Innovation: incremental versus game-changing


moon-walk_small-step“One small step for a man, one giant leap for mankind” Neil Armstrong 

During March I attended a couple of events. One was Sensors in Medicine in London and the other was Diabetes UK in Manchester. Both were fascinating and worthwhile in their own rights, but specifically they got me thinking about approaches to innovation.

When people talk about innovation related to technology (including medtech and healthcare) they usually refer to incremental or game-changing innovation. As the names suggest, incremental are small, me-too improvements on the status quo, while game-changing present a whole new way of doing things. The sexy column inches usually go in favor of the game-changing, and within this group, game-changing technology seems to get the most attention (e.g. a new cancer drug).

Is there a hybrid approach that makes use of strengths from both approaches? I think so. But first a small diversion into the two conferences mentioned.

Future gazing

At Sensors in Medicine, I was invited as a panelist and the topic was based around the future of sensors in medicine. As anyone who knows me will tell you, I’m not a big believer in predicting the future (this also relates to my investment style where I prefer to look at something tangible rather than speculate – Medtech Value Investor’s Magic Number). So perhaps the most useful comment I made on the panel is that the only thing I can predict about the future is that our predictions will all be wrong. (Caveat: this is the one prediction which has 99% chance of happening).

The organizer, for a bit of fun, asked all attendees to fill out a survey of several future based technologies and get the crowd-sourcing wisdom on what would come to market and when. The artificial pancreas was deemed as the perennial 20 year technology (i.e. it’s always been 20 years away). Breath testing was predicted some 5 years away (it’s already existed for several years – e.g. H. Pylori testing for gastric ulcers). Nanomedicine, related to diagnostics, was quite a few years out though “nano” seems to be a catch-all phrase that is not related to any specific technology, so a hard one to define.

The focus was most definitely on what’s sexy, what’s revolutionary science, and what will  change the world. I suggested an example from the car industry which shows ways you can have your cake an eat it. Let’s look at fuel economy. There have been a myriad of technologies – some developed and many partially developed or still in development. Examples include the electric car, the battery operated car, the hydrogen fuel-cell car, hybrids engines (a false economy – at best these improve fuel consumption around 20%).

Yet when we look at taking the boring old combustion engine, and applying several incremental technologies and adding them all up, the results are quite astounding. Modern cars, with lean burn engines, stop-start engine technology, aerodynamics, composite materials which weigh less weight yet have more strength – all now contribute to family cars which can comfortably achieve 50 mpg; the newest generation are achieving even 70 mpg or better (where 15 years ago an “economical” family car might have returned 30 or 35 mpg).

Would you call that game-changing? I would. And as fuel prices continue to rise, incremental innovations like these will continue to add up. Who knows how soon when we’ll see the first, mid-sized family car that can average 100 mpg?

Rear-view mirror innovation

Next, turning to the Diabetes UK conference. There were a number of fascinating plenary talks by insightful and innovative clinician-scientists. Examples included:

  • using genetics to stratify diabetes into many more sub-sets of the disease than the existing type 1, type 2 and other. He was achieving significant clinical results with patients who had previously been written off as “heart-sink” patients (you’re heart sinks when you see them because you know you’re struggling to figure out a solution). This approach is akin to pharmacogenomics, where we now recognize that the human form has a huge range of responses to conditions and interventions (not just a simple “one-size fits all” pill to make things better).
  • using IT to centralize and collect data on a wide range of patients across a population and figuring out how to extract meaningful insights. Again, this work over some 10 years, has significantly aided management of this chronic condition. 

When walking through the exhibitor hall and talking to the various company reps, the impression I gained was less impressive (but some revealing simulators, including driving while having a hypoglycemic episode).

Many of the companies were promoting various versions of blood glucose monitors for self-testing. The underlying technology to these has been the same for over 20 years. Yet, in the absence of anything revolutionary, the improvements really were low-level incremental in effectiveness. Examples included more modern aesthetics (several smart-phone like looking devices), touch screens, compiling extensive patient data just to “have it” yet be able to do little more with it, tele-health solutions (some tele-health will be revolutionary but much isn’t)  and others.

While it was interesting to see the current state of play, many of them failed my “so what?” test. Often, while looking good, they didn’t actually offer much to improve the management of patients’ diabetes. Many of the innovations were made looking in the rear-view mirror of diabetes care.

Incremental AND Game-changing

Back then to our question about a hybrid model. How can you utilize incremental innovation AND still make it game-changing? It’s actually quite simple (but like most simple things, not easy).

Let’s look again at the example from the car industry. You use existing technology, figure out ways to optimize it, and by adding one small innovation at a time, your overall return is much bigger. Looking at the math of it – say you find 5 incremental changes which each can deliver 15% improvement. The net effect is compounded. In this example, 5 such small changes would lead to a 2x on performance (1.15^5). I’m not suggesting innovators go out looking for 5 small changes, but the point is that a few, well-thought out, small improvements can make a BIG difference.

Or, maybe you combine expertise from different industries (this can lead to massive improvements, using what’s already well-defined and understood in a different industry). For healthcare, probably the biggest parallel industry that could lend to incremental yet game-changing improvements is from IT. It could even be down to developing an algorithm in a way which just hasn’t been thought about before.

Often it comes down to thinking about the problem in a new way. Maybe this comes from one who isn’t embedded in an industry and doesn’t suffer group think. Independent thinking is necessary, but vastly underrated. Questions may be seemingly naive, but actually they get to the root of why things are done in a certain way (worst response: “that’s the way it’s always been done”).

Michael Dell did this to extraordinary effect when he developed Dell’s innovations around processes, manufacturing and delivery. Now just-in-time has become the accepted wisdom across multiple industries.

The tools are already there, waiting to be used. Your job as the entrepreneur and innovator, is to bring the curiosity and compulsion, and to put the disparate pieces together.

by Raman Minhas

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2 thoughts on “Innovation: incremental versus game-changing

  1. Pingback: Investor insights: using checklists to improve returns | Medtech Value Investor

  2. Pingback: Digital health – enhancing healthcare delivery | Medtech Value Investor

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