Why we need to take a customer focused approach to Healthcare

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

Copyright © 2009 | 21 West Partners LLC. All Rights Reserved
2 21WestPartners

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

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
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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
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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
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Momentum Companies & Brands

MOMENTUM
EFFECTSPARTNERS
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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
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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
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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
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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
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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
12 21WestPartners

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
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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
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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
15 21WestPartners

Why we need to take a customer focused approach to Healthcare

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