 7 months for a company to recoup the cost of hiring someone.[2] Prior to COVID, there were large capital expenditures required like real estate and technology for all employees.
Given capitalism’s focus on quarterly earnings and investor exits, leaders have little incentive to think long-term. This often conflicts with long-lasting profitability and enterprise value. Organizations have unwritten rules that speak louder than core values airbrushed on a meeting room wall. One of these rules is not to propose radical change, even if it is beneficial to the company. This rule put another way is: don’t innovate. As it is said, “The squeaky mouse gets the cat.” This reality gives employees what I call “cognitive dissonance whiplash”. Trying to hold two beliefs simultaneously will make most folks unhappy. Worse, these folks who feel trapped in their job then erode the company culture. There is a reason why Tony Hseih offered employees thousands of dollars to walk away from Zappos if they felt the grass could be greener elsewhere.
Additionally, the pace of technology is changing the job market. The turnover rate is the highest it has been in 10 years. Gallup polls have shown consistently that millennials are less engaged in their work (by 5%), and 21% have changed jobs within a year, more than 3 times the number of non-millennials who report the same.[3] And here’s a staggering statistic to consider: if technology continues to evolve at its current rate, by 2030 technology knowledge will double every 1 to 3 seconds.[4]
But you don’t need me to tell you this – it’s all common sense. We witness this every day in our jobs. In fact, that HBR article I previously referenced about inertia driving employees to stay? It was written in 1973.
And I quote from the conclusion[1]:
“If organizations resist recognition of the change in values for working, sticking with a single approach to people, retain the concept of the average employee, and continue to snap on golden handcuffs, then
- The new generation may not even enter those organizations, but create its own (or take over existing ones).” OR
- Present employees who are locked in and turned off may seek third-party intervention to guarantee their right to job satisfaction or their real freedom to leave.”
We’ve seen examples of new market creation over and over: cryptocurrency, social media, fintech. And now we’re seeing unionization of highly skilled workforces like at Google[5] and even some physician groups[6]. So why are 99% of innovation jobs in health care tech full-time employees? Are you convinced about the stagnation in health care tech yet?
Hire problem solvers, not employees
Innovation is like artistry. The best sculptures in the world aren’t made on a tight deadline. You can’t tell an artist what medium and color to use in their painting and expect a masterpiece.
Rigidity is necessary for parts of companies. Taxes have to be filed. Warehouse orders need to be filled. And folks can flourish in these types of jobs until they find their next challenge.
But where the company is struggling the most – that is the place where flexibility becomes critical. When there is a product or a service that requires “innovate or die”, the “rules” that are applied to 90% of the company need to give. The hardest problems are solved by folks ruminating about the problem in the shower, on a hike, or during an unrelated meeting. The innovators often work in a small group and the insight can come from anywhere. When the best ideas are winning and red tape isn’t holding up progress, that is when the magic happens. In short, innovation takes trust between an innovator and a company.
When I speak with a company that is looking for product managers to innovate but is requiring full-time employment with golden handcuffs….how can I innovate in a cage? What companies are saying to me is: we require you “commit” to us before we will trust you. We require that you only draw with red markers, that you work these defined hours and you put barriers around yourself to prevent yourself from leaving us. That is the opposite of a creative environment.
Innovation takes symbiosis with an innovator and a company. Innovators like working on hard problems. Innovators must produce, and take pride in their ability to. If they are unable to produce, this is typically discovered on the order of months, not years. Innovators are sometimes driven more by tangible factors like money, but other times by passion, curiosity, or fun. An innovator’s success is the company’s success. When a company can recognize the need for change at these critical business junctures and foster an environment of creativity, companies like Twitter emerge from their podcasting predecessor, Odeo[7][8].
When a company dictates how or what an innovator produces, the passion, curiosity, and fun evaporate. When a company restricts the innovator from investigating certain avenues because of political factors or does not allow the innovator to access unconventional resources, the innovator cannot perform.
This is precisely why it is innovation – it will not look like anything that came before it.
Innovation is often a shorter-term symbiosis in the start, whether the company acknowledges this or not. A “full-time employee” does not guarantee you an unlimited source of innovation. Innovators have no issue leaving a company when the relationship is no longer symbiotic.
Innovators have become integral, long-standing partners with companies that understand how to allow them to flourish. Consider how Jony Ive, lead designer at Apple, reported to no one.[9] This isn’t to imply that innovation has to happen at the highest company levels. It is needed wherever the company is most struggling.
When an innovator hears that a company cannot be flexible about something as simple as employment terms, what’s communicated is: “we’re not serious about innovation.” Or “We’re okay with only solving problems in a way that satisfies short-term thinking”. Half-solving problems is why healthcare tech is currently lagging 20 years behind most consumer-based technology industries. Half solutions like electronic health record systems have contributed to a national physician shortage.[10]
What would Blockbuster give to wind the clock back, forget about their quarterly earnings and listen to fresh ideas about real-time content consumption and network effects? Blockbuster would pay a king’s ransom to go back and have innovators challenge leadership’s future projections. Innovation is priceless. But get ready – innovators may not fit into traditional molds. They almost certainly don’t want to get married to a company on the second interview. They will be persnickety and demand reciprocal trust. They will agree to be held accountable. They will bring dangerous and exciting ideas to the table. If you let them ideate, they will innovate in an industry ripe for disruption and your company will get the glory.
So, if you want your problems solved, stop trying to fit an innovator into your company’s idea of a perfect box. Look up from the box. Better yet, drop the box and find the person that can solve your problem.
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References
[1] Flowers and Hughes. “Why Employees Stay.” Harvard Business Review, July 1973, https://hbr.org/1973/07/why-employees-stay. Accessed 4 April 2021.
[2] Weltman, Barbara. “How Much Does an Employee Cost You?” U.S. Small Business Administration, August 22, 2019, https://www.sba.gov/blog/how-much-does-employee-cost-you. Accessed 4 April 2021.
[3] Adkins, Amy. “Millennials: The Job-Hopping Generation.” Gallup Business Journal, https://www.gallup.com/workplace/231587/millennials-job-hopping-generation.aspx. Accessed 4 April 2021.
[4] Booth, Jeff. The Price of Tomorrow. Stanley Press, 2020.
[5] Conger, Kate. “Hundreds of Google Employees Unionize, Culminating Years of Activism.” New York Times, Jan 4, 2021, https://www.nytimes.com/2021/01/04/technology/google-employees-union.html. Accessed 4 April 2021.
[6] Bussey, Stuart. “Washington State Providers Are Forming Unions.” Union of American Physicians and Dentists, undated, https://www.uapd.com. Accessed 4 April 2021.
[7] Wikipedia. 2021. “Twitter”. Last modified 10:06 AM, April 5, 2021. Accessed 8 April 2021.
[8] Miller, Claire Cain. “Why Twitter’s CEO Demoted Himself.” The New York Times, October 30, 2010, https://www.nytimes.com/2010/10/31/technology/31ev.html. Accessed 8 April 2021.
[9] Gassée, Jean-Louis. “Apple: Misunderstanding Design and Jony Ive’s Role.” Monday Note, July 7, 2019, https://mondaynote.com/apple-misunderstanding-design-and-jony-ives-role-ed90faa146a4. Accessed 4 April 2021.
[10] Madara, James L., Executive Vice President and CEO for the American Medical Association to The Honorable Seema Verma, Administrator US. Department of Health and Human Services, Centers for Medicare & Medicaid Services. January 4, 2021. https://searchlf.ama-assn.org/letter/documentDownload?uri=%2Funstructured%2Fbinary%2Fletter%2FLETTERS%2F2021-1-4-Letter-to-Verma-re-CMS-NPRM-on-Provider-Burden-and-Prior-Auth-with-Table-of-Proposals.pdf.