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Q Deployment of e-health services – a business


model engineering strategy
Björn Kijl*, Lambert JM Nieuwenhuis*, Rianne MHA Huis in ‘t Veld†,
Hermie J Hermens‡ and Miriam MR Vollenbroek-Hutten‡
*School of Management and Governance, University of Twente, Enschede; †Roessingh Research and Development,
Enschede; ‡Telemedicine Group, Department of Biomedical Signals and Systems, Faculty of Electrical Engineering,
Mathematics and Computer Science, University of Twente, Enschede, The Netherlands

Summary
We designed a business model for deploying a myofeedback-based teletreatment service. An iterative and combined
qualitative and quantitative action design approach was used for developing the business model and the related value
network. Insights from surveys, desk research, expert interviews, workshops and quantitative modelling were combined to
produce the first business model and then to refine it in three design cycles. The business model engineering strategy
provided important insights which led to an improved, more viable and feasible business model and related value network
design. Based on this experience, we conclude that the process of early stage business model engineering reduces risk
and produces substantial savings in costs and resources related to service deployment.

Introduction chronic neck and shoulder pain or whiplash injury. Previous


.............................................................. studies have demonstrated the clinical effectiveness of the
treatment.5 Clinical trials have shown an increase in the
E-health services may produce quality improvements and ability to work during treatment for patients with whiplash
higher efficiency. However, most have been limited to the and patients with chronic neck and shoulder pain. The ability
pilot or R&D phase. Despite high user satisfaction and to work is an indicator of employee productivity.6,7
attainment of initial objectives, most new services never The myofeedback teletreatment equipment monitors
reach the market – presumably because the related business muscle relaxation during daily activities via sensors and
models are not viable.1,2 actuators in a wearable garment which is connected to a
E-health services seem to be mostly technology driven, personal digital assistant (PDA). The system provides
instead of being focused on value creation.2 Business continuous feedback when there is too little muscle
modelling may be a method of helping technological relaxation. The monitoring information is sent wirelessly to
innovations reach successful deployment and several a computer which can be accessed by health-care
determinants for success have been identified.1,3,4 By giving professionals (Figure 1). These health-care professionals can
the business model a high priority at the start of a project, use the system for optimizing treatment, working more
the failure rate of e-health services may be reduced. This is efficiently by saving on face-to-face contact hours with their
because the business models of these services should be patients and by giving them more personalized feedback.
better aligned with available resources and with their
external environments.2

Research approach
..............................................................
Case study
.............................................................. An iterative, multi-method action design approach8,9 was
used to develop the business model. There were three steps:
The objective of the present case study was to design a
business model for a myofeedback-based teletreatment
(1) An initial qualitative business model was designed;
service MyoTel. The service was aimed at patients with
(2) A quantitative abstract cost benefit model was then
designed, based on the qualitative model and
interviews with experts;
Correspondence: Björn Kijl, School of Management and Governance, University
of Twente, PO Box 217, 7500 AE Enschede, The Netherlands (Fax: þ31 53 489 (3) A value network design was then derived, based on the
2000; Email: b.kijl@utwente.nl) two models and further interviews with experts.

Journal of Telemedicine and Telecare 2010; 16: 344– 353 DOI: 10.1258/jtt.2010.006009
B Kijl et al. Deployment of e-health services

Figure 1 The teletreatment service

Business model descriptive models.13,14 Based on a literature review,10,13 we


.............................................................. defined the following four components:

The business model concept is important in deploying


e-health services, because it supports structural and logical (1) Service (description of intended value, delivered value,
thinking about designing viable services.10 A widely used expected value, perceived value);
business model definition is ‘a blueprint for how a network (2) Technology (description of technical architecture,
of organizations co-operates in creating and capturing service platforms, devices, applications);
value from technological innovation’.4 Essentially, a (3) Organization (description of actors, roles, interactions,
business model can be seen as a definition of the manner strategies and goals, value activities);
by which an organization delivers value to customers, (4) Finance (description of investment sources, cost
entices them to pay for value and converts those payments sources, revenue sources, risk sources, pricing).
to profit.11 In our view, it is important to distinguish
between the two main types of value to be created: These components are related to the ones identified by Afuah
customer value (value delivered from a customer and Tucci15 and Osterwalder and Pigneur.16 The framework
perspective) and monetary value (value delivered from a depicted in Figure 2 was used for analyzing the teletreatment
provider perspective). We therefore define a business model service. Broens et al. 1 identified five categories that influence
as a description of the way an organization or a network of implementation of telemedicine or teletreatment
organizations aims to make money and create customer interventions: (1) technology; (2) acceptance; (3) financing;
value.12,13 (4) organization; and (5) policy and legislation.
We focused on two of these determinants: the
Organization component (with specific attention to the
value network and related roles) and the Finance
Business model components
.............................................................. component (with a special focus on revenue streams). The
other components had already been designed and partly
In recent years business model research has focused on implemented in the R&D phase of the telerehabilitation
exploring business model components and developing service.17 – 19

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B Kijl et al. Deployment of e-health services

Figure 2 Components of a business model

Dynamic business model engineering workshop for 12 experts in the field of myofeedback and
teletreatments from four European countries (The
and validation Netherlands, Belgium, Sweden and Germany). The method
..............................................................
was based on a scientifically tested business model
Most business model literature has a static and qualitative development method.10
character. There has been little research on early stage The main question was which business model would be
development and validation of business model designs.13,20 needed for deploying the telerehabilitation service and how
In practice, business models are dynamic and change the related value and revenue streams would look. The
continuously – from the R&D phase to the market experts proposed to offer the myofeedback teletreatment
deployment phase – because of changes in market, technology service as a fee-based, full service with the health insurance
and regulatory environments.10,13 This dynamic character is organizations of patients as the primary revenue source.
depicted in the dynamic version of our business model analysis These organizations could reimburse the teletreatment for
framework as discussed in the previous section (see Figure 3).10 their patients. Because of its complexity and technological
Business models could be qualitatively as well as quantitatively character, offering the service in the form of an ‘off the
developed and tested, not only at the market stage, but also at shelf’ product was less viable according to the experts.
the implementation and R&D phases.20,21 Starting to think Table 1 shows the main value network roles, actors and
about business model designs during implementation or, even activities as identified by the experts. A value network role is
worse during the market deployment phase, is common, but it performed by a specific value network actor who performs
is very risky and costly.20 So also is not testing business model the actual activities in the value network (cf a specific actor
designs quantitatively.21 playing a certain role in a film).
In our business model engineering method we aimed to According to the experts, the most crucial role in offering
design an initial business model in the R&D phase of the the service would be that of the telerehabilitation service
innovation process and to quantitatively validate it in order provider. The medical R&D organizations, as well as the
to reduce risks, save costs and improve the chances of software platform provider, were also expected to be
successful deployment. In this way, the business model important because these roles are highly specialized and
could then be further improved in the subsequent phases of more difficult to replace than a hardware or network
implementation and market deployment.10,13,20 provider. According to the experts, good co-operation
between them would be a prerequisite for offering the
teletreatment service in the next stages of the deployment
Step 1: Designing an initial, qualitative process.
For a complete overview of the proposed value network
business model structure and related roles and revenue streams as proposed
..............................................................
by the experts, please see Figures 4 and 5. (The blocks in
In order to develop an initial qualitative business model for the diagrams represent primary value network roles,
the myofeedback telerehabilitation service, we organized a whereas the arrows represent the related activity flows in the

346 Journal of Telemedicine and Telecare Volume 16 Number 6 2010


B Kijl et al. Deployment of e-health services

Figure 3 Dynamic business model framework

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B Kijl et al. Deployment of e-health services

Table 1 Main value network roles, actors and activities identified by the value network. The nodal value network role of the
experts telerehabilitation service provider is centrally located.)
Roles Actor Activities

User/patient Therapist patient Is treated by the


myofeedback system Step 2: Developing a quantitative
Network provider Telecom operator Offers mobile
communication abstract cost benefit model
services ..............................................................
Hardware provider, e.g. Hardware company Offers hardware
for communication
Most business model and value network design processes
devices and sensors
Telerehabilitation Spin-out company/ Offers the actual service, stop at the level described in the previous section without
(myofeedback) service independent including helpdesk conducting any further quantitative validation.10 Although
provider organization support, training and
business model and value network designs may be
certification, public
relations developed based on the extensive knowledge of experts,
Health-care professional Therapist organization Offers the professional they should be further tested and validated in order to
care accompanying the
obtain some indication of the viability of the designs. For
activities of the
myofeedback service this reason, we developed a quantitative analysis model – a
provider so called abstract cost benefit model (ACBM).
Software developer Company Develops the
myofeedback software
Software platform Company Offers the myofeedback
provider software platform Background to the quantitative model
Insurance company Company Offers health insurance to
An ACBM was developed to obtain more insight into the
end user/patient
Employer (Non) commercial Employs the patient viability of the service concept and related value network
organization structure. The model focused on identifying the main
Medical research and A group of medical Medical research, giving
differences in costs and benefits when comparing
development institutions that support related to
organization supports the developing training conventional treatment for work-related neck and shoulder
commercial material, certification problems and whiplash patients with the new
exploitation of the
myofeedback-based teletreatment. The model calculated
myofeedback service
costs and benefits without predefining specific network

Figure 4 Initial telerehabilitation service value network structure with value streams

348 Journal of Telemedicine and Telecare Volume 16 Number 6 2010


B Kijl et al. Deployment of e-health services

Figure 5 Initial telerehabilitation service value network structure with revenue streams

value streams or revenue streams. It could therefore be used costs for personnel and housing. The volume and cost tables
for designing new value network structures as well as are part of a spreadsheet that simulates the provisioning
validating and improving existing ones. of the teletreatment service in year i from 2008 to 2018.
The ACBM helped to answer the following question: Multiplying Ni and Pi gives the overall costs for year i for
which of the most relevant value network roles will increase each activity. The values for Ni are based on an S-shaped
the costs and which will decrease the costs related to technology adoption curve.22 The values for Pi are based on
implementing the new service? This is crucial information today’s market prices that develop over time, i.e. technology
for defining the money streams and their volumes. When a prices decline (deflating prices), whereas e.g. salary costs for
value network role sees a strong decrease in costs because of professionals increase (inflating prices). This enables Net
implementing the telerehabilitation service, this role may Present Value calculations ( present value calculations of
form an important revenue source for the telerehabilitation expected future cash flows) over the ten-year period as well.
service provider in order to compensate for the value created The ACBM was developed in the form of a spreadsheet
for this role by the telerehabilitation service provider. On the model. By changing the variables in the model, the
other hand, when a value network role has to incur more expected benefits and costs were automatically recalculated.
costs in order to offer telerehabilitation, then this role has to In summary, the ACBM was developed in the following
be compensated for the value created by this value network steps:
role.
(1) Identify the primary value network roles;
Modelling approach (2) Identify the main activities associated with each of the
roles;
The modelling principles underlying the quantitative
(3) Determine the costs related to these activities;
model are relatively simple. The basis of the model forms an
(4) Determine the volumes of the activities;
analysis of the most relevant value network roles in the
(5) Calculate the expected benefits and costs.
context of telerehabilitation deployment. For each of these
stakeholders the most important business processes and
activities are defined. For each activity we determine the
number of times N the activity is carried out and the cost 1. Identify the primary value network roles
price P per activity. With respect to cost price, we On the basis of interviews with the experts, four main value
distinguish between investments and yearly costs. The network roles for benefit and cost calculations were
investments are onetime costs for training and education identified: (1) the myofeedback service provider; (2) the
(needed when new employees get involved) and health-care provider; (3) the employer; and (4) the patient.
investments for equipment (needed when more devices The service provider offers the telerehabilitation service
are needed or old devices are worn out). Other costs are value proposition. Important activities of this role are

Journal of Telemedicine and Telecare Volume 16 Number 6 2010 349


B Kijl et al. Deployment of e-health services

managing the telerehabilitation back office and


myofeedback devices, as well as developing the service
concept. Another important role is that of the health-care
provider who diagnoses and consults patients. The health-
care provider also performs the actual medical treatment.
The employer employs staff who may or may not play the
role of telerehabilitation patient. The employer may profit
from the telerehabilitation treatment when it leads to less
sick leave or improved worker productivity.

2. Identify the main activities associated


with each role
Based on a value network role activity analysis, supported
by the experts mentioned before, the most important Figure 6 The cost benefit model showed that the new
activities for each role as mentioned in the previous step myofeedback treatment was more expensive than the traditional
were identified (see Table 2). Because the ACBM focuses on treatment, mainly because of ICT investments and operational
the main differences in costs and benefits between new and costs. The total costs are expected to increase by about E100 (to
about E500) per patient with chronic neck and shoulder problems
traditional treatment, the experts were also asked to identify
the activities that are expected to lead to the most
substantial cost and benefit changes. These activities are 4. Determine the volumes of the activities
italicized in Table 2 and modelled in the ACBM. The volumes related to the activities were identified by the
experts, such as the number of patients treated, the number
3. Determine costs related to the primary of treatments and health-care professionals involved, as well
as the number of devices and back office units needed.
value network role activities
In order to perform the activities as identified in the
previous section, costs have to be made. These costs were 5. Calculate the expected benefits and costs
defined for each of the activities modelled in the ACBM. For The main value network roles and their main activities and
the model, we made a distinction between investments related costs and volumes were modelled in a spreadsheet
(such as hardware, maintenance, training and education for a 10-year period, from 2008 to 2018.
and depreciation) and operational costs (such as personnel For calculating the costs and benefits of the teletreatment
and housing). service, a so-called variables ‘cockpit’ was developed. This
cockpit gave an overview of the most important variables
Table 2 Main value network role activities. The activities that are that influence the costs and volumes. Based on this, the
italicized are explicitly modelled in the Abstract Cost Benefit Model. The actual benefit and cost calculations can be made. Important
italicized activities are expected to show the most critical changes when
comparing the current situation (making use of conventional
treatment) with the new situation (using the teletreatment)

Role Activities

Myofeedback service provider Manage telerehabilitation service (overhead)


Develop telerehabilitation market (marketing)
Acquire telerehabilitation customers
Build back office
Manage back office
Build device service
Manage devices needed for treatment
Train myofeedback service delivery personnel
Deliver myofeedback service
Request reimbursement myofeedback treatment
Receive payment for myofeedback service
Health-care provider Develop telerehabilitation treatment
Train personnel telerehabilitation treatment
Diagnose patient
Consult patient with traditional treatment
Consult patient with telerehabilitation treatment
Request reimbursement treatment
Receive payment for treatment Figure 7 Overview of the cost benefit analysis in the Netherlands;
Employer Employ traditionally treated employee
showing the expected ICT investments and ICT operational costs,
Employ telerehabilitation treated employee
Patient Undergo traditional treatment
service provider and health-care professional investments (#1: neck
Undergo telerehabilitation treatment and shoulder treatment; #2: whiplash treatment) and the expected
operational benefits/costs for health-care professionals

350 Journal of Telemedicine and Telecare Volume 16 Number 6 2010


B Kijl et al. Deployment of e-health services

traditional treatment of neck and shoulder problems can be


found in the cockpit. This is not the case for teletreatment of
whiplash patients because this kind of treatment is not
designed to replace existing treatment methods.
The variables in the cockpit are grouped by general
country characteristics, general health-care professional
variables, variables related to traditional and myofeedback
teletreatment of neck and shoulder problems and variables
related to traditional and myofeedback telerehabilitation
treatment of chronic whiplash disorders. The last section of
the cockpit consists of some specific variables related to the
telerehabilitation service provider role.
Based on these variables, the volumes and costs for each
of the activities identified were calculated over the period
2008– 2018. Because the model was designed in the form of
Figure 8 Overview of the cost benefit analysis in the Netherlands. The a spreadsheet, it is very flexible: the effects of changing one
maximum employer benefits related to absence reduction and or more variables are calculated immediately. Based on a
productivity improvement are also shown different set of cockpit variables for different countries, the
ACBM can automatically estimate the expected volumes
variables in this context are the hourly cost price of a health- and costs on a country-by-country level.
care professional, the expected productivity increase
resulting from treatment, the number of therapy
appointments per treatment and the myofeedback device Results of the quantitative analysis
costs. All figures for the cockpit variables were determined The cost benefit calculations revealed three things. The
based on results from the literature, from research results and related figures show the calculations for the Dutch market.
from the expert workshops. Because the teletreatment of For the other three countries, similar conclusions can be
neck and shoulder problems is on par with conventional care drawn:
but without the efforts and time loss associated with regular
visits to the clinic18 and because we wanted to calculate the (1) The new myofeedback treatment is more expensive
relative levels of potential efficiency increase because of using than conventional treatment – mostly because of IT
the new service, variables related to teletreatment as well as investments and operating costs (see Figure 6);

Figure 9 Final telerehabilitation service value network structure with revenue streams. The alternate revenue source role is
shown in bold type

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B Kijl et al. Deployment of e-health services

(2) Although the myofeedback treatment is expected to be The cost benefit calculations part of our strategy revealed
more efficient compared with the traditional treatment three critical points:
method, the IT investments are likely to exceed the
labour cost savings (see Figure 7); (1) The new myofeedback treatment was more expensive
(3) The expected absence reduction and productivity than traditional treatment;
increase of working myofeedback patients does (2) The labour cost savings are not likely to compensate for
compensate the investments needed at the employer the additional IT costs;
level (see Figure 8). (3) The expected absence reduction and productivity
increase of working myofeedback patients do
compensate for the additional IT costs.

Step 3: Deriving a viable value Our ACBM falsified the initial value network structure that
network design resulted from the first step, where the experts expected that
.............................................................. the teletreatment service would be cheaper than
conventional treatment methods. The introduction of the
Based on the previous two steps the initial value network
myofeedback treatment based on the initial value network
design was updated in the form of two alternative value
structure and related business model design is expected to
network structures.
be difficult due to a lack of incentives for health-care
Because employers (as well as their occupational
insurance organizations to reimburse myofeedback
health-care/disability insurance organizations) and not the
teletreatment. Thus the teletreatment leads to higher
private health-care insurance organizations seem to profit
treatment costs, which may not be attractive to health-care
most from implementing the myofeedback service, a
insurance organizations. However, employers of patients
revenue model based on payments by employers (or their
would receive most benefits related to implementing the
insurance organizations) seems to be more feasible. A related
myofeedback service. Consequently, these organizations
alternative could be to offer the service directly to employees
should be seen as the main potential revenue source and
via the health and safety departments of their employers.
therefore as having a critical value network role.
The value network structures were validated in the form
We conclude that our early stage business model
of eight semi-structured expert interviews with
engineering strategy reduces risk and results in service
organizations that could potentially fulfil critical roles in
deployment costs and resources savings. This is because it
the value network design (such as health-care professionals,
led to business model and related value network design
insurance organizations and potential myofeedback service
improvements that would otherwise have been unknown or
providers). Based on these validation interviews, the first
learned at a much later phase of the deployment process.
alternative value network structure (a revenue model based
Although the results are encouraging, the method needs to
on payments by employers) was the preferred option, in line
be further validated. A more thorough analysis of
with the results of the ACBM. One possible change was
environmental factors like market, technology and
proposed by the experts: they proposed to extend the role of
regulatory environments1,10,13 could be included in the
the software provider in the initial value network structure
future. In the context of new e-health services, regulatory
(see Figure 4) into that of a system integrator which
environments may have a major effect on deployment,
integrates the software as well as hardware components
technological quality and user acceptance.1,2
needed for the myofeedback service. Because of such a
change, the myofeedback service provider could focus on
the delivery of the teletreatment service without the need
for resources to handle technical problems. The resulting
value network design is shown in Figure 9. References
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