Various stakeholders from the healthcare industry gathered in Singapore on April 20 and 21, 2018 at a workshop held on the ESSEC Asia-Pacific campus on the theme: « Patient centered digital health & health care products industries: opportunities in Asia Pacific ».
During the different talks, the following question often came up : How to develop a sustainable business model within the digital health sector? « Digital disruption can be fatal for some businesses, but it can be an opportunity, » said Prof. Jan Ondrus, associate professor and chair of networked business models at ESSEC Business School Asia-Pacific.
Here are the highlights of his speech.
From a horizontal business model to the digital platform model
« It’s not just about technology but about creating a business model, » Prof. Ondrus said, adding that it’s important for every company to deploy a sustainable strategy before launching a new product on the market, as attractive as it is.
The arrival of smartphone in our daily lives and the digital revolution in general had a considerable impact on the empowerment of consumers, he remained us. Initially, high-tech products were only affordable for companies, now they are more affordable for public. In less than ten years almost everyone has started using a smartphone.
Threats for companies have risen with the high tech revolution
It has been difficult for companies to adapt to this rapid evolution, and it still is. There has been a rise of threats for them, even for the big ones.
Today, the life expectancy of a big company is only fifteen years. Pressure to change is high.
Producer and consumer are at the same level
The business model of health tech companies can no longer be build on the tradition value chain : you start from from the producer to the consumer through the manufacturer, the distributor and then the retailer, Prof. Ondrus added.
A powerful digital triangular model has emerged : the platform business model. Here, the producer is directly connected to the consumer via a digital platform.
This model has been adopted by many young successful companies such as Uber, the world’s largest taxi company which owns no taxis, Airbnb (doesn’t own real estate) or Netflix (doesn’t owns cinemas) and telemedicine companies like MyDoc in Singapore, a mobile app allowing patients to have access to online medical consultations.
Network effects
The main benefit of this model is that it tends to bridge industries which generate network effects. Indeed, 4 users can create 6 connections, 8 users 28 connections, etc. Companies can extract value from these connections.
The goal is to have the biggest network, that is to say a lot of users to generate more and more connections and build a sustainable model. Every company fights to be #1, sometimes at the expense of the users (example: it’s very difficult to completely delete your account from this kind of platform).
« You have to look beyond industry boundaries »
« You have to look beyond industry boundaries, » Jan Ondrus said. The idea is to connect the dots. To build a sustainable business model, he identified six steps:
Example: fighting diabetes or solving malnutrition. « Some entrepreneurs develop a solution and then try to find a problem to solve. It is important to first identify a problem and then develop a solution to overcome it. «
- 2. Identify the stakeholders (patients? Next of kin? Doctors? Pharmaceutical companies? Etc.)
- 3. Assess pain point to better overcome your weaknesses and face competition.
- 4. Design solutions.
The use of digital technology can help to remove friction and create trust between the players by fostering collaboration and co-innovation.
- 5. Share value equitably.
It is important for the sustainability and the healthiness of the company.
« In conclusion, with the right business model and the right use of digital technology, it is not too late to surf the digital wave, » Jan Ondrus said.
Funding: a central problem
A discussion among the participants of the workshop led to several questions, some of which related to the patients’ data protection. To reassure consumers about the use of their personal data, industry has to focus on transparency, explaining who can access their data and for what purposes.
Another concern is the usability of digital products. « Everyone should be able to use the application easily without specific knowledge, » Prof. Ondrus said. Easy of use is mandatory, especially if the solution is dedicated for the elderly people.
Finally, there is the big question: who has to pay? This is one of the main challenges digital health entrepreneurs have to deal with. Among the speakers, Sze-Yunn Pang, head of Population Health Management at Philips ASEAN Pacific, said the biggest challenge lies with insurance companies. « How to convince them to fund [our] programs? »
Those questions reflect the uncertainty of the digital health market, still young, but, according to the participants of the workshop, these problems can be overcome if industry players meet the new expectations of patients and use digital technology smartly.
