Innovation Systems Framework: How Can We Evaluate Innovation in Healthcare?

During my initial conversations about my DELTA Thesis project, I was posed with a question: “how can a healthcare institution produce innovation?” What struck me about the question was that it framed innovation as the tangible output of a process; as some kind of product resulting from various inputs that, if we just tuned them right, could make us more “innovative.” The trouble is that by evaluating how innovative an institution is by how many new products they’ve created, we ignore the process and structures that enable innovation in the first place. In other words, innovation is the process. By focusing only on innovative, new products like 3-D printed skin, connected medical devices, and nanomedicine, we introduce noise into how we evaluate innovation. Some institutions get lucky or have a unique problem requiring a unique solution - necessity being the mother of invention and all. By defining and measuring the process more precisely, institutions can begin to create and manage the conditions by which innovation is enabled. What I outline below is a preliminary framework to evaluate an innovation ecosystem. I developed this framework in preparation for my DELTA thesis with a tremendous amount of help from my committee, and a number of books and articles on the subject, which I’ve included at the end of the post.

A quick editorial note - I understand that the word innovation is often used to refer to a new product or process. In fact, one of my favorite definitions of innovation comes from Michael Raynor, who refers to it this way. An innovation, in his words, is anything that breaks a constraint or changes trade-offs. I think, however, that the process of innovation is the more interesting and fundamentally important aspect, and will thus refer to innovation that way - as a process. The material result of the innovation process can be referred to as an innovative product.

Innovation Systems

The concept of an innovation system is simple to define in a general sense. It is:

The policies, norms, and external factors affecting the process of innovation within a given time, space, or organization.

Every institution and organization has an innovation system, although some are more explicitly defined than others. The innovation system determines how free members of the institution are to experiment, evaluate, learn, disrupt, and fail. Most organizations - and especially most healthcare organizations - have a very low tolerance for disruption and failure. And for good reason… we’re dealing with the health of patients and their families and life-or-death situations! So how do we promote experimentation and disruption in such a high-stakes ecosystem?

Every institution also exists within larger (regional, national, global) innovation systems. So, for example, while the policies and practices of a hospital in one state may promote certain kinds of innovation, those very same policies and practices may stifle innovation when combined with the regulations of a different, neighboring state! The upshot of this is that there is no silver bullet or magic combination of factors that enable innovation, but that’s a blog post for another time.

The Policies (Proximate Factors)

Of course, the ability to innovate is directly affected by the policies in place within a given innovation system. In my initial exploration of this topic, I referred to policies as “proximate factors”. Policies can be explicitly related to innovation (“new procedures must be approved by so-and-so”) or affect innovation in more subtle ways (“employees must bill X-many hours to a project;” which leaves less time for free experimentation). In the Innovation Ecosystems framework, there are nine factors that directly impact an innovation system.

  • Funding for research and innovation: how much funding is directed towards experimentation and innovative activities?

  • Talent: Do people have the skills and character to innovate effectively? Do managers effectively direct such activity?

  • Innovation centers: are there organizations (such as institutes, hubs, labs, etc.) in place to help encourage, direct, and manage innovation?

  • Collaborators: is the organization effectively building and using outside partnerships to encourage and manage innovation?

  • Credit and recognition: how do people get credit for the innovative work they produce?

  • Procurement: are sufficient processes in place to evaluate whether new procurements should be purchased, co-developed with a partner, or built from within?

  • (Un-)Reliability of incentives: are innovators sufficiently rewarded for their activities, and are those rewards consistent over time and across the organization?

  • Symbolic gestures: can the organization do something that demonstrates their values with regard to innovation?

  • Demand-side incentives: do users have sufficient incentive to actually use innovative products?

The Ecosystem (Distal Factors)

The innovation system is also directly and indirectly impacted by larger factors in the ecosystem. These factors can be determined at many levels, but one can think of them as regional, national, or global factors that affect the system. I referred to the ecosystem as “distal factors” in my preliminary analysis. These five factors are each extraordinarily complicated and could be the topic of an entire thesis on their own.

  • Markets: what economic and market incentives exist for organizations and individuals to engage in the process of innovation?

  • Networks: what social and professional networks can be leveraged to promote an organization’s values with regard to innovation?

  • Spatio-temporal factors: are innovative activities consistent with the resources and constraints present in a particular time and space?

  • Politics: how can power dynamics and political activity enable or hinder innovative activity?

  • Social factors: is the process of innovation consistent with the values, needs and culture of a society?

The Levers (What Organizations Can Do)

Once the policies and ecosystem are evaluated, the question becomes then, “what can we do to change how we innovate?” Generally speaking, governments, research institutions, and some nonprofits focus on impacting the innovation ecosystem, whereas private actors like non-academic hospitals, biotech, and pharmaceutical companies operate on their own policies. I am currently developing a list of “levers” that organizations can pull to affect the innovation systems that they are a part of, so this list of ten is certainly not comprehensive.

  • Change the scale of funding

  • Change the sources of funding

  • Change the recipients of funding

  • Codify and communicate values and policies related to innovation within the organization

  • Re-balance the distribution of basic vs applied research and innovation

  • Re-tool the (de-)centralization of innovation centers

  • Re-balance emphasis on long- vs. short-term return-on-investment

  • Determine and change how innovations are diffused within the innovation system

  • Change the risk tolerance of the innovation system

  • Evaluate and change the openness and availability of innovations to internal and external actors

Historically in healthcare, we have viewed innovation either as an innate talent that some organizations have and others don’t, something that “we know it when we see it” but have trouble defining and codifying, or simple and blind luck. My hope is that by using this framework, we can begin to define and evaluate our innovation systems and systematize how our organizations cultivate new and experimental ways of disrupting constraints in the health system.

I mentioned above (but it bears repeating!) that one could focus an entire career on any one of the policies, ecosystem factors, or levers I’ve described above, so this post is necessarily general in some places. I also mentioned that this is a preliminary framework so I would encourage readers to leave feedback in the comments below!

Some reference material:

[1] State of Innovation: The U.S. Government's Role in Technology Development by Fred Block and Matthew Keller

[2] The Politics of Innovation by Mark Zachary Taylor

[3] Scrum: a Breathtakingly Brief and Agile Introduction by Chris Sims and Hillary Louise Johnson

[4] Pasteur's Quadrant: Basic Science and Technological Innovation by Donald E. Stokes