Sunday, July 19, 2009

Innovation - Not Always all it's Cracked Up to Be

People sing the praises of innovation like it's going to save the world, answer all our problems and grow our markets. There's only one problem, there isn't necessarily a correlation between innovation and growth. Let me give you an example.

The Japanese cell phone maker, Sharp, is currently selling the Aquos 912SH. It comes with an LCD screen that swivels 90 degrees, GPS, a bar-code reader (for researching and comparing products), digital TV, credit card functionality, video conferencing, a camera and it is unlocked by facial recognition.

It is an amazingly innovative phone that is years ahead of anything else, all except for one problem - they can't sell them anywhere outside of Japan. For years Japanese phones have innovated ahead of the world. In 1999 they had cameras, 3G networks in 2001, full music downloads in 2002, electronic payment in 2004 and digital TV in 2005. And what has all their innovation got them? Squat.

Japan has innovated at least 5 years ahead of the US and their market is shrinking. They've developed standards the rest of the world is not adopting. Innovation is only beneficial if there are growing markets that are demanding your innovations. Next time someone starts prattling on about how great innovation is, ask them why their not buying the most innovative cell phones in the world?

Tuesday, July 14, 2009

Can Software Save Money in Health Care?

Phillip Longman has an article Code Red in the Washington Monthly talking about how to make health care more cost effective. James Kwak provides an excellent summary of the points in the always informative "Baseline Scenario".
  1. The health care cost problem is largely caused by overtreatement.
  2. The answer is software: "Almost all experts agree that in order to begin to deal with these problems, the health care industry must step into the twenty-first century and become more computerized."
  3. Software implementation projects can go horribly, horribly wrong.
  4. The solution is open-source software.
Point one makes sense, but there is no reason to believe that software will solve this problem. If anything, software will make the problem worse. Why?

Computerization is like paving the cow path. People gather requirements, find ways to do things more efficiently and then, ideally, implement software systems to do this. i.e. they pave the cow path. So now cows move more quickly, one has more visibility to where they are and more people can interact with them in more ways. How will this reduce cost?

Someone is in a medical facility for a certain period of time. Paving the cow path will enable fifty people to interact with them as opposed to five. So now fifty people can over treat and over bill as opposed to five. And anybody believes this is going to reduce overtreatement and cost?

It's like trying to trap a mouse in a house of cheese.