The cost of health care is painfully high, and patients are very aware of this. But what about medical practitioners themselves? For those in small clinics and large hospitals alike, the cost of doing business can be prohibitive, especially when it comes to the expensive machinery. Patients, who interact with manufacturers infrequently, expect x-ray machines, MRIs, and CT scanners to work perfectly and immediately. However, used day-in, day-out, these machines age and depreciate, which leads to the conundrum – repair or replace.
When new models come with six- or even seven-figure price tags, health care facilities may find themselves forced to keep existing machinery in operation well beyond their prescribed life spans. This leads to repairs outside of warranty, and a decline in available parts, supplies, and qualified operators. These problems increase machine downtime, which further cuts into revenue.
For many, there seems to be no choice – stick with what you have and spend your scarce funds patching it up.
There is a new, disruptive solution that companies and customers in machine-dependent industries are now discovering – the transformation from a product industry to a service industry. At SAP hybris, we partnered with a manufacturer of high-tech medical equipment including CT scanners, and helped them deploy a disruptive model where they offer their machines for free – or at least at a significantly reduced price – in return for subscription revenues. In this arrangement, the manufacturer retains ownership of the machine, and responsibility for and all servicing and upgrades. Even the cost of printing the scans is covered within the subscription fee.
The benefit for B2B customers (hospitals, clinics, or physicians) is an affordable arrangement based on usage, frequency, and revenue share, without a high initial financial outlay for the machine. Further, the customer can order additional downloads, such as a knee-scanning template, on an as-needed basis. Rather than waiting for years to break even, clinics can invest in a subscription instead, and allow the manufacturers to keep the machinery operational and up-to-date.
The benefit for B2B suppliers is that by evolving from the business of selling machines into a service industry, they open brand-new markets, connecting with customers who could never have afforded the machines, and would have turned to secondary or tertiary markets for used machinery, service, and parts. Even for those larger customers with the financial ability to purchase, the shift to delivering a service is becoming more lucrative and more regular.
Medical machinery is not the only market for this disruptive model. Photocopier and printer companies have traveled this new route, transforming themselves into document service companies. Coffee machine makers do the same. New and better revenue opportunities exist within dynamic and perpetual service relationships, rather than static hard-goods sales.
This subscription-based shift is just one of many ways in which organizations in high-tech media, entertainment and sports are discovering new and vibrant revenue opportunities, either as an adjunct to existing relationships or for breaking new ground. We call this disruptive monetization.
