Managing the Healthcare Innovation Culture

A White Paper by Christine Nesbitt, Founder & CEO of Manifest Healthcare Solutions
An observation hit me the other day: why is it that when clients go through a Lean program, they require a new way to manage? What makes a Lean culture so different?

Here at Manifest Healthcare Solutions, we think that if a CEO wants to create a culture of innovation and maximize internal growth, change is not just needed; it is demanded!

The reason that change is needed is that the system is based on a faulty assumption for today’s market. And that faulty assumption is this: “an inner core of highly competent managers can deliver maximum value to shareholders and customers.”

Let me explain…

Why is it a flaw to think that highly educated managers are unable to do the job alone? How can we say that? Aren’t they trained specifically to deal with highly reactive markets? Aren’t these managers capable of seeing what is going on in the market and deal with these issues? Why would these managers need help? After all, they are highly paid and they know strategy—it is their job to make it happen.

Take what we saw happen at Apple Inc. Didn’t Steve Jobs take a core group of executives and create the company with the greatest market capitalization in the history of the stock market? So how can we say that centralized decision-making is a flaw? The Apple example demonstrates the most centralized form of management around.

The flaw here isn’t that the average executives are incompetent. They are usually very competent. However, the traditional management approach cannot keep up with the current speed of market changes. In fact, the slow rate of new innovation hitting the streets from Apple may be an indication that the centralized model doesn’t work without a strong leader like Steve Jobs. Speed to market is directly tied to the innovation going on at a company—anyone slow to innovate is shouldered out of market share. But we didn’t come to this conclusion by spending time with executives. In fact, we started at the other end of the employment food chain. We noted the success businesses had when we helped them execute Lean healthcare. We saw the enthusiasm that we got from employees further down the management line, and individual contributors, when they were allowed to flourish. They implemented their ideas and were excited to do more. In most cases, they innovated with incremental innovation. These are the small improvements in process that managers often ignore, because they just aren’t all that exciting.

​​ But when these employees get ideas into play, good things happen!

What we observed was non-managerial employees being able to learn about and see the big picture. They were not incompetent and their managers were not ignorant. Together they could expand the scope of the response to market changes.

A non-managerial employee without an MBA is not going to have the same level of business acumen as someone who does have an MBA. But they can help and they will help make your business successful, given training and motivation. They see things every day that add to the depth of understanding of issues for your business and they can be trained to look for problems and market opportunities.
Think about it. The speed of change requires a healthcare company to move a large number of minds to a new stage of value delivery. To do this requires that you tap the employees who have critical process information. It’s important to capture this knowledge to help identify and resolve many re-occurring problems! How do you achieve this?

Employees need the right forum to share their insights. To do this successfully, they need some basic Lean manufacturing training and an environment that allows them to improve their own workplace. An empowered workforce will improve productivity and increase value for the organization and for its patients. But with the centralized management model, that is not easy. It can be like trying to get an ocean liner to turn on a dime — it just isn’t possible.

Let’s look at some of the reasons behind the flaws in the system:

Too slow

We are dealing in rapidly changing markets. As Bill Gates put it, “business is performing at the speed of light.”
In the flawed logic of a top-down managed business, managers look for problems and opportunities, decide the actions to be taken, and everything just grinds along at a snail’s pace as ideas fight to get on the radar of decision makers. Innovation is stifled. Employees with ideas find it hard to maintain excitement with their jobs.

Underutilized Know How

Know How, or Employee Intelligence, is a huge strategic resource. To improve, it needs to be managed grow dramatically with a little effort. But in most businesses, Know How is not managed; managers often don’t even pay attention to it.

Employee Intelligence is the collective wisdom of the organization, the sum of all the knowledge and capabilities. It is the knowledge needed to deliver, to support, or to develop value for patients. But it can also be the knowledge that is wrong, imprecise, or useless. It is knowledge of the informal power structure and processes— or how things really work versus how they ought to work. It is knowledge of who constrains process and who facilitates them. It is the knowledge that is squirreled away by employees who feel a need to protect their jobs by not sharing the information needed to do a job most efficiently. This is all part of Employee Intelligence.

For example, the untapped knowledge and experience of a worker who won’t tell others how he can put those two processes together (when no one else can). That knowledge is his job security. That bit of Employee Intelligence remains underutilized; recognizing this is very challenging for a business.

There are many ways to improve the utilization of Employee Intelligence, but innovation is the foundation. To survive rapid market changes, even mature healthcare businesses need continuous innovation through new ideas and through improvement of processes and services. A declining healthcare business needs the innovation from Lean Manufacturing to recover productivity.

Stifled Innovation

In the traditional work world, ideas for process improvement have seemly nowhere to go. Here’s how the process works: an employee suggests an idea to a manager or a supervisor. If it is deemed worthy of attention, it gets a hearing, and maybe run further up the flagpole, maybe to get approved…eventually. One employee at a clinic noted that his definition of management was “where ideas go to die.” He was being facetious, but his point was made.

In many healthcare companies, employees know through the Employee Intelligence network which managers are receptive to new ideas and they migrate to those departments;. ideas explode out of these groups. Human beings love to play or tinker with ideas and collaborate. Managers who encourage this make their employees work lives better.

When employees are encouraged to innovate, good things happen.

Too Costly to Innovate

Every investment has a cost. Even an idea that just improves a process with minor tweaks requires some investment in training and documentation. Bottom line; ideas cost time, money, and resources.

It’s not that there is no innovation going on in healthcare companies, but the innovation process is usually limited to an “in crowd” who have control over a limited budget. There are ways to approach innovation with an eye on high ROI.

An objection we’ve heard from some clients is that ideas are too costly. What that really means is this: ideas pull people away from their work. Performance could slow and revenue targets might not be achieved.

But ideas are only expensive when there is no noticeable benefit. In fact, we found that even though we took employees away from their jobs for 20% of their workweek during the Lean process projects, our clients didn’t see any measurable loss of output.

Too Complex

Ask the following question about your healthcare company: “What percentage of people in the business add value?” To answer it, you first need to know the value that is delivered by your company. In Henry Ford’s definition of waste, it is every job that doesn’t deliver value. Starting there, if you list the people in the company who add value, you can easily answer it.

It doesn’t matter what business you are in, you will be aghast at the number. What do all those other people do? If only a small percent of your employees add value, why are so many people supporting them?

When we do this exercise for healthcare companies, it almost always gets nasty. The people who aren’t perceived as adding value get incensed that we would begin this discussion. It can only lead to people getting fired. In most cases, it doesn’t, because we end up increasing performance and finding ways to redefine jobs so that these people do start to add value to the bottom line.

But this all begs the original question, why are there all those non-value-adding jobs?

We think it is because business has become overly complex. Over time, most business adds a legacy of unnecessary, inappropriate, or obsolete systems and procedures. This legacy, often called “the way we do it here,” is both a waste and a barrier to innovation.

Complexity drives up the overhead.

Elimination of the overly complex system quick starts the innovation culture by engaging everyone in housecleaning. It speeds business processes and builds revenue.

Too Risk Averse

Managers in today’s market are often discouraged from taking risks. They are the Admirals and the Generals who will never get the next star if they make a mistake or take a risk that fails.

Don McCaskill, former CEO at Warner Lambert, said that he knew that as a CEO he was doing a good job when 50% of his projects were successful. His methodology was to take lots of action. Start on the smallest scale, and then, if it is working, broaden the scope. If it is not working, fix it or kill it before any serious damage is incurred. Learning from failures as well as successes builds Employee Intelligence.

We agree with Mr. McCaskill, because progress never occurs without some failures. And managers who never take risk never really learn. Thomas Edison said it best, “I have not failed. I've just found 10,000 ways that won't work.”

Thomas Edison had another revealing thought on this subject, “We often miss opportunity because it's dressed in overalls and looks like work.”

Summary Thoughts

Do all of these reasons behind the flaws in the system offer enough of a reason to change? How do you manage in these conditions? How do you get the bang for the buck that investors demand? How do you do so with minor disruption of your organization?

A different paradigm is needed to make change transition work. An exclusive club of competent managers cannot compete alone. They need the help of everyone in the organization and a management structure that supports teamwork. The traditional centralized management paradigm just doesn’t create a culture of innovation and maximize internal growth very well.

In our context, a paradigm is the set of rules used to manage the people in a healthcare business. The CEO defines those rules. They are the rules on how he wants to lead the troops. Most often, the paradigm is not written down in any one place. It becomes the culture of the company.

Ask the questions! What does a good “management paradigm” look like? Can it be achieved?

We think that there is a very subtle yet effective way to achieve this goal with a minor change in how we manage. It is not based upon a feeling or a gut-check. It is built on evidenced-based and outcomes and metrics for many healthcare providers across the board. Our ideas about how to change the management paradigm have been tested in the healthcare provider space and have given us great insights in helping healthcare businesses create Lean organizations.

ABOUT Manifest Healthcare Solutions

Manifest Healthcare Solutions is the premier provider of process and performance improvement and transformation solutions for healthcare providers. By partnering with clients, Manifest Healthcare Solutions delivers strategy and solutions that improve quality; increase revenue; reduce expenses; and enhance physician, patient, and employee satisfaction across the healthcare enterprise. Clients include leading integrated healthcare providers: physician groups, dentists, physical therapy, chiropractors & home health.
To see how Manifest Healthcare Solutions can empower your mission, contact us at 510-846-5214 or visit

- Christine Nesbitt, Founder & CEO of Manifest Healthcare Solutions