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Innovating Organizations

Disruption From Without and Within

  • Zeljko Branovic
  • Wednesday, 12. October 2022
© Andy Sutioso

Regulatory barriers have insulated health care companies from a rapidly shifting business landscape. Have they been kept too safe?

In most industries, it has become a standard part of business to anticipate disruptive threats and make related investments intended to pay off in the marketplace of the future. But for life science companies, specific conditions have to be considered while dealing with disruption. The regulatory barriers surrounding the health care marketplace create both a safe haven from disruptive competition and a barrier to innovative change.

Drugs and treatments are developed and approved at a snail’s pace; most changes are moderate and, due to patents and regulations, stakeholders can see shifts coming from a mile away.

How the regulatory environment in life science impacts companies

The regulatory environment has done more than slow down change within the industry; it has also shaped life science companies’ innovation management and investments. Without the threat of fast-acting disruptors, specialists deeply embedded in the status quo become resistant to new ideas and are unlikely to adopt agile processes.

This is not to say that companies are not already investing in innovation efforts. Many companies become part of venture capital funds. In practice, though, internal cultural blocks and competing motivations usually prevent the absorption of startup innovations into a company’s core portfolio. Similarly, innovation labs attract new ideas from inventors, but the engineers and R&D staff assigned to evaluate these proposals are usually predisposed to judge ideas based on their existing experience.

Investing in the unknown unknowns

So what can industry leaders who wish to protect and grow their businesses do? They must actively carve out space for future-forward thinking and the development of new markets at the periphery. The only way for them to truly support innovation is to foster profound organizational shifts, either by making structural changes and creating new functions and units or by empowering leaders within the company to act outside of the box. Just as pharmaceutical companies have accepted unknown ROIs when investing in the next core product, they must now begin investing in unknown unknowns.

But if these investments are based only on business cases, they will never be made. Pitching for a budget to test fresh ideas should be made easy. Fast experimentation and prototyping should replace long-term engineering processes geared toward optimizing the final 10 % of a product. In one successful case, a med-tech company granted a small budget for a minimum viable product (MVP) version of a data dashboard for nurses—realized in six months. It is now becoming part of an integrated information system.

Making other departments follow suit

Standing alone, such innovation has little organization-wide impact. But when organizations move to create processes that promote new ideas through concrete rules and communication channels, other departments are compelled to act in support of innovation. In the case of the data dashboard, R&D was required to integrate the solution into the current medical device and data management offering.

This success was the result of targeted organizational efforts to promote innovative thinking and processes. To achieve such results, organizations must launch investigations at their periphery and reward outside-the-box thinking through incentives.

Zeljko Branovic

Dr. Zeljko Branovic

is a Senior Consultant at Metaplan and collaborates with clients on innovation and digitalization projects.

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