Bue ocean strategy in Healthcare
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The document discusses the concepts of blue oceans and red oceans from the book Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne. It provides examples of companies like NetJets and Casella Wines that created blue oceans by reconstructing market boundaries and buyer value. It also summarizes how Novo Nordisk transformed the insulin industry by shifting focus from doctors to patients and creating pens that made administration easier. The document outlines tools from the book like the four actions framework and strategy canvas for analyzing industries.
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Bue ocean strategy in Healthcare
- 2. The Literature – The Authors © JOHN ABBOTT Prof Chan Kim 15/01/14 Dept. Of Hospital Administration © JOHN ABBOTT Prof Renee Mauborgne 2
- 3. What is a Blue Ocean? Blue oceans denote all the industries not in existence today. This is the unknown market space. Red oceans represent all the industries in existence today. This is the known market space. 15/01/14 Dept. Of Hospital Administration 3
- 4. Red Vs. Blue 15/01/14 Dept. Of Hospital Administration 4
- 5. How many of today’s industries were then unknown? 15/01/14 Dept. Of Hospital Administration 5
- 6. The Answer Automobiles Music recording Aviation Petrochemicals Healthcare 15/01/14 Dept. Of Hospital Administration 6
- 7. 30 yrs ago…… Mutual Funds cell phones Only thirty years ago biotechnology 15/01/14 Dept. Of Hospital Administration coffee bars 7
- 8. Now put the clock forward twenty years 15/01/14 Dept. Of Hospital Administration 8
- 9. The reality is that industries never stand still. They continuously evolve. Operations improve, markets expand, and players come and go. History teaches us that we have a hugely underestimated capacity to create new industries and re-create existing ones. How can a company break out of the red ocean of bloody competition? How can it create a blue ocean? Is there a systematic approach to achieve this and thereby sustain high performance? 15/01/14 Dept. Of Hospital Administration 9
- 10. The Cornerstone – Value innovation 15/01/14 Dept. Of Hospital Administration 10
- 11. Analytical tools Four Action Framework EliminateReduce-RaiseCreate Grid Strategy Canvas 15/01/14 Dept. Of Hospital Administration 11
- 12. Analytical tools and Framework Four Action Framework Drop Cost structure 2. 1. 4. 15/01/14 Dept. Of Hospital Administration 3. Lift Buyer Value/ Create New demand 12
- 13. : reconstruct buyer value elements across alternative industries to offer buyers an entirely new experience while simultaneously keeping cost structure low. 15/01/14 Dept. Of Hospital Administration 13
- 14. Eliminate Reduce Raise Create Grid Ex of Cirque du Soliel (A circus) 15/01/14 Dept. Of Hospital Administration 14
- 15. 15/01/14 Dept. Of Hospital Administration 15
- 16. Strategy Canvas 15/01/14 Dept. Of Hospital Administration 16
- 17. Examples Net Jets : Aviation Industry Casella (Yellow tail) : Wine Industry Case study of Novo Nordisk : Pharma 15/01/14 Dept. Of Hospital Administration 17
- 18. Net Jets The most lucrative mass of customers in the aviation industry are corporate travelers. When business travelers want to fly they have two principal choices 15/01/14 On the one hand, a company’s executives can fly business class or first class on a commercial airline. On the other hand, a company can purchase its own aircraft to serve its corporate travel needs. Dept. Of Hospital Administration 18
- 19. The Strategic question By focusing on the key factors that lead corporations to trade across alternatives and eliminating or reducing everything else, NetJets created its blue ocean strategy. So NetJets offers its customers one-sixteenth ownership of an aircraft to be shared with fifteen other customers, each one entitled to fifty hours of flight time per year. Owners can purchase a share in a $6 million aircraft. Customers get the convenience of a private jet at the price of a commercial airline ticket. 15/01/14 Dept. Of Hospital Administration 19
- 20. 15/01/14 Dept. Of Hospital Administration 20
- 21. Casella Wines • • • • • • • 15/01/14 Price per bottle of wine An elite, refined image in packaging Above-the-line marketing to raise consumer awareness Aging quality of wine The prestige of a wine’s vineyard and its legacy The complexity and sophistication of a wine’s taste, ex tannins and oak A diverse range of wines to cover all varieties of grapes Dept. Of Hospital Administration 21
- 22. Grid of Yellow Tail 15/01/14 Dept. Of Hospital Administration 22
- 23. Results Instead of offering wine as wine, Casella created a social drink accessible to everyone: beer drinkers, cock- tail drinkers, and other drinkers of non-wine beverages. In the space of two years, the fun, social drink [yellow tail] emerged as the fastest growing brand in the histories of both the Australian and the U.S. wine industries and the number one imported wine into the United States, surpassing the wines of France and Italy. By August 2003 it was the number one red wine in a 750-ml bottle sold in the United States, outstripping California labels. By mid-2003, [yellow tail]’s moving average annual sales were tracking at 4.5 million cases. 15/01/14 Dept. Of Hospital Administration 23
- 24. Case of Novo Nordisk Historically, the insulin industry, like most of the pharmaceutical industry, focused its attention on the key influencers: doctors. The importance of doctors in affecting the insulin purchasing decision of diabetics made doctors the target buyer group of the industry. Industry geared its attention and efforts to produce purer insulin in response to doctors’ quest for better medication. Significant challenges in administering : vials left the patient with the complex and unpleasant task of handling syringes & needles. Social stigmatism for patients. 15/01/14 Dept. Of Hospital Administration 24
- 25. Novo Nordisk to the NovoPen, launched in 1985. The NovoPen resembled a fountain pen; it contained an insulin cartridge. The pen had an integrated click mechanism, making it possible for even blind patients to control the dosing and administer insulin. Inject insulin with ease and convenience without the embarrassing complexity of syringes. Later, Innovo was designed to manage the delivery of insulin through built-in memory and to display the dose, the last dose, and the elapsed time. 15/01/14 blue ocean Dept. Of Hospital Administration opportunity of 25
- 26. Grid of Novo Nordisk ELIMINATE RAISE Dependency on doctors/family Administration Risk minimization Administration Convenience Self Esteem REDUCE CREATE Efficacy Compliance and adherence assistance Side effects Minimization Patient out of pocket minimization 15/01/14 Self Tracking Capability Dept. Of Hospital Administration 26
- 27. 15/01/14 Dept. Of Hospital Administration 27
- 28. Draw the SC based on: Price Efficacy Side effects Admin risk Convenience Self esteem Compliance Self Tracking 15/01/14 Dept. Of Hospital Administration 28
- 29. Strategy Canvas – Novo Nordisk Novo Nordisk 15/01/14 Dept. Of Hospital Administration Self track Compliance Self esteem Convenience Side effects Efficacy Price Regular 29
- 30. The Six Principles 15/01/14 Dept. Of Hospital Administration 30
- 31. Visualizing Strategy 15/01/14 Dept. Of Hospital Administration 31
- 32. The Six Principles 15/01/14 Dept. Of Hospital Administration 32
- 33. Noncustomers 15/01/14 Dept. Of Hospital Administration 33
- 34. Transform What are the reasons 1st tier customers want to jumpship and leave ? What are the reasons 2nd tier customers refuse to use products offered ? Look for commonalities across their responses (NOT THE DIFFERENCES) You will glean insight into how to unleash an ocean of latent untapped demand. 15/01/14 Dept. Of Hospital Administration 34
- 35. The Six Principles 15/01/14 Dept. Of Hospital Administration 35
- 36. The Sequence 15/01/14 Dept. Of Hospital Administration 36
- 37. The Six Principles 15/01/14 Dept. Of Hospital Administration 37
- 38. The Four Organizational Hurdles 15/01/14 Dept. Of Hospital Administration 38
- 39. The Question Remains 15/01/14 Dept. Of Hospital Administration 39
- 40. Health Care's Blue Ocean By Joseph A. Jackson, LICSW In the coming years we will see: 15/01/14 1) An exponential increase in the number of people with disabling, chronic health problems, 2) A concomitant decrease in available caregivers, 3) Diminishment in the resources that will support health care, especially under commercial and government health insurance, and 4) An inevitable increase in stress on family caregivers Dept. Of Hospital Administration 40
- 41. Physician, Hospital and Insurance driven Healthcare will give way to Home based healthcare. Implementing Telemedicine programs for Home health care like Cardiocom Game-changing technology is just around the corner : online diagnostic and treatment software Insurance that will best enhance health and cut health care costs is the one that engages patients as both health care decision makers and payers, i.e. – the one that includes health savings accounts (HSAs). The reason: 15/01/14 People are more likely to change unhealthy lifestyles if by doing so they get richer. Dept. Of Hospital Administration 41
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- 44. References 1. Blue Ocean Strategy – How to create uncontested market space and make the competition irrelevant; W. Chan Kim, Renee Mauborgne; Harvard Business Press (2005) 2. Essentials of Management – An International Leadership Perspective; 9th Ed; Mc Graw Hill; Harold Koontz, Heinz Weihrich 3. Healthcare’s Blue Ocean; Joseph a. Jackson; Eldcare Advisor’s Inc. – The care planning company 4. How to find Blue Ocean in Healthcare; Richard Prest; Finsights; July 17th 2012 15/01/14 Dept. Of Hospital Administration 44
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Editor's Notes
- Healthcare industry: Like all industries also aims at making a profit not only for sustainability but also for qualityAs administrators we must take a leaf out of other industries like entertainment, automobile, aviation to improvise on existing healthcare strategyWill be dealing with the concept of Blue Ocean and later the applicability in healthcare
- This remarkable concept was brought forward in a book by authors…..Over 2 million copies sold.Translated in 41 languages which is a world recordTaught as a major theory of strategy in leading business schools. Not only theoretical but also can be very practical in Healthcare.
- Approach under which a firm aims to develop and market unique products for different customer segments. Usually employed where a firm has clear competitive advantages, and can sustain an expensive advertising campaign.
- LIKE HOSPITALS
- What do we basically do, it is not just theoreticalNow we will look at HOW we go about in the strategy or the tools that we require
- Four key questions to challenge an industry’s strategic logic and business model: The first question forces us to consider eliminating factors that companies in your industry have long competed on. Sometimes there is a fundamental change in what buyers value, but companies that are fo- cused on benchmarking one another do not act on, or even perceive, the change. .second question forces us to determine whether products or services have been overdesigned in the race to match and beat the competition. Here, companies overserve customers, increasing their cost structure for no gain. The third question pushes us to uncover and eliminate the compromises your industry forces customers to make. The fourth question helps us to discover entirely new sources of value for buyers and to create new demand and shift the strategic pricing of the industry.
- The grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating and reducing as well as raising and creating,
- they choose commercial air- lines for only one reason: costs. On the one hand, commercial travel avoids the high up-front, fixed-cost investment of a multimillion- dollar jet aircraft. On the other hand, a company purchases only the number of corporate airline tickets needed per year, lowering variable costs and reducing the possibility of unused aviation travel time that often accompanies the ownership of corporate jets.
- Reduce - OverserveRaise : Compromise
- Awakening :discuss changes in strategy before resolv- ing differences of opinion about the current state of play. A problem is that executives are often reluctant to accept the need for change; they may have a vested interest in the status quo, or they may feel that time will eventually vindicate their previous choices. Exploration: sending out managers and drawing strategy canvas. Fair : presentingthecanvasandfeedbacks. Communication : communicate it in a way that can be easily understood by any employee.
- Although the universe of noncustomers typically offers big blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them. To convert this huge latent demand into real demand in the form of thriving new cus- tomers, companies need to deepen their understanding of the uni- verse of noncustomers. Tier 1 They sit on the edge of the market. They are buyers who minimally purchase an industry’s offering out of neces- sity but are mentally noncustomers Tier 2 seen your industry’s offerings as an option to fulfill their needs but have voted against cannotafford Tier 3 never thought of your market’s offerings as an option. Typically, these unexplored noncustomers have not been targeted or thought of as potential customers by any player in the industry. That’s because their needs and the business opportunities associated with them have somehow always been as- sumed to belong to other markets.
- Simple flowchart
- Organization hurdle: awareness
- The hospital bed itself will become a scarce resource, just in time for the baby boomers’ arrival and the associated skyrocketing demand for health careA health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).[1][2] The funds contributed to an account are not subject to federal income tax at the time of deposit.Unlike a flexible spending account (FSA), funds roll over and accumulate year to year if not spent. H
- ----- Meeting Notes (15/01/14 14:44) -----healermedical importancechecklist