Overrating the Value of Innovation

August 17, 2012 Editor 0

From Stanford Social Innovation Review: By Christian Seelos & Johanna Mair

Everyone talks about rock these days; the problem is they forget about the roll.—Keith Richards

Most of the value that established social sector organizations create comes from their core, routine activities perfected over time. Efficiently producing and providing standard products and services creates tremendous value, particularly in places with widespread poverty.
Demand for the basics of life is high, and markets where organizations compete to serve the poor are often inefficient or nonexistent. For organizations that have found a working model in a particular context, efforts toward predictable, incremental improvements—exploiting what an organization knows how to do well, rather than developing innovations, exploring new activities, or creating new knowledge—may generate superior outcomes over time.

The Aravind Eye Care Hospital provides a vivid illustration to support this claim.³ Since its founding in 1976 as an 11-bed hospital in Madurai, India, Aravind has pursued its mission to eradicate needless blindness, centering on one chief intervention: cataract surgery.  Aravind resisted temptations to scale up to a full-service ophthalmologic hospital, although other ophthalmologic problems are widespread in India. Instead, it focused on improving its specialization and keeping it cost-efficient. Today Aravind runs six Indian hospitals that perform more than 300,000 eye surgeries annually, fighting preventable blindness at the same scale at which it occurs in India.

Aravind’s road to becoming the world largest eye hospital was marked by a disciplined approach to developing a system based on routines, improving practices continuously, and investing profits to build additional capacity. The dedication to standardization, the provision of real-time performance measures, and the focus on incremental improvements has driven operational productivity.

Aravind uses “eye camps” for fast and efficient scanning of potential rural patients, transporting groups of patients needing surgical procedures to the main hospital and then back to their villages.

Strict task specialization at every level of the organizational hierarchy—reminiscent of Adam Smith’s pin factory—enables steep learning curves and focused skill development. A doctor at Aravind performs more than 2,000 surgeries per year compared to an average of about 200 in Indian hospitals. This productivity is based on deep competencies, which result in cost savings that enable treating two-thirds of the poorest patients free. Yet Aravind still earns sufficient income to enable expansion. Aravind’s high productivity is also based on careful evaluation of practices, enabling incremental
improvements over long periods of time. Further, the strength of Aravind’s organizational culture has grown with its productivity successes.

What motivates eye doctors, a scarce resource in India, as well as nurses and other employees to work in this environment are the unique learning opportunities, the unmatched levels of surgical productivity, and Aravind’s proven and reliable ability to help the poor.

Routines and competencies constantly push the frontier of Aravind’s best practices. Meticulous screening of what does and does not work allows for small adaptations of routines and practices, which rapidly spread across the six hospitals. The hospitals are perfect replicas of the original Aravind hospital, which enables sharing best practices by eliminating variation in organizational context.

Yet Aravind has had losses as well as wins. To quickly grow the number of cataract surgeries and to meet the ambitious goal of reaching 1 million eye surgeries per year by 2015, Aravind in 2005 started to experiment with new organizational models that forged
partnerships with existing or new hospitals that agreed to use Aravind’s best practices.

Despite an intense training and monitoring period involving experienced Aravind doctors, this “Managed Care” program was stopped after five years. The routines developed at and continuously improved upon and nurtured by Aravind could not be transferred fully to partner hospitals because of differing organizational contexts.

Aravind’s example underscores that relentless attention to incremental improvements lies at the core of an organization’s ability to build capacity and to make an impact on a scale appropriate to the social problem being addressed. Unpredictable innovation activities always compete with predictable core routines for scarce organizational resources, such as staff time and money. There needs to be a healthy balance between the allocation of resources among core activities, which enable predictable improvements and innovations, and the allocation of resources that lead to unpredictable results.

The example of Aravind also underscores that many poverty-related and persistent problems may not need innovative solutions but rather require committed long-term engagement that enables steady and less risky progress. In environments of widespread
poverty where innovation is not triggered by changes in customer wants, new technological advances, or harsh competition, progress and impact may come more from dedication and routine work. Unfortunately, dedication and routine work do not have the sexiness factor of innovation.

Oddly, it is often the scarcity of organizational resources in established social sector organizations that legitimizes the argument for more innovation. But this argument is based on a wrong and dangerous assumption that innovation creates more bang for the buck and constitutes a development shortcut, solving big problems faster.

In addition, social progress often depends on changing ways of organizing and the norms, habits, and beliefs of people. For example, social progress is difficult unless the roles and rights of women in rural communities change and values such as accountability, responsibility, and long-term commitment are institutionalized. This
requires patience, direct engagement with the poor, and dedication that challenges organizations to remain motivated and focused.

We claim that the prevailing innovation discourse may push organizations toward adopting innovative practices, when actually more incremental developmental practices would produce more value over time.

 

Categories: Insights

Tags: Aravind, hospital, incremental improvements, Innovation, Organization