3 Components of Transformational Change

In my experience, major change requires strong, top-down guidance supported and driven by bottom-up pressure for change. It’s easy to point to the need for transformational change while picking the low-hanging fruit of incremental change. Although change initiatives abound in healthcare, most are piecemeal efforts that marginally improve existing systems. Major, transformative changes such as shifting from fee-for-service to value-based medicine require more than gradational improvements from current operations.

Drawing from my experience as a consultant and educator, I believe transformational change requires the following three commitments.

Build a Portfolio of Initiatives

First, building a portfolio of initiatives that meet short-term requirements while investing in longer-term, more transformative initiatives ensures that there is no trade-off in pursuing either incremental or transformative change. Rather, improving operations by freeing up resources supports investments in more transformative initiatives. The reason is simple: Transformative changes are rarely accretive in the short term. Thus, while incremental changes—typically aimed at improving efficiency or developing related businesses—may not in themselves drive systemic transformation, they are necessary to support longer-term transformational initiatives.

So how should organizations develop a portfolio of strategic initiatives that are both incremental and revolutionary? They need to create a portfolio of critical priorities built upon what I call “core,” “new” and “wow” tactics.

• Core. These short-term, relatively low-risk priorities or investments are focused on improving efficiencies and increasing investible margin. These might cover 70%–80% of an organization's resources, investments and personnel, and they are aimed at keeping the doors open. They also drive ever-greater efficiencies in operations to free up resources for medium- to long-term initiatives that rarely cover their investments in the short term.
• New. These medium-term, medium-risk opportunities can eventually expand the core but may be successful only 50% of the time. These are classic adjacency initiatives such as an inpatient center opening outpatient facilities for revenue and mission impact, but they rarely signify transformational change. In addition, the medium-term horizon should be a time for shutting down projects or reapportioning resources that are not meeting original goals.
• Wow. These longer-term, transformational efforts are high-risk but with high potential impact. In the tech world, such investments are characterized as “fail fast, fail cheap, fail often.” While the healthcare sector is certainly more conservative than tech, Highmark Health provides an example of embracing disruptive change and using outside talent to drive technology-enabled healthcare innovation.

Embrace Failure

Second, be willing to experiment and thus embrace failure as a learning prerequisite to create new, transformative healthcare delivery models. The problem then becomes how much risk the organization is willing to take on.

Objectivity is too often lacking when assessing progress toward goals, and then deciding what needs to be done to make amends going forward. Typically, when an individual or team is successful, personal efforts are lauded; when things do not go so well, pressures that “no one could control” are blamed. Worse, the organizational culture unique to healthcare settings can impede change.

The lack of organizational learning from failures can be explained instead by three less obvious, even counterintuitive, reasons: an emphasis on individual vigilance in healthcare, unit efficiency concerns and empowerment. These three factors, while seemingly beneficial for nurses and patients alike, may leave nurses overwhelmed in a system bound to have breakdowns because of the need to provide individualized treatments for patients.

The key is to shift one’s culture from an accountability lens—assessing fault—to one embracing failure as the way to learn and change. After all, most transformative initiatives will not be successful. Still, without such experiments, how will the U.S. healthcare system evolve and survive?

Monitor Signals

Finally, monitor key signals for disruptive change. This means shifting from a primary concern with internal operations (e.g., improving quality) to an external focus (e.g., identifying future needs of patients and payers). While no one can predict the future, it is important for organizations to periodically engage in “what if” exercises on the implications of alternative future scenarios.

As part of your transformational change process, ask the following questions:

• If we were the competition, how would we attack our business?
• If we were to sabotage current projects, how could this occur?
• What new surprises could really hurt/help us if they came true?
• What emerging technologies could change everything?
• What is the most unthinkable or impossible future imaginable? And how could we be successful even in that future?

Transformative change is emotionally challenging, time-consuming (as it frequently requires changing cultures) and inherently risky. The movement requires strategic change that builds upon a portfolio of initiatives to improve current operations while investing in transformative future initiatives, embraces failure as a necessary part of learning and monitors the external environment to prepare for an uncertain future—no matter what that future may bring.

Jim Austin is adjunct senior professor, Executive Master of Healthcare Leadership, Brown University.

Editor’s Note: This content has been excerpted from “Strategic Healthcare Change: Balancing Change and Stability,” Journal of Healthcare Management, vol. 68, no. 1, by Jim Austin. It has been edited down for length.

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