rethinking the hospital - value of business models for hospitals

Rethinking the hospitalThe value of business models for hospitals

Master thesis Maarten den Braber (m@mdbraber.com)

What is this presentation about?

• Strategy

•Hospitals

• Value

• Business model

Value ! delivered !

Customer!preferences !

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

value!creation!

implementation!value!

appropriation!

Business model

Market!segment!

Question: what is important for you?

Running a hospital is a balancing act

4

Pressures are rising

Demand-sidedemographics

disease patternspublic expectations

Supply-sideknowledgeworkforce

Societalfinancial pressures

internationalizationglobal R&D

Zero-sum competition

•No value is created

•Competition is about shifting costs, increasing bargaining power and competition to capture patients

• Escaping through value-based strategy

Porter & Teisberg (2006)

Reactive behavior is not enough

Field research: 11 interviews - 2 sessions

What issues? 5 examples

• Specialized medical care considered core business

•Decisions often supply-driven

• Scale and scope important decision criteria

•Governance structure complicated

•What are reasons for success and failure?

Current literature: boxed solutions

•Darzi (2007)

•MacKinnon (2002)

•McKee & Healy (2002)

•NVZ vereniging van ziekenhuizen (2000)

Darzi as example: 6 boxed solutions

But “one size does not fit all”

How to build your specific hospital?

Strategy helps determine direction

Value-based strategy?

Value is defined by attributes

•Viewed from the customer perspective

• Spans the complete process

•Delivered through a sustainable process

Value-based strategy requires balance

Outside-in: customer preferences

Inside-out: organizational preferences

Models help solving complex problems

Value ! delivered !

Customer!preferences !

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

value!creation!

implementation!value!

appropriation!

Business model

Market!segment!

Business model: build strategy

•Comprehensive

•Coherent

• Structured

Value proposition: core functions

•What (and for who), where, how and when?

•What are your core functions?Curing sick people or keeping people healthy?

•Who are your stakeholders?Patients, family, physicians, nurses, insurers, ...

•Who is your customer?

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

Market!segment!

!

Current value proposition: different?

Market segment: define potential

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

Market!segment!

•Who and how many?

•What defines your market?Geographic region, specific illnesses?

•What is your market potential?Market size, share, volume, growth, ...

Strategic position: link with environment

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

Market!segment!

•What is inside and what is outside?

•What is our position in the value chain?Who comes before, who comes after?

•How do we balance scale and scope?Compete, collaborate, collaborate to compete?

•What is our governance structure?Who runs the organization, what are the dependencies?

Health care value chain

Value chain: exchanging value

•How to structure processes?

• Link value exchanges to the core functionsDoes the exchange add real value?

•Optimize the value chainLean management, TQM, Six Sigma...

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

Market!segment!

Competitive strategy: stay ahead

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

Market!segment!

•What is your advantage?

•Tools and techniques already availablePESTEL, SWOT, 5 forces, ...

•Non-profits need competitive strategyJust as for-profits organizations do

•Current: quality is medical-technical qualityWhat other types of quality are possible?

Quality can be many different things

Cost structure / revenue potential

Value!proposition!

Strategic!position!

Value!chain!

Competitive!strategy!

Cost /!revenue!

Market!segment!

•Make your activities sustainable

•Cost and revenue mean more than accountabilityInvestment needs, projections, variable/fixed costs, ...

• Balance your service portfolioProfit centers versus cost centers

•Tools: do not reinvent the wheelBCG matrix, GE matrix, ...

Business model: strategy building tool

Comprehensive. Coherent. Structured.

Business model and the hospital

•Does it fit? (suitability)

•Will it work? (feasibility)

•Will it be used? (acceptability)

Suitability: does it fit?

•Makes decision-makers smarter

•Aligns with organizational specifics

•Makes knowledgeable about succes and failure

• Possible to test current and analyze new scenarios

Feasibility: will it work?

•Not easy moving away from established policies

• Business model helps building and connecting logic

•Many tools available already that can help

• Strategic mindset in the whole organization is needed

Acceptability: will it be used?

•Again: not easy moving away from established policies

• There is willingness to change

• Inclusive ways are an addition to current methods

• Business model reduces complexity

Conclusions about the business model

• Business model makes decision makers smarter

•Comprehensive. Coherent. Structured.

•Aligns well with the organization

•Needs effort and time to be implemented

•Delivers value... for customer and organization

Remember this?

With the right tools

We can build this!

!

And now...