Wednesday, November 27, 2013

Blue Ocean Strategy in Healthcare

Kim and Mauborgne's article on Blue Ocean Strategy highlight the benefits of competing in 'uncontested waters'.  As opposed to Red Oceans, Blue Ocean Strategies allow companies to beat the competition, grow market share and create sustainable value by creating uncontested market space and making the competition irrelevant. 

Currently, in healthcare, health systems and providers compete in Red Oceans.  They compete in the existing market space of patient care, employ strategies aimed at beating the competition, exploit existing demand of sick patients, and make the value-cost tradeoff.  Instead of operating within Red Oceans, where reimbursements are being reduced, costs are going up and health systems compete using the same services, hospitals and healthcare companies should employ a Blue Ocean Strategy to innovate and grow market share.

As Kim and Mauborgne mentioned, Blue Oceans often exist within Red Oceans.  Healthcare is an ideal example of looking for Blue Oceans within Red Oceans.  There are Blue Oceans that exist within financing patient care, delivering patient care, educating healthcare providers, empowering patients and monitoring patients.  Each traditional facet of healthcare is ripe for Blue Ocean Strategy.

Eric Brody, a branding and marketing CEO, highlights several healthcare initiatives that reflect Blue Ocean Strategy:
 Mayo Clinic Health Manager; a free tool that creates the ability for people to easily manage their families health online.
HelloHealth; a new company mixing office and online visits to give people personal attention from their neighborhood doctor when and how they want it. 

Highmark, a Pennsylvania insurer who rolled out the nation’s first prepaid gift card designed specifically for healthcare expenses.
InstyMeds™, the health care industry’s first fully automated ATM-style dispenser of prescription medications.

These are interesting innovations that reflect a Blue Ocean Strategy of creating and capturing new demand.   The market for healthcare has traditionally been viewed as 'sick patients'.  As such, systems and products have developed to address this narrow market.  In light of healthcare reform and new technologies, the healthcare market is broadly defined as sick and well patients, uninsured and insured patients, rural and urban patients, the elderly, etc.  This broadening of the definition itself serves to create uncontested market space and create new demand.

In formulating a Blue Ocean Strategy in healthcare, it is important to ask is, "How can we differentiate ourselves", "What value can we create for patients in light of an industry undergoing heavy reform?" and "What lessons from other industries can we leverage to create new markets within the healthcare industry?"

Sources used:
Creating Healthcare Blue Oceans (

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