By Christopher Wasden
For many, innovation might be characterized as an “I’ll-know-it-when-I-see-it” experience. And, as we explain in our cover story on page 10, innovation is born out of an organization in which the culture supports a dual-pronged approach to creating new value: 1) improvement-focused efforts and 2) invention-driven ones. With so many moving parts, then, can you really distill the investment and activities of a company, university, or country to mere scores or bar charts? Yes, we believe you can—and should—measure innovation. With a solid understanding of where you are now relative to your peers, and where you want to be going forward, you can better cultivate and manage innovation.
PwC took this approach in a pair of recent benchmarking studies on healthcare innovation. While focused on the medical technology industry, the insights and trends surfaced are valuable starting points for any company, institution, industry, or country serious about innovation.
Our first study, the Medical Technology Innovation Scorecard, looked at innovation from a country perspective. We assessed the capacity for innovation of nine countries— Brazil, China, France, Germany, India, Israel, Japan, the United Kingdom, and the United States—selected because of their strong medical technology market and innovation potential. We collected and analyzed data for the 2005-2010 period, composed of dozens of metrics organized by what we call innovation pillars, crucial supporting factors for innovation like powerful financial incentives and a supportive regulatory system. Using these, we then calculated each country’s overall innovation score, as well as scores for each innovation pillar. (See Figure 1.) Based on this comprehensive data foundation, we forecast their performance to 2020.¹
What did we learn? The very nature of industry innovation is changing—both the definition of what constitutes value and who determines it. Previously, the physician was the primary decision maker, often selecting technologies—and assigning value—based upon features and functions but not necessarily on their ability to decrease healthcare costs while improving outcomes. In the new era of healthcare innovation, governments, consumers, and private insurers are demanding a different kind of value, one that prizes healthcare that is smaller, faster, and less expensive, enabling delivery of care anywhere and helping to reduce healthcare costs.
With innovation essentially being redefined, the locus of the medical technology industry, which has long been the United States, is also changing. Emerging-market countries such as Brazil, China, and India, despite their comparatively less well-developed healthcare system infrastructures, are quickly taking the lead in developing so-called lean innovation or frugal innovation. For example, with frugal innovation, innovators refine process to the point that they can deliver high volume and high quality at a low cost. Such is the case with Dr. Devi Prasad Shetty in Bangalore who has perfected a $1,500 heart surgery by optimizing processes and applying supply chain principles—the same procedure with the same quality outcomes would cost more than 50 times as much in the United States.
While healthcare consumers will begin having greater influence on innovation than they have today because they are bearing more of the costs, those in the United States may find themselves unable to readily access new products and services. Our study found that many companies are increasingly going outside the United States to garner clinical data, register new products, and begin earning revenue. Today, due to differences in the regulatory process in Europe and other regions, compared with the United States, they are going first to market in Europe and, by 2020, they likely will move into emerging-market countries before taking on the United States’ challenging regulatory environment. Countries are finding that a superior regulatory process can create a competitive advantage, compared with the United States, where the FDA struggles to keep pace with medical technology innovation.
While at first glance, these insights may seem obvious to those in the medical technology industry—and many other industries—the significance of the Innovation Scorecard is that there is hard data to back up the assertions. The Scorecard also illustrates how the industry’s innovation pillars have changed and reveals a new set of factors that will be crucial for countries and companies as they seek to foster innovation going forward. This new paradigm for the future will require medical technology companies to provide systembased solutions that deliver value—a radical departure from the current featurefocused approach that drives the system toward higher volumes rather than value.
Our second study on healthcare innovation focused on academic medical centers and was conducted in partnership with Memorial Sloan-Kettering Cancer Center (MSKCC).² Universities represent an essential component of the innovation value chain, thanks to their resources and their knowledge of how to generate technologies that can improve people’s lives, create commercial value, enhance the prestige of the institution, and further advance research and development. But until innovations are shown to have economic value, these benefits are not fully realized. That’s why the commercialization services of universities’ technology transfer offices (TTOs) are so important.
But why are some TTOs more successful than others? To find out, we created an Innovation Scorecard that applied the same principles as our other study but was tailored to the academic research community. We sought to identify the leading practices that can be applied— and then measured—to better manage the innovation process in the university setting.
From our analysis, three major themes emerged: 1) Leading practices varied considerably across institutions in their approaches to patenting, networking, marketing, funding structures, and licensing, resulting in measurable differences in workflow processes and outcomes. 2) No institutions excelled in all innovation dimensions, indicating that all could benefit from applying the leading practices performed at other universities. 3) No institutions have a robust system for measuring and managing leading innovation practices.
Even with so much room for improvement, the university environment is ahead of most businesses in supporting and measuring innovation because of decades of open innovation and commercialization of their intellectual property. The corporate world is only now beginning to look for better ways to support and accelerate innovation and can learn from the leading practices and measures used in universities.
Both Innovation Scorecard studies underscore why measuring innovation in an objective way and tracking progress over time are crucial parts of the innovation process. Today, very few companies, universities, or countries measure innovation, and, if they do, they often rely on incomplete measures. But by taking a comprehensive approach to measurement, they can better drive innovation in their organizations.