Ventures that rely on integrated healthcare business models develop a growth strategy for their enterprises by (a) putting value-based business models into practice and (b) shaping smart product-service collaborations between industry and healthcare organisations.
- Value based business models go beyond the key drivers of product or service quality delivered at an efficient price. They aim to deliver better health outcomes for the end-user at a value that accurately reflects the outcome.
- Smart product-service collaborations between industry and healthcare participants create a foundation for these ventures to achieve their goals, namely the development of a total or comprehensive solution on care. In practice, this means bundling services and products that influence each of the subcomponents (such as exercise, nutritional needs, medication, social isolation, etc.) that impact a person’s health.
This strategic positioning enables these ventures to tap into three unique growth dynamics:
End-user-centric: with a value proposition that puts the end-user’s health outcome first and by providing the end-user with a total solution (instead of a fragmented one), integrated healthcare business models are better able to meet the customer’s actual needs.
Evidence-based: by accurate monitoring of the health outcomes of the different service-product bundles and adapting the product-service mix to the needs of the different user groups serve as proof that integrated business models are an effective means of solving health outcomes for different user groups in society. This evidence enables these companies to develop convincing market strategies and to scale-up beyond the home market.
Shared value: given that integrated healthcare business models must be optimised in terms of economic return, these ventures are better positioned to develop structural growth partnerships with players in the later health sector in the EU, as opposed to with competition basing itself solely on the economic and transactional.
The objective of this methodology is to provide companies, healthcare and social care organisations with guidance and support in developing integrated business models along with developing the interdisciplinary and cross-sectoral partnerships needed to sustain them.
Like other business modelling exercises, this innovation process can be divided into three major stages: value creation, value capture and value delivery. Before defining these, however, it is essential to identify the value definition targeted for delivery to understand how it will generate both profit and impact.
Value definition: value definition in integrated models defines the organisation’s purpose and the scope in which it seeks to address a social need and subsequently transform this into a business opportunity. A key aspect of value definition analysis is adopting an ecosystem perspective, which leads to a comprehensive understanding of the full potential and constraints of the field of operation. The value definition is what makes it possible to identify what makes your organisation tick, among others honing in on and solidifying: the vision, the mission, the strategic focus and the key values used by the initiators to approach the business.
- Value creation: value creation in integrated models is the actions taken to increase the value of goods, services and business not only in terms of economic impact but also in terms of social impact. The focal point of value creation is to create better value for customers and stakeholders. A key aspect of value creation is the value proposition. The value proposition refers to the business statement that summarises why a consumer ought to buy your product or use your service. How the venture seeks to achieve a positive impact on the end user’s health outcome is a core aspect of the value proposition.
- Value capture: Value capture in integrated business models is the ability of the venture
- (a) to create economic return and ultimately profit from its transactions (= the activities the company undertakes to create the value), while simultaneously
- (b) creating a positive social impact in terms of health outcomes. A key aspect of value capture is the integrated business model.
A business model is the company’s strategy in terms of:
- how it will generate revenues and make a profit
- how it will generate impact in terms of better health outcomes within an efficient pricing structure
- how it will generates positive or virtuous cycles where increased revenue generates greater impact (and vice versa).
- Value delivery: value delivery in integrated business models includes:
- how you reach and interact with your customer
- how you design and produce your products
- how you deliver it/these to your customer base
- how you are organised (internally and externally)
- how you monitor and measure your impact
- how you finance your organisation and operations to result in maximum value (health as well as economic impact) for the customer using your products/services.
- A key aspect of value delivery is the go-to market plan. An organisation’s go-to-market plan takes place as a phase-gate process that includes a number of milestones, including:
- how the organisation will use its internal and external resources to deliver its unique value proposition
- how it will create economies of scale and attain the full potentiality of the business model in economic terms as impact outcomes.
A holistic, interrelated model
A crucial aspect of the business model’s three stages is that they are interrelated.
Not all roads are straight
The sequential approach, i.e. treating a business model like a straight road, with progressive pitstops along the way, is frequently employed by entrepreneurs and organisations. It is, however, a misguided one. Typically, entrepreneurs start out trying to tackle the issue of value creation ( ‘Which solution to a problem will we try to put on the market?’). And once having reached a consensus in this phase, the average entrepreneur or organisation will move on to value delivery. It is only at the tail-end that the issue of how to generate profit (value capture) is brought to the table. Unfortunately, this not the best approach to creating a business model and can even be counterproductive. The interrelated quality of a business model’s phases means that a linear approach is an approach headed straight towards trouble.
An ecosystem perspective
An ecosystem perspective encourages you to look at how the different stages of a business model relate to each other, and how the dialogue they create gets you to the destination you’ve set. Decisions on how to deliver a solution to the customer impact value capture and vice versa! The type of business opportunity pursued makes a real difference to value capture. Avoiding a linear approach to the three phases is a decision for sustainability.
The methodology will guide you through these three key business model phases and enable you to design the integrated value proposition, the integrated business model and the go-to-market plan. So… Let’s go!