The Innovators Prescription for IT – Part 2
February 17, 2009
Part 2 of my post on the new book by Clayton Christensen called: The Innovators Prescription . Part 1 can be found here: (The Innovators Prescription for IT).
A key theme of the book is that the general hospital is not a viable business model because it is focused on trying to do everything for everybody. As a result, general hospitals really are trying to simultaneously support three different business models: solution shops (which diagnose problems and recommend solutions), value-adding process businesses (which fix or repair definitively daignosed problems e.g. a knee replacement), and facilitated networks (membership based networks that deal effectively with chronic disease maintenance). And the resulting overhead structures, high costs, and inefficiencies are the source of the health care problems in this country. The answer is that focused specialists need to disrupt the general hospitals, and this trend is already beginning in health care.
If you are in the IT services or software industries, does this ring a bell? The lack of focus in IT has been a pet peeve of mine for a long time and I have seen it bring down several fine organizations. In effect many IT and software companies act like a general hospital in the health care industry: they try to do everything for everybody.
A couple of recent blog post talks about this growing and pervasive problem (Rocket Watcher), and the recent product management survey conducted by Pragmatic Marketing really drives home the lack of focus and the problems it causes.
In essence many IT and software companies are acting like general hospitals: they try to do anything for everybody. And as such they are trying to manage multiple business models just like the general hospitals: solution shops (which diagnose problems and recommend solutions), value-adding process businesses (which implement the systems and technology that address business needs), and facilitated networks (ongoing management and support). The result is the same high overhead and increased costs that the market is no longer willing to pay for.
In health care we are starting to see disruptive business models displace the general hospitals. Specialist hospitals are starting to pop up everywhere. Neighborhood clincs are dealing with the simple illnesses that we used to go the physicians office for. And online networks are helping people manage their chronic diseases far better than their primary care physician can (due primarily to the fee-for-service profit formula in use today). To survive, general hospitals are going to have to be dissected into the three businss models.
In IT we are starting to see the same thing. Fueled by simple new tools and technologies (WordPress, Facebook, Twitter, Google Docs, etc.), disruptive innovators are starting to steal market share from the industry leaders. Specialists and focused competitors are the wave of the future, just like in health care. If you are still caught in the general hospital business modl, you had better act fast. Once disruption hits it stride, creative destruction will quickly push aside those organizations that are unable to adapt.
If you are in the IT or software industries, pick up Christensen’s book and kill two birds with one stone. Become an informed citizen as the health care debate picks up in this country, and develop some keen insights on how to move your IT or software business forward in the new era of disruption.
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