Creative destruction: The future of healthcare entrepreneurship

Dr. Richard Foster, a jack-of-all-trades in healthcare innovation and venture sat down with Rock Health to discuss industry trends and the future of entrepreneurship.  He is the author of two best-selling books: Innovation: The Attacker’s Advantage (1986) and Creative Destruction (2001). He was also named one of Harvard Business Review’s “Masters of Innovation” in the past century.

We’ve seen rapid growth in this field in the past few years from startups, and now in the past couple months from larger companies such as Apple and Google. Do you see the industry controlled by a few hands in the future?

I don’t—I do think that Apple, and particularly Google, have taken all the messages about why big companies can’t innovate to heart, and are working on solutions. Google has proven their willingness to shut things down that they’re experimenting with. The hardest part is not coming up with the creative idea, the hardest part is shutting down what you already have—your noble experiments that don’t work. The market doesn’t have any problem shutting things down. It’s called: “We’re not going to fund you for round B.” But corporations have traditionally had a harder time—Google has fixed that problem.

In healthcare IT, we have Epic, Cerner, athenaHealth, Allscripts, and five or six others that are important. Except if you actually look at the number of healthcare IT companies out there (I’m currently tracking 2,167 of them)—I’ve said before, and I’ll say it again—I think in fifteen years, 75% of the S&P 500 will be companies that we don’t know today. That’s not because we don’t know their names, but because they don’t exist. There’s no way with that amount of change, that we have to worry about monopolies.

The hardest part is not coming up with the creative idea—the hardest part is shutting down what you already have.

You’ve played many roles in the health tech sector—board member, venture capitalist, government advisor. In your opinion, what is the largest hurdle for entrepreneurs to overcome in this sector?

It’s just so complex. There’s no business in the world where if you don’t do things right every time, people die. There’s no business in the world where the chief practitioners, otherwise known as docs, have absolutely no training in technology. There is no healthcare IT class, that I’m aware of, that is given in a major medical school in this country, or any other country. There is no course in major medical schools, that I’m aware of, that teaches you how to start and run a practice.

There’s no business in the world where if you don’t do things right every time, people die.

Patients aren’t particularly compliant either. I saw somebody that had an app that was for once and all going to solve the problem of pill-taking compliance. They took a video of the patient taking the pill everyday that had to be sent in. Within a week, people had taken that video and recorded it, and every morning they got up and played the video and they never took their pills. So patients are really, really clever. There’s a fraction of them, a double-digit fraction, that just says, “I’m not going to do it.” So all those things make it much more difficult.

Big data is a huge topic in healthcare, in relation to multiple providers, patient reported outcomes and other topics. How do you see big data evolving in the future?

In general, you’re not successful as an entrepreneur because you bring a new ability whose need is unknown to the marketplace. You have to develop and show the need. So I think the challenge in big data is figuring out what the most important problems are. The government is doing so and running some of these experiments—that being said, if you and I went down to Washington DC and we said, “Okay, we’d like to compare the rates of rates of diabetes in 18-25 year old males between Tennessee, Oklahoma, and Mississippi for the last 30 years.” All that data is in Washington. My guess is all the data files have different formats, they record the years as different years, and the definition of diabetes is different. So we have the data and it’s useless. When are we going to start gathering clean, auditable data that means what it’s supposed to mean and put it to use? We have a long way to go and we need to have major hospital systems say, “I’m going to do this.” There also has to be reimbursable costs for this, and of course insurance companies have to be on board.

Dr. Richard Foster is a professor at the Yale School of Management, an emeritus director at McKinsey & Company, Inc., and the special advisor on healthcare innovation for the Yale University President. At McKinsey, he founded many practices, including the healthcare, technology and innovation practices. He also sits on the ZocDoc Advisory Board.