Learning from CVS – When is telemedicine disruptive, and when is it just…cool technology?

By REBECCA FOGG 

The Theory of Disruptive Innovation, defined by Harvard Business School (HBS) Professor Clayton Christensen in 1997, explains the process by which simple, convenient and affordable solutions become the norm in industries historically characterized by expensive and complicated ones. Examples of disruption include TurboTax tax preparation software, which disrupted accountants, and Netflix, which disrupted retail video stores and is now giving Hollywood film studios a serious run for their money.

According to Christensen, a critical condition of disruption (but not the only one) is an “enabling technology”—an invention or innovation that makes a product or service (or “solution”) more accessible to a wider population in terms of cost, and ease of acquisition and/or use. For instance, innovations making equipment for dialysis cheaper and simpler helped make it possible to administer the treatment in neighborhood clinics, rather than in centralized hospitals, thus disrupting hospital’s share of the dialysis business.

However in an interview in Working Knowledge, the online newsletter highlighting HBS research, marketing Professor Thales Teixeira asserts that it’s not innovative technology that disrupts a market. Rather, it’s companies recognizing and addressing emerging customer needs sooner than incumbents. “…In many industries, both the disrupter and the disrupted had similar technologies and similar amounts of technology,” he points out. “The common pattern was that the majority of customers in those markets had changing needs and wants, and their behavior was changing.”

Well that’s interesting. Does Teixeira’s view on the role of technology in disruption, at least as summarized in the interview, contradict Christensen’s groundbreaking work? Not at all. In fact, Teixeira effectively reinforces an oft-overlooked nuance of the latter: disruption is not just about the innovative solution, no matter how novel, dazzling or slick the technology it may employ. It’s about using the solution to do a job for consumers that makers of incumbent solutions are ignoring—usually in a cheaper, simpler and more accessible way; and maximizing likelihood of success by aligning the innovator’s whole business model toward that end.

As I’ve written before, therefore, the lesson Christensen’s Disruption Theory teaches is not how to design a solution differently, but how to compete differently. How can innovators apply this lesson to disrupt health care? They can develop solutions that address people’s urgent, unmet need for quality care that helps each of us live the longest, healthiest life possible. That’s care that is so simple, convenient and affordable that people can access it regularly over time, and consistently get the help they need to  effectively maintain their health or manage conditions that arise.

When innovators design health solutions to that end, and deploy them within a business model and value network specifically constructed to facilitate their delivery, they’ll create the conditions for cracking costly, painful problems like chronic disease. That’s how Disruptive Innovation can transform health care delivery for the better.

Telemedicine: It’s not (just) about the technology

Looking at the range of ways in which telemedicine is being used today illustrates the point that, regardless of the technology it employs, a solution can only be disruptive when it successfully addresses an unmet need in the market.

Telemedicine technology enables virtual consultations between health care professionals and consumers, and is often deemed disruptive. But when used simply to enable physicians in traditional health care models to consult with more patients in a day than they could physically see at their offices, the technology merely improves the status quo. It won’t help to disrupt it.

By contrast, CVS’ new telemedicine services, launched in nine states last year to complement the company’s retail “Minute Clinic” offerings, might just. Minute Clinics offer a wide range of routine preventive and clinical services, like vaccines and disease screenings; treatment for minor illnesses and injuries; and monitoring of chronic conditions—just like a traditional, primary care physician’s practice. But Minute Clinics are more accessible than the latter on several counts. There are multiple locations within a geographic market, clinics are open seven days a week, services are provided on a walk-in basis, and out-of-pocket fees, where applicable, are relatively affordable.

CVS Minute Clinic Video Visits significantly augment those benefits, giving consumers 24/7 access to a provider at a cost of $59 per consultation. That’s a far cry from traditional primary care services, usually accessible only during “bankers’ hours,” and costing an average of $160 for an uninsured person, according to researchers at the Johns Hopkins Bloomberg School of Public Health.

Together, Minute Clinics and Minute Clinic Video Visits could be a package solution that, for many people, begins to address that unmet need for continuous, proactive care designed to maximize healthy years of life. If so, CVS could prove disruptive to traditional health care delivery models (which specialize in episodic acute care) by locking them out of a massive and potentially lucrative new market.

Even more intriguing, CVS might eventually be expected to tap new parent company Aetna’s provider networks and underwriting expertise to integrate the full continuum of health care services with Minute Clinic’s consumer-friendly offerings. If so, CVS could accelerate disruption by siphoning off the traditional health care delivery model’s current patients, too—not just those with unmet needs.

That’s a lot of “mights” and “coulds,” because Disruption Theory only tells us what’s possible, while the long-term innovation strategies of CVS and its competitors will determine how the drama actually unfolds. However there are two things we can be certain about. Given the rapid expansion of telemedicine, as well as the brisk pace of innovation in Artificial Intelligence, big data, the Internet of Things and other hot domains, technology will play (in fact, is already playing) a critical role in the transformation health care delivery. But as Christensen’s and Teixeira’s work reminds us, it’s solving consumers’ unmet needs that will ultimately disrupt the industry, not beating competitors in a technological arms race.

Rebecca Fogg is a senior research fellow at the Clayton Christensen Institute, where she studies business model innovation in health care delivery, including new approaches to population health management and person-centered care.

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