Can a massive hospital learn from a lean startup?

Have you recently asked your executive team to become more innovative, consumer-centric and agile, only to be met with uncomprehending stares? The "lean startup" methodology may be a way to rally the troops.

First evangelized by Steve Blank in Four Steps to Epiphany, the lean startup philosophy struck a chord with entrepreneurs, product managers and developers who sought to build better software products. "Better" in this context meaning products their customers would actually use. While widely embraced in the startup community, nowhere is lean needed more than in traditional health organizations seeking to become lighter on their feet.

Today, hospitals, health systems and physician groups are enthusiastically expanding their portfolios of offerings, moving along the continuum from illness to wellness. These offerings have included retail outlets, apps, and branded insurance products — to name a few. In an uncertain, margin-squeezed market, though, hospitals cannot afford to invest in products that the market does not want. "Lean" can be a tool for them to rapidly develop, test, reject and improve potential offerings.

However, lean is not going to be easy for hospitals. The "zero-defect" culture in the DNA of every health systems is fundamentally at odds with the "fail fast" philosophy of a startup. This is as it should be — you would not want to undergo a "beta" version of a heart surgery or settle for an "80 percent correct" C-section. However, when it comes to the more innovative, non-core offerings, we believe executives should take lean for a test drive.

This article is focused on helping health organizations infuse lean customer development into their innovation agendas. Below are three practical ways lean can easily be applied in a healthcare organization to better align their efforts with customer needs.

1. Bring your customers along for the entire journey. One of the biggest mistakes organizations make in their innovation efforts is not engaging with patients and consumers early enough, or often enough. This "if you build it, they will come" mentality results in organizations building products or services assuming that patients or consumers will engage. However, this is rarely the case. Furthermore, it is not enough to launch a focus group, and then move on to developing your product in isolation. Significant meaning is lost in the translation of focus group results, and rarely do meaningful insights grounded in patient empathy result.

Where to begin. Bring your customers to the center of the discussion, at the start of your innovation effort. And keep them there throughout. Significant time, effort, and expense can be saved through a proactive customer development strategy that ensures the products and projects your organization is pursuing meet customer needs. Hospitals can leverage their existing "voice of the patient" programs, relationships with volunteers, donor, and even employees to test new offerings quickly. By doing so early in the innovation process, you can increase your odds of building something of value for your patients and customers.

2. Set aside your ego and be prepared to pivot. Innovation leaders — both entrepreneurs and intrapreneurs — often share the common trait of being visionaries, holding strong opinions about the products they are building and the problem they are solving. While valuable, this trait, if taken to an extreme, can also prevent these leaders from truly embracing the customer and user voice. The result can be a rift between customer needs and the product or service developed. This issue is particularly endemic to the health organization, driven heavily by tenure and publishing record of senior physicians. Specific agendas or objectives can influence, or sometime outweigh the customer perspective. In order to avoid this, leaders must hold deep empathy for their customers and users, be prepared to set aside their own egos and vision, and follow the customers' needs.

Where to begin. The first step is to look at your innovation leaders. Innovation leaders who are humble, and who embrace deep empathy for patients and health consumers will naturally focus on their input as a central driver of the innovation process. Furthermore, these leaders will recognize that anyone in your organization — whether a nurse, a physician, a receptionist or a payment specialist, could hold the key to noticing, understanding and addressing a critical consumer need. The next step is to ensure that a robust customer development process is in place to support these teams. This is critical to ensuring that the innovation teams gather the consumer needs.

3. Don't bring a bazooka to a knife fight. Okay, this may be a bit of hyperbole. However, healthcare organizations are notorious for overbuilding solutions — well beyond what is required to serve their customers. These overbuilt products and services take too long and cost too much to deliver. And, when they fail to satisfy the underlying customer or user pain point, they are often tossed aside as soon as the next shiny object comes along. While healthcare requires significant care and diligence around information security, it is not dissimilar from other categories of products and services in other regards. There will always be some minimal set of functionality or capability that will satisfy the customer need (often referred to as the Minimum Viable Product, or "MVP"). Keeping this principle at the center of the innovation effort will ensure that only the core set of capabilities required to test the hypotheses laid out for the initial effort will be developed.

Where to begin. Establish guiding principles at the outset of the project, the first of which should focus on identifying the minimum set of capabilities and functionality required in the product or service. Adhering to this principle will be a lot harder to do in practice than in theory. For this reason, the onus is on the innovation leaders to ensure this becomes more than a principle, but that it becomes a core value in the culture of the innovation division. Only once every staff member is asking, "Do we need this to test our hypotheses?" will your organization truly be on a path to embracing lean customer development.

John Petito is a manager with Strategy&, PwC's global strategy consulting team, and Igor Belokrinitsky is a principal with the firm.

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