Case Study: A New Healthcare Model at Royal Philips

Learning Objectives:

• Apply your understanding of problem framing to analyze an innovation case
• Compare different stakeholder groups in terms of skepticism about an innovation

In 2011, Royal Philips’s new CEO Frans van Houten decided that the organization would divest from lighting, which it was widely known for, to pursue innovation opportunities in patient journeys throughout the healthcare system.

Philips was already a producer of healthcare technology, such as MRI machines, ultrasound equipment, and other imaging, diagnostic, and therapeutic tools. The innovation came in integrating all of these products into a system that would connect care providers and distribute information for better treatment, all while responding to pain points in the entire care pathway.

In the following video transcript, Frans van Houten describes this end-to-end approach in the healthcare continuum.

You've got to look for what is the unmet need, and then structurally, what is that in health care? And I mentioned, as a society, we grapple with health care costs, an aging population that has more of a need for health care. And then what are the game changers there? You can think about, for example, value-based health care, where you optimize outcomes over effort.

But you can also take another concept, which is the continuum of health. And that's basically what every person goes through, from being healthy to falling sick. You need to be diagnosed. You need to be treated. And then you have to support it to recover and come back to good health. And that's called the life cycle of health, or the health continuum.

Think of it as an ecosystem approach. Such as other industries have done before, we want to innovate like that. And design thinking has been instrumental to gather the insights of how this would work. And we had to learn a lot about the clinical practice, the patient journey, understanding what was going well, and what was not going well.

And that led us to discover the discontinuities in that process, and how to repair that, how to fix it, how to make it fast, and seamless, and efficient, but also an experience that would be, under the circumstances, a pleasant experience, and not a stressful experience because all of that has an immediate impact on quality of care, and also effectiveness of care.

So we became a completely different company. We had to invest in informatics and data science, in doctors, in nurses. So we got new people in, and we started to shift beyond the hardware into–to become a solutions company.

To be open to the insights Philips CEO Frans van Houten described, Philips approaches strategy as a chance to reframe the problem. Remember the characteristics of innovative problem framings: deep, emotional, broad, and dynamic. They identify the most critical or game-changing part of the problem.

Philips’s original framing was “How might we deliver positive experiences through top-of-the-line equipment for diagnosis and treatment?”

What do you think their new problem framing was?

Example framings from Philips’s new end-to-end perspective include:

• How might we help patients feel comfortable, safe, and taken care of throughout their journey?
• How might we empower each provider to treat the whole patient, from their past to their future?

Review the following video transcript to learn how this new framing required a full accounting of the stakeholders involved, and how Philips might innovate structurally to focus everyone on the new task. Sean Carney, the Chief Design Officer at Philips, explains.

My name is Sean Carney. I'm the Chief Design Officer at Royal Philips in the Netherlands. I'm also the business leader for a business unit within Philips called Healthcare Transformation Services.

So what you end up with then, is maybe at a high level, an individual patient journey. But very quickly, you kind of ladder down to building out a number of other or identifying a number of other key stakeholders. And as you map that out, you then also identify white spaces where there isn't a solution. There's maybe an opportunity to go develop something or to go seek a partner to plug a gap there as well.

That drives a number of different behaviors in the company as well. And by mapping it out on these journey maps, by articulating it in that way, it makes it very easy for the businesses to identify the role they play and what their contribution should be in delivering that solution.

There are other parts of this as well, parts of this puzzle. Because what this now requires, is again, the mindset of the companies, the business units within our larger enterprise to think about how they are going to marry up and join up to maybe one of their neighboring business units.

So how do we make sure that when you put two applications side by side on the screen, which were developed by two different parts of the organization, often completely different geographies, how do you make sure that they present a unified appearance and a unified experience to the end user?

So this is where, again, design can play a role. We team up with our chief architect's office in order to make sure that the software stacks are consistent across the businesses. And then from a design experience perspective, we make sure that we develop assets from a user experience and user interface catalog. We build those into a catalog, which then the individual businesses can call upon to build and configure their solutions, their applications so they eventually make a seamless experience for the end user.

Like IBM, when it was adopting design thinking for product and service development, Philips would need to bring different business units together to deliver a consistent user experience.

However, as you identified earlier, Philips would need to deliver for a wide range of users—patients, practitioners, providers, and many more.

Imagine that Philips was developing a dental-health innovation: a Bluetooth-connected toothbrush that monitored brushing habits in exchange for lower insurance premiums. Which group of stakeholders might have a more difficult time overcoming status-quo bias, patients or insurers?

The status-quo bias might be difficult to overcome for both groups:

• Patients would need to change daily habits and perhaps pay more for the device, all for benefits that might be abstract without the properly targeted communication.
• Insurers might be skeptical of the long-term savings or of patients’ ability to sustain the behavior change.

Overcoming status-quo bias means targeting your message to specific individuals or stakeholder groups. Innovation teams typically have some of the background research needed to create this messaging from the development phases of the design process, especially if cross-functional teams collaborate.

In the following video transcript, Sean Carney describes how the connectedness of a similar dental-health innovation helped Philips minimize its costs and maximize its perceived value for both patients and insurers.

When you're designing in the health care space, it's never as simple as just designing for the patient or the clinician. You really have to do the multi-stakeholder mapping. And this is why we have a number of different teams and disciplines come together as we're creating these end-to-end journey maps.

A key part of that would also be the reimbursement model. So within our chief medical office team, Dr. Jan Kimpen - he has a team of what we call health care economics and market access consultants. The role of this team is to really look at the reimbursement models to make sure that, as we create a solution, there is an understanding of how it would be reimbursed and how the health care provider will actually be able to monetize this opportunity as well.

Philips Oral Health Care - we've got these connected toothbrushes now. These are toothbrushes that track and monitor your brushing habits and help coach you to have the best possible oral hygiene. All the data was basically being fed back into your cell phone, into your application. You could choose to share that with your oral health care provider when you did your next visit to your hygienist or dentist. They could give advice and coaching back to you on how to improve your gum health or reduce tartar on your teeth, et cetera.

What we did then was team up with an oral health care insurer and a provider and equip the population - in this case, one part of North America - with these connected toothbrushes. They would, in return for sharing their data, get, obviously, better oral health, but they would also get lower insurance premiums as a result of being able to prove they were taking good care of their teeth.

The strategic shift to creating end-to-end health care solutions was just one part of the overall innovation concept at Philips. By analyzing pathways on the health care continuum, Philips continued to find opportunities for user-focused products and services that expanded the concept and sustained innovation. Additionally, each successful new innovation provided evidence of positive user outcomes.

As a result, patients, providers, and insurers began to view Philips as an innovator, and the status quo bias was easier to overcome. Let's think of this in terms of Everett Rogers's factors of innovation. For example, once stakeholders had experienced Philips's more accommodating MRI room, they would be more open to the relative advantage and compatibility of other Philips innovations in the same end-to-end model.

Creating a whole health care system for Philips's products and services also increased each additional innovation's trialability and observability and reduced its complexity. By taking a long-term and comprehensive view of innovation, Philips actually made innovation easier to implement.