What is a business model canvas? Wikipedia defines it as “a strategic management template for developing new or documenting existing business models”. It is not a business plan, but rather a visual language designed to align business activities that produce value by illustrating potential trade-offs. The idea was initially proposed by Alexander Osterwalder.
A business model canvas for the American healthcare system
Phase 1 of the modelH CoCreation Forum aims to create a business model canvas specifically for healthcare. To do so we must first agree on what defines value within the American healthcare ecosystem. Our definition of value is based on Michael Porter’s work in What is Value in Health Care? – “the patient health outcome achieved per healthcare dollar spent”. Therefore, a value-based healthcare business model must result in:
Increased access to necessary care through an engaged delivery system;
Reduced aggregate cost of care, with a market-driven, balanced incentive and reward model; and
Improved consumer experience yielding an informed decision maker aligned to their risk and reward.
Our healthcare business model canvas, which we are calling modelH, must also work in a market-driven system. Better ideas can then be generated and evaluated using that engine because they 1) create shared value and 2) can succeed in the marketplace. Likewise, current models and trends can be evaluated through this engine to see if they are effective.
The basis for modelH is Alex Osterwalder’s work on business model generation but modified to fit the uniqueness of the American healthcare domain. Our community will participate in modifying the Osterwalder model as needed to create the modelH Healthcare Business Model Canvas.
Our work on Phase 1 of for modelH will take on two distinct conversation types.
The 1st conversation type will be to look at the core Building Blocks of Osterwalder’s model and debate their nuances in regards to healthcare business models. Wikipedia defines these core elements as:
Customer Segments – the customer groupings a business model serves.
Value Propositions – the collection of products and services a business offers to its customers.
Channels – the way a company brings its value proposition (product) to its customer segments.
Customer Relationships – the type of connection a company wants to create with their customer.
Key Activities – the most important tasks in the execution of a company’s value proposition.
Key Resources – the internal assets required to create value propositions for customer segments.
Key Partners – the external relationships needed so a company can focus on their Key Activities.
Costs – the most important financial concerns of a company’s business model.
Revenue – the way a company makes income from each customer segment.
The 2nd conversation type will be to define the new Building Blocks needed for healthcare and how they should be incorporated into the canvas. The additions to be discussed are:
Externalities – the external forces (regulations) imposed on healthcare business models.
Jobs-to-be-Done – the customer’s JTBDs, which may not adhere to a company’s value proposition.
Intermediaries – the influencers/intermediaries between the healthcare customer and the product.
Experiences – due to multiple intermediaries, customer experience bears a greater look.
Cost Drivers – for healthcare to exists, the cost drivers must come under control.
Payments Sources – in healthcare, customers are separated from payment sources in many cases.
Platform – the healthcare ecosystem is interdependent, requiring an infrastructure to work.
We will do this in the order of importance to a business model – starting with the Customer and ending with the Platform. The result will look something like this:
Hello again. I wanted to give you all another update on the big project I am calling modelH. This project is a dynamic collaboration between Innovation Excellence, Batterii, and a bunch of great healthcare thinkers including me.
Last week I told you about what we were trying to solve. This week I aim to tell you how.
I need your help to make this work. But before we ask you to get involved, let’s talk more about how we can solve this problem – together.
How do we solve the problem?
The American healthcare system is not so much broken as made up of working parts not working together.
The modelH team believes the ecosystem can be fixed! The answer lies in aligning the business model, so all stakeholders share an understanding of “value” across the themes of consumption, delivery, and financing. Our definition of value is based on that of Michael Porter, put forth in his paper entitled What is Value in Health Care?. Value in healthcare is measured as the patient health outcome achieved per healthcare dollar spent. A better healthcare business model must then result in:
Improved consumer experience yielding an informed decision maker aligned to their risk and reward,
Increased access to necessary care through an engaged delivery system, and
Reduced aggregate cost of care, with a market-driven, balanced incentive and reward model.
Our goal of Health Model Innovation is lofty, but achievable. We believe modelH will result in a practical guide to fixing the healthcare system that all stakeholders can use to create better aligned and market-sustaining business models.
But our goal is too big and too important to try and solve alone. This cannot be done without the actual stakeholders co-creating the solution together, outside of an over-focus on any particular theme, or an over-influence from any stakeholder group.
Phase 1 is to agree on the framework and tenants of a healthcare business model canvas. This will create a structured means for business model generation, similar to the one developed by Alexander Osterwalder and team, but designed to work in the American healthcare system.
Phase 2 will use the healthcare business model generator to develop and evaluate innovative market models and business ideas with the hope that some party within the ecosystem, or even outside of it, takes them to market.
Phase 3 will take our findings and publish them in a visual playbook for all healthcare innovators to use.
Stay tuned – next week we will discuss how to build a business model canvas for the American healthcare system.
Any healthcare company that builds products or talks with customers ought to have an “Innovation Center”. The idea is to create a physical facility that is part consumer lab, part living laboratory, and part workplace- aimed at designing and delivering the healthcare models of the future. It will be an environment where all organizational and community stakeholders can experience your company’s view of the future of healthcare and be inspired to help create it. An Innovation Center can incorporate the brand promise within a physical setting. An Innovation Center shows true commitment to practice innovation in healthcare. It is time for all healthcare companies embrace the future the way the Mayo Clinic has done for years.
To get started on what I am about to talk about, watch this virtual walk-through of the Mayo Clinic Center for Innovation.
What is an Innovation Center and Why Would You Need One?
The main objectives for an Innovation Center are:
1. Designing
2. Prototyping
3. Collaborating
4. Simulating
5. Validating
6. Envisioning
Lets discus them in some detail.
1. Designing.
Job # 1 of an Innovation Center should be to create (and improve upon) intentional experiences for your customers. You cannot have a good experience without good design. The Customer lab can serve as the place to visualize and practice Design Thinking. Wikipedia defines Design Thinking as “a style of thinking [designed with] the ability to combine empathy for the context of a problem, creativity in the generation of insights and solutions, and rationality to analyze and fit solutions to the context. “
An Innovation Center lets you teach the process and the methods of Design Thinking. These are the tools and techniques that great designers use to generate ideas and solve problems. Your aim should be to create an employee base trained in the arts of creative problem-solving.
Source: Design Thinking for Developing Innovative Communication Strategies By Don Bulmer
2. Prototyping.
Job # 2 of an Innovation Center should be to create faster paths to market for new products and models. One such method to do this is referred to as rapid prototyping and uses the discipline of Minimum Viable Product (MVP). MVP enables designers to validate assumptions about their “product” in two important aspects: its value and the demand for it.
By definition, MVP is the version of a product that gets built through one cycle of a build, measure, and learn loop – as fast as possible. Once the MVP is confirmed (keep in mind it may take a few iterations), other lean methodologies can be employed to build upon it. An Innovation Center allows this rapid prototyping to occur outside the traction of the legacy product and technology build systems at your company. MVP delivered through an Innovation Center enables product developers, system designers, and business analysts to determine whether people want what they are building – in a manner that gauges acceptance and demand – yet preserves capital and time for your company.
3. Collaborating.
Job # 3 of an Innovation Center should be to create a physical place designed to facilitate adult learning and team collaboration. As discussed in the book Where Good Ideas Come From: The Natural History of Innovation, big ideas are a series of smaller ideas coming together to form something that is meaningful to the market. The Innovation Center should be a co-laboratory that brings multi-disciplinary thinkers together on a common problem. Think of it as a modern version of a Library, except you are allowed to talk, experiment, and interact on topics of importance to your customers and your company.
You cannot ask people to collaborate on work if there has been no historical support for collaboration at your company – they simply just do not know how. They remember when they were kids but were programmed out of that model through a progression of educational settings and work scenarios where individual work product was the mode of operation. Asking people to change their work models without giving a realistic means to do so is merely rhetoric. An Innovation Center is designed to force interaction between co-workers. When combined with modern adult learning techniques like teaching collaboration, an Innovation Center can be the breakthrough that your company needs to re-educate its employees on how to work together.
4. Simulating.
Job # 4 of an Innovation Center should be to create a place to simulate customer interactions. Simulation is another great tool for adult education. While classroom learning and computer-based training still have their (small) place in the arsenal of training tools, nothing substitutes simulating a real life scenario to embed the training into the mind, and actions, of the trainee.
If your current training facilities do not invoke/inspire interest and a spirit of learning about how the customer feels in response to your customer-facing interactions – consider extending the facilities into an Innovation Center. Use the space as a simulation center to teach how to deliver the best results to a member and video it to review in private.
I had the opportunity to a take tour of the CAMLS — Center For Advanced Medical Learning And Simulation in Tampa, FL. I was highly impressed with this innovation facility and what it will accomplish for the future of medicine and healthcare. You can see some images from my time there in this short video.
5. Validating.
Job # 5 of an Innovation Center should be to create a place to have customers provide feedback on your company’s products and services. Part of the MVP concept mentioned above requires feedback. Healthcare is not like software – it is harder to have Beta users and not create tenuous or even dangerous situations. Proper validation through customer feedback is essential to great product design.
An Innovation Center as a customer lab allows this to happen with the control and confines of your company and reduces the need to pay outside parties to accomplish this oft-repeated task. To be a great consumer company, your company should foster its ability to do firsthand consumer research.
6. Working.
Job # 6 of an Innovation Center should be to your workplace of the future. Unless your company offers workspace like Google (and there are many of these, especially in Austin!) – consider using your space to transform your company’s cube farm into a dynamic workplace. Even if you are doing the best work on Earth, if you are sitting in a cube farm only lit by artificial overhead lighting, chances are you are miserable. Employers are obligated to make great environments for all people to work in, not just the executives. But convincing leaders about what this space should look like is hard to do.
An Innovation Center is supposed to look different – so make it your staging ground for your transforming workplace. Build it with the most modern yet simple furniture. Give it the technology bells and whistles that are fun to use and make people happier when using them. Keep it open and well lit. Provide couches and comfortable chairs to think in. Make it like everybody’s favorite thinking place – Starbuck’s. This will greatly enhance the employee experience and value proposition – and as a result, create a more productive workforce.
7. Envisioning.
Job #7 of an Innovation Center should be to create a fluid understanding of what the future of healthcare might look like. According to Microsoft, their “Microsoft Innovation Centers (MICs ) are state of the art technology facilities for collaboration on innovative research, technology or software solutions, involving a combination of government, academic and industry participants.” Apparently there are now more than 100 Microsoft Innovation Centers worldwide. IBM has several IBM Innovation Centers as well. The concept used at Microsoft’s Innovation Center is “Behind this door lies the future – not a vision of what we want, but a vision of what will be.” Your company should adopt this philosophy as well.
Telling is greatly improved by showing. Teaching a man to fish is how the old adage goes – try putting the pole in his hand near the water, and you are off to the races. Showing removes the need for employees to try and interpret what your leaders are envisioning. Instead, it evokes people to quickly debate on what they see or come up with ideas on how best to implement them. This should be a focus for your company.
Justifying the Cost
In Summary, an Innovation Center can be easily justified as both a capital expenditure and a resource development tool. To compete in a consumer economy, a company needs the capacity to think, react, and dream at the speed of the customer. The natural functioning of business units is contrary to this need. A customer lab opens up the ability for consumer thinking for the whole company, without jeopardizing the current operations.
So the question is not, how can an insurance plan justify an innovation center on an ongoing basis? – but how can they not if they want to become great consumer healthcare companies?
But a word of caution on this idea – companies and the people that work for them change – what is needed today will be old hat tomorrow. If you are going to build your own innovation center – don’t pour it in concrete. Meaning, save room for new ideas and build it modularly so sections that are no longer relevant can be removed.
Hello to all. I am working on a new project I am calling modelH. This project is a dynamic collaboration between me, Innovation Excellence, Batterii, and a bunch of great healthcare thinkers.
Our goal is to create a business model canvas specifically designed to generate and evaluate healthcare business models that can create positive consumption experiences, improve care delivery, and align and control costs. We then want to use our framework to co-create and test some innovative healthcare business models. The results will be compiled in a book to be released in 2014.
modelH – Health Model Co-Creation Forum
What is the problem we are trying to solve?
The American healthcare “ecosystem” in its basic form operates along 3 themes: care consumption, care delivery, and care financing. These domains are interdependent points of interaction along a value chain of healthcare. To impact one point, you really impact them all. Make no mistake – healthcare is a business! The problem is that very few people create business models that are considerate of all three points of view – and certainly no one has come up with a framework to make this easier.
Also, across the value chain of healthcare, there are four key stakeholders: patients, providers, payers, and purveyors. To put it in simple terms, the party who consumes the product of healthcare (the “patient”) is usually not the one who pays for it, or at least not most of it. The party that pays for it (the “payer”) is best served when it is not used, and is therefore motivated to push for less of it. Furthermore, the parties that deliver it (the “provider”), and the parties that support its delivery (the “purveyor”), are not aligned to place realistic boundaries on its cost, thus forcing the system into bankruptcy. Due to its divided nature, the ecosystem is overrun with inefficiencies and creates dis-incentives across themes and between stakeholders so that each maximizes their own value, often at the expense of the others.
But the system is not so much broken as made up of working parts not working together. Our diagnosis of the problem is a misalignment of the ecosystem’s building blocks. Our prescription is to reset these building blocks into a better working order. The outcome will be a healthy and aligned ecosystem that is both market-driven and cost conscious.
There is no better time to try and fix the healthcare system than amidst the current environment of reform. The team behind the modelH CoCreation Forum feels that a collaborative and systematic approach is the only means to overcome the interconnectivity barriers that exist to get past where others have failed. We have the means to accomplish this collaboration though Batterii’s CoCreation® Platform. We have the right approach for how to systemically validate a healthcare-specific business model through Kevin Riley’s Business Model Method for Collaborative Healthcare Innovation. And through Innovation Excellence and our own networks, we have access to a community of radical innovators with representation across all key stakeholders, as well as business model experts, ready to engage with us in this year-long project.
This is where you come in! But before we ask you to get involved, let’s talk more about how we can solve this problem – together.
Wednesday, March 13, 2013, 1:00 pm – 4:00 pm in Lake Mary, FL; 5th Annual Leadership Summit on Health Plan Innovation
Why not combine the best parts (contributions) of a start-up company with the necessary (working) parts of a legacy company to form something both new and necessary? There has been a lot of movement in the launching of healthcare vertical-specific accelerators that bring together legacy healthcare companies into partnerships with entrepreneurs and health start-ups. The quid pro quo is to create learning and business opportunities for the startups and affect the legacy company with agility and innovation. Some recent examples are DreamIt Ventures, Rock Health, Blueprint, Healthbox, New York Digital Health Accelerator and Startup Health to name a few. This panel is designed to inform and discuss a health plan or provider who might be looking at creating their own start-up accelerator.What You will Learn:
Wednesday, March 13, 2013, 1:00 pm – 4:00 pm in Lake Mary, FL; 5th Annual Leadership Summit on Health Plan Innovation
In the mid 2000’s, there was a disruptive movement in healthcare to build nurse practitioner run clinics within grocery store settings. Retail Health was disrupted again when insurance companies started building retail stores to attract consumers and sell their insurance products. Recently, partnerships between health plans and urgent care centers/retail clinics have spurred even more opportunity for plans to identify options for additional non-emergency services instead of expensive emergency room visits, when appropriate.In this workshop, learn how insurers are exploring this changing dynamic to not only control costs, but also attract new customers and coordinate member care. Key takeaways include:
Understanding the purpose and use of a retail storefront
Assessing the impact on the plan-member relationship
Understanding the payment model for a retail care clinic
Assessing the impact on the plan-provider relationship
Incorporating retail clinics and urgent care centers into accountable care and changing models
This workshop will be split into three distinct sections:
Part 1 – A brief history of retail health and its place in insurance
Part 2 – Case Studies from successful organizations
Part 3 – Open Discussion and Q&A on “The Future of Retail Stores and Clinics for Insurers”
Can a traditional, low risk corporate culture stimulate innovation to stay ahead of the curve? I believe they can. If culture eats strategy for breakfast, innovation has to be part of the digestif at the very least.
But how can health insurers innovate and become more flexible in a heavily regulated market? They need to develop an organizational culture that prioritizes innovation and ties it to the organization’s strategic direction.
Creating a Culture of Innovation for Health Plans
The intent of innovation within an organization is to transform the core models and marketplaces (incremental innovation) as well as disrupt the core model (disruptive innovation).
You can see an extended version of the talk I will be giving in the Slideshare below.
PANEL DISCUSSION: Power to the Patient: Technology and Networks that Support Consumerism
Tuesday, February 26, 2013 at 1:30 – 2:45 in Arlington, VA 22201; 6th Annual Consumer-Directed Healthcare Forum
Consumer-directed healthcare at its best empowers consumers-providing information about price, quality and treatment options; offering network options and incentives, including access to low cost self-care and retail healthcare; and providing tools, technology and interventions that help consumers make the best choices possible. Finally, you’ll learn the value of providing members access to critical pricing and quality information. Key takeaways include:
Learn about demand management programs that educate members on proper utilization of services.
Explore trends and development in the availability of price and quality data.
Gain insights on the evolution of retail healthcare and learn what’s coming next.
Retail health— from convenient care clinics in drugstores to the emerging insurance exchanges mandated by healthcare reform—has the potential to reshape the provider and payer markets. Health plans are taking a position by investing in technology, assisting members with price and quality transparency, and developing innovative care networks that broaden member access. This webinar in brief is about how consumer-directed healthcare empowers “shoppers” by providing them with information about price and treatment options so that they can pursue cost-saving opportunities. As a result, a growing number of managed care organizations are adding retail health stores and clinics within their networks. Consumers want convenience in their health care options, which is right in line with retail channels offer.
PANEL DISCUSSION: Power to the Patient: Technology and Networks that Support Consumerism
I will be giving a talk on Tuesday, February 26, 2013, at 1:30 – 2:45 in Arlington, VA at the 6th Annual Consumer-Directed Healthcare Forum.
Here we will discuss how consumer-directed healthcare (at its best) empowers consumer-providing information about price, quality and treatment options; offering network options and incentives, including access to low-cost self-care and retail healthcare; and providing tools, technology and interventions that help consumers make the best choices possible. I will provide insights on the evolution of retail healthcare and learn what’s coming next.
You can see an extended version of the talk I will be giving in the Slideshare below.
