Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.



Digital Health System Foundational Competencies

No one says that they’re going to see a digital movie or read a digital news article or go to a digital bank. Though currently, a "digital health system" is a short-hand name for health systems that have started to focus on the stages of IT-enabled strategy and digital transformation and innovation—soon “digital” will become the norm in health care just as it is in other industries.

What's crucial to understand is that becoming a digital health system is not a project or an end unto itself. It is about building a set of competencies and capabilities that help improve operations, enable organizational strategies, and facilitate innovation.

This guide moves through five imperatives and ten accompanying competencies that we identified as essential to innovation and able to be strongly influenced by CIOs and IT teams.

Align with Business Needs

  1. Governance
  2. Strategy

Earn Credibility/"Permission"

  1. "Keeping the Lights On"
  2. Cybersecurity

Exploit Assets and Capabilities

  1. Advanced Analytics
  2. Interoperability/Integration

Cultivate Skills and Resources

  1. Talent Management
  2. Partner Management

Evolve Culture and Innovation

  1. Agility
  2. Culture change

Now that you're oriented, let's begin exploring →

Align with Business Needs

Big idea: IT leaders must align IT with the organization’s business needs through good governance and strategy processes.

1. Governance

It’s hard to talk about new IT investments for transformation and innovation if your organization has yet to realize significant benefits form its existing ones, such as your EHR and other IT capabilities. We know from Peter Weill’s work at the MIT Center for Information System Research that effective IT governance correlates highly with the success of the overall business.

From his research, we see that top-performing enterprises designed IT governance to emphasize their business objectives—and to align performance goals, resources, and metrics with those objectives. Digital innovation also requires a similar approach to good governance.

From our research with members, governance for digital innovation currently comes in many different forms, but ultimately culture, structure, and need dictate the governance approach used. Here are two successful approaches from our member interviews:

governance for digital innovation

2. Strategy

Virtually all organizations recognize the importance of aligning the business plan and the IT plan, and some progressive organizations are even moving toward concurrent planning. In short, they realize that technology can either enable or inhibit their organizations' strategic plans.

These organizations identify which areas can be planned in isolation and which areas require concurrent, perhaps iterative, planning. Planning has to be bidirectional in their organization.

Innovation functions many times start out as skunkworks or with “a thousand flowers blooming.” Leading organizations have begun to consolidate innovation functions in order to get more synergies and more tightly align this progression with enterprise strategy.

Get started with these resources

Toolkit: IT Governance Charter

Service: Strategic Document Review

Earn Credibility/“Permission”


Those who are close to IT operations know that most of the expenses are incurred in just keeping the lights on (i.e. keeping existing systems up and running). Across industries, many organizations spend 70% to 80% of the resources on KTLO. That leaves very little for new initiatives, including innovation. Envision a Pac-Man gobbling up dollars that could be used for digital innovation. In our research interviews, many IT leaders stated that they were reducing KTLO costs in part to free up resources to support new initiatives and innovation.

There are a number of approaches to reduce KTLO costs, including modernizing the infrastructure, rationalizing technology portfolios, standardizing applications, and rethinking sourcing strategies. Below are examples of how two leading organizations have adjusted their sourcing strategies. One common example, as seen with MemorialCare Health System, is to selectively outsource commodity work to free up resources for new initiatives. A less common example, from Intermountain Healthcare, is business process outsourcing of the entire claims and payment function.

Providing a stable, reliable, flexible, scalable cost-effective operational backbone using modern technologies provides three main benefits:

  • It can help earn credibility by improving stability and reliability
  • It can help free up resources for innovation
  • It modernizes the infrastructure to better support innovation initiatives.

4. Cybersecurity

If cybersecurity weren’t difficult enough for organizations to tackle internally, it’s even more complicated with innovation because of the system access that consumers and partners need. Innovation will require new partnerships with third-parties in order to deliver new-in-kind interactions and service capabilities—but these third-party relationships increase a system’s cybersecurity risks.

As such, organization must establish and enforce standards for digital partners. Third-party risk management is not a one-time activity. Health systems must follow these critical steps:

  • Set standards for integration of partnership
  • Determine which standards will be mandatory (but offer flexibility on the rest)
  • Assess partner against these standards before integration
  • Provide bridge solutions to lower risk until minimum standards are met
  • Contract for accountability and progressive penalties for non-compliance (see below for a spectrum of accountability)
  • Monitor and review compliance with security standards continuously

Get started with these resources

Toolkit: Third Party Risk Management

Procurement Checklist: Cloud Computing 

Cheat Sheets: Cybersecurity for the C-suite and Board


Exploit Assets and Capabilities

Big idea: IT leaders must build in the necessary capabilities in order to exploit their technology assets, including developing advanced analytics and interoperability.

5. Advanced Analytics

Analytics is frequently part of the innovation solution, but can play multiple other roles outlined in the graphic below. Analytics can help:

  • Identify innovation opportunities by evaluating internal data (for example to identify high-frequency, high variability, high cost procedures) or by evaluating external data (for example, to better understand market needs and consumer expectations).
  • Track the impact of the innovation initiative on the organization. Some of our members track both organizational key metrics as well as lower level, or “micro”, metrics that are more easily attributed directly to the innovation initiative.
  • Monitor their innovation solutions (e.g., patient behavior and infrastructure performance) to improve current initiatives and inform future initiatives. See Partners HealthCare example below.
  • Monitor the performance or maturity of the organization’s foundational competencies. For example, you could create a dashboard for the ten competencies. Or, you could use analytics not only to monitor but also to improve some of the competencies such as talent management.

Strong analytics requires lots of high quality data. You’ve probably heard the statement that in today’s economy, data is the new oil or gold (or bacon). This data must move beyond structured, primarily internal data to include external and unstructured data.

“Without data, you’re just another person with an opinion”
—W. Edwards Deming

Some leading organizations are investing in a strategic data acquisition plan based on their business strategy and key decision-making processes that must be improved. Below are examples of data types needed for advanced analytics. 

6. Interoperability/Integration

Many organizations have moved from best-of-breed systems to comprehensive suites for their systems of record (such as EMR and ERP systems)—and we’re now seeing regulatory and market pressure to make these systems more open and modular.

Though making this shift will be essential to consumer facing innovation, there are a number of technical challenges to interoperability, including security, data structure and semantics, and the ability of the modular components to fit well into the workflow and interact more or less real time with the core systems. There are non-technical challenges too, such as pricing practices for the systems of record vendors for access through APIs. Even so, we’re making progress in moving from closed applications to more open application ecosystems as depicted below—something which cannot happen without interoperability.

Some progressive organizations have discovered that most innovations have some commonality in the technology components needed to implement them (e.g., patient matching and results retrieval). Partners HealthCare has identified a set of innovation components and created an innovation services group to build and maintain them (you can see more on Partners below).

If a new innovation service is requested, the innovation services group can prioritize that request so that it doesn’t have to get in line with traditional run and build requests. In short, many requests can be resolved with existing innovation services and new services can be prioritized within a matter of days. To implement these types of new services, however, a commitment to interoperability is key.

Get started with these resources

Presentation/Recording: Interoperability: Can You Hear Me Now?

Virtual Summit Session: Build Your Digital Front Door

Report: The API Economy


Cultivate Skills and Resources

Big idea: IT leaders must ensure that adequate skills and resources are readily available through talent management and partner management.

7. Talent Management

It’s difficult to excel in any of the competencies described so far without strong talent. Unfortunately, most health systems have tight budgets and strong competitions for talent—82% of organizations struggle to attract critial skillsets such a software engineering. In this transformative time, talent management must go well beyond replacing or growing existing talent pools.

Our digital health system maturity model shows new skillsets and mindsets must be acquired. That requires a much more rigorous, thoughtful approach to forecasting what your organization will need, developing plans to meeting current and future needs, and screening and selecting internal and external candidates. One advantage that health care organizations have is their mission to improve lives. It can be much more attractive than a mission to, for example, sell more clickthroughs for online ads. But there’s a lot more to recruiting and retention than just promoting your mission.     

Below are some suggestions for how you can obtain and retain new skillsets and mindsets. Note that we’re moving from needing people with narrow IT skillsets to needing people with broad skillsets and also new skillsets such as those in analytics and mobile app development. Many organizations are attempting to ensure diversity as they obtain their resources, whether by internal training, partnering, contracting, or hiring. Progressive practices include contracting by e-lancing (electronic freelancing) or by hiring telecommuters—and there is an increasing number of tools becoming available to enable e-lancing, telecommuting, and agile development.

As difficult as obtaining new skills sets may be, retaining the skillsets can be even more challenging. Today’s top performers are increasingly looking for results-oriented dynamic environments, career paths and rewards for “makers” not just for managers, flexible roles, and opportunities for lifetime learning. Without the pieces in place to retain skill sets, obtaining those skillsets may be a waste of time, energy, and money.

8. Partner Management

As we expand the focus of the health care system beyond ‘find it, fix it’ medicine to a more holistic approach (e.g., social determinants of health, wellness, prevention, chronic care, and genomics), the need for strategic partner management will increase significantly. We frequently hear the work “ecosystem” to describe this new environment—some examples are described in the graphic below. The list includes both traditional partners, such as our core system vendors, and also more non-traditional partners such as government or faith-based organizations.

Many of these relationships will become more strategic in nature, rather than vendor-client oriented as they may have trended in the past. The graphic below also shows a set of questions for you to consider as you evaluate strategic partnerships. Some of the questions touch on other competencies in this series, such as analytics, interoperability, and cybersecurity. 

One of our members has set standards for third parties (not just IT vendors) such as the ability to support APIs and FHIR standards, participate in single sign-on and support data access. When selecting an IT vendor, they like to test multiple vendor products in live environments. They also distinguish between vendors and partners. For example, partners must also be willing to co-develop with the organization.

Some progressive organizations have discovered that most innovations have some commonality in the technology components needed to implement them (e.g., patient matching and results retrieval). Partners HealthCare has identified a set of innovation components and created an innovation services group to build and maintain them (you can see more on Partners below). 

76% of health system leaders think it’s important to partner with other innovative health systems. And, 70% of surveyed leaders do not believe that their IT department has sufficient resources to effectively support digital innovation. This need for strategic partnerships has created an opportunity for conveners. AVIA brings together health systems focused on solving a common challenge, such as those related to Medicaid or consumer access. These partnerships can help mitigate risk and share successful practices. AVIA already has several organizations participating in their network; some are listed below


Get started with these resources

Virtual Summit Session: Assemble the Digital Transformation Dream Team

Handbook: IT Contracting

Evolve Culture and Innovation

Big idea: IT leaders must build upon existing skills to improve IT departmental and organizational agility and help change the culture. We all know that major IT-enabled initiatives in the past such as EMR implementations have really been primarily people and process change initiatives. This will be equally true for digital innovation initiatives.

9. Agility

Agility is important for the entire organization and ecosystem. It can begin with IT-enabled initiatives and as such IT leaders may be in the position of explaining the different between waterfall and agile methodologies and why the organization must leverage both for so-called “two-speed IT.”

Our research shows that innovative organizations typically use both approaches—frequently used for systems of record, while agile is typically used for systems of engagement (e.g., customer facing systems) and more frequently for analytics initiatives. In short different types of systems require different approaches.

Getting started: The use of agile typically starts for IT-enable initiatives such as web development, mobile application development, and analytics initiatives—or for minor system enhancement or maintenance projects. After that, it may be extended more deeply within the IT department and then even beyond the IT department to the rest of the organization.

Use agile as a starting point to develop your own approach—don’t be handcuffed by trying to follow it step by step. Below are some getting started steps:

  1. Start with a carefully chosen pilot. Good options include: EHR optimization, web work, mobile app development, and some BI work like dashboard and report development.
  2. the team members carefully. People comfortable with team work are better suited to Agile than those with an independent streak.
  3. Engage with the whole team. Together establish the process, standards, and techniques to be used but supplement them with an experienced coach. .
  4. Take a balanced approach to plan the new process . Do just enough to make it clear to every team member how work will progress and acknowledge that it will not go perfectly at first. .
  5. Align governance meeting with sprint cycle. The governance committee should understand and monitor progress without having to become proficient in Agile.

Extend Agile with IT: Geisinger has extended Agile within the IT department. When possible, IT work is done now in two-week Agile sprints, including application development and system implementations, maintenance, and enhancements. Geisinger’s non-IT stakeholders like Agile for its ability to course correct. Some progressive organization outside of health care have extended Agile to the IT infrastructure.

Extend Agile beyond IT: A growing number of organizations, regardless of industry, recognize the need to be both stable—in order to enable efficiency, reliability, and scalability—and also to be agile—to enable responsiveness and adaptation. These organizations extend Agile beyond IT-enabled initiatives. McKinsey has created a test to determine where organizations fall—a portion of this test is depicted below. Those organizations that have both a stable backbone and dynamic capabilities to change are considered agile. Where would you place your organization?

10. Culture Change

We define organizational culture as a system of shared assumptions, values, and beliefs, which governs how people behave in organizations. According to a recent survey, 64% of innovation executives said the biggest barrier to innovation is culture/organizational structures. As the graph below illustrates, technology change is advancing much more rapidly than human can change individually or as part of organizations—which is a complicating factor when you consider that digital transformation is about change and not technology.

CIOs and IT leaders can play two important roles:

  1. They must lead culture change within the IT organization.
  2. As a member of the senior leadership team, they should contribute to the culture change within the organization. This isn’t new to many CIOs since recent major EHR implementations have been the implicit point of the spear for process and culture change.

One organization that has done fairly well with culture change is Spotify. They knew that they needed organizational agility to compete in today’s market. They identified a number of principle for speed and innovation including:

  • Mission, not structure
  • Metrics, not standards
  • Experiments, not directives
  • Trust, not control
  • Transparency, not need to know
  • Collaboration, not hierarchy
  • Continuous release, not big projects
  • Products, not projects

They have used these principles to develop and reinforce new behaviors. Our research also uncovered a number of other potentially relevant principles including:

  • Autonomous, cross-functional teams, not hierarchy fixed structures
  • Accountability, not control or finger-pointing
  • Competencies, not credentials
  • Hit or miss, learn, not success or failure
  • Lifelong learning, not job/role preservation
  • Data-informed, not gut-feel

Dignity Health’s approach to innovation and organizational change is a useful example that underscores the need to stress-test your innovations and your organization’s ability to change. First, they test the innovation in a favorable environment. They use what they call “micro metrics” to evaluate its performance, recognizing that this limited deployment will probably have very little impact on key organizational metrics.

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