Our latest InnoLead Live call featured Justin Graham of Hearst Health talking about the innovation lab he oversees in San Francisco. We discussed staffing, funding, and focus of the lab — and took several questions from listeners.
Graham told us that he sees the lab a bit as a startup that gets ideas to the “minimum viable product stage,” and then pitches them to the four businesses that make up Hearst Health, part of the media conglomerate Hearst Corp.
“We…see ourselves as a startup pitching an investor, and [we need to be] able to convince them that what we are working on is something they should spend their money on and invest in in the coming years,” he says. “It keeps us honest, and it holds us to a high standard. We have to justify what we are working on and prove that there is a business value and it is technically feasible. It keeps us grounded in very realistic projects that have real long-term potential. We are very much a pragmatic, product-focused innovation lab.”
InnoLead: Why don’t we start by just having you talk a little bit about your role as Chief Innovation Officer there, and maybe the particular division of Hearst that you work for?
Justin Graham: Sure. Hearst is a large media company. You’re probably more familiar with its consumer media companies like the magazines Cosmopolitan, or Esquire, or the TV stations, or the radio stations or the cable TV channels. It’s the same company that was founded by William Randolph Hearst back in the journalism era over 125 years ago.
Hearst has become very diversified in the last 30 years and moved into what’s called Business Media, about 30 years ago, [providing information in a] business-to-business setting. And Hearst has been in the healthcare information business since the acquisition of a pharmacy data company back in nearly 30 years ago, which later evolved to becoming First Databank, which is the leading provider of pharmaceutical and drug prescribing information used by hospitals, physicians, and pharmacists all over the country — in fact, all over the world.
In addition to First Databank we have Zynx Health, which provides information to doctors and nurses in hospitals to provide evidence-based care. We’ve got Milliman Care Guidelines, which are the leading guidelines that are used by insurers to determine if the care provided for you at a hospital or in a clinic is appropriate and evidence-based, and Homecare Homebase, which is the leading provider of software that home care agencies and hospice agencies use to take care of patients.
The Hearst culture is very much allowing each of these companies to operate in their own milieu…When companies become part of the Hearst family, often Hearst says, “You’re doing great. We’re going to do a little bit of back-end integration, but we’re going to let you continue running your business and we’re going to stay out of your hair for a while…” That’s pretty typical for Hearst, so each of these companies is operating as independent siblings.
The entire notion of Hearst Health as a network of companies only came into being about two years ago, after the acquisition of Homecare Homebase, when we really started to get critical mass.
But shortly before that there was an idea of forming an innovation lab to work with these individual companies, as well as potentially external parties, to help drive some innovative product concepts and new ideas, and be a focal point for concepts that may not have a natural home as a product extension [within] any of the individual companies.
That was started by my predecessor, Chuck Tuchinda, who is now the president of First Databank, and I came on board a little more than two-and-a-half years ago to take over the lab.
InnoLead: Why did you choose San Francisco as a location for the lab, and tell us a little bit about what the original marching orders were.
Graham: I think it was a matter of convenience that it was started in San Francisco, because the corporate headquarters for First Databank is in San Francisco…
We are [also] the innovation hub of the world, and there’s so much going on — so much energy and enthusiasm for new ideas and new concepts. People are open to [new ways] of thinking of willing to try new things, and being willing to accept failure as a natural consequence of taking risks. It’s a great place to have an innovation lab, and there’s so much going on around us.
(For more slides that offer an overview of the innovation lab, visit our Resource Center.)
InnoLead: Tell us a little bit about the staffing level at the Innovation Lab. You said that the mandate was to explore product ideas and business ideas that might not get explored within the different divisions of Hearst Health. Talk a little bit more about that and some of which you’ve done there so far.
Graham: The lab when it started was…four people taking over the conference room… We’ve grown a little bit since then, and we’ve moved into adjacent office space that’s better-suited for innovation work.
The first thing that I asked for was whiteboards everywhere. We had no whiteboards in the old space, and now we have all the walls with whiteboards. [They’re] a must for any innovation center, so that the distance from idea to writing it down is almost zero.
We intentionally keep the team pretty lean. …We have a total of six people on the team including myself. We have two technical leaders. We have a medical informaticist and a solution architect. Then I’ve got a clinical strategist, who is another physician like myself with a technology background. I’ve got a product strategist who comes from consulting and a business strategist…and some contractors as needed to get the job done.
We…try to keep our costs down because we are not a revenue-producing unit. The ideas that we are working on and the products that we are trying to build are several years away from returning our investment. We honestly don’t want to carry a large footprint unless we start working on something that has a huge potential.
Funding and Business Unit Links
InnoLead: On that funding topic, I had seen initially when the innovation lab and Hearst Health venture capital arm got announced that they said the company was committing $75 million to investing in startups, and another $75 million for future funding opportunities. I’m guessing some of that is budget for running the lab and funding your projects — or is that all investing in startups by your corporate VC arm?
Graham: No that’s all the VC arm. We have a separate individual right now who is running our venture fund with three active investments and more on the way. That’s a completely separate fund.
We get funded out of a different pocket — much, much smaller than that amount of money. Like I said, enough for us to employ six individuals and run an office space and have some [money] for consulting.
InnoLead: Talk a little bit about working with people at the business units. It sounds like you are a resource for them, but explain to me how can you get their time when you want help from them — or do the businesses fund projects as they are moving out of the concept phase towards prototype or towards the market test? What’s the input and output when you interact with the business units there?
Graham: I’ve maintained great relationships with all four businesses [that make up Hearst Health.] One of the first things I did after coming on board was setting up an informal advisory board made up of senior executives of each of those companies, as well as a few other individuals who are influential in the organization…At the minimum, they are informed on what we are working on and ideally, they can be partners on what we are working on. Otherwise, we would be concerned if we would be perceived as this separate entity that was off on its own and [the businesses] didn’t know what we were working on.
The relationship is very collegial and very friendly. …We don’t have too much trouble picking up the phone and contacting individuals we may want to work with in these individual companies. We also ran an innovation workshop last year that tried to cement more relationships.
InnoLead: Does any funding come from those businesses, or not really?
Graham: No. Not directly. The funding comes from the Hearst level, although at the end of the day, it does come from those businesses, but those individual businesses aren’t necessarily making budget decisions about funding the innovation lab.
We are not equipped to… do more than getting something to a minimum viable product. [After that, the next step] is either spinning off a new business entity under the Hearst umbrella, or spinning it into one of the existing companies. Our preference is probably to spin it to one of the existing companies [because they] already have apparatus for sales, marketing, et cetera. In order to do that, we do need to convince them of the suitability of the idea, and whether they are willing to [include it in] their capital budget planning for the subsequent year.
In that respect, we would like to see ourselves as a startup pitching an investor, and being able to convince them that what we are working on is something they should spend their money on and invest in in the coming years.
I think it’s good. It keeps us honest, and it holds us to a high standard. We have to justify what we are working on and prove that there is a business value and it is technically feasible. It keeps us grounded in very realistic projects that have real long-term potential.
We are very much a pragmatic, product-focused innovation lab. There’s a wide variety of what an innovation lab can do. Some are hubs for trying out new technology and testing out new prototypes, without any necessary market potential… Some are focused on internal business process optimization.We don’t do either of those. We are focused on products that have a real long-term return on investments. It’s more of an investor model, a startup model where…they are going to get [a return] back on the money they put in.
Where do Ideas Come from?
InnoLead: The first listener question is about ideas. Do the ideas come from your staff at the lab, or do they come from the business units as part of their strategic plans, or things that they are trying to accomplish? You can also give us a couple of concrete examples of the type of ideas that you guys have worked on.
Graham: I would say ideas come from all the above. Everyone on the team has been working in healthcare for a decade and more; we all know healthcare inside and out.
Healthcare is an industry that has no shortage of problems to be solved, and I am not worried for my career, being in the healthcare innovation space. We’re in the middle of a long effort to slowly turn a battleship that is heading towards an iceberg and we are going to do it, but [there are a lot of things] that need to be fixed in healthcare.
We have an idea list that’s a bit longer than we have the capability to work on already. I’ll give you some examples of some things we’ve done in the past – this is a little bit before I came on board.
One of its first spin-off products was something called the AlertSpace, which is a tool used in conjunction with First Databank. First Databank creates tools to be used by physicians when they prescribe a medication.That medication may have interactions with other medications or may not be suitable for you as a patient because of the problem that you have with your kidneys or your liver. Various alerts would [show up] to the physician as he or she was writing that prescription.
One thing that we are facing today…is alert fatigue — too many alerts, too often. AlertSpace is a tool that healthcare providers and hospitals can use to tweak the sensitivity of their alerts.
If they’re getting physicians complaining about an antibiotic causing too many alerts, they can dial that down. It’s an overlay on that First Databank product.
We also created a product about a year-and-a-half ago that provided evidence-based information to pharmacy benefit managers, who are the companies that are the middlemen between your insurer and your pharmacy. They are charged with trying to determine whether the medication prescribed by your doctor is the right medication — particularly when it’s an expensive, high-cost specialty medication.
Are you being treated with the medication for the right reasons? Because the worst thing to do is to give you the wrong medication and then have it be super-expensive.
We provided some high-quality, evidence-based information in an electronic format that’s compatible with the latest electronic health record systems to enable what’s called a “medication prior authorization” to proceed in an automated fashion. We’re trying to automate some inefficiencies involved with faxing forms back and forth to fill out that medical information.
InnoLead: Doctors are the last people still using fax technology, I think.
Graham: That’s right. They fax it everywhere in healthcare. It’s nuts — hand-written paper forms being faxed back and forth. That is the norm in healthcare. It’s crazy.
Staying Aligned with Senior Leaders
InnoLead: What’s one thing you do on a regular basis to make sure you have continuing senior leadership support? Is it a report that you provide? Is it just in-person meetings? What would you say is important for just maintaining support?
Graham: Despite being enormous, our local group is small. The leader of Hearst Health and the leader of Hearst Business Media — I have a dual reporting relationship with both of them. I’m in touch with them frequently, but I have a tremendous amount of autonomy, too. I run my own ship. I check in with them regularly. I also have these quarterly advisory board meetings, which are seen as checkpoints for what we’re working on… We use those as milestone points.
We go through two phases, I’ve found, in the last few years. We’re divergent for a period of time, where we are cycling through a lot of different ideas. We’re brainstorming. We’re looking at our pipeline. We’re getting out and interviewing people and trying to refine different concepts, and seeing which one might hold some water.
When we start to narrow our field and narrow our pipeline, we might be looking at six, seven ideas and then [we] narrow things down to one that looks most promising. We identify a really promising vein of ore to dig into. Then we start dropping everything else and we converge…
Instead of each person working on their own idea, [everyone] focuses on the one idea that has the most potential. We scrum hard on it. We go into a full-blown startup mode, because if you’re a six-person startup, you wouldn’t be working on four ideas. You’d be working on one product day and night.
At the moment, that’s what we are now.
InnoLead: Are there any other innovation labs in Hearst focused around media?
Graham: We’ve been unique in the innovation space in Hearst. They just recently announced over on the other side of the house, the more conventional media side of the house, that they are looking at incubating some media-based startups in the Hearst headquarters in New York. I haven’t been directly involved in that, so I don’t know much about it, but I know that there’s interest in trying to replicate what we’re doing here in the other parts of the Hearst businesses…
Making Innovation Everyone’s Responsibility
InnoLead: One more listener question. What have you seen work when it comes to encouraging a more innovative company culture? This person notes enterprises can be very siloed, and employees can be very focused on day-to-day work.
Graham: Hearst does a good job. Hearst could do a better job. I’m not saying we have all the answers here. It does help that we have a culture at Hearst where [we allow] individual operating units to do their own thing, and…have their own culture and their own approach and run their own businesses.
Like every company that’s mature, everybody has got their day-to-day responsibilities. Salespeople are reimbursed based on sales of existing products and not new products. …It’d be great if each [Hearst] company had something baked into their incentive structure about creating a new product every year, or selling a product that was created in the last year or two. [That way,] everybody has got a little skin in the game about creating something new. That’s a great way to do it.
If I were a king for a day at Hearst, I might make that change. I think we do rely a little bit too much on a standalone innovation unit.
By the way, I would point out that each individual company has their own internal new product development and innovation work, although not as formalized as what we’re doing. Most of their new product development is based on Horizon One product extensions of what they’re working on.
We’re not the only hub for innovation, but it would be nice if that was a little more part of everyone’s responsibility, as opposed to just a standalone unit’s responsibility. We do get to chase after ideas that have no precedents at any of the Hearst businesses. That would be hard for any of the Hearst businesses to [do] on their own.