Elements to pharmacy business models

ELEMENTS TO PHARMACY BUSINESS MODELS

DAVID HOLDFORD, R.PH., M.S., PH.D.

PROFESSOR, VIRGINIA COMMONWEALTH UNIVERSITY SCHOOL OF PHARMACY

Slides to Accompany “Marketing for Pharmacists”

OUTLINE

1. DEFINE BUSINESS MODEL

2. ILLUSTRATE A BUSINESS MODEL CANVAS

3. DESCRIBE THE ELEMENTS TO PHARMACY BUSINESS MODELS

1. DEFINE BUSINESS MODEL

A BUSINESS MODEL DESCRIBES HOW A BUSINESS OR ELEMENT OF A BUSINESS PLANS TO MAKE MONEY.

BUSINESS MODELS ARE GENERAL, LARGE PICTURE VIEWS OF THE BUSINESS & TYPICALLY GLOSS OVER THE OPERATIONAL DETAILS OF THE BUSINESS

BUSINESS MODELS DESCRIBE:

• THE CUSTOMER VALUE PROPOSITION

• RESOURCES & PROCESSES

• THE PROFIT FORMULA

2. ILLUSTRATE A BUSINESS MODEL CANVAS

THE BUSINESS MODEL CANVAS IS A POPULAR TOOL USED FOR PLANNING & DEVELOPING BUSINESS MODELS

THE BUSINESS MODEL CANVAS ORIGINATED FROM BUSINESS MODEL GENERATION (HIGHLY RECOMMENDED) & HAS BEEN ADAPTED FOR MANY TYPES OF BUSINESSES INCLUDING HEALTH CARE

THE BUSINESS MODEL CANVAS HAS BEEN ADAPTED TO TEACH PHARMACISTS AND PHARMACY STUDENTS HOW TO DEVELOP INNOVATIVE BUSINESS MODELS

Organization's Operation -

Specific background about the organization

where the product/service will

be provided

Strengths, Weaknesses - Your

capabilities to serve targeted

customers

Value Proposition - The case you make

to customers

Secondary Customers - all

other people you may serve

Partners - People or businesses who can help you serve

customers

Opportunities, Threats - Potential

for success or failure in the

market

Primary Customers - People or

businesses you want to serve

Competitors - People or

businesses who compete for your

customers

Costs - Financial and nonfinancial inputs needed to serve customers

Pricing & Reimbursement - Sources of revenue to sustain your value proposition

Communication Plan - How your

value proposition is communicated

to customers

Implementation - Details about critical factors for success of business

Business Model Canvas for Pharmacy Services

Source: (adapted) Osterwalder A, Pigneur Y. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ.: John Wiley and Sons; 2010.

Organization's Operation -

Specific background about the organization

where the product/service will

be provided

Strengths, Weaknesses - Your

capabilities to serve targeted

customers

Value Proposition - The case you make

to customers

Secondary Customers - all

other people you may serve

Partners - People or businesses who can help you serve

customers

Opportunities, Threats - Potential

for success or failure in the

market

Primary Customers - People or

businesses you want to serve

Competitors - People or

businesses who compete for your

customers

Costs - Financial and nonfinancial inputs needed to serve customers

Pricing & Reimbursement - Sources of revenue to sustain your value proposition

Communication Plan - How your

value proposition is communicated

to customers

Implementation - Details about critical factors for success of business

Business Model Canvas for Pharmacy Services

Source: (adapted) Osterwalder A, Pigneur Y. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ.: John Wiley and Sons; 2010.

3. DESCRIBE THE ELEMENTS TO PHARMACY BUSINESS MODELS

Organization's Operation -

Specific background about the organization

where the product/service will

be provided

Strengths, Weaknesses - Your

capabilities to serve targeted

customers

Value Proposition - The case you make

to customers

Secondary Customers - all

other people you may serve

Partners - People or businesses who can help you serve

customers

Opportunities, Threats - Potential

for success or failure in the

market

Primary Customers - People or

businesses you want to serve

Competitors - People or

businesses who compete for your

customers

Costs - Financial and nonfinancial inputs needed to serve customers

Pricing & Reimbursement - Sources of revenue to sustain your value proposition

Communication Plan - How your

value proposition is communicated

to customers

Implementation - Details about critical factors for success of business

Business Model Canvas for Pharmacy Services

Source: (adapted) Osterwalder A, Pigneur Y. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ.: John Wiley and Sons; 2010.

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1. PRIMARY CUSTOMERS

Primary customers are the most important group of individuals served by what is being offered?

Physicians? Employers? Government? New customer? Established customers?

2. SECONDARY CUSTOMERS

These are the other customers served by what you offer

They may be

Internal to your organization

External to your organization

3. VALUE PROPOSITION

This is the promise to customers of the value to be delivered

It explains in a compelling and clear manner why customers should choose you over competing options

4. PARTNERS

With whom will you partner to serve customers?

Will you work with other health care professionals, local businesses, insurers?

Inside the organization

Outside of the organization

5. COMPETITORS

Who will be your current & potential competitors?

If they aren't partnering with you, individuals and organizations may be competing with you.

Intra type competitors – offer same or similar services to your pharmacy

Intertype competitors - provide distinctly different products and services that meet similar customer needs & wants you plan to serve

6. YOUR ORGANIZATION’S OPERATION

1. Tangibles - Location, facilities, and brief description of other products & services provided

2. Mission and Values - Mission of the organization & the values that are important in making choices (e.g., patient-oriented, profit driven, community-oriented)

3. Team - Key members of the team who are planning & providing the service

7. STRENGTHS AND WEAKNESSES

What unique strengths does your organization have that gives you a competitive advantage over other options in the health care marketplace?

What weaknesses give you a disadvantage?

“Marketing of Health Promotion Programs/Activities.” Pharmacotherapy Self-Assessment Program (PSAP) – Sixth Edition. Lenexa, KS: ACCP. 2008.

8. OPPORTUNITIES AND THREATS

What opportunities (that your service could meet) are in the current marketplace?

What are potential threats to the success to your service?

“Marketing of Health Promotion Programs/Activities.” Pharmacotherapy Self-Assessment Program (PSAP) – Sixth Edition. Lenexa, KS: ACCP. 2008.

9. COSTS

What are the major costs of the service being provided?

Startup Costs

Operating Costs

Fixed

Variable

10. PRICING & REIMBURSEMENT

How does the business receive revenue for the service being provided?

What will be the price for each unit of service provided?

Who will pay for the service?

11. COMMUNICATION PLAN

How will you communicate your value proposition to customers?

What messages will you communicate?

What do you want to achieve with your communications?

12. IMPLEMENTATION PLAN

What things do you, the customer, and the payer need to do to make the service a success?

What are the most important things your organization needs to do to successfully implement the program?

How will you know if you are successful or not?

SUMMARY

Planning is essential to prepare for success

Plans themselves are meaningless unless they are used to achieve the organization’s mission

Models need to evolve as they are tested in real marketplace conditions