modelH update: Channels

Editor’s note: This article is an update on modelH, the dynamic co-creation forum created by Kevin Riley and Associates, Innovation Excellence, and Batterii where healthcare innovators from around the world are building a foundation for new business models in healthcare. Their goal is to co-create an open source business model canvas that applies specifically to the US healthcare system.

Learnings on Channels for the Business Model Canvas for Healthcare

We just wrapped up our 8th business building block sprint on Channels. In summary, we completed 2 objectives:

• What questions do we ask for the canvas regarding Channels?
• How do we treat the development and optimization of the Channels that help our Customer Segments find our Value Proposition?

Your Channel (communication, distribution, or service) is where your Value Proposition is delivered to your Customer Segments.  Channel development starts with understanding the Buyer’s Purchase Journey, defined by the specific steps a buyer takes while deciding to purchase a given Value Proposition. But healthcare business models must also consider which Channels are relevant to how a User actually “uses” a given Value Proposition. Finally, we’ll explore the effect that Key Influencers and Intermediaries have on a Channel’s outcome in order to achieve optimization.

Customers often use multiple Channels to decide upon and purchase (or consume) a given Value Propositions. Consumers have the expectation that retailers with multiple channels should have alignment across channels for both service and sales. Channel Threading is the intentional connection of multiple Channels with the understanding of how they will be used to complete an outcome for your Customer Segment.

Doing this well creates distribution channels that are linked together in a meaningful way and also enables healthcare companies to create personalized products and messaging. Market leaders in retail health first focus on helping consumers navigate through the maze of health options available. Market disrupters work to remove the maze altogether. As the maze is different for every individual, the most successful healthcare business models will know and understand their customers’ preferences for successful channel “navigation”.

Our canvas should help practitioners both:

1. Design business models that optimize Channel mix based on Customer Segment preference, and
2. Thread Channels together to create a meaningful purchase journey.

1. Questions to Ask on the Canvas for Channels

What are the Questions that should be answered when developing Channels for a healthcare business model?

• Through which Channels do your Customer Segments want to be reached?
• Through which Channels are you touching your Customer Segments now?
• Do your Customer Segments use multiple Channels, and if so how?
• Which Channels work best for your target Customer Segments? How are you integrating your Channels with your Customer Segment routines?
• Which Channels are most cost-efficient for your target Customer Segments?
• Are there Intermediaries in your Channels?
• How do you engage your Key Influencers into your Channels?

2. How to Optimize and Thread Your Healthcare Channels

How do you design business models that optimize Channel mix based on Customer Segment, then preference and thread them together to create a meaningful purchase journey? It is critical for healthcare business models to correctly use their multi-channel strategy. You must know your total traffic amount from each channel.  Moreover, you must be able to trace how consumer transactions that take place – across multiple channels.  Most importantly, you need to make it as easy as possible for the consumer to navigate where they need to go and convert.

Channel Threading is the intentional connection of multiple Channels with the understanding of how they will be used to complete an outcome for your Customer. It requires tying together the touch points that exist today, as well as areas that are not being addressed but are desired by your Customer Segment. Furthermore, the modern customer uses multiple Channels to decide upon and purchase (or consume) a given Value Proposition. To do this well, it creates methods of distribution that are linked together in a meaningful way. This enables healthcare companies to create personalized products and messaging.

Channel Threading starts with understanding the consumer’s purchase journey. The purchase journey is comprised of the steps a customer takes in deciding to buy and use a given Value Proposition (product).  It involves the Channels in which the steps take place as well as the effect that Key Influencers and Intermediaries may have upon the outcome. However, healthcare it is very complex. There are two parts to the journey: the purchase and the use of the purchase. Both of these parts matter equally in healthcare business models, but unfortunately do not have equal treatment.  Traditionally, more time has been spent on the purchase side than on the use side of the equation.

Ultimately, the winning healthcare business models will not focus on helping consumers navigate through the maze of health options available, but instead remove the maze altogether. As the maze is different for every individual, the most successful models will know who their customers are ahead of time and will understand their preferences.

Before You Begin

Keep in mind that you cannot be all things to all people. Understand increasingly complex consumer behavior as you address your actual channel strategy. This strategy should stem from what your Customer Segment desires, instead of what you believe it needs. When you pick a channel, you must also pick an “EST” which creates a focused experience. For more on the theory of EST, I suggest you read “Winning at Retail: Developing a Sustained Model for Retail Success,” by Willard Ander and Neil Z. Stern.  The upshot of this theory is that the best retail channel companies intentionally create a defined market position for themselves, and reinforce this position in the customer’s mind. In short, they dedicate themselves to being the best at one of the “EST” models, and then defend that advantage against the competition.

The EST model creates a focused experience by being the best at one thing.

A Simple Plan

Basically, it is a very simple path. First, pick which Customer Segments are most important to you. Then build what Channel(s) matters most to your customer. Put them in a priority list according to their needs and what is perceived as Value. Then craft an orchestrated Experience across the list.  Devise what adds value to your Value Proposition (both known and unknown) in an iterative fashion.

1. Building the appropriate channels for any business starts with identifying the jobs-to-be-done (JTBD) for each of the consumer purchase journey categories, or “bubbles” as shown above.
2. Identify all possible channels that the consumer can use to complete their JTBD. This includes channels inside and outside of your control.
3. Consider the degree of fit for each selected channel: product and customer fit, profitability, goals and objectives, and sales goals.
4. Create a “Hassle Map.” By definition, a “hassle map” defines all of the actual steps that characterize the negative experiences of the customer.  For our work, we will use the term but understand that it does not necessarily equate to all negative experiences.  In this situation, we will define the Hassle Map as the “steps that characterize the various channel experiences of the customer in completing their JTBD.” The goal is to create the actual journey of the customer across all selected channels.
5. Create the desired “channel threads” from the representative gaps in the process. These threads show how the customer uses your channels in combination or sequence to complete their JTBD, planned or otherwise. The redesign requires accentuation of the existing positive experiences and improvement of those negative experiences that represent what is most appealing to the customer.  This minimum viable product approach to channel improvement is necessary because 1) there is a limited amount of work that can be accomplished at any given time, and 2) the customer’s needs and wants for a channel will change over time as they acclimate to the process (and like it). An example for this is the migration from retail banking to online banking.  This work also includes clearly stating what is being “left out of the process so that manual work-arounds can be developed and communicated”.
6. Finally, create a channel development plan in conjunction with the channel owners and other internal stakeholders for the tasks needed to modify and/or link channels to optimize the consumer JTBD flow.

Build With The End In Mind

What happens when you Channel Thread without regards to good Experience design?  This is a key question. Watch this engaging video explains this concept.

How (not) to Thread Your Multiple Retail Channels

In all seriousness, this is a funny video that actually does a good job of showing how multichannel retailing can work – although in this case, very poorly due to a bad customer experience. Your customers want and expect you to tie together their experiences across your channels (and others). Imagine ordering a pizza in the future and your health insurance premiums change with your toppings.

In Conclusion

There are three additional factors to consider when selecting your Channels and Channel mix:

• Control: the amount of control you have over the customer experience;
• Visibility: the strength of potential to collect customer data; and
• Customer preference: prioritizing options for direct or indirect channels.

Take time to consider any of these topics along with other relevant factors in the Channels block of your business model canvas. Regardless of whether your business model is aimed at Patients, Providers, Payers, and or Purveyors, you need to focus on properly defining your Channels, Channel mix and the threading of your Channels. The goal is for the Customer Segment to successfully complete their purchase journey and realize your Value Proposition to its fullest.

What Is Next?

Next up at modelH, we are going to tackle another doubleheader, examining Customer Relationships (1.9) and Customer Experience (1.10) simultaneously.  Hopefully, we can optimize making sense out of experience when juxtaposed with relationships.

Interested in what we are doing?

Step up to the plate an get involved. We welcome your expertise and contribution as we co-create our open source business model canvas for healthcare.

• Click here to learn more: https://www.modelh.org/modelh.htm
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Kevin Riley is an entrepreneur, healthcare executive, and business model innovator who works with start-ups and legacy companies across the healthcare industry. He founded and was CEO of a national health care retail company, has played leadership roles for national retail health start-ups, and served as the first Chief Innovation Officer of a major insurance plan. In 2006 he started Kevin Riley & Associates Health Model Innovation to help companies with the convergence of health care and the consumer.