Healthcare got smart
Healthcare industries are in critical conditions, and many believe smart technology is the cure. How does this technological game changer disrupt business models, and what are their strengths and challenges for survival?
Healthcare industries across the world are in critical conditions. Their ability to provide fundamental services are challenged by urbanization, scarce labour resources and an aging population that is rapidly growing. As a response, smart technology is emerging as a disruptive and popular solution. It allows healthcare services to be delivered more efficiently and less labour intensive than classical healthcare. This increased demand for highly intelligent tools has sparked the creation of smart healthcare; a subset within the more commonly known field of e-health.
The market demand also sparks a strong incentive among company managers to optimise their use of smart technology. Despite this, managers struggle to implement a fitting business model because of two significant hurdles: Firstly, managers have no clear conceptualisation of smart business models that they can easily adopt and carry out. Secondly, little is known about the strengths, challenges and underlying motivations of the existing smart business models.
To contribute with some clarity to the fields of business models and smart healthcare, we devoted the master thesis to research how smart technology affects business models in the Norwegian healthcare industry. We identified the emerging smart business models and uncovered their strengths, challenges and underlying motivations:
- Companies with the Inverted Razor-Blade model offer reactive solutions to aid with light conditions among private individuals. Customers are attracted by free/low cost software (e.g. an app that enhances sound and blocks out noise in standard earphones). Later, the customer is exposed to a lock-in effect with a complementing high-cost hardware (e.g. headset that improves the hearing aid).
- The One-Time Payment model provides accessible and effective solutions for various conditions to private individuals. Companies who operate with this business model include providers of classical doctor’s appointments delivered through smart online video/payment solutions.
- The Long-term Subscription model offers practical solutions that simplify daily tasks for both private individuals and professional healthcare workers. Companies with this business models include producers of tailored dispensers that distribute medicine in the patient’s home.
- The final smart business model, Platform Communication, offers communication internally or between customer groups. Value is delivered strictly through software. For example in a two-sided platform that connects the city’s demand and supply of healthcare services.
We discovered that smart technology affects all elements of a business model: How value is created, captured and delivered. Regarding value creation, many companies offer prevention and monitoring of diseases - rather than classical treatment. Particularly interesting are solutions that rely on the patient to create value, because they empower the patient with knowledge and physical independence from healthcare facilities. Value delivery is also affected as technology creates endless communication opportunities (e.g. personal smartphones). Value capturing demands substantial R&D investments that are compensated for by few marginal costs in up-scaling. Finally, customer segments now include groups of private individuals, because they can be reached through personal mobile devices 24-7.
Our study of the healthcare industry reveals that the top three success criteria for creating and maintaining a business model founded on smart technology concern: 1) Tailoring value propositions to accessible segments, 2) Delivering value through secure software channels and 3) Employing a structure for revenue and costs that ensure long-term profits and reflect plans for upscaling.