Connected Things Business Models: Philips Monitoring-as-a-Service

Jen van der MeerBusiness Model Practice, Hardware

Enterprise Monitoring

Philips provides monitoring capabilities aligned to use and acuity, which means the level of monitoring based on the severity of illness. Monitoring-as-a-service as an offering promises to be more financially-friendly and more aligned to hospital performance goals.

Founded

It was founded in 1891 by Gerard Philips and his father Frederik, in Eindhoven, Netherlands to manufacture light bulbs. 

Funding

Koninklijke Philips N.V. trades on the NYSE under ticker PHG and has reached an all time high market capitalization this year, at $48 BN as of the time of this case study (12.16.2020). 

 

Sustainable Development Goals

Philips adopted an integrated set of commitments across all the Environmental, Social and Corporate Governance (ESG) dimensions that to guid the execution of our company strategy with a focus on: Goals 3, 12 and 13:SDG 3: Ensure healthy lives and promote well-being for all at all ages; SDG 12: Ensure sustainable consumption and production patterns; SDG 13: Take urgent action to combat climate change and its impacts.

Mission

At Philips, we are striving to make the world healthier and more sustainable through innovation, with the goal of improving the lives of 3 billion people a year by 2030.

 

Where on the Resiliency Scale?

Client Disclosure

This series explores the variety of ways established companies and incumbents adapt digital business models for hardware, and how these are contributing to all of us understand the impact of these machines.  

Philips has been a client of Reason Street, who worked on developing the Monitoring-as-a-Service financial and servitization model, so we are indeed biased and believe this is an excellent case study of connected things and moving beyond hardware-as-a-service to deliver better outcomes for Philips’ hospital customers. All descriptions of this model are derived from Philips’ public statements and press regarding the adoption of this offering. 

Philips is a pioneer n servitization and their shift to offer this model was well poised to provide more resilient and responsive service to customers during the COVID19 pandemic and beyond.

Let’s take a look at the offering from Philips Enterprise Monitoring.

 

Business Model Moves

Solve a Customer Problem 

The constant introduction of new features and  into products can increase performance but also create challenges in terms of deciding when to upgrade, and the requisite training time and cost of managing tradeoffs. 

The Enterprise Monitoring offering is designed to answer the questions posed by Philips’ hospital customers, “If you introduce new, more advanced monitoring technology, do you have the resources you need to drive adoption; train and educate staff; and improve interoperability? In five years, will you be faced with the same questions?”

 

Business Model Aligned to Value Proposition and Continuous Service

The enterprise as-a-service model focuses on a shift in mindset and practice not just for Philips but for their customers. 

Rather than the one-off system purchase model, the solution migrates to continuous “capabilities consumption” facilitating the ability to purchase, but also including adoption and adherence by measuring use in the workflow. 

The relationship model moves from up front sales to ongoing engagement wth technical, clinical, and financial interactions to manage adoption and uptake of new technology. 

Financial payment is attached to a pay-per-patient model better aligning for quality and financial outcomes. 

 

Data, IoT, Not the Lead Idea

Note that the shift to ongoing services and enablement does not highlight any of the technology features that enable the solution. Philips leads with business and clinical outcomes, not the prowess of their technological achievements.. in 

Data Rights Transparency 

As a company based in Europe with a more privacy-oriented philosophy than US counterparts, the company has an overall data policy, and then specific policies for each type of stakeholder and device. 

Any data collected or stored on Philips HSDP or Health Suite Digital Cloud for services like remote monitoring, and the company insists on opt-in permission for any personal data collection.

 

Evaluating Philips Enterprise Monitoring Efforts 

Since we acknowledge that we are biased, we’ll leave it to a Philips’ customer to evaluate their Enterprise Monitoring offering. Jackson Memorial Hospital, a nonprofit tertiary care teaching hospital in Miami, was one of the first to sign up for the service, and now gives the model high marks for satisfaction and efficiency.

The Enterprise Monitoring-as-a-Service (EMaaS) model six months after its deployment received the following results: 

  • Nursing staff gave the new model a 90% satisfaction rating, up from 8% prior to the new system,  an 82% improvement. 
  • The hospital also estimates it will save 13,331 staff hours from workflow improvement and automation of manual tasks. 
  • The patient transport process has reduced the time it takes to connect a patient to a transport monitor from 5 minutes to 3.9 seconds – saving staff more than 4 minutes and 56 seconds per patient.

Source: Jackson Memorial Hospital gives Philips Enterprise Monitoring as a Service model high marks for satisfaction and efficiency, 2020. 

Systems-Level View and Shift to Outcomes Based Value

The most meaningful transformation comes from the shift from hospitals managing point solutions to a broader birds eye view of the entire system. The CIO is suddenly able to see relationships and patterns to identify issues like alarm loads and alarm response times that affect the quality of care. Ongoing data analytics services can also point to potential improvements not just for cost and technology utilization but also for quality and adherence to the best practices in care. 

The overall shift results not just a transition from selling boxes to serving an ongoing relationship, but aligns Philips and their hospital customer to shared outcomes and success objectives. What was once a capital expenditure, or Capex, becomes an operating expenditure, or Opex, but with a very clear through line to ensure predictable cost and true benefit to the quality of the experience, and better outcomes.

*Sources:

Jackson Memorial Hospital gives Philips Enterprise Monitoring as a Service model high marks for satisfaction and efficiency, 2020. 

Partner Perspective: Progressive Thinking on Patient Monitoring Enables Clinical Transformation at Speed; Why CIOs Need the Nimble Business Model Flexibility of an ‘As-A-Service’ Approach, HealthSystemsCIO, 2020.  

 

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