Preventing Scurvy, or: Smith School Business Summit brings together Practitioners, Students, and Thought Leaders

May 7th, 2012 by under Economics, Leadership and Managing Human Capital, Strategy. No Comments.

Last Friday, I attend the inaugural Smith School Business Summit.  One of the best things about the Smith school is that its multiple campuses (College Park, DC, Baltimore, and Shady Grove) tap into the resources and talent of industries all over the DC, Maryland, Virginia area.

Located at the University of Maryland BioPark in Baltimore, the Summit is the first of what will be regular retotating symposia between the campuses.

How to Prevent Your Organization from Getting Scurvy

The evening was opened by a speech by Prof. Oliver Schlake, who is renowned at the Smith School for captivating presentations and story telling.  Prof. Schlake used the example of overcoming scuvy in the British Navy to explain how organizations do not bother to innovate during good times and then spend lots of energy on innovation when times are bad.  When times are good, organizations lack the urgency to transform themselves because they are too focused on incremental changes and current operations; in difficult times, the need to innovate becomes an imperative.  However, the organizations that are innovating during good times are able to weather difficult times more robustly.

Captain James Cook succeded in circumnavigating the globe without losing a single sailor to scurvy, a significant and unsual accomplishment for the time!

Captain James Cook attempted to overcome organizational inertia within the British Navy by experimenting and bending the rules to influence sailor behavior.  Through trial and error, he came to the belief that eating limes and sauerkraut and preventing sailors from eating fat from the bottom of cooking pots prevented scurvy.  At first, he tried stockpiling limes for his voyages, but was prevented by the Admiralty.  Then he tried to get his sailors to eat sauerkraut; however, sauerkraut was considered a poor man’s food at the time and sailors disdained it.  Captain Cook used reverse psychology by having sauerkraut served only to the officers and making it public that only officers may eat sauerkraut.  His crew objected and demanded to eat the sauerkraut!  He also used punishment to discourage scriping the bottom of pans.

Cook’s intution was right, even if he didn’t know why: 1) lime and sauerkraut contain the ascorbic acids that allow the body to produce collagen; and 2) the iron from cooking pots prevents the absorption of ascorbic acid!

Cook’s experience demonstrates how innovating in an organization with a lot of inertia requires experimentation, perseverence, and tacitcs to change behavior and culture.

Envisioning Outcome based Medicine

Prof. Schlake’s keynote was followed by a series of panels on finance, health care, organizational culture, sustainability, and product life cycles.

The health care panel I attended had a diverse group of panelists, from medical device makers to insurance carriers, to health care financers, to international development executives.  The panelist discussion mostly revolved around the differences between paying for services and paying for outcomes.  Currently, US healthcare costs are based on services used (labor, equipment use, diagnostics run, etc.).  Theoretically, the panelists argue, using health outcomes as a price/cost basis instead would incentivize new arrangements of care that would lower costs and improve outcomes.  An example of this would be increased coordination and communication between primary care providers and specialists.  This could be encouraged by giving primary care providers a bonus for improved outcomes for patients that see specialists.

However, such a system would require not only new incentives and ways to communicate, but also new ways to evaluate and track outcomes.  For example, if each care provider could see the total cost of caring for a patient across all providers, then each of them could be incentivized for lowering total costs.  The growth of Accountable Care Organizations is an example of the way the industry is shifting toward outcome based medicine (a.k.a. value based purchasing a.k.a. paying for wellness).