Finance and Business Strategy

Why the idea of disruption is so hard for healthcare leaders to understand

March 13, 2023 6:55 pm

It’s time to talk about the word disruption – what it is and what it isn’t – because right now in healthcare it seems to be generating more angst than strategy.

First, some good news. Disruption (shorthand for “disruptive innovation”) is just a theory. It’s an idea. That’s all. It was first introduced in the mid-1990s, having been designed by Harvard academics to answer one question that was on every executive’s mind: How do I stay on top of my industry when this new “internet” thing is changing everything below it?

At the time, tech companies were gobbling up market share from well-managed and established brands across the country (e.g., Amazon versus Borders, Netflix versus Blockbuster, new e-commerce channels versus Sears).

Disruption, as an academic theory, entered the national conversation to help explain how those popular brands were losing market share, even while ostensibly doing all the right things:

“The process begins with a small company entering the low end of a market … claiming the least profitable portion of the market as its own. Because the established, incumbent companies own the most profitable market segments, they most likely won’t fight the entrant for that market share.

The entrant then improves its offerings and moves upmarket with increasing profitability. Once the incumbents’ customers have widely adopted the entrant’s offerings in the mainstream market, disruption has occurred.”a

Limitations of the disruption thesis

Over the years, as researchers would point out, the original disruption thesis was never a great at explaining U.S. healthcare. In a 2006 article on why innovation in healthcare is so hard, for instance, Regina E. Herzlinger, a renowned Harvard Business School professor, pointed to the “array of barriers” that make healthcare more difficult to penetrate than other American industries (e.g., astonishing fragmentation, complicated reimbursement practices and heavy government regulation).b

And in a 2014 article, Harvard University professor Jill Lepore explored how the tenets of disruption were at best dubious, and perhaps more applicable to industries that turn things into commodities and sell them for gain. Lepore summed up disruption as “a theory of history founded on profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence.”c

Healthcare leaders need to be worried about another dis- word

Today, a continued focus on disruption in healthcare is problematic for two reasons. First, according to Clayton Christensen, the author who coined the term disruptive innovation in 1995, the term’s popular meaning no longer reflects its original meaning:

“Many researchers, writers, and consultants use disruptive innovation to describe any situation in which an industry is shaken up and previously successful incumbents stumble. But that’s much too broad a usage.”d

Second, and most important, we have not yet replaced this misapplication of the term with any clear insight into how new tech entrants are actually affecting the legacy U.S. community hospital ecosystem. That’s a recipe for poor strategy.

Yes, it’s true, investors are pouring money into new technologies that aim to peel away hospital patient pipelines and profitable services. Yes, it’s true, many of these new entrants seek to enable care outside of traditional community hospital walls. And, yes, it’s true that the availability of historically privileged hospital-insurance price data will soon eliminate one of healthcare’s more durable barriers to entry: opacity.

Still, none of these “disruptive” forces represent the fundamental strategic concern facing community hospital systems across the country today: How do healthcare leaders navigate and plan for technological change that is exceeding society’s ability to absorb it? It’s not disruption that you should be worried about; it’s dislocation, the radical reshaping of entire industries, economies and systems.

In his 2016 book Thank you for being late, author and journalist Thomas L. Friedman summarized this challenge with a quote from Craig Mundie, supercomputer designer and former chief of strategy and research at Microsoft:

“‘Disruption’ is what happens when you or your company look obsolete. ‘Dislocation’ is when the whole environment is being altered so quickly that everyone can’t keep up.”

We need a mental model — a single image to help us understand the future

One reason we so often use visuals to simplify the complex is they are effective. (Does Quint Studer’s Five Pillars™ ring a bell to any hospital leader?) When it comes to understanding technology, healthcare and the future, perhaps the best illustration comes from the graph below, developed by Astro Teller, CEO of Google’s research and development lab, and highlighted by Friedman in Thank you for being late.

Here is an explanation for the graph’s four key elements:

1 X-axis and Y-axis. On the x- and y-axis, you have “Time” and “Rate of change,” respectively. In theory, any given rational thing should improve/change with time.

2 The adaptability line. This blue line is upward sloping but is relatively flat. It represents the rate at which humanity adapts to changes in its environment. Fortunately, over the centuries, individuals and societies have gotten a little bit faster at adapting (e.g., increased literacy, knowledge diffusion, culture sharing). A thousand years ago, it may have taken two or three generations to adapt to something new. Today, each generation hardly recognizes the one preceding it (thus, the upward slope).

3 The technology curve. This green line represents technological progress as a swooping exponential curve that starts relatively flat, escalates gradually and then soars to the upper right quadrant. In the past, it may have taken centuries for technology to change the world (e.g., fire, wheel, the longbow). By the 1900s, however, the time frame in which technology was making the world uncomfortably different condensed, noticeably, as technological innovation began to give birth to other new innovations in rapid succession (e.g., steam engines led to railroads, which led to oil/kerosene, then to electricity, then to the internal combustion engine, airplanes and so on). In recent years, technology’s ambition has crawled up the human vertebrae – from seeking to substitute muscle and manpower to seeking to substitute brainpower. As a result, today, technology can touch and transform anything that the brain can see. New innovations are unlocking each other almost instantaneously, resulting in a parade of disorienting and disconcerting differences unfolding in real-time.

4 Dislocation. Notice where we sit on the technology curve presently (black diamond). Somewhere in and around the late-1990s and early 2000s, society crossed a threshold whereby technological progress began to outpace our collective ability to adapt to it (e.g., unregulated computer algorithms and speculation in the American mortgage market triggering the 2008 Great Recession). In other words, technology is now altering societies, businesses and individuals so quickly that we can no longer keep up. This puts entire industries, economies and systems at risk of collapse. (Imagine, say, a manmade virus built on a complex computer escaping the lab and sparking a global pandemic.)

Implications for healthcare leaders

To stay focused and motivated as we encounter unprecedented levels of uncertainty in every aspect of our lives, it’s important that we start by appreciating how the human brain is not wired for this much uncertainty. Social psychologist Heidi Grant and Ernst & Young’s Chief Learning Officer Tal Goldhamer have described it this way:

“For most of human history, we have been hunter-gatherers, living in groups where individuals had established roles and lives. While sometimes dangerous, life was largely predictable. The brain evolved to be remarkably good at recognizing patterns and building habits, turning very complex sets of behaviors into something we can do on autopilot.”e

If you have ever driven home from work and ended up in your driveway, with no memory of actually driving home, that’s the kind of thing Grant and Goldhamer are talking about.

“Given that habits and recognizable patterns are kind of its ‘thing,’ the brain evolved to be uncertainty averse. When things become less predictable — and therefore less controllable — we experience a strong state of threat. You may already know that threat leads to ‘fight, freeze or flight’ responses in the brain. You may not know that it alsoleads to decreases in motivation, focus, agility, cooperative behavior, self-control, sense of purpose and meaning, and overall well-being.”

Does a decrease in “motivation … cooperative behavior … sense of purpose” sound familiar to anyone in healthcare right now? Probably so. Part of the problem in U.S. healthcare right now could be quite simple: Leaders aren’t adequately explaining this dizzying moment in human history.

When it comes to a challenge as great as 21st century cost-effectiveness of health – addressing the factors that impede quality and raise cost – our workforce and our communities need to understand the existential “why” behind every “what” and “how” that we propose. An important first step in that process is understanding what disruption is, what it isn’t and where technology is taking us next.

Author’s note: A distinguished group of the brightest minds in healthcare will be focusing on this article’s topic on May 4-5 at HFMA’s Spring Thought Leadership Retreat, in Atlanta. Click here to join us for “Disruption Week.”


a. Cote, C., “What is disruptive innovation?” Harvard Business School Online, Sep. 3, 2020.
b. Herzlinger, R.E., “Why innovation in health care is so hard,” Harvard Business Review, May 2006.
c. Lepore, J., “The disruption machine: What the gospel of innovation gets wrong,” The New Yorker, June 16, 2014.
d. Christensen, C., Raynor, M.E., and McDonald. R., “What is disruptive innovation?” Harvard Business Review, December 2015.
e. Grant, H., and Goldhamer, T., “Our brains were not built fort much uncertainty,” Harvard Business Review, Sept. 22, 2021.


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