By Saul Kaplan, on Mon Aug 4, 2014 at 8:30 AM ET  John Hagel speaks with satisfying precision. He has kind eyes and stern glasses, which together dominate the screen during a Sunday-afternoon Skype conversation.
As co-chairman of Deloitte’s Center for the Edge, Hagel hunts for unexploited capability on the “edges” of business and makes the case to include them on the CEO’s agenda. “The edges are most fertile areas for innovation,” he says. They are an important place to watch, because what happens at the edges transforms the core.
Hagel’s research encompasses geographic edges (overseas economies), demographic edges (younger generations entering the workforce, their unmet needs), and the edges of technological discovery. If there’s anything his work has taught him, it’s that the manual is less of an asset than the “ability to respond to unexpected events.”
Hagel believes that we are approaching fundamental revaluation of the role corporations play in our lives.
Corporations in the first half of the 20th century were built around what Hagel calls the “push” business model. The greatest asset of these vertically integrated, gargantuan structures was their knowledge stock — aggressively protected trade facts and formulas that allowed them to forecast with reasonable accuracy which direction to “push” operations.
However, this push model is failing in the face of expanding digital technology infrastructures, Hagel claims. Reinforced by long-term policy shifts toward economic liberalization, barriers to market entry have been significantly reduced on a global scale. The pace of our transactions has increased, the lifespan of knowledge stocks has decreased and competitive intensity in the US economy has doubled in the last 40 years. Hagel calls this “the dark side of technology” — a counter-narrative to the Silicon Valley script of dazzling possibility.
But Hagel sees an antidote to this volatility: openness. “People are realizing that they need to collaborate to survive,” he says, “You have to give up your secrets, your competitive advantage. It’s the only sustainable edge.” Hagel calls this new order the world of “pull,” and he describes it in his book, The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion.
“Pull,” a splendidly iconoclastic antidote to traditional American corporate culture, means moving away from hub-and-spoke networks where knowledge was selfishly guarded to mesh networks that favor collaboration. Pull rejects claims to have all the right answers and instead favors asking smart questions.
“When people come at you with a façade as if everything’s under control, it does not generate trust,” Hagel says. “Admitting you don’t know something is a prerequisite to making progress.”
Rather than showing strength, influence in an uncertain economy paradoxically comes from expressing vulnerability. Yet Hagel says he had to learn the value of vulnerability. As a boy, he was often subject to his mother’s hostile temper.
“The key lesson that I took from my childhood was that my needs did not matter,” he explains. Upon his entry into management consulting, Hagel readily embraced the maxim that the client’s needs had to come first. “For the first part of my career, I was a servant of others,” he says. “The idea that others could help me was completely foreign to me.”
Hagel attributes the shift in his thinking to a talk he gave at the Collaborative Innovation Summit hosted annually by the nonprofit Business Innovation Factory (BIF) in Providence, RI.
“Saul Kaplan invited me to be a storyteller at BIF6, and I’ve talked a lot and in various conferences and settings, and that seemed perfectly fine,” Hagel says. “But then he said, ‘We want you to talk about a personal experience and what you’ve learned from it,’ — and that was very scary.”
“Stories are not my thing. I am a person of reason and analysis,” began Hagel’s BIF6 story. But sure enough, he shared two tales of formative childhood experiences in a passionate expression of his business philosophy that later became the story of that year’s Summit. “It was the first time I ever got on stage and talked about myself,” he reflected in hindsight.
The experience was an incredible catalyst. “It really unleashed a tremendous sense of potential and possibility, that by sharing my personal experiences, by talking about things I didn’t know, and I connected with people in a way that I would never have had I just given my standard speech. I can’t wait to be a storyteller at BIF10 in September.”
“The key lesson I got from the BIF Collaborative Innovation Summit,” Hagel says, “is that innovation is ultimately not about ideas, it is about personal connection.”
This is the first of a 10-article series originally published on the Time website, authored by myself and Nicha Ratana, of conversations with transformational leaders who will be storytellers at the BIF10 Collaborative Innovation Summit in Providence, RI, on Sept. 17-18.
By Saul Kaplan, on Mon Jul 28, 2014 at 8:30 AM ET I have to admit when I was growing up and when we raised our children I thought weird was out. Weird was isolated, ostracized, dismissed, and definitely not cool. Turns out I was wrong. Weird is in. Weird is unique, refreshing, remarkable, and definitely cool. It just took me a while to figure it out. The evidence is all around us. Two personal reminders of how weird can be an advantage are a recent trip to Austin, Texas and reading Delivering Happiness by Zappos CEO, Tony Hsieh.
I was asked to give a talk on business model innovation to a group of association leaders in Austin, Texas. It was my first trip to Austin but the city’s reputation for embracing weird preceded my visit. I love the city mantra Keep Austin Weird. How many cities would have the guts to rally around such a weird positioning? I think it is brilliant. It is differentiated and sends a clear message to both residents and visitors that Austin is an edgy and interesting place where creativity is central and you just might learn something new. It makes me want to live and invest there. The night I arrived the positioning was realized immediately as I joined an eclectic crowd forming on the Congress Street Bridge to watch North America’s largest urban bat colony emerge from under the bridge. You don’t experience that every day. It was delightfully weird and the gathered crowd was a great manifestation of Austin’s community aspiration for a collaborative fission of coordinated individualism.
The discussion I went to Austin for with a diverse group of association leaders focused on declining association membership and how to design and test new business models. Turns out that many young professionals are not joining associations and the group wondered if those professionals most receptive to innovation and changing the role of their professions are the least likely to join associations leaving an aging membership uninterested in being and celebrating weird. Maybe associations could benefit from a little more weird.
I just finished reading and highly recommend Delivering Happiness by my friend Tony Hsieh. Tony reveals his Zappos playbook and no surprise weird plays an important role. One of Zappos’ 10 core values is Create Fun and a Little Weirdness. Can you imagine your company explicitly celebrating being weird as one of its core values? Zappos means it. Not crazy or extreme weirdness but comfort with unconventional approaches, learning from mistakes, and the ability to laugh at themselves. Zappos wants a touch of weirdness to make life more fun and interesting for everyone. Tony is serious when he says the company must have a unique and memorable personality.
I experienced the weirdness first-hand when I visited Tony at Zappos headquarters in Las Vegas. It is remarkable to see the Zappos culture up close and personal. If you are going to Las Vegas definitely take Zappos up on its standing offer to visit the headquarters. None of what you have read about Zappos is as powerful as seeing it in action. From the way you are greeted at the airport to a memorable stroll through the company. On the outside the buildings look like any one of a million suburban office complexes but once inside you will not forget the experience and uniqueness of being warmly greeted by each department with an eclectic mix of streamers, parades, kazoos, cowbells and what ever expression strikes the Zappos team at the moment. The Zappos culture Tony talks about is obvious, tangible, and infectious. In Tony’s own words to Zappos employees, ” We want the weirdness in each of us to be expressed in our interactions with each other and in our work.” I am thrilled that Tony is joining us as a storyteller at BIF-6 (not to be missed, hint, hint, only 60 seats remain).
If the goal is to get better faster and learning is optimal at the edge we could all benefit from a little more weirdness. We need to make room in our personal lives, organizations, and communities for embracing weird. Everything else seems boring and stagnant. Weird is in.
By Saul Kaplan, on Mon Jul 21, 2014 at 8:30 AM ET  I tried. I really did try to take a break from all the design and innovation buzz while on vacation last week in Spain. It didn’t work. Throughout an incredible ten-day sojourn across northern Spain design and innovation reminders were everywhere. It wasn’t premeditated. I am sure the lens through which I view the world has a lot to do with it but I also credit Spain, which has a clear case of the design and innovation bug. Then again maybe my perspective was colored by all of the great Rioja wine. Here are the design highlights from this innovation junkie’s summer vacation.
We started our Iberian adventure in the great city of Barcelona. On our first day we set out to see Casa Battlo and La Sagrada Familia designed by Spanish architect Antoni Gaudi. Both were on our must do list and unanimous recommendations from many Twitter friends who had been to Barcelona. Goodbye jet lag. Wow. I wasn’t familiar with Gaudi before our trip but will never forget his work after seeing it. Gaudi was ahead of his time. He was more modern than the Modernist Art Nouveau period in the late 19th early 20th century he lived and designed in. Throughout Gaudi’s life, he studied nature’s angles and curves and incorporated them into his designs. His works are iconic and seem to flow directly from nature. Gaudi said, “The great book, always open and which we should make an effort to read, is that of nature”. Amen.
Casa Battlo, or as the locals refer to it Casa dels Ossos (House of Bones), has a skeletal, visceral, natural feel throughout. I don’t think there is a straight line in the entire house. The way Gaudi used color and light to draw you in is amazing. He devoted the end of his life, unfortunately cut short in 1926 by a tram accident, to the monumental church La Sagrada Familia. He completed the amazing design but barely saw the work started. The work continues on today and the iconic church spires define the Barcelona skyline. There aren’t enough times in your life when design takes your breath away. Visiting Barcelona and seeing Gaudi’s work took my breath away.
From Barcelona we drove into Rioja wine country for some rural relaxation and leisurely wine tasting. Surely my obsession with design and innovation could take a rest there. No such luck! The concierge at our beautiful Relais & Chateau advised us to visit a couple of wineries in the small village of La Guardia. As GPS guided us toward the Marques de Riscal winery there was no mistaking the iconic design of Frank Gehry as we pulled in. I had no idea that Gehry did Rioja. But there they were, those signature metallic ribbons that remind me of the ribbon candy that we ate and got stuck in our teeth when we were kids. I knew we were going to see his famous work in Bilbao later in our trip but wasn’t expecting to see it in Rioja country.
As we visited the winery it began to make sense. Marques de Riscal is attempting to create a new positioning for the winery and its wines to blend tradition with innovation. What better way to execute a transformational positioning strategy targeted at employees, visitors, and customers than to hire the iconic architect Frank Gehry. I would like to think that wine is about grapes and fermentation but the business is all about brand, customer experience, marketing, and price point. It makes great sense to differentiate brand and customer experience through the power of design. As a bonus the Rioja was pretty darn good.
After several days in wine country the last leg of our journey took us north into the Basque region. We headed for San Sebastian and took a side trip to Bilbao. This time it was by design that we visited the Guggenheim Museum to see Gehry’s iconic work and its great collection of modern art. It was wonderful to visit and I couldn’t help but think about the power that iconic design can have on a community. Bilbao is an old industrial port city that has been transformed in part by the iconic Guggenheim into a design and innovation center in northern Spain.
I will spare you the details of every tapas bar, pintxos crawl, great restaurant, and winery we visited. Trust me when I say that a good time was had. Batteries are recharged and inspiration to advance the mantle of purposeful design and innovation is renewed. Gracias Espana. El gusto es mio.
By Saul Kaplan, on Mon Jul 14, 2014 at 8:30 AM ET  I have been thinking about regeneration. While it is common knowledge, it still amazes me, that salamanders can regenerate body parts, including their tails, upper and lower jaws, eyes and hearts. Yet mammals including humans can’t. Salamanders are the highest order of animals capable of regeneration. Do mammals know something that salamanders don’t? Cosmetic surgery, implants, and promising regenerative medicine research aside we humans are stuck with the body parts we are dealt for now.
I wonder if our inability to regenerate at the biological scale also impedes our ability to regenerate at a social system scale. It seems obvious that our important social systems including education, health care, and energy need serious regeneration. These systems have evolved over a long period of time, were built to support an industrial era that is long gone, and have built up incredible mechanisms to resist and prevent needed change. It is not technology that is getting in the way of social system change. It is humans and the organizations we live in that are both stubbornly resistant to change. Why are humans so incapable of regeneration at both biological and social scales?
Maybe understanding the biology of regeneration can provide insight. Salamanders can regenerate injured body parts because evolution has enabled them to immediately unleash stem-like cells to a wound site when damage is detected. When salamanders are wounded skin, bone, muscle, and blood vessels at the site revert to their undifferentiated state. In essence they go back to an embryonic state and start all over again making regeneration possible. Humans took a different evolutionary path.
Turns out the human evolutionary pathway traded off regeneration in favor of tumor suppression. In order to decrease the risk of cancer and increase longevity our mammalian ancestors selected against regeneration. The theory is rapid cell division required for regeneration looks to our bodies a lot like the unchecked growth of cancer. Because our longevity makes us vulnerable to accumulated DNA mutations we’ve evolved a kind of molecular brake to keep tumors at bay. I can’t speak for humankind but it seems like the right trade-off to me. Unlike salamanders, when mammals lose a limb the body’s reaction is to release cells to the site that become scar tissue. Current stem cell research is promising and offers the future potential for a work-around to enable regeneration without turning off the molecular brake that prevents tumor formation and progression. Tissue generation and regenerative medicine are both exciting fields to watch.
I think there are parallels at a social system scale. Social systems have also evolved selecting for traits that maximize longevity. Our current education, health care, and energy systems are well intentioned and pedaling very hard to deliver value. The truth is these systems are no longer positioned to deliver value the way we want and need them to. We all know there is a better way. The 21st century screams for system regeneration and yet the best we seem to be able to do is tweak current models and to leverage technology in a sustaining way to coax more life out of systems that are not sustainable. The evolutionary pathway for our current social systems seems to have traded off regeneration in favor of innovation suppression. I know it seems extreme to equate innovation to a cancerous cell in an organization or social system. But hey, I have seen and worked in many organizations and systems, in both the public and private sectors, which have built up incredible defenses to insulate and protect themselves from innovation and change. Tell me you haven’t experienced the same thing? Our social systems have evolved antibodies to attack and wear down innovators. Organization and system leaders fear metastasis of disruptive technologies and seeds of change. They have established an armamentarium of tools to resist and block regeneration.
We don’t need more tweaks. We need system regeneration. Just like tissue engineering and stem cell research is opening up the possibility of regeneration at a biological scale we need to leverage social media and purposeful networks of innovators to enable regeneration at a social system scale. We must design, prototype, and test new systems solutions in the real world to determine what works and can scale. Student, patients, and citizens are waiting. Let’s unleash the newt within.
By Saul Kaplan, on Mon Jul 7, 2014 at 8:30 AM ET It’s time for me to come clean. In today’s social media crazed world it will come out sooner or later anyway. I have one high school varsity letter and it’s for bowling. Yes, you heard right, bowling. And it wasn’t ten-pin, but candlepin bowling. Anyone who grew up in New England, with parents like mine who looked for ways to get the kids out of their hair on rainy Saturdays, knows exactly what I’m talking about. Candlepin bowling rocks.
For those of you who aren’t from New England, candlepin bowling is a unique version of the sport invented in 1880 in Worcester, Massachusetts by a local bowling alley owner, Justin White. Candlepin bowling is clearly evidence of New England as a regional innovation hot-spot. For the most part candlepin never caught on outside of New England and the Canadian Maritime provinces. In the region candlepin bowling enjoyed a cult following including its own local television shows. I remember Candlepins for Cash, which was a Saturday morning staple and may well have been the first reality television show.
The first noticeable difference from the more popular ten-pin variety of bowling is the small size of the balls. Don’t look for holes for your fingers because there aren’t any. The ball is 4 ½ ” in diameter weighing only 1.13 kg. It fits in the palm of your hand and can literally be thrown rather than rolled down the alley at the pins. I have seen many errant candlepin balls launched across lanes. Personal injury insurance is a must. Back in the day I owned a set of balls (spare me the cajones jokes) and yes of course the required bowling ball bag. The balls were a pearly white with wonderful lime green marble swirls throughout. Come to think of it I wonder where they went. Most likely my wife sold them at a garage sale when I wasn’t paying attention.
Another difference in candlepin bowling is the size of the skinny pins (15 ¾ ” by 3″) which are harder to knock down so you get three tries in every frame versus the two attempts you get in ten-pin. My favorite difference in candlepin bowling is that the deadwood between shots isn’t cleared. In other words pins that are knocked down are left as they lie to either impede or aid the subsequent shot in each frame. You haven’t lived until clearing a 7-10 split which would be all but impossible without the help of well-placed deadwood. I love this aspect of the sport and in this way candlepin bowling is like the innovation process and life. There is always deadwood to deal with. It is how you deal with and leverage the deadwood in your life that defines you.
Innovation is a better way to deliver value. It isn’t an innovation until value is delivered to an end-user in the real world. Innovators must figure out how to deal with deadwood. This ability often marks the difference between an innovator and a non-innovator. It isn’t the lack of ideas or technology that gets in the way it is stubborn humans and institutions that slow down or block experimenting with and scaling a better way. Most give up when deadwood is either blocking the way forward or it seems insurmountable and not worth the personal effort or risk. Innovators don’t give up and are never deterred. They incessantly find ways to go around or through deadwood. The most creative innovators find ways to leverage deadwood. They actually put it to use in exploring new and better ways to deliver value and solve problems. Innovators co-opt or repurpose people and capabilities to enable the innovation process. What looks like deadwood to most is just part of the solution for an innovator.
This is the secret of how innovators confidently attempt 7-10 splits when no one believes a proposed innovation is even possible. Innovators see ways to recombine capabilities in order to tackle the seemingly impossible. They are relentless in trying new permutations until some new combination works. Innovators have learned to leverage deadwood to find new ways to create, deliver, and capture value. This innovation junkie is proud of his bowling varsity letter. Bring on the deadwood.
By Saul Kaplan, on Mon Jun 30, 2014 at 8:30 AM ET One of the great things about having the kids around the house this summer is the temporary return of snack food. But this summer is different; the snacks are all lined up in the cupboard in 100-calorie bite size packages. As if the packaging alone will ensure portion control and make snacking consistent with our attempts at healthy living. Of course it only works if you stop with one 100-calorie package, which I seldom do. While snacking I have been thinking about the idea of bite size packaging and wondering if breaking up big hairy social goals into 100-calorie bite size packages of work tasks would better enable us to harness the power of social media to get more stuff done.
Social media platforms like Twitter and Facebook are incredible at stirring up the pot but not as good at serving the meal. I have been amazed at the way social media enables the exchange of ideas. The school doors are open 24/7 for life long learning. Diverse communities of interest arise spontaneously reacting to world events, spectacles, and provocative ideas. But how do we translate interest and commentary into action?
I am fortunate to interact every day with passionate and motivated innovators who agree that we must transform our health care, education, and energy systems. We also agree that the technology we need is available today to enable transformative change. This is our window of opportunity. Tweaking the current systems won’t work. We need real systems change and the key will be to unleash the power of social media beyond exchanging ideas to taking meaningful action. What if we could make it as easy to take an action step, as it is today to contribute and react to ideas? The way forward is to break these seemingly overwhelming social tasks down in to bite size 100-calorie packages so that social media enabled communities can engage by rolling up their sleeves and contributing deliverables that will advance these important causes.
We have to get better at asks. Asks have to be simple. Asks must be accessible at the point of interest. Asks should not require more than 140 characters. It has to be easy to say yes and to accomplish the bite size task. There should be immediate feedback on all completed tasks and it must be clear how the task fits into the bigger picture contributing to the overall social objective and systems change.
Social media platforms have the potential to move beyond talking about changing the world to actually enabling us to change it. We can accelerate progress by breaking down wicked goals in to 100-calorie bite size packages that are easier to snack on.
By Saul Kaplan, on Mon Jun 23, 2014 at 8:30 AM ET
“Education is not the filling of a bucket, but the lighting of a fire” W.B. Yeats
Excuse the rant but I am outraged by the state of the U.S. education system. We have let the pilot light go out and we are failing our youth. It is time to move beyond public policy debates and institutional rugby scrums to try new solutions. What we are doing now isn’t working and far too much of the federal stimulus investment is being spent to sustain the current system.
A report last year from the nonprofit network America’s Promise Alliance showed that 1.2 million students drop out of high school each year. Only about half of the students served by school systems in the nation’s 50 largest cities graduate from high school. The U.S. public education system, especially in the country’s urban centers, must be transformed.
Only about 40% of the U.S. adult population earns a college degree. That may have been fine in the 20th century when an industrial economy supplied good jobs to those without post-secondary education. It is not fine today when a post-secondary credential is a necessity for a good job.
Our education system was built for the 20th century.
Everyone loves to point fingers at the other players in the system as the cause of the problem. Observing our education system today is like watching an intense rugby scrum that is moving in slow motion hoping the ball will pop out. Finger pointing and incessant public policy debates galore. We love to admire the problems: It’s the unions that are getting in the way. Teachers are resisting change in the classroom. Administrators don’t understand what is going on in the classroom. Parents are not engaged. Public policy makers can’t make up their minds. If only private sector companies were more engaged. Students are unruly, undisciplined, and disrespectful. Everyone is blamed and nothing changes.
The simple idea of “lighting a fire” expressed in Yeat’s quote says it all for me. Teaching is an important means to an end. Creating passionate life long learners is the objective of education. Content, subjects, jobs and requirements, will all change over time. The pace of change is accelerating and the half-life for assumptions and usable knowledge is decreasing. It has become a life long challenge to stay relevant. The only thing that is sustainable is a fire inside to keep learning
The objective of education is to light a fire for learning in every single youth. When the pilot light is on, everything else is possible. For starters, lets recognize that individuals have different learning styles. One-size industrial education models are not working and must be transformed. We have the enabling technology available to us today to create and scale an education system that provides access to killer content and experiential learning opportunities tailored to individual learning styles for every student. It is time to demonstrate that we can and will change our education system. Our country’s youth is waiting.
I am excited to be part of the Business Innovation Factory (BIF) community focused on real world experimentation for new education systems and solutions. In BIF’s Student Experience Lab we are bringing the voice of the student into the education innovation conversation and creating a network of innovators motivated to explore new system solutions. Join the conversation. The water is fine.
Lets reignite the pilot light and demonstrate that there is a better way to light a fire for learning in every youth.
By Saul Kaplan, on Mon Jun 16, 2014 at 8:30 AM ET I got a heavy dose of design vibe last week in NYC. You know. Hanging around really smart design thinkers and the places they hang out in hopes that some of it will rub off. I designed the boondoggle around an invite by Business Week and Smart Design to sit in on an innovation and design discussion hosted by my friend and BIF-5 co-host, Bruce Nussbaum. Bruce has gotten the design vibe thing longer than the rest of us and has a great new gig at Parson’s. I needed to go over a few BIF-5 things with Bruce anyway so off to the big apple it was.
Bruce invited me to Parson’s so we could catch up and I could see the vibe up close. The village and Parsons conspire to draw you in. I also spent time with Helen Walters and Reena Jana, who cover the Design and Innovation beat at Business Week. Interesting week for them as they learned McGraw Hill put Business Week up for sale. The event I came down for took place at Smart Design (known for Oxo, and flip design) at their very cool (high on the design vibe meter) space in Manhattan. The event was well done with an active conversation about design’s place in the U.S. economic narrative. My visit was complete when I also got to spend time with my friend Alice Wilder of Blues Clues, and Super Why fame.
I left NYC charged up and more convinced than ever that design has an important role to play in transforming social systems, including health care, education, and energy. I also left with a strong sense that the design community needs to move on from the incessant argument over the importance of design thinking and process. It is time to claim victory. Get over it. The argument is boring. Design is important. We stipulate that design is about more than sexy products. We get that design is about delivering a compelling customer experience. Now, can we get on with putting it to work to solve real world problems?
No more books are needed to convince us that design thinking and process are a priority. They are important tools. If you want to convince us, stop talking about design thinking, and start putting it to work to mobilize real systems change. I want the next book I read about design to be about the “how”. I want case studies of how design enabled system experiments in health care, education, and energy. I want to know what we learn from these experiments and how we can try even better system configurations to deliver value to the patient, student, and citizen.
I am grateful for a strong design vibe because it gives me hope that we can create a better future. I just want the vibe to translate into trying more stuff and putting the tools to work rather than the navel gazing of today’s design thinking debate. Time to move the design conversation to a new, actionable, place.
By Saul Kaplan, on Mon Jun 9, 2014 at 8:30 AM ET I love conversations about ideas worth scaling. Many of the comments to my BW column on biotech disruption are from industry stalwarts fighting to defend the industry. Thinking about how biotechnology can help enable a transformed health care system seems worth talking about.
I am not criticizing either the pharmaceutical or biotech industry or any of its companies and executives that work hard every day trying to bring forward life extending and life saving drugs. I have the utmost respect for the industry having spent nearly my entire career in and around it. I am suggesting that the current blockbuster industry model may have served its purpose and can be changed by the disruptive potential of biotechnology. It is this disruptive potential that will enable us to get under the buzzwords of personalized medicine and begin to understand how a new and better health care system can work.
It is predictable that existing industry players will fight to strengthen their relative position in the industry and to sustain the current industry model. I don’t criticize them for that. I expect it. I can hear Clay Christensen saying that companies and industries don’t disrupt themselves. He is so right.
Our current health care system is unsustainable and until we experiment and scale new system approaches that take advantage of technology to put the patient and citizen at the center of a well care system our current system will expand out of control.
I have lived and worked in every nook and cranny of the pharmaceutical and biotech industry over a 30 year career and have helped design and build capabilities at the function, company, and industry scale.
One commenter mentions Leigh Thompson from Lilly. Leigh was a friend of mine from old Lilly days and one of the smartest people I have ever known. We worked together during the latter stages of clinical and regulatory development as well as on the U.S. launch planning for Prozac. Leigh was remarkable and is sorely missed. He was indeed a big proponent of internal systems to fail fast for product and clinical development programs. I know Leigh would be an active participant in today’s conversation about the need to experiment with new business models and industry systems. He saw the promise of biotechnology and knew the industry would have to change to take advantage of it. He was a world-class innovator.
I had a front-row seat during the early days of the biotech industry. I remember like it was yesterday touring the very first industry scale production facility for a recombinant DNA derived product, human insulin (Humulin). As a road warrior consultant over too many years I worked with many project teams building new capabilities for both pharma and emerging biotech companies. Some even harbored early hopes of leveraging biotechnology to create new platforms for discovery and development for personalized medicine. I was in many great discussions about the difference between a platform and a product business model. In every case the siren call of the blockbuster industry model reinforced by a VC exit strategy dependent on either an IPO or Big Pharma acquisition won out. It was predictable and companies did the right thing to maximize shareholder value.
There is a lot more technology development work needed to enable personalized medicine but biotechnology has advanced enough for us to demonstrate how a system can work in several specific diseases and care path areas. All key levers and stakeholder roles must be on the table to fully explore available system options. At the non-profit Business Innovation Factory we are creating actionable lab platforms for exactly this kind of experimentation.
There has been a lot of talk about business models built around outcomes that deliver better care for less money. The hypothesis has always been that drugs are cheaper than other types of health care and should be used, more not less, to save the health care system money. The theory goes that if you squeeze the toothpaste tube in one place it only pops up in another. Only looking at the entire tube not just squeezing all over the place will result in an opportunity to design and test possible new systems.
The pharma industry has never done particularly well at selling the “toothpaste tube” story and seems content working the current system for maximum return. The current blockbuster model is bringing continued consolidation and is not sustainable.
New business model discussions with industry friends that are open to the discussion and not defensive about the history and current position of the industry are always interesting. Discussions with the “lean against” crowd that don’t think the system has to change don’t go very far or last long. Most of this crowd just point at another silo in the rugby scrum as the source of the inertia. It is the fault of doctors. No, it’s the insurance companies, the hospitals, the government, the patients etc. Everyone points at everyone else as the source of the problem and nothing changes.
In the current health care system drugs, whether they are from chemical or biological processes, are treated as a cost center or one more silo to manage. The industry fights every day to make sure the silo is managed in a way that benefits the industry. Rules form the architecture that the industry operate and compete under including patent law, FDA regulations, and federal/state legislation. I don’t blame the industry for fighting for rules that are in their best interest. I am suggesting that we should at least consider that with today’s technology we can do better and should be testing new system designs to see what works and can scale.
The silver tsunami is coming as the first baby boomer turns 65 in 2011. We had better get on with exploring new system approaches before the current system crashes. I am proud of the industry I grew up in and want it to be an innovator and leader in shaping a new and better health care system. The patient is waiting.
By Saul Kaplan, on Mon Jun 2, 2014 at 8:30 AM ET The national health-care debate is many things to many business interests. To the biotech industry, it seems to be a matter of life and death. Makers of biotech drugs, which are derived by manipulating genetic material in living organisms, insist that their products must be patent-protected from generic “biosimilars” for at least 12 years. That would ensure monopoly prices, which the industry says are required to earn back their big investments in research and development.
To reform the U.S. health-care system, the government shouldn’t be creating a road map to biosimilars, however long the trip. Instead, it should open the floodgate to “biodissimilars” and to the personalized medicine options they will enable.
Biotech is a great U.S. innovation success story with the potential to be the disruptive force that makes personalized medicine possible. Personalized medicine creates remedies designed for your specific genetic makeup or condition and offers a path toward better, longer lives, and lower health-care costs. Unfortunately, the biotech industry has moved away from its disruptive potential and morphed into Big Pharma, adopting the pharmaceutical industry’s unsustainable “blockbuster or bust” business model.
Blockbuster BustBiotech executives will claim that they are different from the pharmaceutical industry. Don’t believe it. Just check out the overlap of their participation in the Biotechnology Industry Organization (BIO) and PhRMA, the Pharmaceutical Research & Manufacturers Assn. The biotech and pharmaceutical industries have locked into identical business models, both dependent on producing a steady stream of blockbuster products, or drugs that generate at least $1 billion a year in revenue. Blockbuster drugs offer a one-size-fits-all therapeutic approach—think Lipitor or Advair—and the antithesis of personalized medicine.
Today both industries are valued on Wall Street solely by the net present value of their product portfolios and compounds under development. In addition, the few biotech companies with branded productsmarket them exactly as pharmaceutical companies do. It works both ways. Check out almost any pharmaceutical company and you will find that it has fully integrated biotech platforms into its R&D capabilities. You can’t tell the difference between these two industries.
Initially, all new technologies are deployed as a sustaining innovation. Biotechnology is no different. As predicted by Clay Christensen’s disruptive innovation theory, the pharmaceutical/biotech industry has deployed biotechnology tools and platforms in an effort to sustain its current blockbuster business model. Both pharmaceutical and biotech companies will fight to the death to wring out every possible blockbuster product from the current industry model. There is still money to be made—a lot of money, in fact—but the model is not sustainable.
Imagine needing to introduce three, four, or five products every single year each with more than $1 billion in market potential. That is the scale it takes to compete in the drug industry today. This daunting challenge will force another wave of consolidation as a few very large companies try to feed the voracious appetite of the blockbuster monster. Everyone else will be either a niche company or a development company feeding products to the few behemoths left standing.
Fail Faster!I don’t know how long it will take, but all of the disruptive innovation theory and supporting evidence predicts that the current industry model will fail. We need it to fail faster because the patient is waiting. Reform, as currently contemplated, is little improvement. Legislation under consideration today does nothing more than extend access and marginally increase the efficiency of our current system. Costs will continue to escalate out of control and outcomes will not improve.
Biotechnology has the potential to change the way we understand and treat disease. It has the disruptive potential to put the patient at the center of a new system with individualized diagnostic and treatment approaches. As such, it could deliver better care for less money.
To fix the U.S. health-care system, we need to design a system where incentives are realigned and the roles of the players—doctors, patients, insurers, hospitals, etc.—are reconfigured to create a “well-care” system that puts the patient in charge and at the center of the system. Biotechnology can help enable the transformation to personalized medicine, but not until we take better advantage of its disruptive potential.
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