Master thesis presentation of Maarten den Braber about the value of business model theory 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?

14. Strategy helps determine direction

15. Value-based strategy?

16. Value is defined by attributes
• Viewed from the customer perspective
• Spans the complete process
• Delivered through a sustainable process

17. Value-based strategy requires balance

18. Outside-in: customer preferences

19. Inside-out: organizational preferences

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?

26. Health care value chain

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

37. Remember this?

38. With the right tools

39. We can build this!

41. !
And now...