Understanding Your Healthcare Customers with modelH (1 of 8)
As part of our 10-year revisit of modelH, we are examining each of the building blocks, one by one, to determine how they affect your healthcare business model and the tricks of the trade for implementing them.
Today, we are diving deep into the crucial aspect of understanding the Customer in the healthcare industry.
Our premise is simple, but if it were well understood and consistently executed, fewer healthcare companies would go belly-up. Please don’t take my word for it; read this article from the expert Halle Tecco, 10 Healthcare Startup Cautionary Tales (That Aren’t Theranos).
Let’s reiterate our simple yet powerful premise, which should guide all our work. Understanding our customers is the key to our success.
- If you know your customers,
- you can get them what they want
- and delight them in the process!
- (repeat step 1 to see how things have changed)
In modelH, we break customers down into three categories:
- Users are the customers that a business model serves.
- Buyers are the customers a business model sells to & may also be Users.
- Intermediaries affect how a Value Proposition is seen and paid for by the Buyer.
Understanding Customers (the modelH holy trinity)
Why do we focus first and so much on Customers in modelH? Because you, your business model Users, Buyers, and Intermediaries (who influence both) are unique individuals. Among these four, your (and your employees) opinion is the least important, as it shapes our understanding of the customer.
You
As Steve Blank aptly put it, your office lacks market facts — it’s merely a place where you conceptualize what your customers might want, outlined on your modelH Business Model Canvas. To truly understand what your customers need and want in the context of your business idea, you must design ‘experiments’ to extract this information from them willingly. This crucial stage, known as Customer Discovery in the modelH method, is where we learn from our customers and apply it to our business model to validate our assumptions or seek a better alternative (a pivot). The importance of this process cannot be overstated, and we will delve into pivots in the future.
Companies that base their decisions on what their employees think rather than what is proven through customer validation often grapple with challenges that can lead to their downfall. Relying on consultants to interpret your customers’ preferences is even more perilous. Only the Users, Buyers, and Intermediaries genuinely understand what they like and dislike. If you heed the advice of someone who claims to be an ‘expert’ but has yet to spend time in the field with any or all of these individuals, you are venturing into risky territory. The risks of not understanding your customers’ needs cannot be overstated.
Using buzzwords like VBC, AI, and customer engagement is a cop-out. Your customers are the ones who can honestly tell you what they want. Don’t let others dictate what your customers or the market needs. Take the initiative to conduct your research. Let’s dedicate some time to learning how to do this effectively.
Your Users
You are not your Users. For example, suppose you work at a healthtech company. In that case, you’re more technologically sophisticated than your customers, but you also have, at best, a vague understanding of how they use your product. Your closeness to the software may also make you overlook experience problems that are incredibly obvious to someone using it for the first time.
This disparity between developers and end-users is even more pronounced in healthcare software development. Unless you’ve experienced the same condition as your patient, it can be challenging to understand their perspective truly. Moreover, as a well-adjusted adult, you may have inherent biases that hinder your ability to understand the customer’s social determinants of health. Nurses grasp this concept very well, but it can be less than clear to developers. This highlights the unique challenges in healthcare software development and the need for a more nuanced understanding of the end-user’s needs. By the way, healthcare solutions come with some form of software. It is a digital health world now.
The standard cliché is a developer laboring over advanced customization options while the User is stumped trying to figure out the login page. This story will make you laugh. I am unsure how true it is — but it gets my point across.
And AI can make this worse. Digital health technologies are one of the best ways to bridge the gap between a limited pool of healthcare professionals and a growing sicker population worldwide. AI can usper chartge this. However, addressing significant challenges and barriers to equitable AI implementation is crucial, especially concerning infrastructure limitations and algorithmic bias. Newer techniques and global collaborative efforts have the potential to overcome these barriers and allow disruptive and transformative digital health tools to flourish. That is beyond the scope of our conversation today, but good food for thought for another post.
Your Buyers
You aren’t your Buyer, either.
Most salespeople begin their pitch by extolling the virtues of their product. I suggest that your Buyers do not care what your product does well, what the features are, or whether fancy AI is included. They only care about how well your product solves their problems better than the competitor. As we call for in modelH, solving for the Buyer and User jobs to be done means identifying the specific tasks or challenges your product helps them overcome and then tailoring your product to address these needs. For instance, if your product is a care management tool, the ‘jobs to be done’ could be managing intake, competing outreach assessments, tracking progress to care outcomes, and facilitating care team collaboration. By focusing on these “jobs to be done (JTBD),” we can get right to the heart of our goal of Product/Market Fit (more on the JTBD in a later post).
In B2C business models, the Buyer and User roles can sometimes overlap, such as in a small Doctor’s office. However, even in these cases, the Primary Care Physician will often purchase a system that she expects her staff to use on her behalf. This distinction between the Buyer and User roles is a key factor to consider in business model development, product roadmap, and GTM strategies.
In B2B sales, the Buyer is often different from the end User, adding a layer of complexity to the sales process. The final decision maker is typically a few levels above the User, someone who has transitioned to a managerial role and is responsible for budget allocation. While the Buyer values the User’s feedback, their primary concern is the overall return on investment (ROI) rather than the user interface (UI) details. This fact underscores the importance of understanding each individual’s JTBD to achieve Product/Market Fit.
Your Intermediaries
And, as you guessed, you are not your Intermediary, either. What exactly is an intermediary in healthcare? First, we must understand that healthcare is a multi-sided market because it involves several interdependent groups interacting through a “platform” to receive value. Here is how it breaks down.
The Players
- Patients: Consumers seek medical services, preventative care, prescription drugs, and durable medical equipment.
- Providers: Doctors, specialists, hospitals, and clinics delivering care services to the Patients.
- Payers: Insurance companies, employers, or government programs that finance all or part of the care.
- Purveyors: Pharmaceutical companies, device manufacturers, and data analytics firms provide the “goods” that are part of the care services.
* Authors note: yes, Pureveyors is an onerous word for what amounts to medtech and pharma, but I love alliteration!
The Platform
This platform can be physical (like a hospital connecting patients and doctors) or digital (like a telehealth app connecting patients with remote providers). The platform facilitates interactions and creates value for each side.
Value for Each Side
- Patients: Find convenient access to qualified providers, manage appointments and prescriptions, get access to discounted drugs and equipment, and potentially benefit from cost-saving comparisons.
- Providers: Gain a more comprehensive patient pool, streamline administrative tasks through the platform, and receive insurance reimbursements.
- Payers: Manage costs by ensuring efficient service delivery and negotiating better rates with providers.
- Purveyors: Pharmaceutical companies and medical device manufacturers can perform longitudinal studies on tailored populations to create more effective and cost-efficient drugs and devices.
The Interdependence
The success of each group relies on the others. Patients need providers and payers to access care, providers need patients and payers for revenue, and payers need patients and providers to deliver on their promises to policyholders. Pharmaceutical and medical device companies rely on Providers to place their goods and Payers to subsidize their costs. This complex web of interactions makes healthcare a prime example of a multi-sided market.
Now, back to Intermediaries.
Not all intermediaries are bad. They usually only exist if the business model has flaws or constraints placed on it — such as healthcare does. No one wants to pay more or spend more time than they have to, yet many healthcare business models leave the Buyer and User utterly confused, the Value Proposition unrealized, and the JTBD (Jobs to be Done, the tasks or problems a product or service is designed to address) incomplete.
Most successful business models started as some type of Intermediary. For example, health insurance companies began as intermediaries between patients and providers, managing the financial aspects of healthcare. Those that are successful now dispute their intermediary origins. The problem lies when the Intermediary becomes locked into a static model and works to prevent better models from surfacing. In healthcare, this has led to runaway costs at 18.8% of the GDP.
However, healthcare is complex, and most Buyers and Users have poor situational fluency. In this way, many great healthcare business models require a helping hand from an Intermediary to ensure a Value Proposition is understood. In these markets, Intermediaries bridge that gap and assist and improve the Customer Relationship (more on this in a later post). As such, they are not just beneficial but essential.
Furthermore, healthcare is extensive, containing distinct markets where only giant players can survive. This fact creates a natural resistance to change and usually yields profits for the company and a poor customer experience. In these markets, Intermediaries force the legacy players to act on behalf of the Customer Segment and are, as such, also essential.
Intermediaries in healthcare can take various forms. They can be data managers, claims payers, brokers, or consultants. For instance, a data manager might help a self-insured employer make sense of complex health data to inform their health plan decisions. The question of influence and outcomes can be best understood by first asking who benefits from the information.
If the Intermediary benefits before the User (consumer, patient, etc.) or Buyer (health plan, risk holder, etc.), then the Intermediary is at odds with the Value Proposition. This is often the case whether the Intermediary is a data manager, claims payer, broker, or consultant. When the value to the Intermediary supersedes the benefit to their clients, the Intermediary either must adapt or be disrupted. It’s important to note that while intermediaries can bring value, they can also create inefficiencies and increase costs in the healthcare system.
Given all of this, how do you identify and activate Intermediaries when they are needed and beneficial and disintermediate them when they are not?
First, isolate the Intermediaries by defining a canvas specific to their business model and then re-insert them into yours based on their Key Activities, Value Proposition, and Customer Relationship. We believe this is a valid approach and can lead legacy businesses to rethink how they approach their intermediaries — and possibly even seek to disrupt them, opening up new possibilities in the healthcare industry.
In Summary
Understanding your healthcare customers, be they patients, members, citizens, soldiers, or whatever, is fundamental. Don’t just run around yelling VBC and AI without really taking the time to develop a model that drives value into your defined customer segment.
By knowing your User’s background, concerns, and preferences, you can tailor treatment tools and communication styles to yield better outcomes. You can consider factors like cultural background, language, and health literacy to ensure you are equitable in your approach. Just like any other service industry, healthcare Buyers expect a positive experience. Amazon (not Amazon Health, yet!) has set the standard for everyone else. When people feel valued, they are likelier to buy and recommend to others — bottom line. This level of intimate understanding of Buyers, Users, and Intermediaries will provide your business model with trust and rapport — so you can focus your marketing efforts and product offerings more effectively.
In short, understanding your patients in healthcare is about providing quality care while fostering trust and satisfaction (back to the good ole Triple Aim). Your work here will translate into better health outcomes, increased patient loyalty, and a stronger business model. And if you are in the healthcare business, you better be in it for better health outcomes. Please — don’t be a pharma bro.
What is Next?
Next, we will continue with our short series on Customer Segmentation in modelH. We will examine how to Perform Proper Customer Discovery. Finally, we will return to Intermediaries and examine how to activate them in the modelH Business Model Canvas.
Interested in what I am doing and want to learn more? You can read all about modelH business model innovation for healthcare on Medium.
To your health,
Kevin Riley
