While the healthcare technology industry is still relatively strong, we’re seeing many of the same trends crop up that have drastically impacted other industries, mainly enterprise IT and industrial equipment. It all starts with the slowing down of CapEx revenue as new product feature innovations take a backseat to value realization. Suddenly, the business model that was built on high growth rates and high profitability needs to adapt to be in the business of delivering outcomes, not just products and services.
However, with the rise of economic buyers and value-based care in the healthcare industry, there’s an opportunity to reverse these trends by creating new service offers. With that in mind, here are the top business challenges impacting the healthcare technology industry and the 5 key themes TSIA has observed during regular conversations with our membership community.
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The top business challenges affecting the healthcare technology industry.
#1: Service Delivery Optimization
The need to reduce the cost of delivering services isn’t new, but due to declining service margins, many TSIA members have put this at the top of their list of priorities. For example, we receive a lot of member inquiries related to traditional productivity approaches, such as improving utilization, driving down the cost per service incident, reducing the cost of spare parts, and moving work to the lowest cost delivery channel.
With a focus on alleviating security concerns, the number of healthcare organizations that are slowly but surely adopting increased connectivity as part of their overall operations has grown significantly.
In addition to traditional approaches, we’re seeing a large amount of interest from healthcare organizations on how to best utilize smart, connected products to implement proactive and preventative technologies. With a focus on alleviating security concerns, the number of healthcare organizations that are slowly but surely adopting increased connectivity as part of their overall operations has grown significantly. The results can be stunning: One member reported that 60% of hardware related issues were resolved remotely without needing to dispatch a field service engineer.
#2: Developing Optimization and Outcome Offers
With the rise of the economic buyer and even more customer demand for value-based care solutions, healthcare technology organizations are presented with a unique opportunity to develop differentiated offers. As accountable care organizations (ACO) continue to tie provider reimbursements to the quality, appropriateness, and efficiency of the healthcare provided, the economic buyer is now more open to new optimization/outcome offer types than ever before. At TSIA, we’ve received more inquiries on how to develop, price, and launch these new optimization and outcome offers over the last 12 months than ever before, and are actively helping our members address this primary concern.
#3: Benchmarking Business Model Transformation
Similar to the drastic changes impacting the enterprise IT and industrial equipment industries, TSIA has observed that the healthcare technology industry is at the beginning of a major business model transformation. When faced with such disruption, every organization wants to know not only how they compare, but also why they are different, and ultimately, how they can improve.
While it’s one thing to spot industry disruption, it’s quite another to do something about it. This is why TSIA provides validated benchmarking that allows these organizations to gauge their performance against the industry, prioritize areas for improvement, and identify best practices for organizational structure and strategic alignment.
#4: Establishing Customer Success
In the healthcare industry, customer success is all about delivering value-based care. Essentially, this means providing better health outcomes relative to the cost of delivering those outcomes. Based on the other industry trends I’ve listed above, it’s apparent that healthcare technology suppliers are being forced to move away from CapEx revenue with annual support/maintenance contracts and toward ARR (annual recurring revenue) business models. But, along with this change, a new customer engagement model is needed.
In the healthcare industry, customer success is all about delivering value-based care.
To support this transition, TSIA has developed the LAER Customer Engagement Model, which consists of four basic steps:
- Land: All of the activities required in selling an offer to the customer and the initial implementation of that offer.
- Adopt: All of the activities involved in making sure the customer is actually adopting the solution that was implemented.
- Expand: All the activities required in helping current customers expand their budget spend with the company.
- Renew: All the activities required to ensure the customer renews their current relationship with the company.
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TSIA's LAER model as it applies to healthcare technology.
As a result, Adoption, Expansion, and Renewal activities have become a heightened focal point as organizations establish how they interact throughout the customer lifecycle.
#5: Developing and Retaining Service Personnel
The labor market for service personnel is tightening globally. In addition, the skill sets that companies want to see in their employees are expanding from the traditional obsession with hiring technical and sales skills (which built the last generation of companies) to now include deep vertical industry expertise.
Based on conversations with our members, we’ve found that healthcare organizations are looking for insights on establishing career paths, benchmarking employee attrition rates, professional development, certifications, and benchmarking base and incentive compensation.
Find Out Even More About What’s in Store for the Future of Healthcare
While this is just a brief snapshot of what’s on the horizon for the healthcare technology industry, even more details, including the capabilities you should be developing to address these changes and challenges can be found in my free report, “TSIA State of Healthcare Technology 2017-18.” Also, I encourage you to join other leading healthcare organizations by becoming a TSIA member to get the tools, frameworks, and deep industry insight to rise above these challenges and set a foundation for a successful future in a changing market. Contact us today to learn more about what TSIA can do for you.