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Research by Lee Ann Jarousse

Your New Core Competency

You can't do today's job with yesterday's methods and still be in business tomorrow." The old truism sums up the challenge for the hospital field as it prepares for a dramatic change in the care delivery system. The shift to bundled payments and value-based care will require health care organizations to think outside the box to develop new business lines and ways of providing care.

Innovation is more important than ever as hospitals and health systems move into uncharted territory. "We are in a time of tremendous change and we are not taking full advantage of the innovations and ideas of people within our organizations," says Naomi Fried, chief innovation officer for Children's Hospital Boston. "Innovation is a necessity, not a luxury."

That sentiment is echoed by Philip Newbold, president and CEO of Memorial Hospital & Health System in South Bend, Ind. "We have no way to invest in the future if we don't invest in innovation," he says. Newbold advocates elevating innovation to the level of an organizational competency. "Innovation is the most important competency of the future," he says. "Like quality improvement was 20 years ago, innovation is a competency; we'll have to spend some time learning it and practicing it."

The place to start is at the top. Innovative organizations require passionate leadership that sets the vision for the organization and allocates the necessary resources to facilitate innovation from within, asserts William Dwyer, a health care strategist and futurist. The ability to assemble the right team to inspire and support the effort is a key characteristic of an innovative leader, he says. Innovative leaders also recognize and take smart risks. "They are not always the market innovator, but a fast follower," Dwyer says. "They also have the ability to listen to the market and see change as an opportunity and not as a threat."

Becoming an innovative organization requires significant culture change. "The culture must be proactive and open to risk-taking," Newbold says. "One way to change the culture is to have everyone involved." That includes educating employees about innovation and the organization's vision. But that's only the beginning. "If an organization spends the effort on building the competency of innovation, it needs to build an environment that allows it to flourish," says Andrew Garman, CEO of the National Center for Healthcare Leadership. Among other things, organizations should have processes in place to encourage the formation of teams that will develop, test and share ideas. It's equally important to recognize and reward individuals and teams for their creative efforts.

Success in the future may require a level of disruptive innovation, turning the health care delivery model on its head. "Disruptive innovation can be quite intimidating, doing things that challenge the success of existing business lines and the status quo," says Jason Hwang, M.D., executive director of health care at the Innosight Institute, an innovation think tank in Mountain View, Calif., and co-author of The Innovator's Prescription: A Disruptive Solution for Health Care. "Hospitals and health systems essentially must create their own competition in-house," Hwang says, and that includes developing new delivery systems to keep patients out of the hospital and sacrificing immediate profits for more down the line. "If you don't do it, someone else will," he cautions.

It's important to remember that change takes time and innovative organizations aren't created overnight. "You have to stay with this for a long, long time," says Newbold. "We've been at this for eight or nine years and we are just getting traction."

Getting started: The path to innovation

To become more innovative, organizations need passionate, supportive leadership; an environment that nurtures a culture of creativity; and a systematic process that allows employees to generate ideas, and test and share their results.


Hospital executives are the drivers of innovation within their organizations. It's up to the CEO to assemble the right team and create an environment that fosters innovation and raises the concept to the level of a core organizational competency. A good place to start is with an organizational assessment to determine the hospital or health system's innovation capabilities and employee perception of innovation. By building and supporting this kind of culture, leaders can enable innovative thinking and practice among all levels of the organization.


To fully support innovation, organizations need a system in place that encourages creative thinking, provides a venue to test new ideas and a means to accelerate their dissemination. Innovation policies at the board level solidify the organization's commitment. The process should make it easier for all employees to discuss and develop ideas and see them through to fruition. That includes funding specifically for innovative projects. Education and training is also critical. It's not necessary to reinvent the wheel. Outside experts can be brought in to share their experiences, and a number of successful models already are in place within the hospital field.


The practice of innovation can take multiple forms. Some organizations may choose to establish formal innovation centers and hire full-time employees to drive it within the organization. The title of chief innovation officer or chief transformation officer is becoming more prevalent in hospitals and health systems. A process also should be in place to encourage innovation at the front line to enhance the care process as well as the customer experience. Separately, organizations may choose to develop a formalized process to explore new business models and services that will differentiate the organization in the future.

Four types: Areas of innovation at work

There are different types of innovation and each has an important role in organizational strategy and achievement. Here are four types that should be part of an organization's efforts to innovate. Phil Newbold, president and CEO of Memorial Health System, South Bend, Ind., and Diane Serbin Stover, chief marketing and innovation officer, outline the first three in their book Wake Up and Smell the Innovation, and assign percentages as to how much the specific type of innovation should make up the organization's strategy.

70% SUSTAINING | Sustaining innovations address existing products and processes to preserve or extend their life span. Sustaining innovation is common in health care as organizations consistently seek ways to improve quality of care and eliminate unnecessary expenses. Implementation of Lean or Six Sigma are examples of sustaining innovations. These projects should comprise 70 percent of innovation work within the organization.

20% TRANSFORMATIONAL | Transformational innovations are more complex and may involve combining products and services to differentiate them from competitors. Outpatient Lasik surgery is an example of transformational innovation. These projects should comprise 20 percent of an organization's efforts.

10% REVOLUTIONARY | Revolutionary innovations should comprise 10 percent of the organization's innovation work. These projects involve significant organizational change and have substantial economic impact and often address customer preference. Freestanding surgical and ambulatory care centers are examples of revolutionary innovation.

Wild card DISRUPTIVE | Disruptive innovation involves turning current practices completely upside down. Technology, such as the development of the electronic health record, can have a disruptive effect on the health care delivery system. The development of medical homes and retail health clinics are other examples of disruptive innovation in health care.
Sources: Wake Up and Smell the Innovation, by Philip A. Newbold and Diane S. Stover, 2010, and H&HN Research, 2012

Tips: What it takes to be successful

In their book Wake Up and Smell the Innovation, Newbold and Stover highlight the key aspects of innovation necessary for organizations to be successful. They were adapted from innovation guru Larry Keeley of Monitor-Doblin, an innovation strategy firm based in Chicago. Newbold and Stover write: "Essentially, innovation must be a competency that becomes an integral part of your organization's culture. The process of making it so requires courage."


Innovation must be ingrained in the organization's culture. Again, leadership support and the allocation of resources are important factors in
developing and sustaining a culture of innovation. It's also important to establish a policy and formal mechanisms to foster, test, spread and celebrate innovation throughout the organization. All employees should be encouraged to participate in innovation programs.


Innovation must become a competency that is practiced and supported throughout the organization. Leadership support and ongoing education are essential to raising innovation to the competency level.


Innovation requires risk, and risk takes courage. Innovation challenges the status quo and may encounter resistance within the organization. Not every idea will succeed. Senior leaders must acknowledge failure while also championing the effort and encouraging innovation to proceed.

Source: Wake Up and Smell the Innovation, by Philip A. Newbold and Diane S. Stover, 2010

Case study


Children's Hospital Boston launched its Innovation Acceleration Program in 2010 to support innovation at the grassroots level, offering both formal and informal resources. Chief Innovation Officer Naomi Fried describes her responsibilities in overseeing the provision of resources, supporting the organization's innovation strategy and identifying unmet innovation opportunities. "Our leadership had the foresight to recognize that we weren't doing as much clinical innovation as we should," Fried says. "Our goal is to enhance the culture and to provide tangible results and support." Among other things, CHB's Innovestment Grants provide seed funding to support clinical innovation. A FastTrack Innovation in Technology award offers software development resources. A team of dedicated software developers works on short projects with innovators to develop a pilot or prototype of a software program.


HealthEast believes innovation is an important part of work within the organization. To that end, the first hour of new-employee orientation is focused on the organization's vision and how innovation is part of everyone's job to make the organization a better place to work and to receive care. "We really push innovation; it has to be a part of our culture," says Tom Schmitt, vice president and CEO, Woodwinds Health Campus. Small improvement teams are formed to identify solutions to problems at the grassroots level and spread the results across the organization. Innovation is often counter to how some executives and managers are accustomed to leading. "It's a type of servant leadership, stepping back and supporting front-line staff in their work," Schmitt says. "That will create more sustainable solutions."

How We Did It: This gatefold was produced by researching published studies and articles and conducting interviews with hospital and industry executives.

Research: Lee Ann Jarousse, ljarousse@healthforum.com

Design: Chuck Lazar, clazar@healthforum.com