Colorado Medical Society

http://www.cms.org/articles/incubating-good-ideas/

Incubating good ideas

Tuesday, January 24, 2017 07:27 AM

Health care is a complex, adaptive system. Its interconnected elements are dynamic and resilient. Larger organizations within this system possess something like the human immune system that identifies and eliminates existing and potential internal threats. While this is usually a good thing, a targeted “threat” may be something the system needs, and by overreacting, the system destroys internal innovation that could have given new life and health to the organization.

Startups, new ventures created by a founder or group of co-founders, exist to give effect to change, to bring that change to life and make it sustainable. Startups seek to become dominant in their respective markets. They do not yet have an internal immune system. Many startups are supported by “accelerators,” programs 13 weeks in length (give or take) that focus exclusively on what happens after a startup is created. Accelerators help a startup hone its elevator pitch and value proposition. They also provide access to qualified mentors and investors and help with customer discovery and pitch development.

Startups and accelerators have become a big business. TechStars, a Boulder-based accelerator, has expanded to cities throughout the U.S. and around the world; 13 Y Combinator startups have been valued at more than $50 billion; and by 2016 more than 650 accelerators were in operation around the world.

Unlike accelerators, venture generators provide support to serial entrepreneurs – sometimes called “Prospective CEOs” – before these entrepreneurs create their next new venture. For example, before they even have an idea for their next venture, Prospective CEOs are invited to participate in 10.10.10 Health, a program that pitches 10 “wicked” problems in health that could be turned into sizeable market opportunities: 10 successful entrepreneurs from throughout the United States spend 10 days together exploring 10 wicked problems in health. During their first day together, problem advocates pitch problems like Alzheimer’s, antibiotic resistance, patient data matching, childhood obesity, and pandemics and bioterrorism. After five days exploring the problems, the Prospective CEOs lead teams in a five-day “sprint” designed to solve big problems and test new ideas.

Within 60 days of the first 10.10.10 Health program the first startup, BurstIQ, was formed and funded. One of the other Prospective CEOs from 2015 co-founded Airstream Health. And the first company to emerge from the 10.10.10 Health 2016 program, Concert Health, was formed in September. As its programs improve, 10.10.10 expects half of its 10 Prospective CEOs will create new ventures offering new, market-based solutions to wicked problems in health.

Validators

A key aspect of the 10.10.10 program is the relationship it facilitates between the Prospective CEOs and individuals and organizations known as “Validators.” Validators come to the program with deep domain experience. They provide subject matter experts to help entrepreneurs understand why a problem is important, why certain solutions to a problem may work, and why others may not work as expected or find acceptance in the marketplace. Because the Prospective CEOs and Validators come from very different worlds and cultures – with a different vocabulary, dress code and perspective – they almost never connect in the real world. They move in entirely different spheres of influence. Yet they have much to offer one another.

Two cultures, two types of innovation

In larger organizations that provide 10.10.10 with its Validators, innovation is a frequent topic of conversation. Clayton Christensen’s pioneering book, Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, introduced a distinction between sustaining innovation and disruptive innovation that continues to dominate the discourse today. Larger companies prefer sustaining innovation (for reasons we will explore). When established companies talk about and commit resources to innovation, they almost always mean sustaining innovation. Sustaining innovation starts with identifying needs of current customers in an existing market. It applies proven technologies to well-known markets and products with the expectation that the resulting product or service will offer current customers something that is better, faster or cheaper.

Entrepreneurs more frequently practice disruptive innovation. Innovation is to entrepreneurs what water is to fish – the medium in which they live and breathe. (Ironically, this means entrepreneurs devote as much time thinking and talking about innovation as fish spend thinking about and discussing water.) The example below is from a recent conversation with a successful serial entrepreneur who has founded two large health care companies and served as CEO:

“I worked at a large company where all we talked about was innovation – the need for it, how to do it, why it mattered. The thing is, we never did it. We never innovated. Yet in my startups as part of a team, we never talked about innovation. But that’s all we ever do. We constantly encounter and solve problems. We actually innovate. We do this all the time.”

The innovation entrepreneurs do (but may not talk about) is the flip side of the innovation coin, disruptive innovation. Disruptive innovation provides solutions to problems by delivering new products to new markets – typically markets undiscovered and unknown at the time a new technology was conceived. Entrepreneurs possess the speed, focus, longer-term view and risk tolerance that makes them ideally suited to this form of innovation. What entrepreneurs do not have is an understanding of critical issues that might adversely affect customers’ interest in a new product or service. They also lack, initially, the capacity to scale.

Better together

Taken together, the respective strengths and weaknesses of larger organizations and startups point to a solution: partnership. Entrepreneurs could find in larger organizations the benefit of substantial industry insight, a capacity to scale and access to a customer or group of customers. Large organizations could find in entrepreneurs and the startups they create the benefit of speed, focus and risk tolerance that allows them to seed disruptive innovation outside the walls of the larger organization.

Effective collaboration between large organizations and successful entrepreneurs is a big new idea. Successful entrepreneurs will tackle the world’s wicked problems supported from the start by larger organizations. Larger organizations will harness the speed, focus and risk tolerance of entrepreneurs, learning from and de-risking the disruptive innovation undertaken and supported through these new ventures.