Why we need to take a customer focused approach to Healthcare

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Larreche's Momentum Effect
Case Studies: Skype and Gleevec
Porter: HC needs more competition

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Why we need to take a customer focused approach to Healthcare

  1. 1. 21WestPartners We Build Growth Momentum for Life Sciences Companies HEALTHCARE REFORM or CUSTOMER FOCUSED HEALTH MOMENTUM? HARVARD BUSINESS SCHOOL CLUB OF WASHINGTON, DC ENTREPRENEURSHIP ROUNDTABLE January 21, 2010
  2. 2. Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 2 21WestPartners
  3. 3. 21WestPartners Healthcare Reform "HOW COULD SUCH TRULY TALENTED PEOPLE ALLOW THEMSELVES TO GET INTO SUCH A MORASS?“ LOU GERSTNER Date Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 3
  4. 4. What is The Momentum Effect? TME is Efficient Growth Strategy based on:  Compelling customer insights  Customer focus product development  Vibrant customer engagement Amazon.com Ranked 4th in Best Books of 2008 Business and Investing * The Momentum Effect, JC Larreche, Wharton School Publishing MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 4 21WestPartners
  5. 5. TME: Efficient Growth Through Customer-Based Strategies Revenues grow faster than marketing spend in momentum-powered firms 2500 2000 1500 Momentum-Powered Firms (Pioneers) 1000 outperform the DJ Index by 80%  Pushers: 3% increase in 500 marketing/sales ratio, no market cap change vs. DJIA  Plodders: no change in ratio, 28% 0 decrease in cap 1 2 3 4 5 6 7 8 9 10 11  Pioneers: 4% decrease, 80% increase in cap Revenues Series1 Marketing Expenditures Series2 MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 5 21WestPartners
  6. 6. The Momentum Effect in Action A VISION Efficient Growth Through Customer-based Strategies Initiate: The Customer Insights Pipeline Inspire: The Unlimited Potential Spirit 4 ACTIONS Cut: Compensating Strategies Redeploy: Towards Customer Engagement MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 6 21WestPartners
  7. 7. Momentum Companies & Brands MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 7 21WestPartners
  8. 8. Case Study 1: SKYPE (1/5)  eBay acquisition of Skype for $3.1 B in 2005  > $3 B valuation in 3 years  53 M users in 3 years MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 8 21WestPartners
  9. 9. Case Study 1: SKYPE (2/5) The Value-Creation Process SkypeOut: Additional subscribing service cross-sold to call landline phones Following charged-for products (Text Value Extraction messaging, cell phone calls…) Focus: Internal Efficiency Partnerships with manufacturers of headsets and Internet-enabled handsets  Appropriation of dissatisfied Value Capture customers from telecom providers Focus: Partners & Competitors  Internet chat, video transmission and audio communication in the same tool Value Origination  Software simple to use, easy to install, reliable, free Focus: Customers MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 9 21WestPartners
  10. 10. Case Study 1: SKYPE (3/5) Momentum Design generates customer traction Communication Compelling Low cost Value Freedom of Access What do these “The whole world can Reliability customers talk for free” Shared enjoyment value ? Compelling Momentum Power Offer Insights Design What is Design What’s the the customer insight ? offer ? Compelling Need for a new Equity telecommunication model What value Valuable advertising target Culture of free exchange of do they have with networking power and information high potential for paid To Skype ? premium products MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 10 21WestPartners
  11. 11. Case Study 1: SKYPE (4/5) Momentum Execution accelerates growth Breaking free of excessive charges Vibrant from telecoms providers Software already on PC Resistance to exploitation from Satisfaction Prompt from other users quasi-monopolistic situations What drives Contact with community emotion ? Power Offer Momentum Vibrant Execution Retention What’s the Execution What drives offer ? action ? Vibrant Convenient Engagement Simple to use What drives Easy to install Member of a trendy club advocacy ? Reliable Sharing a good deal MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 11 21WestPartners
  12. 12. Case Study 1: SKYPE (5/5) Skype: a Customer Momentum Leadership Company  “The model for us is viral growth. We try to get as many people as possible to use Skype for free and some of them become paying users. We are not pushing it because it is a network effect. If you push too hard to convert free users to paying users, you limit growth. It is like putting to much charcoal on a barbecue” *  “Some people want to monetize – that is, move users from Skype’s free service to paid for ones – faster, but the key is to figure out what is the right speed for monetization. If you act too aggressively, there is a real risk you will lose the huge active user base” * * NiklasZennström, Skype’s co-founder and former CEO MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 12 21WestPartners
  13. 13. Case Study 2: GLEEVEC (1/2) High value Small business potential opportunity in terms of:  Unprofitable at first sight  But exceptionally effective to prolong cancer patients’ lives Made an urgent priority by the Concept of customer wider than simply CEO, D. Vasella, despite a low ROI the product purchaser MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 13 21WestPartners
  14. 14. Case Study 2: GLEEVEC (2/2) Leveraging internal and external Momentum Vision: Building internal and external Momentum that powered a record breaking performance Strategic Objectives: Internal Momentum External Momentum Key Strategies: Inspire the Unlimited Motivate employees Engage important stakeholders Potential Spirit Results:  Patients enrollment in  The R&D team  Targeted group of stakeholders offer each something clinical trials lasted 4 committed itself to beat the different to the firm months instead of 3 years management’s deadlines  The press created a buzz around the new “ wonder drug”  Drug arrived on market  Employees volunteered  FDA approved the drug in 10 weeks, the fastest ever after only 3 years for over-time work sanctioning for a new drug MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 14 21WestPartners
  15. 15. Michael Porter’s Prescription Healthcare needs more competition “Value is the engine of self feeding improvement” 1. Incentives based on improved Health 2. Differentiated Provider Services 3. No Restriction to Access 4. Easy Access to Medical Information 5. Transparent Pricing 6. Simplified Billing 7. No Discrimination in Insurance Underwriting 8. Minimal Coverage for all 9. Payer strategies based on Efficiency and Choice 10. Fewer useless lawsuits (Tort Reform) MOMENTUM EFFECTSPARTNERS Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 15 21WestPartners
  16. 16. 21WestPartners 1120 Avenue of the Americas 7th Floor New York, NY 10036 Tel: 1 212 584 4284 www.21westpartners.com October 2009 Copyright © 2009 | 21 West Partners LLC. All Rights Reserved 16

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