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Why classic Business Modelling doesn't work for complex business domains - A new Business Modelling approach for Digital Health

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Abstract and Figures

Over the last 15 years, the term Business Model is increasingly discussed in scientific literature. Business Modelling frameworks are being applied to innovations and new products across different industries with the goal to help business owners and academics to understand as well as create value-capturing processes. The concept provides exceptional value for transformative and disruptive innovations. Digital Health, the convergence of digital innovation with health care, not only represents a highly innovative sector but also one with significant disruptive potential. At the same time the intricacies of the health sector such as country-specific regulations and third party payer insurance systems demand a specialized Business Modelling approach. This paper elaborates the limitations of current Business Modelling frameworks for Digital Health related applications, based on data gathered in workshops with 17 Digital Health startups. Originating from the identified limitations and insights a novel Digital Health specific Business Modelling approach is introduced.
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This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
1
Why$classic$Business$Modelling$doesn’t$work$for$
complex$business$domains$–$A$new$Business$
Modelling$approach$for$Digital$Health$
Jonas&Albert*&
imec-SMIT, Vrije Universiteit Brussel, Pleinlaan 9, 1050 Brussel,
Belgium.
E-mail: jonas.albert@imec.be
* Corresponding author
Thomas&Van&der&Auwermeulen&
imec-SMIT, Vrije Universiteit Brussel, Pleinlaan 9, 1050 Brussel,
Belgium.
E-mail: thomas.vanderauwermeulen@imec.be
Abstract: Over the last 15 years, the term Business Model is increasingly discussed
in scientific literature. Business Modelling frameworks are being applied to innovations
and new products across different industries with the goal to help business owners and
academics to understand as well as create value-capturing processes. The concept
provides exceptional value for transformative and disruptive innovations. Digital Health,
the convergence of digital innovation with health care, not only represents a highly
innovative sector but also one with significant disruptive potential. At the same time the
intricacies of the health sector such as country-specific regulations and third party payer
insurance systems demand a specialized Business Modelling approach. This paper
elaborates the limitations of current Business Modelling frameworks for Digital Health
related applications, based on data gathered in workshops with 17 Digital Health startups.
Originating from the identified limitations and insights a novel Digital Health specific
Business Modelling approach is introduced.
Keywords: Business Modelling; Business Model; Digital Health; Innovation
Management; Stakeholder Analysis; Health Care Innovation; Startups
1 Introduction
Sustainability of health care systems is threatened worldwide. An increasing demand in
health care solutions and progressing gentrification calls for innovation that improves the
delivery of health care as well as prevention and efficiency increase to maintain a global
supply with health-related services (Adams et al., 2006). Much hope is placed on various
innovations with an emphasis on novel health care products that rely on information
processing and the support of digital technology, thereby creating the domain of “Digital
Health” (Ahern, 2007). Digital Health can be defined as a service or a product which is
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
2
utilizing digital technology at its core and is aimed to reduce inefficiencies, improve
access, reduce costs, increase quality for health providers or any health-related
stakeholder and/or makes medicine more personalized for patients (FDA, 2017).
At the same time, the surge in emerging digital businesses has caused an uptake in the
use of Business Modelling (Osterwalder et al., 2010). The terms Business Model and
Business ‘Modelling’ have been increasingly discussed in scientific literature in the last
15 years, bringing more and more attention to their use and application (Wirtz et al.,
2016). Business Models are structured management tools, which are widely
acknowledged to have a substantial impact on success of a company, whereas the process
of constructing a Business Model and determining its validity is called Business
Modelling (Magretta, 2002). Concerning finding market applications and creating socio-
economical value of Digital Health innovations, Business Modelling seems to be the
answer to alleviate the complexity-issues of health care market environments. As
progress in Business Modelling has not caught up with the rapidly advancing
technological developments, novel strategic approaches to find these models are of the
utmost importance. The concrete reasons for this importance are that in order to succeed,
most Digital Health innovations need to identify the added value that drives them and
generates revenue, involve a wide range of business-enabling stakeholders, adapt its go-
to-market strategy to the market-specific regulations and bring all the necessary complex
information into a structured conceptvan Limburg et al., 2011).
2 Business Modelling: Its applications as a theoretical concept and
structured management tool
The first use of the term Business Model can be found in the elaborations of Bellman et
al. (1957), who describe the concept as method to educate senior executives on decision
making in business. A surge in the use of the concept is observable when linking it to the
advent of digital innovation in the business world at the end of the 1990s (Osterwalder et
al., 2005). The explosion of affordable information technology made it easy for
companies to work in “value webs”, which gave enormous opportunities for the creation
of inter firm networks (Lorenzoni and Lipparini, 1999; Amit and Zott, 2001). These value
webs try to create value around products, being complementary and lure additional
revenue to a business. Consider iTunes for the Apple iPod or Xerox and Adobe
(Chesbrough and Rosenbloom, 2002; Osterwalder et al., 2005).
There are definitions that emphasize value, such as Amit & Zott (2001) who state that a
Business Model depicts the content, structure and governance of transactions designed so
as to create value through the exploitation of business opportunities. Also, Chesbrough
and Rosenbloom (2002) similarly explain the reasoning that a Business Model is the
heuristic logic that connects technical potential with the realization of economic value”.
On the other hand, there are also authors whose definition of Business Modelling
focusses on the relation to a company's organization. Johnson et al. (2008) for instance
describe that a Business Model consists of four interlocking elements (customer value
proposition, profit formula, key resources, and key processes) that, taken together, create
and deliver value. One comprehensively inclusive definition is delivered by Al Debei and
Avison (2008) who defines a Business Model as an abstract representation, be it
conceptual, textual, and/graphical, of all core interrelated architectural, co-operation, and
financial arrangements designed and developed by an organization presently and in the
future, as well as all core products and/or services the organization offers, will offer,
based in these arrangements that are needed to achieve its strategic goals and objectives.
Since the first use of the term by Bellman et al. in 1957, the Business Model term has
been strongly used in academic literature. However, since the introduction of Alexander
Osterwalder’s Business Model Canvas (2008), the Business Model is increasingly used as
a management process tool, helping businesses to rationalize the way how the
“organization creates, delivers and captures value” (Osterwalder, 2010). The very popular
Business Model canvas is openly used by a wide variety of companies from different
industries to structure an existing or new business idea.
3 The importance of Business Modelling for Digital Health Innovations
There are many identified advantages of Digital Health innovations, including enhanced
means of communications, data sharing, quality enrichment of services and increased
effectivity of service delivery. These advantages have made Digital Health related
innovations the target of numerous accelerator programmes, government initiatives and
private investments (Eysenbach, 2008; Popescu, 2016). In order to support the realisation
and market-application of Digital Health innovations, Business Modelling has been
identified as a tool of great importance. It can be attributed with the development of an
innovation and its successful implementation on the market. The unique characteristic
concerning Digital Health innovations is that they do not only rely on a large amount of
stakeholders to function, but also on a flawless implementation within the market (van
Limburg et al., 2011; CB Aranda-Jam et al., 2012; PN Mechael, 2009; AbuKhousa et al.,
2012; Heerden et al., 2012)
Finding market applications and creating socio-economical value of Digital Health
innovations, Business Modelling provides an answer to alleviate the complexity-issues of
health care market environments. Digital Health innovations need to identify the added
value that drives them and generates revenue, involve a wide range of business-enabling
stakeholders, adapt its go-to-market strategy to the market-specific regulations and bring
necessary complex information into a structured concept that allow to make managerial
decisions based on said collected information (van Limburg et al., 2011). According to
Parente (2000), a Business Model identifies the market barriers digital firms must
overcome and provides perspective on opportunities for building an infrastructure that is
capable of delivering both a private and a public good.
The use of Business Modelling in the Digital Health domain
The notion of Business Modelling for digital health care applications is rather new.
Figure 1 shows the number of publications registered in Google Scholar for the following
search terms: Business Modelling” AND (“Digital Health”, “eHealth” OR mHealth”).
The increase in publications indicates this scholarly domain to be an emerging field,
which underlines the importance for Business Modelling for digital health solutions.
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
4
Figure 1 Growth in Business Modelling literature for Digital Health
. Van Limburg et al. (2011) state that Digital Health innovations usually think of a
Business Model post-development rather than integrating Business Modelling in the
development process.
According to Burns (2012), the business of health care differs from other businesses
radically on the level of value chains. In a traditional production model, a value chain
links raw materials, manufacturers, distributors and end consumers. In the health care
sector this is more complex as there can be multiple key sets of actors and several
mediators. Key actors can be distinguished into individuals and organizations that
purchase health care, provide health care and produce health care products (Burns, 2012).
Mediators are those firms or organizations that finance health care and those who
distribute them. Herzlinger (2006) has a similar view on the complexity of health care
innovation and attributes the complex and multi-stakeholder landscape to the difficulty of
innovating in health care. Other key difficulties related to innovation in the health care
industry are a unique funding mechanism, decoupled buyer/user decisions, a strong
regulatory framework, the fragmentation of stakeholders and different reimbursement
models (Hwang and Christensen, 2008; Herzlinger, 2006).
Therefore, the authors advocate for a more nuanced vision on Digital Health Business
Models, where the above specifics of the industry are being taken into account. This
standpoint is also building upon Van Limburg et al.’s (2011) findings that building a
Business Model for digital health should be an iterative process, integrated in the product
development phase.
To the best of our knowledge, no examples can be found on Business Modelling methods
dedicated to Digital Health innovation. This leaves entrepreneurs and intrapreneurs in the
health care sector with generic Business Model approaches. Today, we perceive
Osterwalder’s (2005) Business Model Canvas to be the most prevalent Business Model
approach applied. However frequently used by Digital Health entrepreneurs, it can be
reasoned that this model has significant limitations and does not take into account the
intricacies of the health sector such as country-specific regulation, third party payer
insurance systems, decoupled value creation and complex stakeholder cost- and revenue
sharing situations. Ridley’s Model H (2014) represents an attempt to modify
Osterwalder’s Business Model Canvas to a modular approach tailored to the (digital)
health industry. Although this approach made the method more domain-specific it is still
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using the same rationale of pre-made categories and strict classification of actors, which
we assume to be one of the main limitations of current Business Modelling approaches.
4 Research Questions
Based on the situation elaborated in the previous chapters, we claim that current Business
Modelling approaches are not well suited regarding their application on Digital Health
innovations. At the same time we have the ambition to provide an answer to the clear
need of the health sector concerning Business Modelling for digital innovation. We can
therefore formulate two research questions:
1.&What are the capital shortcomings of current popular Business Modelling
approaches when applied to innovations in Digital Health?
2.&How would a Business Modelling approach alleviating these weaknesses look
like?
5 The shortcomings of current Business Modelling concepts to digital health
and why they are not working.
Research Design
In order to answer research question (1) we collected insights from 17 digital health
startups through workshops and interviews. The workshops and interviews took place
from March 2015 until December 2016. The data collection was conducted within the
course of accelerator programs and European as well as nationally funded research
projects including: eHealth Accelerator (LifeTech Brussels), FIWARE FIC3 (European
Commission), Living Labs (iMinds-imec), imec.iStart (imec). The Digital Health startups
included: Minze Health, Yagram, Neveo, Zebra Technologies, Pillas, FiGlass, WIIM,
Alzhup, Talkitt, Gociety, Blindtouch, Oblumi Tapp, diaBEATes, Helpilepsy, Eskesso,
Osteotech and Arianna. Inclusion criteria for the startups were that they were developing
or selling a Digital Health innovation. Digital Health meaning that a service or a product,
which is utilizing digital technology at its core is aimed to reduce inefficiencies, improve
access, reduce costs, increase quality for health providers or any health-related
stakeholder and/or makes medicine more personalized for patients (FDA, 2017). In
addition, only these startups were considered where the interaction from our side was
consisting of dedicated Business Modelling activities such as dedicated Business Model
workshops, research projects with the goal of finding a sustainable Business Model for
the startup company itself and designated Business Model coaching. We deemed the
opinions of these startups especially valuable as we experienced these types of enterprises
to have high interest in and need for Business Modelling. To answer research question 2,
a novel approach was constructed based on the findings from the interactions with the
startups.
The outcome of the interviews and workshops were that models using the notion of a
customer and fixed categories, such as customer segments, customer channels and
partners are ill-suited to be used for constructing Business Models for Digital Health
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
6
innovations. The attempts to put single stakeholders in a specific pre-defined role are
severely limiting the Business Modelling options that a company could explore within the
field of Digital Health. These approaches also do not provide a framework that allows
structuring and categorizing all the complex information that these types of Businesses
have to consider in order to construct a favorable Business Model. We were able to group
all identified shortcomings of current Business Modelling approaches into six points.
Identified weaknesses of current Business Modelling approaches for Digital
Health innovation
1.&No solution for modelling decoupled value creation
The value proposition is at the core of current Business Modelling approaches. According
to all approaches known to us, the proposed value of a company has to be created for a
customer who is the using and paying entity at the same time. But what if the user is not
the payer? Or if the user’s needs are negelctable when it comes to monetization? These
problems were symptomatic for what we encountered regarding the most frequent
complaint form the companies we interacted with. Current Business Modelling
approaches do not allow for easy integration of indirect or split revenue and value flow.
In most cases of innovative products and services that have involvement of patients for
example, a health care system as a third-party payer is involved in the provision and
payment of health-related services. Therefore, companies face the fact that they would
provide an innovation to a patient (User), and having a government agency, such as a
health insurance or a national health agency (Payer), paying for it, and a medical
professional administering and supervising use of the innovation (Enabler) and using
some of the data it generates (User). In addition, there are also entities in most countries
that decide what is eligible for reimbursement and what is not (Enable Payment). To
speak of “customer segments” in such a complex environment is clearly not appropriate,
as there are a multitude of stakeholders of which many are potentially crucial for revenue
to flow towards a company providing a product or service, but not a single one is fitting
the description of a “customer”. These circumstances also lead to a dilemma concerning
finding a “need” that most Business Modelling approaches aim to satisfy. In the scenario
described above, a configuration of different incentives and prerequisites is needed: the
innovation must provide enough value (presumably cost-effective public health) to the
enabling government entity and/or the insurance in order to be reimbursed, it must create
extra value or at least no extra cost (monetary and non-monetary) in order for the medical
professional to use it, as well as provide added value to the patient or at least be usable
for him or her. As a result, a Business Model approach is needed that is flexible enough
to allow placement and evaluation of various roles, in order to combine them into a
configuration that allows revenue to flow.
2.&No consideration of the critical importance of users that do not directly create
value
The second major inconvenience companies face within current Business Modelling
approaches is that they were unable to categorize actors that are using their innovation
but are not directly involved in revenue-creation. Different types of stakeholders could
fulfill this role. Examples are general practitioners or specialist physicians that use data
from a Digital Health innovation but do not directly create revenue for the company
because for example insurance or governmental health systems reimburse the patient or
the company directly. In the majority of observed cases in our sample the company's
innovation provided some kind of data that a medical professional would have to interact
with, but none of the companies targeted the physician as a payer. Instead either the
patients were expected to pay the company directly or the company expected to be
reimbursed by a health insurance, either with the medical professional as an intermediary
or without. In some cases it was expected that the physician would have some added
value by interacting with the additional data and in others he would have to invest
resources, mainly extra time to look into the data. Current Business Model approaches do
not have a dedicated category for a role similar to the one the medical professional is
taking on in these cases, although they can be considered of equal importance as a
customer, due to their crucial position in the Business Model and perform a different role
compared to the role of a business-partner. Also the fact that a variety of stakeholders
could be in this intermediary position and the immense number of potential different
scenarios, defies the notion of creating a category or segment that aims to incorporate all
possible facets. In order to alleviate this shortcoming, a dedicated Business Modelling
approach would have to allow stakeholders to be assessed concerning their role and
importance independent of a fixed category and attributed with enough information in
order to customize their desired role inside a potential Business Model.
3.&No integration of country-specific health system regulations and practices
Health, especially in European countries, is heavily regulated. National Health Systems
regulate eligibility of interventions concerning reimbursement, set standards for devices
and services that are used in health care environments and in some cases own and directly
govern health institutions (Mossialos et al., 2010). Health sector regulations have impact
on Digital Health Business Modelling. The companies we worked with all faced the
similar problem regarding integrating regulatory barriers into Business Models: There is
no dedicated space for them inside the approaches they used. Depending on the country
and the respective health-related regulations, the companies experienced a multitude of
different circumstances, which had to be taken into account for when creating a Business
Model. An example would be the need to provide clinical data for health technology
assessment in the majority of European countries before a novel service would be eligible
for reimbursement. In this case a company faces a prerequisite for unlocking revenue that
has no dedicated space in the classical Business Modelling process. Another example is
the incorporation of the modus operandi of health professionals, especially when aiming
for implementation of an innovation in different countries. A primary care general
physician in Germany for example is paid to a large extent through capitation, meaning
that he receives a flat-fee per patient that is meant to cover a range of regularly occurring
standard diagnostics, making him likely to act differently with regards to decision making
compared to a physician who would be paid exclusively on a fee-for-service basis (Busse
et al., 2014).
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
8
4.&No consideration of incentives for stakeholders that are neither partner nor
customer
Taking up the example of a wearable that is intended to be used in a nursing home and
procures health-relevant information from the inhabitants, we can argue that a nursing
home has no immediate added value by the introduction of the innovation apart from
added marketing potential, possibly attracting new customers. The fact that most
European nursing homes are likely to be operating at full capacity could pose a negating
factor to this type of value propositions towards a nursing home in exchange for their
willingness to take on the extra effort to integrate the innovation in their daily operations.
In this case providing incentives towards the nursing home would be necessary in order
to deploy the innovation. Several of the startups we interacted with were faced with the
need to provide incentives to health providers in order to guarantee their cooperation. The
position of having to be incentivized in order to use an innovation and acting as a
customer channel at the same time is one example for unique or outright exotic
stakeholder roles in Business Models. Several companies expressed the desire to have an
approach that would allow anticipating and rationalizing the need for incentives for
selected stakeholders which is not present in current approaches.
5.&No integration of the decision-making processes concerning medical validation-
relevant Business Model implications
As mentioned in point 3, many countries demand clinical validation for new interventions
and diagnostics. A company developing a Digital Health innovation has to decide if their
innovation should be designed to replace an existing intervention, represent a completely
novel intervention or if it is at all targeted to be a medical innovation, medical device etc.
A Business Modelling approach should thereby provide decision support that yields
comparable results. Discussions regarding this decision were present in all encountered
startup and were mentioned to be of great concern as medical validation was considered
to be extremely costly. The one-dimensionality of the current approaches did not allow
for scenario-building and determination of likelihood of success, depending on which
modus of deployment is chosen.
6.&No integration of internal decision-making processes of stakeholders expected to
provide a contribution towards the Business Model
As demonstrated in the previous points, there are many different types of stakeholders
and heterogeneous stakeholder roles that are crucial to Business Models in Digital Health
that do not fall into the classical categories of partner, customer, or customer channel etc.
In order to determine their role and the likeliness of them being willing to fulfill said role
in a potential Business Model was deemed integral by every single company we
interacted with. Clarity regarding how these stakeholders make decisions and how
potential incentives for them would look like was prioritized by all encountered
companies. According to the startups, current approaches are exclusively focusing on
which partners to select and who to sell to, without taking into account the internal
decision-making process of potential payers or partners. Hence most companies found
themselves in a position where they were unable to anticipate the validity of the Business
Model they selected without entering into negotiations with a range of stakeholders.
5 Our Model
In order to answer research question (2), a Business Modelling approach that alleviates
the identified weaknesses, dedicated to Digital Health is needed which we would like to
propose in the following. One of the main features of this new approach is that it deviates
from the idea of having a traditional “customer”, reflecting the prevalence of decoupled
value-creation in the health-sector. In addition, it leaves room for adjustments depending
on the environment a Business Model is supposed to operate in, represented mainly by
how the health care-system in the respective target-market is organized. Therefore, the
approach intends to deliver a framework that enables thoroughly analyzing stakeholders
within a targeted market-environment without forcing them into pre-made categories and
roles. This enables the Business Modelling process to adapt stakeholder-roles for the final
Business Model and to work out complex relationships without missing crucial
interactions, preferences and opportunities. The output of the approach is intended to not
only be a functional Business Model, but also a complete stakeholder configuration with
defined interactions that enable the flow of revenue towards a company.
Our approach is heavily based on the concept of selecting and analyzing stakeholders.
Stakeholder theory has its origins in 1984. Freeman defined stakeholders as “any group
or individual who can affect or is affected by the achievement of the organization’s
objectives” (Freeman, 1984). Cleland (1986) introduced stakeholders and stakeholder
management by highlighting the importance of stakeholder identification, classification,
analysis, and management approach formulation. During the last decade, many authors
stated the importance of stakeholder management in projects (Crawford, 2005; Morris et
al., 2006; Winter et al., 2006). In our approach we will follow the generic definition of
stakeholder according to freeman. In addition, we also acknowledge that certain markets
or economical eco-systems can have stakeholders attributed to them, as for example the
health sector.
The Model is organized in a step-by-step fashion. It is tailored to work around an
innovative product or service, henceforth called “innovation”. The core of the approach is
comprised of the so-called stakeholder information-categories. These categories provide
the means of thoroughly researching each identified Stakeholder with regards to his
function, revenue structure, decision making, experienced changes through the
introduction of the innovation, willingness to pay and willingness to contribute. Each
category also features a set of core-questions. The information categories represent the
means to properly assess the role of a stakeholder in a potential Business Model as well
as what the prerequisites are for fulfilling this role. Each step is explained below:
Understand, Environment, Define Stakeholders, Investigate Stakeholders and Assemble.
Understand
The initial challenge is to thoroughly understand and preliminarily define what the core
of the innovation is that is intended to be brought to market. The key questions that are to
answer in this step are: What added value is the innovation intended to give? Who is the
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
10
target-population for the innovation to be used by? Who is anticipated to gain added
value from the Innovation? For this initial phase other more generic Business Model
Tools such as the Osterwalder Canvas (Osterwalder, 2007) can be utilized, including
literature on how to define a company's basic value proposition. Important to note is that
the approach distances itself from forcing a company to answer to a certain need
specifically, as it can lead to the oversight of generic desires of businesses and
individuals such as efficiency gains and increased income among the companies that we
interacted with.
Scope
After an initial understanding of the innovation has been reached and the added value has
been initially defined, the approach demands a scoping into suitable target markets,
which usually means picking target-countries. There are cases when a further sub-
segmentation (e.g. regional markets) makes sense. The scope of targeted segments has to
be determined for each new innovation separately. Scoping is crucial as, depending on
the way health care is organized in the respective target-market, Business Models may
face the need to be adjusted accordingly and stakeholders can be anticipated to operate
differently. It is also of importance to present a first assessment as to how the innovation
is envisioned to be deployed, in which environment (e.g. Hospital, Nursing Home,
Consumer device etc.). Criteria for choosing a country could be: Health-specific
regulations concerning the innovation, a similar health system compared to countries
where the innovation is already deployed among others.
Key questions to answer in this step are: In which environment is the innovation intended
to be deployed? In which country/countries is the innovation intended to be launched?
Environment
In this step, a systematic review of all potentially relevant stakeholders in the targeted
environment, consisting of market and country, is provided. This should include mainly
health-services and health-governance related stakeholders but also non-health
stakeholders if they are deemed crucial. In addition, there should be an overview
provided on how the provision of health care works in the targeted environment, as well
as which regulations/laws could impact potential Business Models. Key questions for this
step are: How is health (care) organized in the target environment? How does
reimbursements work? Which stakeholders in the target environment could be important
for the innovation? Which regulations/policies are likely to have an impact on the
deployment of the innovation?
Define Stakeholders
In order to prepare a shortlist of stakeholders for in-depth analysis, this step incorporates
narrowing down stakeholders introduced in the previous step. The knowledge gathered in
the “Environment”-segment is hereby used to define the stakeholders deemed necessary
for the innovation to be brought to market and to generate revenue. Key questions in
order to select the stakeholders are: Which stakeholders will have to be interacted with in
order to register the innovation or apply for eligibility for reimbursement? Which
stakeholders will use/be in contact with the innovation? Which stakeholders are critical
showstoppers for the innovation to be implemented? Which stakeholders’ cooperation is
anticipated to be needed in order for the innovation to work as intended?
Investigate Stakeholders
The investigation of the shortlisted stakeholders is the core-piece of the approach. As
shown in figure 2, each stakeholder selected in the previous step is analyzed regarding
function, revenue structure, decision-making, and situation with and without the
introduction to the innovation, willingness to pay and willingness to cooperate.
It is important to note that not necessarily all of the categories have to be filled out for
every stakeholder, as some might not make sense. For example, when analyzing a public
agency that determines which services are eligible for reimbursement, it is highly
unlikely that willingness to pay will play a role, if the organization is not the reimbursing
actor in the respective health system.
Analyzed Category
Key-Question
Function
What are general actions a stakeholder performs in the
target market?
What is the potential function in interaction with the
innovation?
Revenue Structure
How does stakeholder generates revenue?
What type of revenue does the stakeholder generate?
Decision Making
How autonomous is the stakeholder making business-
related decisions?
What are they based on?
What are specific decision-making procedures?
Situation without the
Innovation
What is the status quo in current operations for this
stakeholder?
Situation with Innovation
What changes for this stakeholder with the introduction of
the innovation?
Willingness to Pay
Under which circumstances is the stakeholder willing to
pay in general?
What part of the innovation is the Stakeholder willing to
pay for?
Willingness to Contribute
Under which circumstances is the stakeholder willing to
cooperate in general?
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
12
What are the prerequisites for the stakeholder to
contribute to the Business Model?
Figure 2 Investigate stakeholders according to indicator
Assemble
The final step of the approach consists of drawing the conclusions from the previously
gathered and structured information. Filling in the categories for every identified
stakeholder allows combining the results in a comprehensive stakeholder databank. This
step is the most variable in the approach, heavily dependent on the nature of the
innovation. The assembling of a Business Model from the stakeholder databank is based
around the idea that every stakeholder has certain prerequisites to fulfill an envisioned
role in the final Business Model. As it is assumed that revenue generation is the main
purpose of deploying the innovation, the assembling starts with stakeholders that have an
identified willingness to pay. It is then analyzed what the prerequisites for the identified
willingness to pay are. In our experience in Digital Health innovation, “unlocking”
willingness to pay usually involves contribution from other stakeholders, which then
leads to a cascade of dependencies of stakeholder cooperation. After all necessary
prerequisites for stakeholder contribution (non-monetary and monetary) are defined, an
informed decision can be made with regards to which willingness(es) to pay should be
exploited and which stakeholder configuration would be the most feasible. The same
goes for identified crucial non-monetary contributions, approached by identified
willingness to contribute und their prerequisites.
Key Questions to ask for this step are: Which stakeholders are possible revenue
generators? What are the prerequisites for these stakeholders to provide revenue for the
company deploying the innovation? Which stakeholders are contributing critical non-
revenue generating functions? What are the prerequisites for these stakeholders in order
to perform these functions? The result of answering the key-questions and assembling the
stakeholders is a tangible to-do list and a stakeholder configuration that is tailored to the
targeted environment for the innovation.
6 How our approach addresses the weaknesses of current Business Model
approaches
After describing the approach, we discuss how our Model alleviates the weaknesses
described in chapter 4.
1.&No solution for modelling decoupled value creation
By eliminating the notion of a customer and focusing on revenue streams it is relatively
simple to model decoupled value creation. Take a generic health service in a social health
insurance system for example: A health insurance pays for a service that a medical
professional applies and a patient consumes. In this example our model allows to define
the contribution and payment streams from every stakeholder in detail without coming
into the dilemma of labeling all of them as customers or different customer segments, as
every stakeholder's contribution is needed to generate revenue and enable consumption of
the service.
2.&No consideration of the critical importance of users that do not directly create
value
By maintaining broad inclusion criteria in the beginning of our approach and having
multiple filtering stages, the process of selecting stakeholders whose contribution is
necessary to a Business Model's success is structured and transparent. Arguments can be
made based on stakeholder-specific information in direct relation to the to-be-introduced
innovation, thereby taking into account all types of stakeholders that could be crucial for
a Business Model to work although not directly creating value.
3.&No integration of country-specific health system regulations and practices
The modular approach of our model allows for easy adaptation when an innovation is
planned to be deployed in another country. If planning to introduce an innovation into a
new market, each existing stakeholder involved in the original framework can be
compared to its counterpart in the new market environment and differences and
similarities can be systematically identified. This becomes especially important when the
same stakeholder either does not exist in the same form in the new target market or is not
able to fulfill the same role compared to the original market. In addition, our approach
features dedicated considerations regarding environment-specific legal regulation.
4.&No room for defining incentives for stakeholders that are neither partner nor
customer
By constructing the concept of “Willingness to Contribute” we enable the easy
integration of stakeholders into a Business Model that have to be incentivized to perform
a crucial task within the confines of Business Model.
5.&No integration of decision-making processes concerning medical validation
based Business Model implications
Including regulatory bodies as stakeholders enables our approach to rationalize which
prerequisites have to be met for which stakeholder in order to reach a sufficient level of
medical validation for the Business Model chosen. The approach also provides a
structured way to make the decision whether to go for medical validation or not, as for
certain stakeholders a prerequisite for cooperation might be medical validation.
6.&No integration of internal decision-making processes of stakeholders expected to
provide a contribution towards the Business Model
Our approach features the consideration of not only the decision making process for
every selected stakeholder but also encourages the user of the approach to define how the
stakeholder generates revenue, as well as to define what exactly changes with the
introduction of the innovation to the stakeholder, in order to determine whether the
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
14
stakeholder would be likely to decide favorable towards the contribution and what
incentive to choose.
7. Conclusion
Our research shows that there are certain shortcomings of current Business Modelling
approaches when they are used in the domain of Digital Health innovation. We also
demonstrated that there is demand for solid Business Modelling methodologies
supporting innovation-to-market in the health-sector, therefore creating the need for a
more appropriate Business Modelling methodology. The model we proposed alleviates
all identified shortcomings of current approaches. From our own experience of deploying
the approach via workshops with Digital Health startups we observed that it substantially
supports their efforts in finding viable Business Models and go-to-market strategies. The
latter is especially evident; as our approach enables companies to assess what action
specific to the chosen target-markets have to take to unlock revenue. The approach also
provides support for companies to better understand critical stakeholder behavior with
regards to how to negotiate with them and how to approach them regarding the provision
of incentives to fulfill a specific role. While the approach provides increased value
towards companies that do not feature a B2C-model featuring a singular user-payer
stakeholder, it also provides much needed flexibility for these types of companies
regarding exploration of different Business Modelling options. In addition, it has the
major benefit of providing a framework that allows for specific adaptations to an already
constructed Business Model, thereby enabling adjustments when introducing an
innovation to a new environment, most prominently represented by a country with a
different health care environment and regulations. More conventional Business
Modelling approaches would require a complete redo of a majority of the Business
Modelling activities in order to incorporate all changes for such an environment change.
The research presented in this paper as a whole is at an early stage. We tried to find a way
to rationalize a problem that we were facing frequently during our work with Digital
Health companies of all sizes: Current Business Modelling approaches are not
performing as well as they do in other domains. As a result, our Business Modelling
approach is intended to be the foundation for a new method addressing Business
Modelling in the Digital Health domain. As we keep on deploying our approach, we are
validating and improving it also with regards to more harmonization with literature on the
topic of stakeholders and stakeholder analysis.
One of the main limitations of our approach is the data gathering. The idea for the paper
and the approach had been steadily developed over a year of working intensively with a
wide range of Digital Health startups. The insights with regards to the new approach are
solely based on the qualitative interactions with a limited number of companies and
therefore not as meaningful as a full quantitative evaluation of the topic, although such an
evaluation could be easily based on the research performed in this paper. In addition, the
specificity concerning use of the approach in the Digital Health domain is currently an
obstacle towards using the framework in other contexts.
Regarding future research, the approach would benefit from further validation apart from
the projects that we already conducted with it. Incorporation in research projects is in
planning as well as further use in accelerator programs to determine the mid to long-term
effectiveness in supporting companies in finding their Business Models and
internationalizing themselves. Also further validation of the shortcomings of current
approaches that we identified with a quantitative evaluation on a larger scale would be
extremely valuable in the near future. In addition a follow-up assessment of the
applicability of the framework in research domains apart from Digital Health should be
undertaken in the near future.
This paper was presented at The ISPIM Innovation Forum, Toronto, Canada on 19-22 March 2017.
The publication is available to ISPIM members at www.ispim.org.
16
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18
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