Thought leadership

Encouraging A Culture of Innovation

Encouraging A Culture of Innovation


“Innovation.” It goes hand-in-hand with transformation and the need to find new, better and more efficient and effective ways of not only delivering great patient care, but improving the health of communities. Innovation is driven by rapid advancement in new technologies, initiatives implemented by the Affordable Care Act (ACA), and market forces that include patient demand for value (lower cost, better outcomes), consolidations and globalization. It’s not surprising that many organizations are investing time, money and resources into innovation—something 85 percent of health care executives have considered important or very important to their organizations’ success.1 

Last year, Becker’s Hospital Review listed 25 hospitals and health systems with innovation centers.2 Although the list was not exhaustive, it described how health systems like PeaceHealth and Providence Health and Services in the Pacific Northwest are partnering to develop innovative health initiatives. 3 Also in the Northwest, Oregon State University’s College of Public Health and Human Sciences’ newly established Oregon Center for Health Innovation is seeking partners in its efforts to find new solutions to health care challenges.4 The Center for Medicare and Medicaid Services (CMS) Innovation Center (CMMI), established by the ACA, is focused on testing new payment and service delivery models, evaluating and advancing best practices and engaging stakeholders in designing new models for testing. More than 28 CMMI pilot programs involve hospitals and health systems across the nation and many of the early pilots have already been permanently implemented by CMS.5

Innovation Doesn’t Happen by Chance 

The message for hospital and health system trustees is loud and clear: holding onto the status quo won’t push your organization toward success. Health care is complex and competitive, and it’s in the midst of seismic change. It won’t be the same tomorrow, just as it has already changed from yesterday. Trustees must lead not only by embracing new ideas and creative thinking, but also by accepting responsibility for governing change while keeping a clear focus on the mission. 

Successful innovation doesn’t happen by chance. It’s built by trustees who are committed to fulfilling the hospital or health system’s mission, who have a good knowledge of the community’s health care needs, and who have a broad perspective of the changes taking place in health care today. Innovative boards not only focus on the future, they take concrete steps to inspire new ideas that will improve health and advance the delivery of care. 

The Board’s Role in Innovation 

Boards of hospitals and health systems trying to keep pace with today’s transformational changes must ask themselves whether the board prioritizes, encourages and supports innovation. A culture of innovation does not stand on its own. It must be purposefully integrated into the board’s governing practices and responsibilities. Strategic planning, leadership performance and accountability, and board agendas are key areas of governance that help drive the organization’s innovative success. 

Innovation is strategic. 

Boards that want to strengthen innovation need to make sure it is part of each step in the strategic planning process.6, 7 For example: 

  • How can innovation help the organization achieve its mission? 
  • How can innovation and change help the hospital or health system move closer to its vision? 
  • Is innovation supported by the organization’s values, is it included as a value? 
  • Do strategic initiatives reflect new ideas, new approaches and fresh thinking? 
  • In what key areas do we want to focus our innovative efforts? 
  • Is there a strategy for innovation? 

An innovation strategy may be as simple as developing leadership skills in innovation processes or as ambitious as naming a Chief Innovation Officer and opening an innovation center. Strategies often include identifying and developing new products or services, applying new technology or establishing new partnerships. It’s important for the board to identify a limited number of key areas where innovation efforts should be focused. For example, an innovation effort may be focused on new ideas and ways to improve community health, strengthen quality and patient safety, or address workforce shortages. 

Ultimately, the board must ensure that the organization’s innovative efforts are prioritized and well-aligned with its strategic priorities, and are given the resources and support needed to succeed. 

Building the board’s strength as an innovation leader. 

Innovative trustees are, by nature, open to new ideas. They explore trends, needs and challenges to identify implications and find opportunities. They are creative and resourceful, considering situations from different angles and perspectives to make sure they understand the real problems and opportunities. Innovative trustees are willing to challenge the status quo and take calculated risks in the interest of moving their organizations and their community’s health forward. These open-minded individuals look into the future and imagine what might be achieved. 

Boards that want to be more innovative should start with a board self-assessment designed to help identify innovation strengths and weaknesses. Trustees should be asked to rate their leadership skills using criteria such as: 

  • Envisioning the future 
  • Challenging the status quo with new and insightful thinking 
  • Analyzing environmental trends to determine their implications and opportunities 
  • Keeping an open mind 
  • Seeking out and listening to ideas and input from sources both inside and outside of the organization 
  • Being flexible and adaptable 
  • Willing to explore creative methods and ideas for addressing challenges 
  • Willing to take calculated risks 
  • Providing strong leadership in dynamic, rapidly-changing circumstances 
  • Demonstrating innovative thinking and leadership 

Once the board knows what its innovation strengths and weaknesses are, targeted trustee recruitment using these same or similar criteria can help to build the board’s innovative strength. 

Are your executives accountable for innovation? 

Strong leadership skills are essential to innovation success for many in the organization in addition to trustees. A McKinsey and Company survey of 600 executives, managers and professionals indicates that the best motivations for innovation are strong leaders who encourage and protect innovation and top executives to manage and drive innovation.8 In recent years, hospitals and health systems have begun to look outside of the health care field for strong leaders who bring not only fresh perspectives and new ideas, but experience and proven success in developing new, innovative and market-changing approaches.7 

An important board responsibility is setting clear performance expectations for the CEO. Establishing clearly stated expectations helps to ensure the CEO’s performance drives achievement of the organization’s goals. Just as the board sets financial and quality performance measures, it should hold executives accountable for innovation by implementing measures and metrics that reflect innovative performance and progress.7, 8 For example, boards may want to monitor measures that include revenue from new and innovative services, or patient satisfaction and quality outcomes that accompany implementation of new processes, procedures or technology. 

Making Innovation a Priority 

Innovative boards set the example for their organizations. They make sure that innovation has a place on their agendas. They review initiatives and metrics of innovation performance, progress and success, and discuss challenges and barriers. 

Innovative boards make time to question assumptions and explore new and different ways of addressing issues and accomplishing goals. They encourage the open discussion and synergistic thinking that’s known to drive new ideas and approaches, they seek ideas from unexpected places, and they understand that a combination of healthy questioning and collaborative thinking provides a springboard for new ideas. 

What Does Innovation Look Like in Health Care? 

The U.S. Agency for Healthcare Research and Quality (AHRQ) created the Health Care Innovations Exchange to speed the implementation of new and better ways of delivering health care. The Innovations Exchange defines health care innovation as the implementation of new or altered products, services, processes, systems, policies, organizational structures, or business models that aim to improve one or more domains of health care quality or reduce health care disparities. Although the project is no longer funded, the website provides a robust database of case examples, resources and tools at 

Websites like the Innovations Exchange and the CMS Innovation Center ( can give shape and direction to organizations looking for innovative solutions. While innovation looks different at every organization, boards that are intentional about leading this charge may consider questions such as: 

  • How can board agendas focus more on innovation and encourage outside-the-box thinking? Do your agendas allow for in-depth discussion, dialogue and debate? 
  • Is your board getting input and insight from inside and outside sources? 
  • Does your board understand the biggest challenges facing the organization and the community? How can you address those challenges in a different way? 
  • Does the board encourage innovation throughout the organization, and are the appropriate resources allocated to support it? 
  • Does your board and/or senior leadership need to engage in innovation training? 
  • Do you need to recruit additional board members with a focus on or experience in innovative thinking? 

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James A. Rice

Jim Rice, PhD, FACHE is the Managing Director & Practice Leader with the Governance & Leadership service line of Gallagher’s Human Resources & Compensation Consulting practice. He focuses his consulting work on strategic governance structures and systems for high performing, tax-exempt nonprofit, credit union and health sector organizations and integrated care systems; visioning for large and small not-for-profit organizations; and leadership development for Boards and C-Suite Senior Leaders. 

Dr. Rice holds masters and doctoral degrees in ...

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