For our September “IL Live” call, we spent a half-hour with Nate Bellinger of Humana, the $41 billion health insurance company based in Louisville, Kentucky. Bellinger has spent the past five years as part of Humana’s innovation team, most recently as Director of Consumer Innovation, before transitioning into a new role this month as Director of Business Model Development.
We talked about the 15-year history of Humana’s innovation initiatives; some of the lessons they’ve learned as it has evolved; the ratio of incremental innovation to transformational innovation; connecting with business units; and various changes in reporting relationships. (We previously spoke with Bellinger for this piece in March.)
What to Focus on
“I’m not sure there ever is a set answer to what that ‘golden ratio’ is [between incremental and transformational innovation.] Over the last 15 years, the Innovation Center at Humana has gone through periods of being 80 percent focused on transformational…and I’ve led it in times when it was 80 percent incremental, and 20 percent transformational. The incremental elements are essential to remaining competitive as a business. We all work in thriving, dynamic marketplaces. Anything we can do to create a difference is going to be valuable. One of the tricks I would always try — sometimes we were more successful than others — is to always be delivering something, which could be an incremental project or a transformational project. The transformational ones normally take more time, but if you can start them and create value in the next 12-24 months, but in the meantime, you can be delivering some incremental solutions that may only take three to six months. If you have the resources, you can be doing both — providing value to the company at all points in time.”
Revenue Isn’t the Only Thing that Matters
“There are several ways to create financial value to our company. It could be in the form of revenue, through capturing new memberships and employer group customers. You can also be creating value by helping people live healthier lives — there’s tremendous value in avoiding incidents that could lead to expenditures of dollars. That’s avoiding costs, and it’s another form of value our innovation teams have focused on.”
Relationships with Senior Management and Business Unit Leaders
“If you are able to align innovation with the strategic priorities of the overall business [and senior leadership], that makes it a lot easier for the innovators and the cells of innovation in the company to be aligned with their partners in the business. There have been times when the focus of innovation hasn’t been clearly aligned to the focus of the executives. That puts more of the burden on the grassroots innovators to try to make those connections [with business units]. You spend a tremendous amount of time doing stakeholder engagement rather than creating innovative solutions.”
How to Measure Your Innovation Portfolio
“The default answer seems to be volume. How many projects do you have at what stage of the lifecycle, and how do you categorize it — transformational versus incremental. But a grounded and believable projection of how successful the current pipeline will be is something that I’ve struggled to find. I’ve used weeks and months of team time to figure out what those best metrics would be, that would be predictive and believable to stakeholders and your team, and to help make management decisions about what you prioritize and don’t prioritize. Obviously, you can use customer feedback or target audience feedback — do they view it as something meaningful for their needs — but there are holes in that. It’s been very tough for us to figure out what is that quality metric we can use for the work we have in hand.”
The Role of Consultants and Their Contributions to Breakthrough Innovation
“I’d look to any use of consulting services to be directly connected to a specific value creation opportunity you’re working toward. If your intent is to create innovation for the sake of innovation [that doesn’t work as well.] “In 2013, one of the innovation priorities for Humana was to help create the conditions for an innovation culture throughout our company. Our executive leadership had recognized how dynamic our marketplace was becoming, and it was going to be accelerating. In an effort to try and build some agility, the ability recognize new business opportunities and develop solutions, the opportunity fell upon the innovation team to try to develop this culture. We worked with an outside consultant to institutionalize some of the elements of their solution.
Humana is a 54,000-person company, and we wanted to be able to create a set of tools and a way of thinking and approaching new opportunities that could be scaled. We felt that using the solutions from a consulting partner was the right answer for that. We call it Innovation Engineering’ internally, and it is now being transitioned from our innovation team into a core component of the Humana business, so it can be truly scaled and reach more people.”
Humana’s new Chief Innovation Officer, Christopher Kay, now reports directly to the CEO. “That helps build the alignment with the near-term priorities for the company, but it also positions innovation to inform the long-term priorities for the company. It allows the level of ambition for innovation to grow — to go more towards that transformational, exploratory space, and be able to support our partners in the business with more of the incremental innovation. More of the innovation resources are being committed to the transformational space than in years past.”
“We’ve always had an independent budget, and we’ve been able to allocate and use it in ways that allow us a great deal of autonomy. That hasn’t changed. What does change is the amount of money you have, which matches the ambition level. Funding for innovation at Humana is getting higher.”