How can developers of serious games for health care applications best design their business models? This was the question I got asked together with the invitation to give a keynote presentation at the first Sino-Dutch Serious Games in Health Care Symposium (November 23 2015, Groningen, the Netherlands).
After some thinking, I arrived at the following blurb and presentation, which I presented at the medical center of the University of Groningen, the Netherlands:
Healthy Business Models? A Framework for Business Model Design and How it May be Applied to Serious Games in Healthcare
Designing and operating a business model is a non-trivial task for any entrepreneurial firm. The choice of business model is important because (a) it is consequential for the organization of the firm and its production processes, and (b) because it impacts the revenue structure of the firm (e.g., volume, timing, and distribution). Furthermore, while a business model rarely provides a source of sustained competitive advantage, it can be a risk-mitigation tool and thus affect the firm’s chances for survival. A firm’s business model can be analyzed along two dimensions that look at how the firm transacts with external actors in the value system, and how it transacts with customers. Using these dimensions, a framework of four ideal type business models and how they affect a firm’s chances for survival is presented. Strategic implications for each business model ideal type are discussed and placed in a context where creative freedom and firm survival need to be balanced against profits and quick turnarounds. It is for these reasons that the framework is specifically relevant for project-based e-businesses such as video game developers, creative agencies, movie producers, and app creators. Illustrations of how the four business models apply to serious games in healthcare will be presented.
Key takeaways from the presentation:
- Digital distribution platforms allow for more freedom in how firms design and operate their business models;
- Firms can engage their end-users before monetizing them, and this allows users to form accurate assessments of their expected benefits. This likely leads to more consumers using the digital application, but it will also delay -and possibly decrease- the moment when income is generated;
- Firms can also dis-intermediate from other firms in the value system with greater ease than before. This increases the share of the pie that a firm captures from its consumers for a digital application, but it likely reduces the size of the pie that the firm captures. Other firms in the value system oftentimes contribute valuable complementary skills and assets;
- Developers of serious games in health care, or any game developer for that matter, operate one of four archetype business models: work-for-hire; artist-led-distribution; multi-sided; or, freemium. Each has their own set of strength and weaknesses;
- Developers of serious games in health care are advised to seriously think about their business model and how to best match it to their product designs: This exercise ought to coincide with the start of the product development process;
- Players of serious games for health care may be the end-users of these digital applications, they not necessarily equate their customers. Firms are advised to carefully identify their key stakeholders, including non-using customers, and institutions that may validate the medical quality of the digital application;
- In the Netherlands, health care insurance firms seem like an untapped customer group that can facilitate both revenues and validation;
- The choice and implementation of a business model is a non-trivial task; (a) it is consequential for the organization of the firm and its production processes, and (b) it impacts the revenue structure of the firm (e.g., volume, timing, and distribution).