Healthcare Innovation: Three things Haven almost got right.
Haven, the healthcare venture backed by Amazon, Berkshire Hathaway, and JP Morgan, created shockwaves in the American healthcare market when it was formed three years ago. The U.S. system was ripe for disruption, and who better to lead it than three of the largest companies with some of the most respected business leaders in the world?
Last week, however, Haven announced its closure. From the start, Haven knew it was taking on a big challenge, with Jeff Bezos saying, “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty.”
Haven had many assets to leverage, but ultimately failed to deliver meaningful impact. Haven’s collapse is disappointing, but innovators can learn valuable lessons from how the firm approached the unique challenges of delivering impactful change in a complex healthcare system.
Here are three things Haven almost got right in its healthcare innovation effort:
Right Problem, Wrong Scaling Path
Amazon, Berkshire Hathaway, and JP Morgan established Haven to reduce their own healthcare costs. Haven focused its efforts on aggregating cross-company employee health data and testing solutions to reduce costs. However, developing solutions that created value for all three parent companies proved to be a major challenge: each company had different motivations, dozens of healthcare administration systems, and hundreds of thousands of employees across different states and subsidiaries.
Bold ambitions for solving complex problems – like putting a human on the moon to enhance our understanding of our universe or reducing the cost of patient care in the $3.5 trillion American healthcare system – are not achieved in one step. Disruptive changes are realized when innovators break down complex problems into smaller steps and iteratively assemble the assets and learnings required to realize their long-term ambition. Haven tested a few solutions – like telemedicine and digital insurance tools – but never articulated an overall strategy for how the company would reduce healthcare costs at scale. Haven’s failure to articulate a path to achieving its goals likely made it difficult for its team to prioritize their efforts and for the firm’s stakeholders to measure the company’s progress towards delivering reduced healthcare costs. The absence of a clear path to disruption may have played a significant role in Haven’s investors losing faith in its ability to deliver meaningful impact.
Achieving a disruptive ambition rarely happens in one step. Innovators must develop a blueprint for how they will assemble the assets required to realize their goals. At Change Logic, we call this a Scaling Path – a living blueprint that looks ambition-backwards to capture the innovation team’s hypotheses about how they will iteratively assemble the capabilities, capacity, and customers required to achieve their disruptive ambition. The Scaling Path enables leaders to narrow the range of options available, provides a logic for decision-making, and outlines incremental milestones for the team to achieve on their path to realizing a disruptive ambition.
Visionary External Leader, Internal Execution Challenge
It’s easy to see why Haven appointed Atul Gawande as CEO – Gawande is one of the most renowned thinkers in modern medicine and has strong connections across the industry. While Haven’s approach was logical, they fell into a classic corporate innovation trap. Hiring an outside expert to lead a new venture seems like the logical choice, but external leaders lack the political capital and internal relationships to leverage resources and drive change in the existing businesses. That’s not to say external leaders can’t be successful, but they have the greatest odds of success when paired with a strong internal leader who can provide the political air cover needed to make innovation happen at scale.
Our research shows that when incumbents aspire to disrupt an industry, leaders drawn from inside an organization fare better than outside experts. Internal leaders have the knowledge and relationships to access and exploit the significant and proprietary assets of their core business more readily.
Shared Vision, Different Objectives
Ecosystem partnerships are most successful when stakeholders share aligned visions, objectives, and incentives. This is particularly true in healthcare, where innovative solutions require buy-in from many stakeholders across different parts of the healthcare ecosystem, all with different motivations and barriers to change. All three parent companies shared a high-level vision of reducing healthcare costs for their 1.2 million employees, but Amazon wanted something more. Early in Haven’s history, Amazon invested heavily in Amazon Care, a digitally driven insurance offering for its employees that competed head-to-head with Haven. Amazon’s parallel investment in its own solution created doubts about its commitment to Haven, complicating the already challenging task of aligning three partners in a healthcare solution. Amazon’s misaligned objectives, coupled with the logistical challenges of changing healthcare delivery at 3 behemoth companies with global operations, made it nearly impossible for this partnership to succeed.
Ecosystem partnerships are complex, especially in healthcare. Successful innovators proactively test not only their solution, but how their solution will get adopted in the market so end users can get value from it. At Change Logic, we work with clients to develop Ecosystem Maps and Adoption Chains that identify what stakeholders will be impacted by a new solution and how to incentivize key stakeholders so the new solution can succeed at scale.