Segment markets on situation to unearth winning new business models

“Situation” is a powerful lens for identifying business model innovation opportunities and protecting whatever market space you now command. “Situational segmentation” recognizes that any one customer’s needs – for a restaurant for example – depend on the circumstances giving rise to the need – entertaining, date-night, shopping with a friend. You can disrupt a leader or protect your position by finding situations where existing offerings fail to address situational needs.

Zipcar, founded in 2000, did just that. Errands and other short trips lead auto nonowners, like college students and young urban dwellers, to need a car for hours instead of days or weeks. Auto rental companies, designed for travel and longer-term rentals, are often too far away, too expensive and take too much time to transact with to meet short-hop situational needs. Zipcar’s car sharing subscription service addressed the unmet need, allowing its members to easily reserve, access and pay for conveniently located cars by the hour.

City specific competitors, such as Wisconsin-based Madison Environmental Group’s Community Cars, offer the same solution. The growing market is attractive enough that Hertz has created a competitive product, Hertz-on-Demand, that I believe will give Zipcar a run for its money with a lower-cost business model and a better solution for trips to and from the airport.

Walk through the grocery store and you’ll see all kinds of situation segmentation. “Meals-for-one” and “crowd-sized” offerings fill columns in the frozen food section. Or one serving yogurt containers and family pack chicken breasts. Spend a week observing markets and you’ll catch the ubiquitous practice of situational segmentation.

Yet head into the healthcare sector of our economy and you’ll find an industry sorely in need of situational segmentation. Surgeons, for example, see patients in their offices and hospital or out-patient operating and recovery rooms, oftentimes leaving post-discharge needs poorly met. But a new company, NudgeRx, is wisely stepping into this void. NudgeRx, started by medical products industry veteran David Schuster, offers hospitals a technology platform and 24-7, on-call nursing hotline to help surgical patients and their caregivers manage post-discharge care. With about a third of hospital patients having an unplanned readmission within 3-months, NudgeRx’s value promise is compelling: “We’ll help you improve surgical patient satisfaction while reducing re-admissions and their financial cost to your organization.” The company is initially targeting 10 common inpatient surgeries experienced by over five million patients per year.

NudgeRx gets its business model design right on multiple levels:

• Preventable re-admissions are a $39B financial drain on the US healthcare system at a time when everyone’s eyes are focused on its high costs. Changes in health insurer contracting and federal health policy place providers, not payers at financial risk for re-admissions, leaving providers searching for solutions.

• By leveraging software technology and the web, NudgeRx’s lowers the cost of care relative to labor-intensive case managers that hospitals use to address post-discharge needs for some home-bound patients; and, it improves quality relative to the “Call us if there’s a problem” approach for all other patients. NudgeRx’s web-based software platform provides discharge instructions through personalized daily “bite-size” recovery plans, daily monitoring questions, tips, medication reminders and other to-do lists, a welcomed and needed alternative to the written discharge documents that often overwhelm patients and their caregivers.

• NudgeRx wisely recognizes that technology must be engaging to improve outcomes. Its 24-hour hotline enables patients to build relationships with nurses, who monitor on-line patient engagement, initiate contact when patients miss milestones and respond to patient questions. The relationship motivates use of the automated system.

• The platform technology can incorporate doctor-specific discharge requests while also addressing best practices in managing specific surgical discharges.

• By offering better support, hospitals may be able to send some patients home rather than to sub-acute care facilities, a change that will benefit insurers’ bottom line, patients’ well-being and NudgeRx’s market size.

• As a start-up, NudgeRx wisely avoided targeting chronic disease discharges. These are far harder to manage, as they often require changes in deep-seated patient behaviors. And it’s offering investors a team with domain experience and clinical trial success, missing from many healthcare IT start-ups.

Healthcare IT business models could revolutionize medicine and dramatically lower its cost. Schuster says that the primary deterrent to adoption of cost-saving technology is provider management teams hesitant to disrupt established treatment patterns. Winning providers will recognize the handwriting on the wall and find the best situation-specific solutions for advancing patient care, making well-designed companies like NudgeRx valued ecosystem partners.

More articles by Kay Plantes

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• Three root causes of failed strategic planning
• Blueprint Health inaugural class of start-ups reinforce business model lessons
• Big pharma faces big business model questions