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Revolutionary Innovation or Evolutionary Innovation?

Business Modeling for the Digital MedTech World

You know that to survive in the digital economy you need to rethink your business model to compete. From increased patient engagement and improved outcomes to operational efficiencies and reduced healthcare costs, the opportunity is enormous. And with recent projections estimating the digital health market to reach $233.3 billion by 2020, it is hard not to feel pressure to act quickly. You know what you need to do, right? So why haven’t you done it yet?

If you pay attention to the popular business media, the message is simple: To be competitive in the digital economy you need nothing less than revolutionary innovation that changes the face of your industry and turns you into a digital health superhero. But the truth is, true revolutionary innovation is hard. While many of the digital business success stories in the news today focus on those that radically changed their industry, examples such as Apple and Uber are really more of the exception than the rule.

No one argues that revolutionary (aka disruptive) innovation can be very valuable, but those opportunities are rare and difficult to execute effectively. You are likely to find many more evolutionary digital innovation opportunities. Those opportunities tend to be straightforward to execute and shorter-term in focus, yet still make important progress towards digital transformation. Let’s take a look at a client who has evolved its business model to capture value and create additional revenue streams in the digital economy.

Monetize Existing Capabilities 

Our healthcare client specializes in medical equipment including Computed Tomography (CT) machines used in hospitals and clinics around the world. In each case, customers are limited to the capabilities of the specific model of CT scanner they have and therefore have to refer patients to other physicians or hospitals for advanced treatment and care.

Connected technology gave the client a way to make a wider set of the capabilities of its CT equipment accessible to all of its customers. By hosting a variety of advanced product software in the cloud, users are able to access a larger variety of on-demand capabilities while the physical product remains unchanged. Their new business model allows hospitals and clinics to pay for advanced features when they need them, ultimately improving the customer’s ability to care for patients. Bottom line: The software was an incremental change to the product. That small change allowed users new ways to access device functionality and created new revenue opportunities for the OEM.

Maximize Operational Efficiency

One of the biggest benefits of digital technology is the ability to improve operations. If you have ever seen a busy hospital in action, it is obvious that they are extremely complex ecosystems with hundreds of clinical and business processes being carried out by hundreds of staff members. By standardizing procedures, breaking down processes, connecting, and analyzing them, the healthcare industry can realize unprecedented operational efficiencies.

To illustrate this point, let’s jump back to our healthcare client. Their connected offering allowed them to offer their customers additional services with a recurring revenue business model. Taking it one step further, our client determined they could improve their offering even more. Utilizing the same connected technology, we worked with the client to develop the ability to integrate the CT test results directly into Electronic Health Records (EHRs), creating a digital workflow and eliminating manual and time consuming processes. Again, this integration was an incremental improvement.  By exploring new ways of meeting present and future customer needs with smart product features, our healthcare client was able to strengthen their value proposition with their customers and give them a competitive advantage in the market. But they weren’t done just yet.

Big Data for Big Profit

As a company, you may be sitting on huge amounts of under-utilized data. Digital products drive additional value from the data they generate and the information you can create from it. But what type of value can you get from your data? How do you prevent the data from digital products from simply being more underutilized data?

Our healthcare client created a digital offering and evolved their business model further by creating additional value with a digital workflow. Throughout the entire evolution of their offering, our client had been collecting the usage data of their products. Data including how often and the type of use of their products provided the client with a holistic view of each customer allowing them to better segment their user base. Leveraging this data, our client targeted specific marketing opportunities to the related products or services that best fit that segment’s needs, ultimately improving sales within their existing customer base. The usage data was also analyzed to determine how the client can improve their products and predict areas of opportunity for new product development.

It’s clear that there is a shift occurring in healthcare and you are going to have to evolve to compete. Revolutionizing your industry with radically new business models is not a requirement to stay top of mind. In fact, it is not only highly risky strategy, but also difficult and expensive. Evolutionary innovation approaches provide you with the ability to build value over time by taking measured risks, just as in the case of our healthcare client. By taking the time to explore new ways of meeting present and future customer needs with smart product features and data, you will be able to create a sustainable competitive advantage in the digital world.

 

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