The NHS has been called a ‘slow adopter’ of innovative technologies. Daniel Steenstra of Innovations Factory looks at why service innovation is the only way forward for the NHS – and how industry can help.

The performance of organisations can be described in terms of a hierarchy of capabilities. The psychologist Abraham Maslow identified four levels of need that individuals have to fulfil before reaching their full potential. These needs form a hierarchy, with some (such as food) being more basic than others. The same model can be applied to organisations: in order to be sustainable and in control of their own destiny, organisations need certain competences and capabilities that form a hierarchy (see Figure 1). But many are not able to reach the top level.

Most public sector organisations are rigid and reactive, under top-down political control. Woolworths is a good example of a company that focused on reducing costs by offering cheap products in a cheap retail environment. However, it was not able to deal with changes in consumer behaviour brought about by online shopping, and went bust. Toyota seems to have invented ‘lean’ business by continuously improving its processes, but is still struggling with quality issues and has had to recall many of its cars. Not too long ago, British Airways was considered the world’s favourite airline, with the fastest aeroplane and the best First Class. It had an agile strategy of adapting to the changing market. However, since the Terminal 5 disaster – a failure to innovate by delivering a new system effectively – the company has lost status. However, BA is still managing to adapt – for instance, by developing joint ventures.

Apple is an example of a company that is consistently able to innovate and offer breakthrough products and services. It is very capable of doing the lower-level things right, such as managing costs. Apple spends a third of Nokia’s R&D budget, yet with the iPhone Apple is leading the ‘smart phone’ market. What differentiates Apple from its competitors is its leadership, vision and commitment to innovation throughout the organisation.

 
Figure 1: Hierarchy of competences and capabilities

Why innovation is vital

There are no prizes for guessing at what level the NHS functions today. The Coalition’s White Paper Equity and excellence: Liberating the NHS outlines the need for the NHS to become a truly innovative organisation. This is a big step and the NHS needs all the help it can get to achieve this.

With 1.4 million employees, the NHS is the largest healthcare provider in the world. It has to deal with rapidly growing demand: more people are living longer, due to advances in medicine and improved welfare. Patients have better access to knowledge and expect a higher level of service. Clinical and administrative processes are more complex, with an increased use of advanced technology. However, the worldwide economic crisis is having a significant impact: with the failures in the banking system, governments are generating less income through taxation, which causes an escalating deficit. This crisis is driving cuts in public sector expenditure.

Healthcare providers have developed a culture of ‘damage repair’ with expensive hospital interventions, and depend heavily on management structures. In order to remain sustainable, they need to become more effective and reduce costs, which means focusing on ‘wellness’: preventing illness and providing care in the community.

We know from examples in industry that increasing productivity and cutting costs are not enough. The only way the NHS can deal with these challenges is by innovating its services.

Fear of the unknown

The NHS is a service organisation, focused on delivering patient experiences. It is centrally led by the Department of Health (DH), with rigid bureaucratic structures. The DH controls England’s Strategic Health Authorities (SHAs); each SHA supervises all the NHS trusts in its area. Hospitals and GP practices have to meet ambitious targets and improve financial performance. Paradoxically, they have a considerable amount of operational freedom to decide how these targets will be met. Governance is also dealt with locally, which partly explains why there are considerable differences in efficiency and effectiveness between services.

There are no mechanisms to encourage Trusts to adopt new processes or products. Measures such as awarding Foundation Trust status to financially sound organisations, outsourcing services to the private sector and PCT commissioning has led to competition between Trusts – but there is no lateral ‘joined-up’ structure between Trusts, so any initiative of successful change remains stuck at a local level and takes a long time to diffuse.

The NHS is a complex and disparate organisation, but there are some common features. Being controlled in a ‘top down’ manner, it is not strategic. Its leaders are focused on managing operations, not on entrepreneurship and service innovation. Staff are cautious when it comes to taking risks. There is a strict hierarchy and a tribal culture. Due to the increasing demand and the lack of time, funding and supporting structures, they do not develop and implement service improvements. There is an immature relationship between managers and clinicians, with lack of trust and respect on both sides.

Inertia creeps

Something changes in people when they become patients. As consumers they are informed and empowered and can easily assert their choice by shopping elsewhere or changing service providers. As patients they are weak and no longer autonomous, and depend on their clinician. In this position, patients seem to accept inefficient services and ineffective products; they are not up to date with new products or services that could support them better. Consequently, patients are not able to drive product or service innovation. This makes it difficult for the health service, and for industry, to develop better products and services.

Compared to the car industry, for instance, the medical technology sector has experienced growing demand and lack of competition. Healthcare providers have not driven industry to develop new products: they have been focused on service operation, and patients have not demanded better services. Large companies can still afford to ignore requests for modified, customised products from clinicians, or opportunities for licensing in new technologies. Procurement systems are geared towards high-value and high-volume products, not potentially disruptive innovations.

When it comes to developing and commercialising new healthcare technologies, universities are experiencing the same problems as the NHS: it is difficult to engage with patients and Trusts for market research and evaluation. Universities have been able to get funding for research without clear practical application: ‘technology push’ rather than ‘market pull’. They have not focused on the needs of the health service or industry: they were ‘inventing’ rather than innovating. As a result, industry is not keen to take on intellectual property (IP) coming out of universities.

Innovation: the recent story

Over a 10-year period, the previous government doubled taxpayers’ investment in the NHS. Recognising the importance of innovation, it set up a joint task force with industry (HITF). This led to the regional NHS Innovation Hubs helping Trusts to manage IP, with the Medilinks supporting industry. The Government also set up a national support structure for innovation, merging the Modernisation Agency with the NHS Leadership Centre and NHS University to form the NHS Institute for Innovation and Improvement.

The attempt to combine different aspects of innovation (leadership, education and service improvement) was not successful. The Institute focused on developing ‘products’ for productivity improvements, based on Toyota’s lean principles (e.g. ‘The Productive Ward’). Trusts could take or leave these products: there was no way of forcing adoption. After Lord Darzi’s NHS review, the SHAs became responsible for innovation. But they had no experience or capability in that area.

In summary, the current innovation capability in the NHS is fragmented: product innovation is not integrated with service innovation, leadership and organisational development (see Figure 2). The result is too little innovation, too late and too expensive. This leaves the NHS in desperate need of innovative services and products, with established industry and academia that are unlikely to satisfy that need.

 
Figure 2: Aspects of innovation

Window of opportunity

The Coalition government wants the NHS to focus on patient choice and outcomes. It wants to empower clinicians, decentralise the NHS, and dismantle management structures such as SHAs and PCTs, with care being commissioned by GP consortia. It has scrapped the NHS Institute, breaking down the already fragile innovation infrastructure. It wants the NHS to become innovative, but has not provided any guidelines, frameworks or support.

In order to deal with these challenges, the NHS needs to change fast. It needs to reduce costs and become a lean, agile and innovative organisation. Many aspects have to be integrated: developing new and more effective services will drive the use of new technologies and products, and so will changing the staff attitudes, organisational structures and leadership.

There is a window of opportunity for industry to lead the way in building a new model of innovation and collaboration. This has to focus on services, integrated with new products and organisational changes that are equitable and deliver bottom-line impact. The NHS needs to work with industry, building partnerships with providers of technologies and services, like BA with Boeing (in developing the Boeing 777) or Toyota with its technology providers.

At Innovations Factory, we have developed a novel platform for NHS organisations and industry to work together in developing the capability to innovate. We are trialling this concept and will explain it in more detail in a future issue of Medtech Business.

 
Professor Daniel Steenstra is Royal Academy Visiting Professor in Medical Innovation at Cranfield University and Managing Director of Innovations Factory Ltd, an SME based in the NHS at Heartlands Hospital in Birmingham and dedicated to helping individuals and companies develop their ideas from basic concept to full commercialisation within the healthcare sector. For more information, visit www.innovationsfactory.co.uk

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