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Research: Health Industry, Technological Innovation Tied to Business Model Innovation

Health Industry, Technological Innovation Tied to Business Model Innovation
Published on
31 March 2017

With the growth of digital tools and applications, many industries are faced with the arrival of new players. This latest study explores the use of applications in the healthcare industry in order to better compare the innovation capacity between incumbent industry companies such as pharmaceutical companies and newcomers such as digital tech companies.

This article from Janna Rose, Vincent Mangematin and Yi Jiang is the subject of the 34th Grenoble Ecole de Management Executive Summaries.

From the article

Technological innovation mediated by business model innovation: App developers moving into health
International Journal of Technology Management, 2017, Forthcoming

To better understand innovation in business models, the researchers studied data drawn from a single technology: the most downloaded apps in the iTunes' Health & Fitness category. As a result, the researchers were able to compare business model innovation by traditional healthcare companies versus innovation by newcomers. In this case, new players included digital tech companies, individual developers and book publishers.

Four areas for business model innovation

The researchers identified four areas of innovation for business models: identifying customers, engaging with customers, monetization, and logistics and governance. Examples of identifying new customers include an insurance company's switch from targeting employers to targeting individuals. The researchers also highlighted new techniques for customer engagement such as tracking with GPS, joint challenges, goal setting and sharing progress. Monetization could often come through various channels, including fees for premium apps, database licensing and fees for advertising. Companies delivered their content and added-value via the iTunes platform as well as app promotion with various audiences at locations such as universities and hospitals.

Newcomers demonstrate greater innovation capacity

In exploring how business models vary between incumbent companies and newcomers, the researchers highlighted that newcomers demonstrated greater innovation capacity in all four areas. While incumbent players focused primarily on traditional audiences (e.g., patients and doctors), new players expanded their target audience by re-orienting towards health and wellbeing. This enabled them to target a wide panel of potential users thanks to apps that cover everything from fitness to health tracking, education or medical references. The researchers underlined that newcomers have a different perspective and therefore the potential to disrupt a market with innovative approaches. Finally, they noted that the shift from patients to consumers, or from users to payers, is an essential factor in the evolution from a purely medical market towards a market for health and well-being.

Key points

  • Business model innovation can grow out of four areas: customer identification, customer engagement, monetization, and logistics and governance
  • In the health industry, new players such as digital tech companies or individual developers demonstrated greater innovation in terms of audience targeting and interaction
  • New players offer a different market perspective and therefore encourage disruptive innovation

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