Business Model

Utilizing the business model canvas for dental practices

Nov. 1, 2020
Do you have a visual model for charting your business model? Dr. Chris Salierno recommends having one, and he's done the research about how to do it for you. Here's what he does that works so well he wants to share the idea with his peers.
Chris Salierno, DDS, Chief Dental Officer, Tend

Businesses can be mutated, wandering beasts. Burdened with unnecessary complexity and lacking any true direction, a business can just stagger into the future, one day at a time. 

In the early 2000s, business thought leader Alexander Osterwalder and his team began formulating a visual tool for companies to chart their business models. The concept was formalized in the 2010 book, Business Model Generation, where Osterwalder shared his process called the business model canvas.1 I have investigated dozens of management models through the years and I believe Osterwalder’s business model canvas to be one of the best suited for our purposes. I encourage you to learn more by picking up his book or by viewing his material at strategyzer.com

A blank canvas for your business

The canvas consists of nine elements of a business model that are interdependent on one another (figure 1). During the exercise, you and your team would lay out an enlarged canvas and sketch out each of the nine building blocks in turn, typically with Post-it notes.

The nine segments of the canvas, in brief, are:

1. Customer segments—the specific types of people you are targeting

2. Value propositions—the unique solutions you offer to the customer segments

3. Channels—the ways in which you communicate with your customer segments and deliver your value propositions

4. Customer relationships—the kinds of relationships expected by the customer segments

5. Revenue streams—the ways in which you generate revenue from customers

6. Key resources—the assets you need to deliver the value proposition

7. Key activities—the operations you use to deliver the value propositions

8. Key partnerships—the external groups that provide necessary resources and activities

9. Cost structure—the expenses for delivering value propositions

The critical first element: Customer segments

When I conduct this exercise with my lecture audiences, often the most challenging step for them is to identify their customer segment. It’s arguably the most important element on the canvas upon which all others are built and yet it’s the least understood by dentists. 

So, I ask you: whom do you want to serve? Many of us have never really thought about that before. We advertise our services to our communities, and we treat the people who walk in the door. When I ask whom you want to treat, perhaps your answer is, “Everyone.” But this is your business and you can design it to recruit and retain the specific kinds of patients you want to treat. As you will see, limiting your potential patient pool to a few target groups will simplify your strategic decisions and reward you with more patients. 

So, let’s play out this exercise a bit. Imagine that you love doing dentures, implants, and sleep apnea therapy. You’d also like to become less dependent on PPOs, so perhaps an ideal patient is one who isn’t in contract with third-party payers. Can you think of a target market who typically does not have dental benefits and who is more likely to need dentures, implants, and sleep appliance services? The answer is seniors, of course. This could be your first customer segment.

After identifying a few customer segments, I find it useful to consider which types of patients are notably absent. For example, if you were to list seniors, young professionals, and athletic adults as your three customer segments, you might notice that children didn’t make the list. Perhaps that’s not by mistake; you may not particularly enjoy treating young patients, and you may refer the majority of that work to your local pediatric dentist. Keep these omitted groups in mind as we move forward in the process.

What’s so special about you?

Now ask yourself, what is it that you offer your customer segments that other dental practices might not? What are your value propositions? Don’t fall into the trap of simply saying that you provide great customer service and excellent clinical dentistry. Those are things that every patient deserves, and every practice aims to offer. So, what specifically do, say, senior customers want from their dental visits?

I would suggest that many seniors who are without PPO coverage and who are living on a fixed income would like affordable care options. What if you were to offer an in-house membership plan for patients over the age of 65? They may also value flexible and simple patient financing solutions such as CareCredit. In this instance, membership plans and patient financing offers are more than revenue streams (element number five in the process); they also serve as unique selling propositions. They represent a strategic decision by your practice to solve a problem for your senior customer segment.

What are the other conveniences and features that would attract seniors, young professionals, and athletic adults to your practice? Suddenly, so many of the blurry decisions you make about your practice snap into focus. What should your business hours be? What should your décor look like? You are no longer designing your practice in a vacuum, hoping everyone will like you. You’re designing your practice for specific people. In the example I created, would you have a bucket of crayons and plastic toys in the corner of your reception area? Of course not! You may choose to still treat the occasional pediatric patient but that doesn’t mean you should devote resources catering to them. Indeed, attempting to appeal to everyone can also send a confusing message to the kinds of patients you are actually trying to attract.

Painting the rest of the canvas

The remaining elements of your business model can fall into place once you’ve identified who your customer segments are and what they really want. The channels element helps you view marketing as a way of informing your target patients about your value propositions. You can now make more informed decisions about the messaging you want to provide in your direct mail campaigns and Facebook ads. The cost structure element helps you view line items on your income statements as either necessary strategic decisions or unnecessary fluff that adds no real value to your business. 

You and your team, armed with pens and Post-its, can list the building blocks of your business and arrange them on the canvas. Creative new ideas will bubble to the surface. The bigger picture of how you deliver service will be revealed to all. 

A model for your future

The American Dental Association Health Policy Institute predicts that the supply of full-time equivalent dentists will increase steadily through 2037.2 If this trend translates into increased competition amongst ourselves for patients, how will your practice stand out from the crowd? I believe that creating a business model with a tool such as Osterwalder’s canvas is a critical step toward ensuring the success of your practice in the future. Perhaps it’s time to stop trying to be everything to everyone and instead be something special to select patients. The mutated, wandering beast evolves and is given purpose.  

References

1. Osterwalder A, Yves P. Business model generation: A handbook for visionaries, game changers, and challengers. John Wiley and Sons Inc. 2010.

2. Munson B, Vujicic M. Supply of full-time equivalent dentists in the US expected to increase steadily. Health Policy Institute Research Brief. American Dental Association. July 2018. http://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_0718_1.pdf

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