Business context analysis An analysis of the industry for telemedicine

Transcription

1 Business context analysis An analysis of the industry for telemedicine Nanna Shyama Petersen

2 Business Context Analysis A rising number of elderly, increased health care costs and labor shortages are some of tomorrow's biggest challenges for the health sector. And that requires new thinking! Telemedicine is not medicine in the traditional sense. Telemedicine is the use of telecommunication and information technologies in order to provide clinical health care from a distance. Telemedicine is described as the solution that can help solve the demographic and economic challenges, which Denmark faces in the coming years. The government, municipalities and regions are already aware of the opportunities that exist in this area (sum.dk) This academic essay sets out to analyze the industry for telemedicine and the competitive factors that shape the business strategy for Waterfull. Elements of Michael E. Porters Five Forces will be used to analyze and characterize the business environment surrounding the innovation concept, Waterfull solution - described in the strategic innovation plan. However, as this industry is heavily integrated with the public sector, the use of this theory has its implications and a complete rundown of all five forces can be trivial. The model will be used where relevant to illustrate the competitive intensity and to understand the complexity of the market. It will not to be used to declare the industry attractive or not (Porter 2008: 87). Furthermore, Geoffrey A. Mooreʼs theory of the technology adoption life cycle and the adopter categories is presented. This use of this theory will explain how technology is received in society and how companies should act towards their target when they want to do business. The Rivalry among existing competitors in the market for telemedicine is based on knowledge and the ability to be innovative. It also includes the ability to introduce new products and service improvement (Porter 2008:85). The goal of telemedicine is to im- 1

3 prove working procedures and provide products which can accommodate the future challenges in the healthcare sector (fivu.dk). This challenges the companies, since their products should accommodate the requirement from the target; the government, the municipalities, the regions and the end users in the society. There are several different companies in the market and telemedicine has been on the agenda for years without a large-scale breakthrough. The area is filled with technical challenges when working with health benefits which have resulted in a variety of projects. But, a dominant player in the market is CSC Scandihealth - who is the leading provider of IT services for the Danish health and social care (csc.dk). Companies competing in this market, offers the health sector different products that meet different needs. Staying competitive requires companies to be innovative in their solutions and make sure that their products meet the requirement from the health care sector and covers all aspects described above. It is also highly relevant to look at the treats of new entrants. Entering this market requires having the knowledge and the ability to compete with incumbents. It is technically challenging to develop health and welfare solutions and high technological standards for telemedicine mean high entry barriers for new entrants. With a high demand for telemedicine solutions the market is likely to continue to grow and it is assumed that a number of new providers will appear. Companies should take this factor into consideration in relation to their strategy. Industry growth is not always beneficial. Growth does tend to mute rivalry, because an expanding pie offers opportunities for all competitors and high growth with low entry barriers will draw in entrants. A narrow focus on growth is one of the major causes of bad strategy (Porter 2008:86). A way to enter the market though is when new entrants are diversifying from others markets, they can leverage existing capabilities and cash flows to shake up competi- 2

4 tion (Porter 2008: 80). Resourceful companies may have advantages even without specialist knowledge in the field since they can make horizontal integration and collaborate with other companies with expertise within the area. This business strategy is commonly used and is often profitable for both parties. By studying this field new knowledge has emerged. The telemedicine market is characterized by knowledge sharing. Denmark has until now developed a wide range of telemedicine solutions but many are not fully implemented. This is a serious limiting factor in Denmark. (alexandra.dk). Because of the technical challenges when developing health and welfare solutions, researchers at the Alexandra Institute and Department of Computer Science have, in cooperation with a line of companies, created version 0.1 of "Net4Care platform", which is an Open Source platform designed to make it easier for SMEs who want to develop telemedicine solutions. With the Net4Care toolbox, companies can concentrate on developing their solution and not spend unnecessary time implementing the underlying infrastructure. Businesses can use the platform as a springboard to develop their own complementary solutions that can contribute to the national infrastructure (alexandra.dk). Net4Care thereby lowers the barrier of new entrants on the market. By implementing the technology into their own product, new companies can enter the market with fewer obstacles. This will change the rivalry among the competitors and call for more efficient design solutions. The competition parameters will also be more focused on the design and the social factors when the technology becomes available through the Net4Care platform. From a different perspective, the knowledge sharing will increase the level of the Danish telemedicine market and make more companies competitive. The Danish market (industry) with influential players can take a strong position internationally. With industry expertise Denmark will be able to penetrate foreign markets that will be economically profitable in the future. 3

5 The power of buyers plays an essential role because they can capture more value by forcing down prices, demand better quality or more service (Porter 2008:83). The buyersʼ can be divided into two groups the intermediary and the end user, where the former is the primary customer. The healthcare sector can be a difficult customer to service due to the bureaucracy in the municipalities. Often the hospital service has long term purchase agreement with regular suppliers and is bound by contract. This means they are not able to purchase new products even though they might be interested. The government budget also influences the municipalities when deciding on which new product to invest in. These examples are factors that influence the forces and affect the companyʼs strategy when approaching their target (Porter 2008: 86). The bargaining power lies with the municipalities because they are subject to the dominant regulatory. The product must be profitable and accommodate the requirement on all levels before the municipalities can buy into new solutions. Intermediate customers, or customers who purchase the product but are not the end user, can be analyzed the same way as other buyers, with one important addition. Intermediate customer can gain significant bargaining power when they can influence the purchasing decision of customers downstream (Porter 2008: 84). To reach the end user, companies who have to sell their product through the healthcare sector which is dependent on the intermediary convincing the end user. It is not enough that the municipalities see both economic and resource advantages in investing in the product - the end user has to be convinced as well. Therefore, the product has to accommodate both the intermediariesʼ needs and the end users. This is an important factor to remember when designing the telemedicine solutions. The demands and needs from to different target groups have to be incorporated into the product regarding design, service and functionality. The interaction between the intermediary and the end user thereby play a significant role when looking at the power of buyers. 4

6 Telemedicine products have a substantial potential in the healthcare sector. The products are expected to optimise working procedure and maximise resources once they are established. But introducing new products and working procedures to an existing industry one must look at the treat of substitutes. Telemedicine is in fierce competition with many other solutions when hospitals must decide which technologies they will introduce (Patientathome.dk). It is important to ensure that the technologies taken in use are effective, that patients are not injured, the price is proportional to the effect, and there is evidence of what is done (Patientathome.dk). The existing remedies in the health care sector can also be seen as a treat to new telemedicine solutions like Waterfull. The newest solutions are still relatively new on the market and the decision makers of the healthcare sector are precautious. They need to see a documented effect before investing money in new projects which means that it can be very difficult to convince the municipalities and the healthcare sector to invest in new unknown solutions. This aspect is extremely important to be aware of when introducing new telemedicine solutions on the market. Adoption of new technology When introducing new telemedicine products, companies may also face challenges on other levels. Geoffrey A. Moore illuminates that it can be a challenge to introduce new products that require people to change their current mode of behaviour or to modify other products or services we rely on (Moore 2002: 7). Products that command us to change our behaviour are called discontinuous innovation. Telemedicine product can be characterized by that term. By introducing discontinuous innovation, the companyʼs product demands significant changes by not only the consumer but also the infrastructure (Moore 2002: 8). Several aspects of challenges in the infrastructure regarding bureaucracy within the municipalities and the healthcare sector have already been analysed earlier and in the strategic 5

7 innovation plan. Waterfull like other telemedicine products are supposed to increase efficiency and reduce costs. At the same time telemedicine provide a better quality of care by involving citizens and patients as active partners. In addition to the technical challenges of these changed health benefits, it is required to change the perception of the doctor-patient relationship. The patient should increasingly be a competent actor rather than a passive recipient of health care. This role change requires a change in attitude among both patients and health care professionals: it requires new professional education of both staff and patients to handle equipment, transmission of data and record keeping. These aspects are a part of the national action plan referred to earlier and in the strategic innovation plan. The government has presented a strategy plan for changes on the societal level to make it easier to establish telemedicine solutions in the healthcare sector. The increased societal focus in this field can make it easier to introduce telemedicine products to the end user. Technology is absorbed into a given community in stages corresponding to the psychological and social profiles various segment (Moore 2002: 9-10). Moore presents the technology adoption life cycle that characterizes a high-tech market is to work the curve left to right focusing first on the innovators, grooving that market then moving on to the early adopters, growing that market and so on down to the laggards (Moore 2002:10). Companies must use each captured group before as a reference before going on the next group (Moore 2002:10). This theory can be viewed from two aspects regarding the telemedicine market; the end user and the intermediary. The first stakeholder who accepted telemedicine could be viewed as innovators. The municipality and the healthcare sector can be characterized as the early majority also defined as The Pragmatists. They are interested in technological solutions, but ultimately they are driven by a strong sense of practicality. They want to see well-established references before investing substantially (Moore 2002: 9). 6

8 When targeting this segment it is crucial to understand the actors and their buying habits and focus on winning their trust. When pragmatists buy, they care about the company they buy from. The quality of the product, the infrastructure of supporting products, system interfaces and the reliability of the service they are going to get (Moore 2002: 32). It is difficult to sell products to the municipality without references and relationships. They wonʼt buy from you until you are established and it is difficult to get established until they buy from your company. But once they see profitable results they tend to be very loyal (Moore 2002: 32) like described earlier in the section; the power of buyers. The ways to market to the municipality, when looking at them as pragmatists, is by being mentioned in articles and develop applications for your product that are specific to the industry. Furthermore, it is advantageous to have partnerships and alliances with other vendors who serve their industry. Overall you need to have earned a reputation for quality and service. The characteristics of the pragmatists have many references to the municipality. The way you, as a telemedicine company, approach them is crucial if you want to establish a purchasing agreement with them. Even though, based on the analysis and the strategic innovations plan, the telemedicine market is influenced by a demand from society. Establishing telemedicine solutions within the healthcare sector will presumably be easier than the theory dictate due to the many initiatives the government already has started in the area of telemedicine. Discussion and Conclusion Looking at the analysis, the industry is very complex. Many factors come into play and the competitive forces influence and affect each other. The analysis also highlights that this is a dynamic industry where new ideas suddenly can affect competition and barriers in the various forces. The Net4Care platform will presumably affect both competition amongst existing competitors as well as barrier for new entrants. It becomes easier for 7

9 new companies to develop new telemedicine solutions thanks to technology offered from the platform. This results in increased competition among existing customers that will affect the product requirements by getting higher and more specific, and places even greater demands on competitors' innovation ability. By providing a new telemedicine product to the municipality and the Danish healthcare sector, Open care solution faces the challenges described under power of buyers. Based on the information and evidence described in the strategy innovation plan OCS has identified dehydration as being an area of considerable difficulties. There is a need for innovative solutions that can benefit both the user and welfare sector. By establishing a working relationship with Team Videnscenter from Aarhus University who has the required innovative insight and a technological understanding in this field, Open care solution has a competitive advantage by being the first on the Danish market to introduce a telemedicine solution that focuses on dehydration. The municipalities can gain economic and human benefits by investing in the new product. By targeting the municipalities who can be described as Pragmatists it is crucial that they are aware which factors that affects them. They should take into account that the municipalities want to see proven efficiency before they invest in new products, but once they see profitable results they tend to be very loyal business partner. 8

10 Reference list Porter, Michael. E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86, Moore Geoffrey M. (2002). High-Tech Marketing Illusion and High-Tech Marketing Enlightenment in Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers, Harper Business, pp Alexandra.dk Csc.com telemedicin_sundheds_it_med_stort_eksportpotentiale Fivu.dk Patientathome.dk Sum. Dk %20Publikationer_i_pdf/2012/Telemedicin/telemedicin_DK_nov_2012.ashx 9