Point: Take the customer’s perspective when designing a new service model.

Story: Some of the best innovations are brilliant in their after-the-fact simplicity. Take MinuteClinic.  We all know “an ounce of prevention…” yet most of us still don’t go to the doctor for preventative care because of the cumbersome process of a office visit: scheduling an appointment, taking time off work, waiting in the doctor’s office for unknown amounts of time, sitting in the midst of other hacking/sneezing people, and being unsure how much the visit will cost.  Worse, the doctor’s advice is often the standard nostrums of “take two aspirin, eat right, drink plenty of fluids, get some rest” that didn’t require the costs and hassles of the office visit.

Michael Howe, former CEO of MinuteClinic, became known as one of the top 10 innovators of the last decade by tackling those problems and designing a straightforward solution.  Howe applied the retail concept to healthcare, putting a mini medical clinic inside a pharmacy.  All the elements of his new service model focused on the customer:

• Pharmacy locations are easy to get to and are easily integrated into the customer’s day
• The clinics are open nights and weekends, expanding convenience for time-pressed customers
• Customer wait time is no more than 15 minutes, and no appointments are necessary.
• MinuteClinic posts all its services on a “menu” with the prices listed for each service

The key behind Howe’s innovation is realizing that the old model of healthcare delivery focused on delivering healthcare to people born 1925-44. But the values of this “Greatest Generation” aren’t the same as the Boomer generation. Boomers don’t want to be directed — they want to be engaged in the healthcare process.  Likewise, Gen-X’ers (born 1965-1984) want self-sufficiency, convenience and immediate access. They, along with Boomers, constitute MinuteClinic’s target customers.
MinuteClinic focuses on providing a standardized set of services that can be provided by nurse practitioners, thus lowering the overall costs of the services.  The company doesn’t claim to compete with the expertise of Mayo Clinic. Rather, it focuses on minor illness exams, minor injury exams, skin condition exams, wellness & prevention, vaccinations, and health condition monitoring. If customers have a serious or unusual ailment, MinuteClinic will recommend that they seek more in-depth medical attention.

In 2006, CVS acquired MinuteClinic. I asked Howe if the acquisition meant there could be more data integration between the two merged companies. His answer was that although the regulatory statutes prevent the sharing of information like prescriptions without patient approval, it was possible to educate patients. “We can use the retail environment to inform patients of alternatives to use for preventative medicine,” Howe said. For example, during the cold and flu season, MinuteClinic could help patients by producing a list of suggested treatments to make it through flu season.

What will be the next healthcare delivery innovation? Using Howe’s model of generations and the different values which each generation has, Howe sees that Millennials (born 1985-2004) are just beginning to understand their needs and that they want technology-based connections. In that future, the mantra will move from the Boomers’ “Engage Me” to the Millennials’ “Connect Me” demand for technology-based connections to their cell phones, laptops and the digitized world of social networks.

Action:

• Look for products and services that have become costly and underutilized due to years of accumulated complexities
• Look for generational differences in expectations, tolerances, and preferences
• Create a solution that increases convenience and certainty
• Create a solution that reduces complexity and cost
• Address 80% of the problem with something simple rather than 100% of the problem with something complex

Sources:
Michael Howe spoke at the World Innovation Forum, held June 8-9, 2010 at the Nokia Theater in New York City. He also presented an online seminar in the HSMAmericas series, which can be accessed here.
See also  http://minuteclinic.com/

Point: Business model innovation can take a company to the white space that lies beyond its core business.

Story: Mark Johnson, chairman of Innosight, wrote Seizing the White Space to help companies understand whether they have the opportunity (or the necessity) to innovate their business model.  Johnson defines white space as “the range of potential activities not defined or addressed by the company’s current business model.”  In Johnson’s model, white space resides beyond product extensions, lateral growth in the customer base, or incremental product innovation.  Instead, he focuses on innovations that really change the way a company does business.

Because Johnson’s book focuses on business models, he starts with a framework for analyzing and creating business models. The framework is composed of four boxes: the customer value proposition, the profit model, the processes, and resources of the business.

The customer value proposition delineates why the customer values the product or what the customer hires the product to do.  (Click here for more on “hiring a product to do a job.”)

The profit model encompasses all the crucial financial dimensions that determine viability, including the revenue model, cost structure, target margins, and velocity (i.e., cycle times).

The resources and processes boxes consist of what the business needs (people, technology, information, partnerships, etc.) and how the business delivers the CVP within the bounds of financial viability.  Johnson uses this four-box definition of business models throughout the book to analyze different case examples and to illustrate a repeatable process of building new business models.

Next, Johnson presents a three-chapter section on three conditions that call for new business models.  The conditions occur when 1) a company wants to transform an existing market, often due to changing competition 2) a company wishes to create new markets, such as in emerging market countries 3)  industry or economic discontinuities appear.  Johnson refers to these three situations as white space within, white space beyond, and whites pace between, respectively.

Finally, Johnson devotes a three-chapter section on the process of creating and implementing new business models.  First, he delves into the process of designing a new business, emphasizing the customer value proposition.  Second, he covers the implementation of a new business model and the process of incubation, acceleration, and reintegration of the new model back into the organization (if there is one).  Third, Johnson addresses a crucial issue of business model innovation within existing organizations — the challenge of innovation in the face of a dominant incumbent (see also this post for related material on corporate antibodies).

Johnson’s overall point is that business models aren’t arcane or serendipitous magic — they can be intentionally developed and implemented as a repeatable process.

Throughout the book, Johnson uses dozens of interwoven case studies of varying lengths to illustrate his points.  These examples include well-known management-book favorites (Amazon, iPod/iTunes, Dell, Southwest Airlines) as well as less-known examples (Lockheed-Martin, Better World, Hindustan Lever, Tata Motors, Hilti).  His point in using these examples isn’t to provide new business histories or reveal previously-untold best practices but to show how a wide range of businesses fit into his framework of the four-box business model and illustrate his process of seizing the white space.

Figures in the book also provide quick brainstorming fodder:  19 business model analogies, 14 levers on the customer value proposition, and 19 common dimensions of interference between incumbent and new business models.

Overall, the book will be most useful for executives thinking about changing their company’s business model or expanding in radical new directions  The in-depth discussions of business models can also aid entrepreneurs looking to build a business model.  Finally, product innovators should consider this book if they think their innovations involve significant changes in customer value proposition, the profit formula, key resource, key processes.  These changes, by definition, call for a new business model and the potential that the innovative product may need to be treated differently than the company’s previous products.

Action

• Know your current business model
• Look beyond adjacencies to consider how business model innovation can open new horizons
• Watch for opportunities, threats, and economic discontinuities that may call for new business models
• Build and implement new coherently-designed business models as needed

For the next stop on the virtual book tour, see: Braden Kelley, Blogging Innovation and Jeffrey Phillips, Innovate on Purpose

Point: Good word-of-mouth can be made even better

Story: The Mayo Clinic is known around the world for reputable, high-quality health care. How can the company extend and expand this good word of mouth? Seth Godin provided an insightful answer during his Online Marketing Innovation Q&A, April 15, 2010 hosted by HSMAmericas.

“When people talk about the Mayo Clinic, they know it’s a good place. But does their conversation lead to an action? Is it specific enough?” People clearly do turn to the Mayo Clinic in a last-ditch attempt to survive rare or hard-to-treat diseases.  But do they also think of the Clinic for more routine (and more common) health treatments such as diagnostics?

Godin contrasted Mayo Clinic’s situation with that of the Pritikin Centers of the 1980s. The Pritikin diet taught people a way to eat that could reduce high blood pressure and cholesterol (leading edge in its time.)  Godin’s own father went on the diet and improved his health. When people commented, “Wow, you look great!” Godin’s father would reply, “I was on the Pritikin Diet. You can read the book or visit their clinics to find out more about it.” Hundreds of other customers were as enthusiastic about the results as Godin’s father was, and word of mouth quickly spread.

The key for the Mayo Clinic, Godin advised, is to emphasize some of the proactive diagnostics that the clinic offers, to give people a reason to go there before having a specific disease. The people who go there and receive the Clinic’s lauded good care and service will be naturally motivated to spread the word.

Action:

1. Expand your product’s or service’s functionality to include common uses, not just rare applications
2. Look at brands as verbs, not adjectives — a brand should be about doing something, not just being “good” or “high-quality”
3. Create word-of-mouth that sparks action, like investigation or emulation — make the people who see the results of your service also want those results for themselves.

Update: Seth Godin also spoke at the World Innovation Forum on June 9, 2010