The untapped potential of ecosystems in health care

Written by Ulrich Pidun I Niklas Knust I Julian Kawohl I Evangelos Avramakis I Andreas Klar

April 29, 2021

Business ecosystems offer three important benefits:

  1. They can provide fast access to a broad range of external capabilities that may be too expensive or time-consuming to build internally
  2. Second, ecosystems can scale much faster than pipeline models
  3. And finally, ecosystems offer a large degree of flexibility and resilience

But why are there so few successful health care ecosystems?

There are a few reasons for this. First, innovation in care delivery is hampered by structural roadblocks that discourage the most important precondition of an ecosystem: cooperation between partners. Second, the health care sector is resistant to change. While the overall health care system is under considerable pressure from rising costs, many individual actors don’t feel this pressure because their business models are still intact, creating a strong status-quo bias. Finally, the strategic challenges of moving from a pipeline model to an ecosystem model are considerable, ande few health care players have found the right approach.

Now is the time for ecosystems in health care

Several trends are paving the way for a broader application of ecosystem models in health care. First, new competitors, many equipped with successful platforms and relevant experience in creating business ecosystems, are entering the market. Second, patients are increasingly demanding levels of service and choice in health care that they are used to receiving in other areas of life—often delivered by ecosystems. Third, technology adoption has created new forms of access and interaction. Finally, while the COVID-19 pandemic has exposed many structural weaknesses of existing health care systems, it has also demonstrated the potential of digital ecosystems.

Based on our analysis of health care ecosystems around the world, we have found that the most successful, sustainable ecosystems embrace the following principles:

  1. Focus on a big enough problem to solve.
  2. Ensure that all essential partners are on board.
  3. Select the right orchestrator.
  4. Achieve critical mass by first increasing scale, not scope.
  5. Create and harness data flywheel effects.

Focus on a big enough problem to solve

Establishing an ecosystem requires a considerable upfront investment to build the platform and incentivize partners to join. These investments can only be justified if the ecosystem, once fully established, creates sufficient value by addressing and solving a sizable problem.

A clearly defined value proposition is vital to the success of a health care ecosystem. These value propositions will vary depending on the ecosystem’s targeted disease scope (the number of indications and whether the focus will be on treatment, prevention, or both) and the targeted life area (health or beyond). (See Exhibit 2).

Ensure that all essential partners are on board

Once you have found a big enough problem to solve, the next challenge is to identify all essential partners needed to make an ecosystem work—and convince them to join the ecosystem. Start by creating a blueprint of your ecosystem that outlines the various activities, actors, and responsibilities, along with a clear view of the ways that information, goods or services, and money will flow through the ecosystem.

Select the right orchestrator

In business ecosystems, an “orchestrator” offers a platform, defines the basic ecosystem governance, and encourages others to join (think of Google in its smart-home ecosystem). “Realizers” contribute complementary products or services (such as manufacturers of lighting, security, or entertainment devices in the smart-home ecosystem). “Enablers” supply more generic products or services to the ecosystem participants (such as manufacturers of sensors or displays).

The orchestrator bears the bulk of responsibility for the ecosystem’s success and will shoulder the significant investments required to make it work. In return, the orchestrator typically claims the residual income of the ecosystem, which can be very high (as in the case of Amazon or Apple), though it may take years to achieve profitability (as in the case of Uber or Airbnb).

The challenge in health care is that the natural orchestrator is not always obvious. That said, in some scenarios a particular organization is in a privileged position to take the orchestrator role, depending on the ecosystem’s value proposition and the player’s capabilities. For example, in ecosystems that focus on optimizing treatment of a disease or improving life with a disease, the point of care and medical expertise is critical; therefore, providers are in a good position to orchestrate these types of ecosystems. If the ecosystem aims at improving processes in health care, it’s more important for orchestrators to have a broad operational scope, putting health insurers and governments in a central position. In ecosystems that aim to facilitate a healthy lifestyle, digital capabilities are frequently at the core of the value proposition, which means tech players are in a good position to take on the orchestrator role.

However, it’s not just the orchestrators that benefit from an ecosystem. In many cases, serving as a realizer or enabler can be highly attractive, because they typically have lower investment requirements and can select the most attractive ecosystem to join—or they can even hedge their bets by participating in more than one competing ecosystem.

Achieve critical mass by first increasing scale, not scope

A key challenge during the launch phase is to achieve critical mass so the ecosystem can take off. To this end, the ecosystem must quickly increase its scale to achieve network effects, whereby additional partners and users make the ecosystem more valuable for existing participants, which in turn attracts further partners and users.

Increasing scale requires focus. A common failure is to broaden the scope of the ecosystem beyond its core value proposition before achieving critical mass. A number of health care ecosystems have fallen into this trap by adding too many services and products, only to find that they have diluted their value proposition, added complexity, and struggled to grow.

Create and harness Data flywheel effects

Data can be a key source of network effects in health care ecosystems. Sharing data among ecosystem participants can not only remove existing frictions and enable a seamless patient journey, but also enable new insights and innovation, such as preventive and predictive interventions, faster drug development, improved clinical decision making, and customized treatments.

Data sharing can also amplify flywheel effects. (See Exhibit 2.) As more users join the ecosystem, more and richer data are available, which enables deeper and better insights, which expands the value proposition of the ecosystem and encourages even more users to join. When the data flywheel gains speed, it can propel two additional flywheels in a health care ecosystem. A growing number of users will attract more partners to the ecosystem, which further increases the breadth and improves the quality of the offering and thus attracts more users. In addition, a growing number of users will also enable economies of scale by spreading the fixed costs of the ecosystem over more users, while lowering unit costs, further increasing the attractiveness of the ecosystem for additional users and partners.

Taking action, jointly and individually

Payers, providers, and suppliers, as well as startups, tech companies, and regulators, all have a unique role to play in navigating, managing, and leading a successful ecosystem. All stakeholders must act now to seize the opportunities ahead.

Note: This is an extract of an article that was originally published@ https://www.bcg.com/de-de/publications/2021/five-principles-of-highly-successful-health-care-ecosystems


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