Real Options for strategy development in the introduction of technology for business and process innovation: New applications for the Automatic Identification technology in the Healthcare Industry

The present work analyses and evaluates the possible applications of the Auto Identification technology (auto-ID) in the healthcare industry (HI1), and gives basic strategic guidelines for its introduction, taking into account industry’s particularities and valuing its tangible and intangible benefits and alternatives by means of a Real Options Analysis (ROA). Because of its general characteristics and the multiple possibilities it offers, the auto-ID technology can be considered as a disruptive technology2. It can be potentially used in the HI for drug supply chain and inventory management, medical equipment management, medication control, document tracking and archiving, among others. This application diversity puzzles the adoption strategy and achievement of successful process innovations, and challenges change leaders. The replacement of wellestablished standards, methods, and technologies – like the barcode; the profound impact on current accepted procedures and practices; the existence of a variety of similar proprietary, incompatible technologies; the intrinsic difficulties in valuing healthcare quality and safety; and the requirement of a minimum critical mass for auto-ID to be profitable; all these factors set important challenges for the successful introduction of auto-ID in the HI, and deeply impact its adoption strategy. Moreover, early auto-ID adoption decisions condition and constrain future ones, and should consider the value of future flexibility to react to uncertain outcomes like emergence of different standards and complementary or substitute new technologies; industry and core technology evolution; market preferences; among others. This work suggests a conceptual approach for the application of ROA in developing auto-ID 1 See appendix A for a full list of acronyms 2 “Disruptive technologies are those which, in the short term, cannot match the performance that customers expect from product and services”. Slack (2001) p722, citing Professor Christensen (Harvard).