Opinion | Disruption: Problem and Potential

Disruption. We’ve been acutely aware of its presence since early 2020. As the pandemic aimed a spotlight on the healthcare industry’s longstanding shortcomings, it also accelerated existing disruptions in the U.S. healthcare system. Consider a few of the more dramatic shifts that have occurred in the past few years — large retailers (e.g., Amazon, CVS, Walgreens) have encroached on the primary care and care management space; there has been a appreciable increase in integrated care models and systems; and healthcare delivery has undergone a seismic digital transformation. These rapidly evolving disruptive forces, and the uncertainty that accompanies them, make everything more difficult for organizations — from daily operations and short-term solutions to long-term strategic planning.

The healthcare industry is by no means unique. Other industries are similarly pummeled by disruption, i.e., the displacement of businesses, markets, and value networks as the result of economic, societal, environmental, political, regulatory, or technological changes.

Recently, I came across the 4th Annual AlixPartners Disruption Index, a fascinating report from an organization that has helped companies navigate disruption for several decades. The report presents findings and perspectives based on a survey of 3,000 chief executive officers (CEOs) around the world. It takes a deep dive into the changing global economy and identifies areas in which business leaders must adapt to and take advantage of these shifts.

Overwhelmingly, CEOs reported that their companies are changing business models:

• 95% have concerns that their companies are not adopting fast enough
• 85% say they don’t know where to start
• 88% expect their business model to change within the next 3 years
• 31% expect their business model to change within a year (up 6 percentage points since last year)

The titular Disruption Index is a measure of the magnitude of disruption faced by companies in the preceding 12 months – including the number and relative degree of challenges reported – by industry, seniority, company size, and country. Although this year’s index showed a decline (from 79 to 76), it is still substantially higher than in 2021 (70).

Interestingly, the survey findings ranked healthcare among the “most optimistic industries” in terms of CEOs’ outlook for the future of business in light of a possible recession. The other “optimists” included the aerospace, media/entertainment, and telecom/cable industries.

The survey sought to identify a segment of companies called growth leaders — enterprises that appear to outpace their competitors in the “age of disruption.” Results suggest that greater determination to improve performance and a willingness to take bold action is what sets them apart. More than half are changing their business models this year.

As business analysts have observed, and successful business leaders have learned, disruption’s often formidable challenges come with a positive flip side — the opportunity for making significant changes that ultimately improve performance.

The healthcare industry’s response to the pandemic’s overwhelmingly complex, interconnected disruptions is a good example. Well before COVID came on the scene, there was general agreement around the need for radical change in the way health care is accessed, delivered, and funded in the U.S. However, the transition from traditional fee-for-service models to value-based care was meeting with resistance and moving at what seemed to be a snail’s pace.

The pandemic accelerated the existing disruption, and successful healthcare business organizations — particularly health systems and healthcare delivery organizations — seized on the opportunity to accelerate necessary changes in their business models as well as their care delivery practices.

What disruptions can we anticipate in the near future? The report points to issues such as:

• Demographic decline (i.e., lower birth rates, higher life expectancy)
• Technology acceleration, innovation, and adoption at an unprecedented rate
• Deglobalization (deteriorating post-Cold War conditions) leading to long-term realignment of supply chains
• Climate transition

New technologies may help in confronting threats that arise from climate change and aging populations, and current geopolitical conflicts might eventually bolster the case for increasing international cooperation. In any event, AlixPartners’ CEO Simon Freakley believes that disruption has become the world’s new economic driver because all CEOs must now contend not only with their companies’ internal challenges (competitors, costs, customers) but also with the inevitable sudden shifts in the business environment.

This column only skims the surface of this comprehensive, thought-provoking, and surprisingly engaging report. I highly recommend it as a very good read!

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