Health care non-profit models - comparing 3 Business Models

In the previous two postings I looked at three business models for non-profit health care that were identified and documented in this wonderful article from MIT Global Health:

Heart Institute of the Caribbean (Jamaica)

Nyaya (Nepal) and Smile Train (India)

 

In this posting I would like to bring all three of the approaches together in one canvas (using the Business Model Toolbox app for the iPad).

By putting the three models (in high form) on the same page we can see how each has individualized their approach to delivering health care to specific populations. This is what I have seen in the models:

Note: the cream coloured notes are elements common to all, or two of the 3 business models.

Common elements:

  • All of the organizations rely heavily on Non-Government Organizations (NGO's) to manage their relationships with the communities and segments.
  • The NGO's and community organizations also form their key channels for connecting and communicating with the communities, and their service delivery is through localized medical services (originally Smile Train was to be a mobile service, but was dropped in favour of funding local delivery). All organizations rely heavily on an electronic communication backbone to reduce costs and increase effectiveness of delivery.
  • All the groups have key activities around gathering and sharing data on their service delivery, though Smile Train really emphasizes this for fund raising. All organizations are involved in training local doctors and service providers.
  • As a common key resource, the organizations have shifted from physical to electronic patient records to reduce costs and improve communications.
  • All three BMs rely on partnerships with NGOs and local organizations and have close ties with local hospitals and medical staff.
  • To varying degrees they all rely on donations as a revenue stream

HIC (blue-ish)

  • for a specialized segment of cardio-vascular patient HIC delivers care at costs that are reduced (for people with income) or subsidized (for low income). This creates a form of multi-sided platform where success of delivery to one group (low income) is contingent upon success in delivering to another group (high income)
  • they use a specialized consultation channel for sharing expertise across the organization and for linking with foreign consulting doctors.
  • their fee structure allows for patients with resources to subsidize patients without resources, while still delivering a lower fee for the first group compared to treatment from services external to the country
  • the production of some pharmaceuticals in house and the use and modular equipment (also their two key resources) makes their core service delivery of treatment and preventive programs more efficient by reducing costs
  • HIC is a little different than the others as they have outsourced the fundraising activities to a partner (separate arm) organization. They also make use of foreign consulting doctors to support their internal staff through electronic consultations.

Nyaya (green)

  • Nyaya provides a full range of health care services to a geographically isolated and low income segment on behalf of the Nepal government. Again we see here a multi-side platform approach with the government forming one of the sides.
  • This model is predicated on Nyaya operating a government owned facility on a multi-year agreement. Nyaya is very dependent on the government grants to fund the operations of the facility. Additional grants are received for the services they deliver.
  • In order to effectively deliver their healh services, Nyaya is required to manage a supply chain for pharmaceuticals and materials to keep the hospital operating and this, along with salary costs form the bulk of their cost structure.
  • There is more emphasis in this BM on the training of local service people than in the other models as they become a staff resources.

Smile Train (salmon)

  • One of these things is not like the others. Where the first two were forms of multi-sided platforms delivering services, Smile Train doesn't deliver the services directly. What they do is fund service delivery through financial aid in grants and contributions. This makes them more of a solutions type business, where they are evaluating and making decisions on solutions to localized problems of funding treatment, and awarding funds to worthy patients.
  • This model has a very specific target segment of cleft and palate medical issues, providing grants to patients and to facilities for service delivery.
  • I have taken the liberty for this group to identify a captured value (form of revenue stream) of the social impact they document. This represents a form of currency in raining funds and is a a key resource in their fundraising business.
  • As a granting body, their key activities, apart from awarding money, centre around the fundraising activities. So their donor base is a critical resource as is the statistics they use to convince potential donors to contribute.
  • Part of their 'effective and efficient' organization pitch to donors is predicated on managing operations costs to ensure the bulk of financial resources are spent on program delivery.

I hope this was an interesting analysis. I look forward to comments, or other interpretations.

 

Cheers

 

Tags: Business, Models, comparison, healthcare, non-profit

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Replies to This Discussion

Permalink Reply by Ashley Perera on July 19, 2011 at 8:38pm

Hi Mike

I find your analysis very interesting and useful, for those exploring business models for non-profit and government funded (but not owned) agencies. I find that in such instances there can be conflicting stakeholder demands and/or outcomes. Do you see any such instances in these models?

 

Thanks. Ashley

 

Permalink Reply by Mike Lachapelle on July 20, 2011 at 2:32am

Ashley

Yes, I have seen conflicts arise, particularly in government funded initiatives. As far as these models are concerned, I regret to say I don't know enough about their context or the history and parameters of their funding; too far removed from the original research.

But more generally, in any 3rd party pay system, government or philanthropic funded, the body receiving the funds has to be sensitive to the goals and objectives of the funding body. This may affect the way the funded body delivers its service or the type of service it delivers. For the most part, the body seeking funding should be able to accommodate the desires of the funding body, as that is part of the value proposition it returns to the funder. That is part of having a multi-sided platform.

However, at its worst, the funding body can become a filter on the service delivery of the funded body. I have seen this happen a lot in government context of providing grants and contributions to organizations. The government goes beyond being concerned with outcomes, to intervening in the delivery activities of the funded body. We (the organizations with whom I have worked) have come to realize, when working with governments often there are two core clients;

- the beneficial client, who ultimately receives the benefit of the program

- the political client, the government funding body

The political client may intervene between the organization and its beneficial client, setting parameters for program delivery that may not work well for either the organization or its beneficial client.

This is where governments have to seriously consider the parameters and expectations of granting programs. Typically these programs are designed for the efficiency and effectiveness of the government and its reporting requirements, not to the needs and desires of the bodies receiving funding or ultimately their beneficial clients.

 

Permalink Reply by Antony Upward on July 22, 2011 at 12:20am

Mike,

 

My first post on the hub...

 

Very interested in this discussion about  conflicting stakeholder demands and how to best use the BMC in this regard....given the BMC focus on customer specifically.

 

Wondering, given many would argue a customer is a stakeholder, but not all stakeholders are customers, how the community has determined the best way to handle this on the BMC?

 

Please feel free to point me to other existing discussions...

  

Antony

 

(I'm not to far from you... in Toronto... where it is 37C degrees right now and I'm close to the lake!)

 

Permalink Reply by Mike Lachapelle on July 24, 2011 at 9:40pm

Hi Anthony, welcome to the Business Model Innovation Hub. 

Stakeholders.... this term has not been, to the best of my knowledge, used very widely in the BM conversations here. Reference to people or organizations with a vested interest in the business will usually fall into one of three categories - clients segments, for whom the value proposition satisfies a need; partners who may provide resources, be delegated on your behalf, or are integrated into your value proposition creation or delivery; and occasionally as a key resource, when looking at things like your own staff resources and knowledge.

Other forms of stakeholders, such as regulatory bodies, aren't part of the business model itself but may form part of the influences and trends that are external to the model but affect the model. One would be concerned with these stakeholders when analyzing the broader environment of the business model.

In the example I mentioned previously, the concern is around one set clients (revenue source) dictating the method of delivery of value proposition to a separate client segment. This can become dysfunctional when the funding body, in serving its own needs, are making it difficult, ineffective or inefficient to deliver services to the beneficial client.

Permalink Reply by SAMUEL A VILLEGAS on July 21, 2011 at 10:32pm

Hi Mike, Excellent value added.

These cases would be perfect ones to many latin-caribean countries.

May be you could consider write some formal paper with these cases and your BMC.

If it so, once you finished it, I could help you with translation (Spanish & Brazilian), and add & adapt for some real potential latin-Caribean Health cases.  Around here, Health is really an issue...

Social Medical Programs with or without goverment Budgets or private fundrising (via CSR initiatives), never have been    

enough to cover Capex ans Opex reqs.

Some years ago, In Peru, Colombia and Here in Venezuela, I worked in a project using C.K.Prahalad BOP approach to create sustainable revenue stream models for homeless and very low income people lack of food, education, and of course “basic health assistance”. 

Until reading your case, I did not get BMC as an option to approach-simulate cases like these particular ones...

 

Two questions about the case:  Do you already have some "economics" simulation and “what if’s” using the Ipad app (as far as I Know you can do that)? How good is the app, to the “economics” approximation-estimations?

I am very interested, because I use playbook-RIM and BMC app is not yet available for it.

I have 2 year using "Excel’s" from my own to work second and third BMcanvas layers in cases I had been running for my SMEs costumers around here. I’m seriously considering polish my BM excels and migrate them to the RIM playbook as a new app, and may be Android…  

Please, if you have some experience with the "figures" using the Ipad-app, tell me about it. 

Thanks, Mike

Permalink Reply by Mike Lachapelle on July 24, 2011 at 10:15pm

Thanks for the comments Samuel:

I would be reluctant to try writing a paper on these case studies. I did not do the research or write up the findings. That credit belongs to the MIT students whose work is showcased in the Article mentioned in my post. I used their good work to demonstrate how the business model canvas is used to understand the dynamic of the businesses.

It was also an opportunity to tie the three very different approaches to delivery of health care into one model, and compare the approaches. By doing that we can see how each approach emphasizes different aspects of the business and how each component is dealt with by the businesses.

I haven't done a lot of 'economic' analysis with the iPad app. For the most part I use the BMToolBox as a key ideation tool. It is a great interactive tool when working with clients, or even in my own thinking time about different options. One of my clients, a real estate business, used the iPad app to work out the key hypotheses of how they wanted to change the way they did business, and from that we built a new business model.

That being said, I do have one client currently, a startup business, in which we are using the iPad app to look at the financials at a high level, and test ideas about how the revenues can be structured.

I can't speak for Alex, but I take it the BMToolBox was designed as an idea generator and a way to prototype different approaches that can help identify the key hypotheses that have to be tested and validated. Through this process one can design and identify the target business model for a startup, or the future business model in a innovation project. I don't think the app was designed for an in-depth analysis or a business' financials. Though it does seem to have the capability to do an extensive look at key elements of the revenue streams and the cost structure.

Permalink Reply by SAMUEL A VILLEGAS on July 25, 2011 at 7:29am
Thanks Mike.
Permalink Reply by Tim France on July 25, 2011 at 12:14am
Many thanks Mike. I had read the MIT paper, but had never thought of this kind of comparative BM analysis. Great idea. I may well try it with some non-profits I am working with to help them clarify their own unique position.
Permalink Reply by Mike Lachapelle on July 25, 2011 at 2:22am
Tim
When working with non-profits, in particular those receiving funding from third parties, it is very important to include the funding body as a client segment with identification of the value proposition for the funding party. One can include all of the segments in a high level model. There, the multiple client segments can be seen as separate business lines. One can then break out separate business models for each of the business lines and deal with each in a more detailed manner.

We did this when I was working with a government agency in eastern Canada. The overall model took into consideration the four separate business 'lines' of the organization, one of which was for the government of Canada, their almost exclusive source if funds. We then broke out the key business we were interested in, grants and contributions, for a more detailed analysis, including a SWOT.

I'm sure it will be an interesting task. It would be great if you could share the result with the community in the Hub.
Permalink Reply by Cheenu Srinivasan on August 2, 2011 at 8:48am

Hi Mike

 

I like the rigour (and colour!) of your model. For those of us who have this iPad App, how do we get hold of your model without having to reinvent it? I know you can send the model as an email from the App but I have not figured how we could add it to our library!

 

Adapting the App/BM for Social Entrepreneurs and NFPs poses a subtle problem as these people rightly see social and environmental benefits being added to 'revenue streams' (benefit streams) while accepting that there could be social and environmental costs under 'cost structure' (costs and risks). So you may want to tweak it a little with that and/or add 'other metrics' on both sides.

 

With regards to conflicts, I use Dr Barry Johnson's model of Polarity Maps where you identify contending values in tension and address them with 'both/and' rather than 'either/or'. See www.polaritymanagement.com for his model.

 

Cheers

 

Cheenu

 

Permalink Reply by Mike Lachapelle on August 2, 2011 at 1:21pm

Hi Cheenu

Glad you enjoyed the analysis. 

Unfortunately the transfer of a canvas between iPads is not available yet. Alex et al are working on it as an upgrade. So, you are limited to re-creating the document in your iPad.

There has been a lot of interesting discussion around the use of the canvas in public sector (e.g. non-profit and government) cases. I have been involved with Tom Graves (@Tetradian) in this, relative to Enterprise and Business Architecture. I still maintain one can use the canvas as is without modification, though I recognize there is a group opinion that one could add two more elements on the bottom of the canvas - social impact and social cost. I have used the canvas quite effectively with government organizations without modification. We tend to get at the impact and cost matters through the environmental analysis, and sometimes through the SWOT.

Some time ago I wrote a blog on The Strength of Simplicity, where I laid out my thoughts on modifying the canvas construct. you can access it here: 

http://mikelachapelle.posterous.com/the-strength-of-simplicity

 

BTW thank you for the reference on  Polarity Management, I shall certainly give it a look.

Permalink Reply by Cheenu Srinivasan on August 3, 2011 at 1:02am

Thanks Mike, I agree that the current canvas is universal enough that people can include social/environmental costs and benefits. I have done that myself and people do understand.

 

Enjoy PM

 

Regards

Cheenu

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