Wrapping up Customer Segments (the Who of your Healthcare Business Model) (8 of 8)

As we close out our final post in this 1st miniseries, we are taking a stroll down memory lane on modelH business model canvas and a victory lap as we complete the “Who” or Customer segment part of our revisit. We have two objectives today:

• A reminder of what the modelH process is and why it helps define healthcare and life science business models.
• A quick run-through of the modelH Customer Discovery process — the “Who” part of the business model.

What is modelH again?

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 a visual language designed to align business activities that produce value by illustrating potential trade-offs. Alexander Osterwalder initially proposed the nine “building blocks” of the business model design template that came to be called the Business Model Canvas in 2005, based on his PhD work on business model ontology, which Yves Pigneur supervised.

I fell in love with it back then and still have my original copy. As I was in the healthcare business, overseeing start-ups as the Chief Innovation Officer at a $12B health insurance company and creating a new company for them (GuideWell Health), it was a fantastic strategic framing tool for my teams and me to use in our work.

However, after experimentation with it, I found it could have been more useful than it was, given the multi-sided nature of the healthcare and life sciences industry.

What is the problem we are trying to solve?

In 2013, I funded an experiment to create a business model canvas to generate and evaluate healthcare business models that can create positive consumption experiences, improve care delivery, and align and control costs (The Triple Aim). We then want to use our framework to co-create and test innovative healthcare business models.

I worked with some fantastic and like-minded people around the globe (about 300 of us) to initiate the modelH CoCreation Forum. We began by agreeing on what defines value within the 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:

1. Increased access to necessary care through an engaged delivery system.
2. Reduced aggregate cost of care with a market-driven, balanced incentive and reward model.
3. Improved consumer experience yielding an informed decision maker aligned to their risk and reward.

What was the Outcome?

Our healthcare business model canvas, modelH, is designed to 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.

We evaluated the core Building Blocks of Osterwalder’s model and debated their nuances regarding healthcare and life science business models.

• Customer Segments: the customer groupings a business model serves.
• Value Propositions: the collection of products and services a business offers customers.
• Channels: how a company brings its value proposition (product) to its customer segments.
• Customer Relationships: the type of connection a company wants to create with customers.
• Key Activities: the most critical tasks in executing a company’s value proposition.
• Essential Resources: the internal assets required to create value propositions for customers.
• Key Partners: the external relationships needed so a company can focus on 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.

We also looked at and debated several new Building Blocks needed for healthcare and how they might be incorporated into the canvas. The additions we discussed are:

• Externalities: the external forces (regulations) imposed on healthcare business models.
• Jobs-to-be-Done: the customer’s JTBDs may not adhere to a company’s value proposition.
• Intermediaries: the influencers/intermediaries between the customer and the product.
• Experiences: due to multiple intermediaries, customer experience bears a greater look.
• Cost Drivers: for healthcare to exist, the cost drivers must be controlled.
• Payment Sources: in healthcare, customers are usually separated from payment sources.
• Platform: the healthcare ecosystem is interdependent and requires an infrastructure to work.

Some of these we kept, some we dropped, some we combined, and some we split out (like Customer Segment). The final result we agreed upon (right or wrong) is as follows:

1. Users are the customers that a business model serves.
2. Buyers are the customers a business model sells to & may also be the Users.
3. Intermediaries affect how a Value Proposition is seen and paid for by the Buyer.
4. Jobs-to-be-Done (JTBD) are high-level goals the customer is trying to accomplish.
5. Value Propositions are products & services offered to customers to solve their JTBD.
6. Key Behaviors are the activities required of the User to complete their JTBD.
7. Key Influencers affect the User’s understanding & ability to complete their JTBD.
8. Channels are the way a company brings its Value Proposition to market.
9. Customer Relationships are connections a company creates with their Buyers & Users.
10. Experience is how Buyers and Users perceive Channels and Customer Relationships.
11. Key Activities are the most important tasks required to create the Value Proposition.
12. Key Resources are the internal actors required to deliver the Value Proposition.
13. Key Partners are the external actors required to deliver the Value Proposition.
14. Costs are the most important financial drivers of a business model.
15. Revenue is the way a company makes money from its customers.
16. Informatics is the data and analytics needed to deliver and measure the Value Proposition.
17. Externalities are the external forces & regulations imposed upon a business model.

modelH Business Model Canvas

The image below shows these 17 blocks can be divided into four main functional areas.

For our revisit, we began with the WHO section (the most important part). We also discussed the JTBD in detail, as it bridges the Who and the What of any business model. Let’s review what we learned in each of the seven posts.

1. Understanding Customer Segments
2. Defining Healthcare Users & Buyers
3. Using Customer Segments & Personas
4. Understanding Jobs to be Done (JTBD)
5. Understanding Intermediaries
6. Understanding Key Behaviors
7. Understanding Key Influencers

modelH Business Model Canvas Placemat — The “WHO”

What is Next?

Well, first, I am going fishing. It is the time of year I head to Alaska with my son to fly fish for wild salmon. But when I get back, we will pick up with the “What” part of the modelH canvas and go into detail on Value Propositions, Experience, Channels, and Customer Relationships. We will also revisit the notion of JTBD in healthcare.

modelH Business Model Canvas Placemat — The “WHAT”

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