What innovative business models can be triggered by precision medicine? Analogical reasoning from the magazine industry

Figures & data

Table 1 Similarities between the magazine and biopharmaceutical industries

Characteristics	Magazines	Pharmaceuticals
Emergence	Seventeenth century	End of the 19th century
Large incumbent firms	Large media and communication conglomerates dominate the industry	Industry giants dominate the industry
Technological discontinuities	Internet, e-reading devices	Biotechnologies, bioinformatics
Recent technological innovations impacting the industry Structure of the value chain (before technological discontinuities)	Programmatic advertising, mobile Internet Linear, controlled by a magazine publisher	Internet and mobile devices Highly fragmented and regulated

Figure 1 Data is the focus of digital business models at Hearst.⁵⁶

Table 2 Summary of challenges and recommendations for business-model innovation in case study 1

	Challenges	Recommendations
Innovative business model 1: large-scale free web
Value creation	Different value-creation and value-delivery mechanisms were needed. Old approach and logic in value creation were not working.	Put the user and data first. Test how users react to the content, and create content with which readers want to engage. Use the power of the brand to communicate. Make smart acquisitions to improve skills and capabilities.
Value capture	Content is free; no monetization from the reader. Advertising money is not enough.	Create large audiences with consumer-proven content, and leverage the audience data to boost income from advertising. Experiment with innovative revenue models.
Innovative business model 2: mobile
Value creation	Only replicating magazine content and magazine approach on mobile platforms was not working. As the company targeted new digital natives, different value-creation mechanisms and skills were needed.	One-size-fits-all approach is not working. Do not just transfer products; create a new product respecting the different needs of the consumer for the new platform. Attract new groups of users.
Value capture	Weak monetization of mobile content.	Raise revenue with the premium price for premium content. Monetization mechanisms require flexibility and adaptation.
Innovative business model 3: e-commerce
Value creation	No experience or capabilities in the commerce business and large competition. High costs for some models of value creation. Becoming a platform for products/services outside the company portfolio.	Use the power of brands and the expertise of the company to create a platform with more competitive and appealing offers to consumers.
Value capture	No clear monetization models.	Experiment with different models until you get it right. Combine to take the best of the both worlds. Use partnerships and competition. Create networks.

Table 3 Summary of challenges and recommendations for business model innovation in case study 2

	Challenges	Recommendations
Innovative business model 1: events
Value creation	Publisher extends out of its core competence and core logic. Existent competition of marketing agencies.	Add value where competitors cannot: in the power of the brand and its capabilities to attract consumers and create experiences. Mobilize new networks and new relationships.
Value capture	Only one source of revenue: sponsors.	Make strategic partnerships with incumbents from adjacent industries and include cooperation on all fronts.
Innovative business model 2: digital advertising services
Value creation	New approach to value, new skills, and new kinds of interaction within the company and with customers.	Use creativity, know-how, and networks that company has in the core business to build up new services. Generate skills in-house. Create a new link in the value chain.
Value capture	Monetization models are not clear, and separate from the core business model.	Monetize on good existing relationships and consumer trust and the possibility of cross offerings to increase revenue potential.

Figure 2 From a linear product-centered to a user-centric business model.

Figure 3 The traditional linear value chain.

Figure 4 The traditional value chain is shifting to a new networked value chain.

Table 4 Summary of recommendations to be included in the new business plan

Business-plan section	Recommendations for biopharmaceutical managers
Innovation assessment	Strong engagement in innovative process with multiple actors: an open innovation approach could be suitable Considering the user point of view: possibility to work on different scenarios based on the user Enlarge the user approach with a study of how the different stakeholders will interact (caregivers, patient, payers)
Management team	• Multidisciplinary management team consisting of project leaders from partner companies and organizations (depending on the innovation)
Market research	• Consider both alternative approaches (substitutes, classical treatments, etc) and holistic approaches, where the focus is not the treatment, but the system of precision medicine
Competitive analysis	• Competitors are not only other biopharmaceutical companies but also companies from adjacent industries: the drug may not be at the core of innovation in precision medicine, and new entrants could promote a different way to create and capture value
Business model	The networked value chain calls for a different type of value creation and capture process The traditional revenue model cannot be applied in precision medicine: there is no other solution but to prototype and fine-tune new revenue models; payers must be involved in this process
Financial projections	• Adopt financial projections used in services (rather than in a product approach)

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