Creating Competitive Advantage Through Telemedicine-based Value Webs

In most European countries public health is stepping towards an economic crises. Extensive competition thus challenges healthcare organizations to redesign their business, to evaluate their product/services portfolios, and to develop new strategies. In this context, the paper examines the creation of competitive advantage through telemedicine-based value webs. Telemedicine has the potential to offer new distribution channels to healthcare services, and it enables creating new cooperation and business models. The focus of our paper is on how information technology and in particular telemedicine can create new, or may change traditional business models in healthcare. Introduction Public health is an important indicator for the prosperity of a society. However, due to increasing deficits in public households in most European countries, more and more conflicts arise between new medical approaches and traditional medicine, between technology-centered and human-centered care, and between increasing demands of patients (societies) and limited, even decreasing healthcare budgets. At the same time, new achievements in medical research, in medical technology, and in pharmacology do substantially increase competition in the healthcare sector. This situation challenges all players in the healthcare market to evaluate their product/services portfolios, to develop new strategies, and to redesign their business models. This is in particular relevant for small players who are not able to cover by themselves the whole value chain at competitive costs. On the other hand, achievements in information technology provide healthcare service providers with new opportunities to design their processes for creating competitive advantages. Three main trends need to be considered here. First, a rapidly increasing portion of information about patients, and healthcare services is represented electronically. Examples are personal records, results of diagnostic screenings, disease descriptions, radiological information, etc. This provides for all advantages that generally come along with digitalization of information. Second, digitalized information can be transported very fast, and at low cost from A to B (and may be also to C, D, E at the same time) through local and wide area computer networks telemedicine). Third, the world wide web (WWW) in particular provides an easy to use infrastructure for all (institutional, personal) participants in the healthcare market. Through the WWW they may offer, sell, retrieve, test, request, and consume a broad range of healthcare services. Thus, the WWW enables completely new healthcare services, new business models in healthcare, and new arrangements of coordination, and cooperation in healthcare service processes. Callon has thus mentioned that competitive advantages can be achieved through IT (Callon,1996). In the scope of this paper an business model can be understood as an architecture for the product, service and information flows, with descriptions of the different economic agents, their roles, the potential benefit and revenue flows (Selz, 1999). Methodology The value chain model was developed as a systematic method for examining all the activities a firm performs and how they interact, as a basis for analyzing the sources of competitive advantages (Porter, 1985). An important point regarding Porters value chain model is that it only requires minor adaptions for use in the healthcare sector (Callon, 1996). According to Porter, hospital value chain activities can be categorized into primary activities (inbound patient logistics, diagnosis, a.s.o) and secondary activities (firm infrastructure, procurement, a.s.o.) (fig. 1). Figure 1. Generic hospital value chain