Slide Presentation
PPTTEST 3/16/00 11:46
e-business & Healthcare Strategic imperatives that will drive health care in a networked world and what to do about them Prepared for HIMSS 2000 April 12, 1999 Presented by: Rick Durig, Principal, Segment Leader IBM Healthcare Consulting and Services
HIMSS 2000
PPTTEST 3/16/00 11:46
"This is the Kitty Hawk era of electronic commerce."
Jeff Bezos CEO amazon.com HIMSS 2000
PPTTEST 3/16/00 11:46
HIMSS 2000
PPTTEST 3/16/00 11:46
Internet has the fastest adoption curve in history 120
Users (MM)
100 80
Years to reach 50MM users Radio = 38 TV = 13 Cable = 10 Internet = 5
60
Radio TV Cable
40
Internet
20
1922 1926 1930 1934 1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998
0
Source: Morgan Stanley Dean Witter Technology Research.
HIMSS 2000
Facing the Challenge. Is the Internet a disruptive technology in healthcare? A: It depends how it's used
PPTTEST 3/16/00 11:46
Clayton Christensen first developed the term disruptive technology in his best selling book, "The Innovator's Dilemma." The terms refers to the fact that some technologies, even leaps in technology, exist merely to sustain an existing technology making the products and services more convenient, better, faster and cheaper for current customers. Every once in a while, however, a disruptive technology comes along that everyone in the mainstream industry ignores because it typically does not meet the expectations of the current mass market.
EXAMPLE Disruptive Technology
Using the internet to negotiate physician services in real time
HIMSS 2000
Sustaining technology
Using the internet to enable an automated enrollment function
PPTTEST 3/16/00 11:46
How does the use of disruptive technologies change business models?
service, convenience, speed, care, access
Customers and target markets Who
Customer needs
Methods of sale standards, technology
Products and Services
How
HIMSS 2000
What
PPTTEST 3/16/00 11:46
How can e-business and the networked economy help with the imperatives and the emergence of the networked economy?
improve current business models and processes
HIMSS 2000
define a new business & economic model
PPTTEST 3/16/00 11:46
e-business strategies vary in scope, value, and enterprise-wide impact
Business Value Creation
Business Strategy
Create Business Strategy
Enhance Business Strategy
Option 3 Enable New Business Model
Option 2 Exploit Business Strategy
Option 1
Provide Operational Efficiency
Extend Range and Reach
Required "me too" strategies
e-business
HIMSS 2000
PPTTEST 3/16/00 11:46
Project Watershed
e-business and Key Drivers in Healthcare
HIMSS 2000
PPTTEST 3/16/00 11:46
There are major changes sweeping through both healthcare and IT
Success will depend on "gauging the waves"
IT
e-business Context
Health Care
HIMSS 2000
Scenario Analysis Watershed in Healthcare
How Big? How Fast? Impact? Consequences for Strategy?
PPTTEST 3/16/00 11:46
IBM has carried out a series of major studies to investigate the potential impact of e-business
Watershed Studies Objectives Create a vision for industry transformation Assess role of e-business as driver or enabler of change, and a source of future competitive advantage
Deliverables Changes in "ecosystem" structure, relationships Processes where e-business has high impact Key success factors: business models, infrastructure
HIMSS 2000
PPTTEST 3/16/00 11:46
Among the "e-critical" drivers identified in the overall study, two key dimensions were selected . . .
Scenario Development Process Industry Analysis Fundamental Drivers
Scenario Dimensions Knowledge Efficiency Clinical standards Information delivery
Consumerism
Trends/change dimensions
HIMSS 2000
Increased role for individuals in decision making
PPTTEST 3/16/00 11:46
These dimensions were used to create four different scenarios for healthcare in 2005 High Knowledge Efficiency
We'll Take Care of You
Consumer Driven Revolution
Low Consumerism
High Consumerism
Stagnation
Frustrated Consumer
Low Knowledge Efficiency
HIMSS 2000
PPTTEST 3/16/00 11:46
Separating the information from the product can generate new value
Information Value Net Information and knowledge flows disaggregated from physical Business intelligence Major role for Knowledge Management
Physical Value Net Material and process flows along the supply chain for suppliers Medical care delivery for providers/payers
HIMSS 2000
e Net u l a V tion a m r o f In
Net e u l a V l Physica
PPTTEST 3/16/00 11:46
So what?
Seven strategic imperatives for health care executives:
• The economic model for Healthcare will change. • Consolidation hasn't even begun - Grow or die. • Consumers will take back control of their health care dollar. • Cost concerns will begin to fade replaced by value. • Quality will mean something different i.e. customer relationship management. • Mass customization of health care services will occur. • Technology won't change the way health care is delivered. The consumer will!
HIMSS 2000
PPTTEST 3/16/00 11:46
New Rules of Business in Healthcare
Business Models for a Networked World
HIMSS 2000
PPTTEST 3/16/00 11:46
Does e-biz make sense for healthcare?
What is the value of e-business in my industry?
How can I achieve this value within my organization?
e-business creates value by connecting critical business systems directly to a company’s customers, suppliers and employees
How do I move from a traditional business model to e-business?
HIMSS 2000
PPTTEST 3/16/00 11:46
Business to consumer imperatives
• Attract customers as rapidly as possible • acquisition will never be as cheap again • Don’t have to show a profit now • Focus on currently ineffective business models/ unpleasant consumer experiences • Consumer centric, not product/ brand centric • Gather as much information on the consumer as possible • Move to one-to-one marketing/ selling • Build the relationship
HIMSS 2000
PPTTEST 3/16/00 11:46
Emerging e-business models in healthcare
Community Content
HIMSS 2000
Connectivity
Clinical Apps.
Commerce
PPTTEST 3/16/00 11:46
Health e-business models (C’s) Bus ines s Are a Conne ctivity
Comme rce
Conte nt
Communitie s
Clinica l Applica tions
• • • •
End Game P hys icia n Eye ba lls S ys te m Inte gra tion EDI EMR's
• • • •
Critica l ma s s Cus tome r a cquis itions Lowe r cos t Improved product informa tion
• • •
Re a ch Bra nd Minds ha re
• •
Re ve nue S o urc e s • Tra ns a ction fe e s • S ubs criptions • E-Comme rce re ve nue s
•
La rge ta rge t a udie nce High pa rticipation le ve ls High me mbe r usa ge
• • • • • • • • • • • • • •
Tra ns a ctions Lis ting fe e s S upplie r re ba te s Re fe rra l fe e s Adve rtis ing S pons ors hips Adve rtis ing S pons ors hip Lice ns e fe e s S ubs criptions Adve rtis ing S pons ors hips Da ta s a le s S ubs criptions
• • • •
Clinica l a cce pta nce P rovide r a ccepta nce P a yor a cce ptance P a tie nt a cce ptance
• • • •
S oftwa re s a le s Ha rdwa re sa le s Da ta s a le s Tra ns a ction fe e s
HIMSS 2000
• • •
• • • • • • • • • • • • • • • •
CS F's Da ta S e curity S ys te m inte gra tion Us e r a doption
Bra nd re cognition Appropria te product offe ring Fulfillme nt Da ta a ccuracy S e curity Firs t move r P e rs ona liza tion fe a ture s P a rtne rs hips Va lue -a dded s e rvice s Qua lity a dvice /informa tion Mode ra te d me s s a ging P a rtne rs hips Ma rke t pe ne tra tion Applica tion re le vance S ys te m compatibility S tre a mline d proce s se s
• • • • • • • • • • •
Me tric s Tra ns a ctions Cla im Cos ts Cla ims proce s s ing e fficie ncy S ys te ms Conve rs ion Unique vis itors Re gis te re d cus tomers a nd s uppliers Numbe r of trans a ctions S ize of tra ns a ctions P a yor re la tions hips Unique vis itors Time on s ite Clickthroughs Vis itor de mogra phics Unique vis itors Time on s ite (s) P a id s ubs cribers Me mber demogra phics
• • •
Ins ta lle d ba se Us a ge Ma rke t sha re
• • • • • •
PPTTEST 3/16/00 11:46
Examples of types of "internet" plays in healthcare These guys are changing the rules One He althBank.com Paye r/Pro v Adjudication
Conne ctivity Plays
Claim sN e t.com Pro vide r Data Proce ssing
Drugstore.com on-line pharm acy
Com m e rce Plays
Chane lPoint.com on-line insurance
Dr.Koop.com Consum e r conte nt
Conte nt Plays
Be tte rHe alth.co m Co nsum e r Conte nt/Info
iHe alth.co m W o m e n's he alth issue s
Com m unity Plays
MDAnde rse n.com Pre m ier Cance r Site
HIMSS 2000
PPTTEST 3/16/00 11:46
Value Metrics for e-business
TRADITIONAL MODEL • ROI • Return on Equity • Return on assets • Financial accounting ratios
HIMSS 2000
E-BIZ MODEL • Market capitalization increase • Productivity • Decreased cycle times • Access to New Markets • Improved customer relations • (intimacy, retention, profitability) • Market/customer share
PPTTEST 3/16/00 11:46
Traditional ROI does not work for e-business.
• There are no reliable benchmarks for similar businesses • E-biz too new to predict returns • First-mover advantages are hard to predict • Small changes in market/business strategy can have huge effect • E-Business timeframes extend beyond normal legacy business ROI • • • • • •
windows Traditional ROI works where business efficiency increases or new markets open, but not where new business models are created Calculating "Cannibalization" effect sinks any possible rate of return gains Cost of NOT transforming the business model is rarely valued Capital costs are too high for traditional firms trying to compete with startups Traditional firms have difficulty attaining the same P/E multiples as start-ups A client must define what results are most important (Mindshare? Brand? Customer relations?) and then target efforts to achieve that end-game
HIMSS 2000
PPTTEST 3/16/00 11:46
The e-Business Cycle
Making e -bus ine s s re al:
Transform
core business processes
Solutions
Consulting
Build
Leverage
e-business applications
knowledge and information
Business Partners
Services
Run a scalable, available, safe infrastructure
HIMSS 2000
PPTTEST 3/16/00 11:46
Implications: Healthcare Participants/Stakeholder
• Understand your customers' value chain • Make strategic decisions about how you enable processes that enhance your customers value chain
• Stop enabling old processes and start thinking about a new • business model for both you and your customers • Act quickly and decisively but be prepared to change course • without notice • Focus on scenario planning not strategy • The bricks and mortar model won't last in its current form. Understand how knowledge can be valued and distributed
HIMSS 2000
PPTTEST 3/16/00 11:46
THANK YOU VERY MUCH FOR YOUR TIME AND ATTENTION
QUESTIONS AND DISCUSSION
HIMSS 2000
e-business & Healthcare Strategic imperatives that will drive health care in a networked world and what to do about them Prepared for HIMSS 2000 April 12, 1999 Presented by: Rick Durig, Principal, Segment Leader IBM Healthcare Consulting and Services
HIMSS 2000
PPTTEST 3/16/00 11:46
"This is the Kitty Hawk era of electronic commerce."
Jeff Bezos CEO amazon.com HIMSS 2000
PPTTEST 3/16/00 11:46
HIMSS 2000
PPTTEST 3/16/00 11:46
Internet has the fastest adoption curve in history 120
Users (MM)
100 80
Years to reach 50MM users Radio = 38 TV = 13 Cable = 10 Internet = 5
60
Radio TV Cable
40
Internet
20
1922 1926 1930 1934 1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998
0
Source: Morgan Stanley Dean Witter Technology Research.
HIMSS 2000
Facing the Challenge. Is the Internet a disruptive technology in healthcare? A: It depends how it's used
PPTTEST 3/16/00 11:46
Clayton Christensen first developed the term disruptive technology in his best selling book, "The Innovator's Dilemma." The terms refers to the fact that some technologies, even leaps in technology, exist merely to sustain an existing technology making the products and services more convenient, better, faster and cheaper for current customers. Every once in a while, however, a disruptive technology comes along that everyone in the mainstream industry ignores because it typically does not meet the expectations of the current mass market.
EXAMPLE Disruptive Technology
Using the internet to negotiate physician services in real time
HIMSS 2000
Sustaining technology
Using the internet to enable an automated enrollment function
PPTTEST 3/16/00 11:46
How does the use of disruptive technologies change business models?
service, convenience, speed, care, access
Customers and target markets Who
Customer needs
Methods of sale standards, technology
Products and Services
How
HIMSS 2000
What
PPTTEST 3/16/00 11:46
How can e-business and the networked economy help with the imperatives and the emergence of the networked economy?
improve current business models and processes
HIMSS 2000
define a new business & economic model
PPTTEST 3/16/00 11:46
e-business strategies vary in scope, value, and enterprise-wide impact
Business Value Creation
Business Strategy
Create Business Strategy
Enhance Business Strategy
Option 3 Enable New Business Model
Option 2 Exploit Business Strategy
Option 1
Provide Operational Efficiency
Extend Range and Reach
Required "me too" strategies
e-business
HIMSS 2000
PPTTEST 3/16/00 11:46
Project Watershed
e-business and Key Drivers in Healthcare
HIMSS 2000
PPTTEST 3/16/00 11:46
There are major changes sweeping through both healthcare and IT
Success will depend on "gauging the waves"
IT
e-business Context
Health Care
HIMSS 2000
Scenario Analysis Watershed in Healthcare
How Big? How Fast? Impact? Consequences for Strategy?
PPTTEST 3/16/00 11:46
IBM has carried out a series of major studies to investigate the potential impact of e-business
Watershed Studies Objectives Create a vision for industry transformation Assess role of e-business as driver or enabler of change, and a source of future competitive advantage
Deliverables Changes in "ecosystem" structure, relationships Processes where e-business has high impact Key success factors: business models, infrastructure
HIMSS 2000
PPTTEST 3/16/00 11:46
Among the "e-critical" drivers identified in the overall study, two key dimensions were selected . . .
Scenario Development Process Industry Analysis Fundamental Drivers
Scenario Dimensions Knowledge Efficiency Clinical standards Information delivery
Consumerism
Trends/change dimensions
HIMSS 2000
Increased role for individuals in decision making
PPTTEST 3/16/00 11:46
These dimensions were used to create four different scenarios for healthcare in 2005 High Knowledge Efficiency
We'll Take Care of You
Consumer Driven Revolution
Low Consumerism
High Consumerism
Stagnation
Frustrated Consumer
Low Knowledge Efficiency
HIMSS 2000
PPTTEST 3/16/00 11:46
Separating the information from the product can generate new value
Information Value Net Information and knowledge flows disaggregated from physical Business intelligence Major role for Knowledge Management
Physical Value Net Material and process flows along the supply chain for suppliers Medical care delivery for providers/payers
HIMSS 2000
e Net u l a V tion a m r o f In
Net e u l a V l Physica
PPTTEST 3/16/00 11:46
So what?
Seven strategic imperatives for health care executives:
• The economic model for Healthcare will change. • Consolidation hasn't even begun - Grow or die. • Consumers will take back control of their health care dollar. • Cost concerns will begin to fade replaced by value. • Quality will mean something different i.e. customer relationship management. • Mass customization of health care services will occur. • Technology won't change the way health care is delivered. The consumer will!
HIMSS 2000
PPTTEST 3/16/00 11:46
New Rules of Business in Healthcare
Business Models for a Networked World
HIMSS 2000
PPTTEST 3/16/00 11:46
Does e-biz make sense for healthcare?
What is the value of e-business in my industry?
How can I achieve this value within my organization?
e-business creates value by connecting critical business systems directly to a company’s customers, suppliers and employees
How do I move from a traditional business model to e-business?
HIMSS 2000
PPTTEST 3/16/00 11:46
Business to consumer imperatives
• Attract customers as rapidly as possible • acquisition will never be as cheap again • Don’t have to show a profit now • Focus on currently ineffective business models/ unpleasant consumer experiences • Consumer centric, not product/ brand centric • Gather as much information on the consumer as possible • Move to one-to-one marketing/ selling • Build the relationship
HIMSS 2000
PPTTEST 3/16/00 11:46
Emerging e-business models in healthcare
Community Content
HIMSS 2000
Connectivity
Clinical Apps.
Commerce
PPTTEST 3/16/00 11:46
Health e-business models (C’s) Bus ines s Are a Conne ctivity
Comme rce
Conte nt
Communitie s
Clinica l Applica tions
• • • •
End Game P hys icia n Eye ba lls S ys te m Inte gra tion EDI EMR's
• • • •
Critica l ma s s Cus tome r a cquis itions Lowe r cos t Improved product informa tion
• • •
Re a ch Bra nd Minds ha re
• •
Re ve nue S o urc e s • Tra ns a ction fe e s • S ubs criptions • E-Comme rce re ve nue s
•
La rge ta rge t a udie nce High pa rticipation le ve ls High me mbe r usa ge
• • • • • • • • • • • • • •
Tra ns a ctions Lis ting fe e s S upplie r re ba te s Re fe rra l fe e s Adve rtis ing S pons ors hips Adve rtis ing S pons ors hip Lice ns e fe e s S ubs criptions Adve rtis ing S pons ors hips Da ta s a le s S ubs criptions
• • • •
Clinica l a cce pta nce P rovide r a ccepta nce P a yor a cce ptance P a tie nt a cce ptance
• • • •
S oftwa re s a le s Ha rdwa re sa le s Da ta s a le s Tra ns a ction fe e s
HIMSS 2000
• • •
• • • • • • • • • • • • • • • •
CS F's Da ta S e curity S ys te m inte gra tion Us e r a doption
Bra nd re cognition Appropria te product offe ring Fulfillme nt Da ta a ccuracy S e curity Firs t move r P e rs ona liza tion fe a ture s P a rtne rs hips Va lue -a dded s e rvice s Qua lity a dvice /informa tion Mode ra te d me s s a ging P a rtne rs hips Ma rke t pe ne tra tion Applica tion re le vance S ys te m compatibility S tre a mline d proce s se s
• • • • • • • • • • •
Me tric s Tra ns a ctions Cla im Cos ts Cla ims proce s s ing e fficie ncy S ys te ms Conve rs ion Unique vis itors Re gis te re d cus tomers a nd s uppliers Numbe r of trans a ctions S ize of tra ns a ctions P a yor re la tions hips Unique vis itors Time on s ite Clickthroughs Vis itor de mogra phics Unique vis itors Time on s ite (s) P a id s ubs cribers Me mber demogra phics
• • •
Ins ta lle d ba se Us a ge Ma rke t sha re
• • • • • •
PPTTEST 3/16/00 11:46
Examples of types of "internet" plays in healthcare These guys are changing the rules One He althBank.com Paye r/Pro v Adjudication
Conne ctivity Plays
Claim sN e t.com Pro vide r Data Proce ssing
Drugstore.com on-line pharm acy
Com m e rce Plays
Chane lPoint.com on-line insurance
Dr.Koop.com Consum e r conte nt
Conte nt Plays
Be tte rHe alth.co m Co nsum e r Conte nt/Info
iHe alth.co m W o m e n's he alth issue s
Com m unity Plays
MDAnde rse n.com Pre m ier Cance r Site
HIMSS 2000
PPTTEST 3/16/00 11:46
Value Metrics for e-business
TRADITIONAL MODEL • ROI • Return on Equity • Return on assets • Financial accounting ratios
HIMSS 2000
E-BIZ MODEL • Market capitalization increase • Productivity • Decreased cycle times • Access to New Markets • Improved customer relations • (intimacy, retention, profitability) • Market/customer share
PPTTEST 3/16/00 11:46
Traditional ROI does not work for e-business.
• There are no reliable benchmarks for similar businesses • E-biz too new to predict returns • First-mover advantages are hard to predict • Small changes in market/business strategy can have huge effect • E-Business timeframes extend beyond normal legacy business ROI • • • • • •
windows Traditional ROI works where business efficiency increases or new markets open, but not where new business models are created Calculating "Cannibalization" effect sinks any possible rate of return gains Cost of NOT transforming the business model is rarely valued Capital costs are too high for traditional firms trying to compete with startups Traditional firms have difficulty attaining the same P/E multiples as start-ups A client must define what results are most important (Mindshare? Brand? Customer relations?) and then target efforts to achieve that end-game
HIMSS 2000
PPTTEST 3/16/00 11:46
The e-Business Cycle
Making e -bus ine s s re al:
Transform
core business processes
Solutions
Consulting
Build
Leverage
e-business applications
knowledge and information
Business Partners
Services
Run a scalable, available, safe infrastructure
HIMSS 2000
PPTTEST 3/16/00 11:46
Implications: Healthcare Participants/Stakeholder
• Understand your customers' value chain • Make strategic decisions about how you enable processes that enhance your customers value chain
• Stop enabling old processes and start thinking about a new • business model for both you and your customers • Act quickly and decisively but be prepared to change course • without notice • Focus on scenario planning not strategy • The bricks and mortar model won't last in its current form. Understand how knowledge can be valued and distributed
HIMSS 2000
PPTTEST 3/16/00 11:46
THANK YOU VERY MUCH FOR YOUR TIME AND ATTENTION
QUESTIONS AND DISCUSSION
HIMSS 2000
