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Rethinking the hospital
  The value of business models for hospitals
         Master thesis Maarten den Braber (m@mdbraber.com)
What is this presentation about?
                                    • Strategy
                                    • Hospitals
                                    • Value
                                    • Business model

                                            Business model

Customer!          Value!        Market!   Strategic!      Value!    Competitive!      Cost /!       Value !
preferences !   proposition!    segment!   position!       chain!     strategy!       revenue!       delivered !


                         value!                                                         value!
                                                        implementation!
                        creation!                                                   appropriation!
Question: what is important for you?
Running a hospital is a balancing act




             4
Demand-side
                             demographics
                          disease patterns
                       public expectations
Pressures are rising
                           Supply-side
                              knowledge
                              workforce

                                 Societal
                        financial pressures
                       internationalization
                               global 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
• 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?

                      What issues? 5 examples
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
Business model

Customer!          Value!        Market!   Strategic!      Value!    Competitive!      Cost /!       Value !
preferences !   proposition!    segment!   position!       chain!     strategy!       revenue!       delivered !


                         value!                                                         value!
                                                        implementation!
                        creation!                                                   appropriation!




                                    Business model: build strategy

                          • Comprehensive
                          • Coherent
                          • Structured
Value!       Market!   Strategic!   Value!   Competitive!    Cost /!
            proposition!   segment!   position!    chain!    strategy!     revenue!




               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?
!

    Current value proposition: different?
Value!       Market!   Strategic!   Value!   Competitive!    Cost /!
           proposition!   segment!   position!    chain!    strategy!     revenue!




               Market segment: define potential


• Who and how many?
• What defines your market?
 Geographic region, specific illnesses?

• What is your market potential?
 Market size, share, volume, growth, ...
Value!       Market!   Strategic!   Value!   Competitive!    Cost /!
proposition!   segment!   position!    chain!    strategy!     revenue!




  Strategic position: link with environment
• 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!       Market!   Strategic!   Value!   Competitive!    Cost /!
             proposition!   segment!   position!    chain!    strategy!     revenue!




               Value chain: exchanging value

• How to structure processes?
• Link value exchanges to the core functions
 Does the exchange add real value?

• Optimize the value chain
 Lean management,TQM, Six Sigma...
Value!       Market!   Strategic!   Value!   Competitive!    Cost /!
        proposition!   segment!   position!    chain!    strategy!     revenue!




            Competitive strategy: stay ahead
• What is your advantage?
• Tools and techniques already available
 PESTEL, SWOT, 5 forces, ...

• Non-profits need competitive strategy
 Just as for-profits organizations do

• Current: quality is medical-technical quality
 What other types of quality are possible?
Quality can be many different things
Value!       Market!   Strategic!   Value!   Competitive!    Cost /!
        proposition!   segment!   position!    chain!    strategy!     revenue!




         Cost structure / revenue potential
• Make your activities sustainable
• Cost and revenue mean more than accountability
 Investment needs, projections, variable/fixed costs, ...

• Balance your service portfolio
 Profit centers versus cost centers

• Tools: do not reinvent the wheel
 BCG 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!
Rethinking the Hospital - Value of business models for hospitals
!




And now...

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Rethinking the Hospital - Value of business models for hospitals

  • 1. Rethinking the hospital The value of business models for hospitals Master thesis Maarten den Braber (m@mdbraber.com)
  • 2. What is this presentation about? • Strategy • Hospitals • Value • Business model Business model Customer! Value! Market! Strategic! Value! Competitive! Cost /! Value ! preferences ! proposition! segment! position! chain! strategy! revenue! delivered ! value! value! implementation! creation! appropriation!
  • 3. Question: what is important for you?
  • 4. Running a hospital is a balancing act 4
  • 5. Demand-side demographics disease patterns public expectations Pressures are rising Supply-side knowledge workforce Societal financial pressures internationalization global R&D
  • 6. 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)
  • 7. Reactive behavior is not enough
  • 8. Field research: 11 interviews - 2 sessions
  • 9. • 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? What issues? 5 examples
  • 10. Current literature: boxed solutions • Darzi (2007) • MacKinnon (2002) • McKee & Healy (2002) • NVZ vereniging van ziekenhuizen (2000)
  • 11. Darzi as example: 6 boxed solutions
  • 12. But “one size does not fit all”
  • 13. How to build your specific hospital?
  • 16. Value is defined by attributes • Viewed from the customer perspective • Spans the complete process • Delivered through a sustainable process
  • 20. Models help solving complex problems
  • 21. Business model Customer! Value! Market! Strategic! Value! Competitive! Cost /! Value ! preferences ! proposition! segment! position! chain! strategy! revenue! delivered ! value! value! implementation! creation! appropriation! Business model: build strategy • Comprehensive • Coherent • Structured
  • 22. Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! 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?
  • 23. ! Current value proposition: different?
  • 24. Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Market segment: define potential • Who and how many? • What defines your market? Geographic region, specific illnesses? • What is your market potential? Market size, share, volume, growth, ...
  • 25. Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Strategic position: link with environment • 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?
  • 27. Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Value chain: exchanging value • How to structure processes? • Link value exchanges to the core functions Does the exchange add real value? • Optimize the value chain Lean management,TQM, Six Sigma...
  • 28. Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Competitive strategy: stay ahead • What is your advantage? • Tools and techniques already available PESTEL, SWOT, 5 forces, ... • Non-profits need competitive strategy Just as for-profits organizations do • Current: quality is medical-technical quality What other types of quality are possible?
  • 29. Quality can be many different things
  • 30. Value! Market! Strategic! Value! Competitive! Cost /! proposition! segment! position! chain! strategy! revenue! Cost structure / revenue potential • Make your activities sustainable • Cost and revenue mean more than accountability Investment needs, projections, variable/fixed costs, ... • Balance your service portfolio Profit centers versus cost centers • Tools: do not reinvent the wheel BCG matrix, GE matrix, ...
  • 31. Business model: strategy building tool Comprehensive. Coherent. Structured.
  • 32. Business model and the hospital • Does it fit? (suitability) • Will it work? (feasibility) • Will it be used? (acceptability)
  • 33. 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
  • 34. 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
  • 35. 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
  • 36. 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
  • 38. With the right tools
  • 39. We can build this!