This is not a rhetorical question. It was something my hospital CEO asked me when, as CIO, I was presenting the digital vision and strategy for the New Odense University hospital construction project. We had a €150 million budget for digital solutions and equipment, so I thought it would be best to set the overall direction with a digital transformation strategy.
The CEO was in charge of our current hospital as well as the move to our new building, which was scheduled to take place within seven or eight years. One could argue that she represented my customers (along with the patients), and that made the statement even more frightening to me. The CEO continued talking about operations and how she needed to find the right balance between small innovations and everyday delivery of healthcare services. “We have at least 900 applications in our hospital, where maybe 100 are considered to be part of our core clinical IT landscape,” she told me. “If the clinical professionals want 900 systems, then that is what they get. The systems are old, lack the necessary functionality, most of them run slowly, and we lack basic data sharing capabilities. So, CIO Jonas, you fix that first and then we can dream of the future together.”
This anecdote is true, but it is not unique and it is probably common in most hospitals around the world. Hospitals need to maintain a delicate balance: on one hand they need to achieve productivity goals within budget, and on the other show innovation. If the reimbursement model promotes increased productivity, and is not based on the outcome and quality of the care delivered, then productivity is the area you automatically focus on. You can only go so far by forced change, and if the business leaders regard innovation as a disruption of their existence, then nothing transformational will ever happen. There needs to be alignment of the value created by the entire organization, together with business units and to some extent every employee.
The two elements of a legacy IT application architecture and a business focus on short-term goals will always result in a prioritizing on operations — keeping the lights on, instead of a transformational and innovative approach. The argument is supported by IDC’s European Vertical Markets Survey (November 2017), which showed that 25% of the allocated budget of a healthcare provider in Western Europe is dedicated to innovation. That seems a lot, but when you combine it with business priorities it is just more of the same. Driving operational performance and managing regulatory compliance are the top 2 business priorities of healthcare providers. In conclusion: innovation is seen more as a business process improvement exercise rather than a business model disruption exercise.
Maintenance and upgrading existing applications account for 60% of the budget. What is more interesting is that 30% of IT spending is controlled entirely by line-of-business decision makers and is outside the IT budget — just as my hospital CEO indicated.
As line-of-business executives, clinical leadership, and professionals in local departments assert their growing budget authority by bypassing IT and acquiring new systems independent of IT, then healthcare CIOs know that these new systems may be critical to the business — sometimes to a very small, specialized part. But they often end up in the shadows with no IT support. When LOBs can choose applications on their own, it might increase local innovation and agility but usually it isn’t built to scale. In addition, a growing amount of shadow IT will increase security risks, and might decrease availability of the infrastructure because it is not designed for such applications. The role for hospital CIOs will be to identify relevant applications, include them in the formal architecture, and scale them to fit the entire organization. Not much of a strategic approach there.
I have thought a lot about my conversation with the hospital CEO, and maybe I was doing it wrong. My plan was the classical “align the IT strategy with the business strategy and then create a digital transformation roadmap and investment plan.” Maybe we need something that is less bureaucratic, closer to the core business, and more agile in its approach to IT planning?
IDC’s DX practice has launched a “use case journey” methodology, in which a business’ vision and strategic goals are divided into three sprints, or horizons. The model is modular, scalable, and extendable, and combines the use case journey with IT investments and a capability map of the workforce. When aligned, these three elements will provide a powerful roadmap toward the future — a future that addresses the current problems and the desired new business models, that has the current state of the hospital as its point of origin. Maybe, for once, IT and business can be aligned — not only at a high level but also by bringing together the CIO and the CEO. I know it sounds disruptive, but we have nothing to lose.
If you want to know about digital transformation and Use case journey mapping in Healthcare, e-mail me at jknudsen@idc.com