Entrepreneurship in healthcare is growing rapidly all over the world. Thanks to the explosion in the Internet and mobile technologies and the cooperation among technologists and medical professionals, China is seeing some great progress in this field. This article discusses some cutting edge technology entrepreneurship in China, using the technique called Business Model Canvas.
Entrepreneurship in healthcare technology is one of the fastest growing investments in the startups in the world today as seen from the reports from the venture capital industry. China is a country of entrepreneurs with nearly 25 per cent of the Chinese technology professionals becoming entrepreneurs. Therefore, it is not surprising that entrepreneurship in healthcare technology is growing rapidly in China. The Centre For Entrepreneurship (CFE) at the University of Michigan-Shanghai Jiao Tong University Joint Institute (UM-SJTU JI) is a premier institution in Asia training engineering students for entrepreneurship through courses and practicum projects in collaboration with local startups and the corporate businesses. Since the Business Model Canvas (BMC) is the de-facto standard method of presenting and validating entrepreneurship ideas, this article uses BMC to analyse healthcare entrepreneurship in China through case studies in projects that CFE has been involved in.
The article starts with an introduction of BMC followed by two case studies; one involving the Haiyang Group, the largest private sector aged care provider in China (that started with the entrepreneurial vision of the founder and CEO Mr. Max Xu) and a new startup called MiDIVI (led by Chen Liang) that is involved in the deployment of cuttingedge Mixed Reality (MR) application in surgery in China. The case studies discuss the business model of each of these sectors using BMC, followed by brief comments from the leader of each company.
Business model canvas (BMC) is a systematic way to present the developing plan of a company’s product with nine building blocks. BMC helps the company in keeping the major decisions consistent with the product positioning. At the initiation stage of an idea, it is done with guesses, which enables the company to clarify the whole developing strategy. Then later during validation phase, the company can evaluate and improve its plan based on BMC.
Value propositions are the core values of a product, namely how it provides a solution to the problems from each specific Customer Segment.
• The Customer Segments describe the target customer groups, to whom the Value Propositions are designed for. Channels indicate through which media the product will reach the Customer Segments, and how each of them is integrated.
• Customer Relationships refer to the strategies to get, keep and grow customers based on designated Customer Segments.
• Revenue Streams are strategies the company adopts to gain profit from each Customer Segment. These include the major revenue sources and pricing model.
• Key Resources include the most important things to keep the BMC work, mainly from financial, physical, intellectual and human perspectives.
• Key Partners can be strategic alliances to jointly provide a complete product or service, suppliers of Key Resources, and so on.
• Key Activities usually consist of development, maintenance and promotion of the product. Cost Structure is the plan for expenditure on each Key Resources and Key Activities.
Shanghai Haiyang Internet Elderly Services Co., LTD. (hereinafter referred to as ‘Haiyang’) is a leading company which provides comprehensive pension service in China. Haiyang focuses on developing an integration of digital technology, new business forms and new models in pension industry. Their main product is Continuing Care Homebased Community (CCHC), which is a smart pension model supported by multiple digital technologies. Haiyang group is now the largest private sector aged care provider in China and it has been a partner of UM-SJTU JI CFE led by Pradeep Ray in the recently concluded project (2019-2021)“Digital Health for the Elderly” that led to the publication of the book “Digital Methods and Tools for Healthy Ageing”, (2021) eds Pradeep Ray, Siaw Teng Liaw and Artur Serrano, published by IET (UK).
1 Analysis based on BMC
The value proposition for Haiyang is to provide a comprehensive pension chain service integrated with digital technologies, which enables the elderly to have a better life and relaxes their children. Most of the competitors in the industry are system or software service suppliers and Haiyang is the only single company in China which covers three pension models which is institutional pension, community pension and home pension. The main customer segment is the elderly who need to be taken care of but lack all-day-long face-to-face care. These “new Chinese seniors” are more open to digital technologies and are also concerned about their own health. Channels for Haiyang can be divided into two parts: healthcare applications or programmes which can be downloaded directly online, and specialised wearable electronic devices which can be bought from both online and physical stores. In order to strengthen customer relationship, Haiyang provides multiple high-quality products and makes good connection between customers and caregivers. The revenue streams can be formed in two parts: direct earning from multiple telehealth products and funds from investment cooperation. Raw material of the products and software providers are the key resources for Haiyang. Chinese government and medical centers are Haiyang’s key partners. The former offers supporting funds and policies and the later provide the best user experience, share the data and do rapid assessment. Key activities of Haiyang include effective production, training for the elderly to use the products and high-quality maintenance. The cost mainly goes to three areas: raw materials, software support, and community workers’ salary.
2 Interview excerpts
UM-SJTU JI CFE team interviewed the CEO of Haiyang Group, Max Xu (Chao Xu) in 2021 as he has been an awardwinning entrepreneur and the founder of the Haiyang group. In his view the nine building blocks of BMC is ranked in the following order (from important to less important): value proposition, revenue streams, customer relationship, key partners, customer segments, channels, key activities, cost and key resources. Apart from the elements in BMC, he believes that people in the core entrepreneurial team are also important for a start-up. The whole team should have a clear division of work, avoid homogeneity, and be brave to face failure.
MiDIVI is a digital health technology startup in Shanghai, China and MiDIVI has been a partner of the UM-SJTU JI Centre For Entrepreneurship (CFE) in offering practicum courses like VX423 for which Caiwei Chen was an intern in this company in 2021. One main product of MiDIVI, Jinshu, is a surgery navigation system integrating medical image processing and Mixed Reality (MR) technique based on MR goggle — Microsoft HoloLens. It is supposed to assist Healthcare Practitioners (HCPs) before, during and after operations, currently supporting percutaneous puncture biopsy (PPB) for cardiothoracic surgery and neurosurgery department, to name a few. Jinshu consists of three parts, the MiDIVI smart holographic cloud platform (MSHCP) on personal computer, the J-MRview on HoloLens, and J-control on an iPad.
1 Analysis Based on BMC
The value propositions of Jinshu vary with customer segments.
For HCPs, Jinshu provides assistance throughout the whole surgery process. Before surgery, MSHCP builds a 3D hologram model of operative field from 2D images (such as CT images), then generate the preoperative plan (such as to determine the precise position of puncture) with deep learning algorithm. During surgery, J-MRview superimposes the hologram model on real-time view according to predefined feature points on the patient’s body. Following the model HCPs can precisely position the surgical tools without further measurement. HCPs can also ask remote experts for help using the meeting module. After surgery, HCPs can review the recorded operation video filmed by HoloLens.
For patients, Jinshu clearly illustrates their conditions and the expected operation procedure with the 3D holograms. Besides, more accurate surgery lead to better therapeutic effect.
For hospitals, Jinshu helps to lower surgical error rate and thus prevent potential medical disputes. Besides, the remote guiding module promotes fair treatment through the society, equalising accessibility to high level medical resources for people from all segments of society.
For traditional medical device enterprises, Jinshu as a representative of information technology advancement facilitates the growth of their competitiveness in the market.
The first step to build strong customer relationships is to get customers, which closely relies on the chosen channels. In general, customers are obtained through direct contact with targeted customers. Since the products apply promising technology advancement, collaboration cases with medical departments are reported by local satellite television channel, while collaborative projects are propagated on partners’ websites. Besides MiDIVI actively attends conferences and exhibitions to present its ideas.
To keep and grow customers, products are continuously upgraded in response to clients’ feedback. Since MiDIVI is a relatively small enterprise, it is possible to tailor project for specific needs, providing better customer experience. Beyond the cutting-edge products, free trials of supplementary services (such as a remote meeting module) are also offered to current customers.
Key activities include software development, marketing and after-sales service, each corresponds to several Key resources.
MiDIVI focuses on developing medical image processing algorithm and operational navigation application. Jinshu also incorporates surgery aid devices based on HoloLens and the optical measurement and electromagnetic (OME) tracking device from NDI.
For research and development (R&D), MR and deep learning technicians are major human resources. To protect intellectual property and to distinguish from competitors, patents are also of key importance.
The particularity of medical devices segment leads to a special financial resource structure. Sale and application of medical devices is strictly controlled by government because they are closely related to human life and health. For the same reason, the productisation commonly takes more than one year, and licensing takes even longer. Therefore, financing, instead of profiting from common trade, is the vital R&D funds.
MiDIVI being one of the small and medium-sized enterprises (SMEs), marketing is a crucial part to obtain customers and expand market share. Consistent with Channels, MiDIVI provides demonstrations to investors and employ online media to promote products like Jinshu.
Key partners are mainly of three types. First, companies such as Microsoft and NDI are key suppliers that provide MiDIVI with necessary hardware. Second, strategic alliance is set up with Jingteng Tech, to name a few, with whom projects are co-launched to make the most of each company’s strength. Third, several medical experts provide both professional surgical aids and practical suggestions as users.
The revenue streams include direct sale and investment. There are two possible ways for Jinshu’s sale. Hospitals usually purchase the whole set of device and service, while some medical device companies may pay for cloud service on use basis. Yet as described, there are strict restraints on the transactions. Currently the expenditure is mainly covered by investor funding.
As an IT product, the cost structure of Jinshu consists of software development and maintenance. To take the remote meeting module as an example, R&D expenses include purchase of resources such as software development kit. Hardware production also takes a considerable portion. Apart from HoloLens and OME tracking device, surgical tools and human anatomical models are needed for simulation and tests. In addition, there are expenses of administration, including rent, business trip and consumables.
2 Interview excerpts
UM-SJTU JI CFE team interviewed the CTO of MiDIVI, Chen Liang in 2021 as he has been an entrepreneur and the founder of the MiDIVI. Chen Liang believes that the value proposition is the most important element among the nine building blocks. He regards it as the origin which makes an entrepreneur clear about his goal and decides the eight rest elements. From the perspective of MiDIVI, the value proposition should include both the innovation of product and business. The former needs to solve the pain of doctors and patients and the latter means to put ideas into practice. Besides, Chen Liang thinks that it is hard to conclude any element in BMC as a less important one. He would rather describe it as a dynamic process and judgement should be made on how to allocate people and one’s energy during different periods.
Entrepreneurship in healthcare technology is now booming all over the world. This article has provided a brief overview of healthcare technology entrepreneurship in China through two case studies; one large group (Haiyang) and one new startup (MiDIVI), using a conceptual model called Business Model Canvas (BMC), now extensively used for modelling and validating startups. BMC is also used to teach entrepreneurship to students all over the world and these case studies would help summarise startup ideas. However, students of entrepreneurship also learn (while doing projects) that much more details need to be added to the BMC for a real startup business and that is the subject of courses like VX420 (Entrepreneurship Basics) taught in the UM-SJTU JI. More research is needed to fill the gaps in BMC as discussed in the forthcoming book “Technology Entrepreneurship for Sustainable Development” by Springer in 2022 with Pradeep Ray and Rajib Shaw as co-editors.
References:
1. A. Ostenwalder and Y. Pigneur, Business Model Generation. USA: Wiley, 2010. ISBN: 9780470876411.
2. Z. Hao, M. Xu, L. Li and P. Ray, “Role of Technology in Aged Care in China,” in Digital Methods and Tools for Healthy Ageing. U.K.: IET, 2021, ch. 11. ISBN: 978-1-83953-462-1.
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