Foreign Policy Blogs

The Innovation Premium

I just got back from a lecture hosted by the INSEAD Africa Initiative featuring Hal Gregersen, professor of leadership at INSEAD.  Hal’s forthcoming book, the Innovator’s DNA (co-written by Jeffrey Dyer and Clayton Christensen) outlines the five essential qualities or skills that innovators possess: Associating, Observing, Experimenting, Questioning, and Networking.

Contrary to the title of the book, Hal doesn’t believe that these skills are possessed by just a few, select people in the world.  Rather, these skills are practiced habits, and even a return to the activities that were more natural to us as 4-year olds, activities that were lost to us as we grew up.  With practice, we can all become more creative and learn to innovate, Hal argues.

What does this have to do with global health, you may be asking?

At one point, Hal posted a slide which showcased a list of public companies and their “innovation premium”, in other words, the premium that shareholders will pay for a stock because they believe that the company has the capacity to grow through the introduction of new products or expansion to new markets.  The interesting thing is that the premium is largely subjective, based on historical performance combined with a belief in the company’s future ability to perform.  The premium is an incentive for companies to innovate and to encourage innovation in their employees.

Enter global health.  I sat looking at the slide, pondering what is the “innovation premium” in public health?  In areas of health technology, pharmceuticals and private healthcare, the market incentives can work in a similar fashion, particularly in publicly listed companies.  However, in the delivery of public health services, the reward for innovation can be dismal at best.  Rather, public health systems are more often rewarded for doing the same thing – whether effective or not – over and over again.  The payment systems bear this out: payments are flat fees for services with little regard for outputs or outcomes, salaries are tied to hours worked and tenure, rather than performance.  In a system with no rewards for exceptional performance, but serious repercussions for failure, what would we expect to be the result?

My colleagues at mothers2mothers have a cynical phrase for this. They call it “magical thinking”, referring to the common practice of believing that different outcomes will occur if one keeps trying the same thing.  “Magical thinking” is rife within the public health system as funding continues to flow to organizations with very little motivation to change and improve.

How could the innovation premium be put to use in public health?  How could health professionals be incentivized to practice some of the innovation habits as advocated by Hal?

One interesting idea is to link outputs with payments, or output-based aid (OBA).  OBA initiatives use vouchers or other counting mechanisms to pay service fees per output, such as family planning services provided or delivery conducted.  But this only goes so far, rewarding efficiency and demand creation, but leaving little incentive (and possibly creating disincentives) for quality outcomes.

We have a long way to go before we have systems designed to reward public health effectiveness in a way that puts a premium on innovation.  In the meantime, public health innovators continue to be motivated the old fashioned way: pure passion.

 

Author

Cynthia Schweer Rayner
Cynthia Schweer Rayner

Cynthia Schweer Rayner is an independent consultant and philanthropy advisor specializing in public health, social entrepreneurship and scalable business models for positive social change. As a recovering management consultant, she spent several months living in South Africa, and later co-founded the US branch of an organization providing support to orphaned and vulnerable children. In 2009, she was an LGT Venture Philanthropy Fellow, working with mothers2mothers (m2m), a multinational non-profit organization employing mothers living with HIV as peer educators to positive pregnant women. She currently works with individuals, companies and nonprofits to finance and develop models for positive change. Cynthia has an MBA from INSEAD and a BA in English Literature from Georgetown University. She currently lives in Cape Town and visits New York frequently, where she co-owns a Manhattan-based yoga studio, mang'Oh yoga (www.mangohstudio.com).

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