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1 Deconstructing the Value Proposition of a Service Innovation Exemplar The value proposition has become one of the terms most widely used in business (Anderson, Narus & van Rossum, 2006). Webster (2002) suggests that the value proposition “should be the firm’s single most important organizing principle” (p.61). Research into the identification and development of value propositions has been highlighted as one of the key research priorities for the period 2010-2012 by the Marketing Science Institute (MSI, 2010). However, despite its importance there is surprisingly little academic research on how value propositions are identified and constructed. A literature review revealed few examples or illustrations of how value propositions are developed by organizations and little effort aimed at deconstructing value propositions into their constituent components. The process of deconstructing an organization’s value proposition is important, as it permits identification of the key building blocks by which superior value is offered to customers. This gap in the literature, together with the importance of this topic (Webster, 2002), motivates this study. The aim of this paper is to (1) develop an approach for deconstructing the value proposition of a service innovator and (2) identify the key components of this proposition that constitute value. The paper is structured as follows. First, we provide a brief overview of the value proposition concept. Second, we discuss the concept of deconstruction and explain how we selected one service enterprise, Shouldice Hospital, for analysis. Shouldice is an exemplar enterprise that has revolutionized the service experience of repairing hernias, by offering a highly innovative value proposition. Third, we outline the data sources and research method. Fourth, we deconstruct the Shouldice value proposition into its constituent components. Finally, the research contribution, managerial implications and future research are discussed. The Value Proposition It is not our purpose to rehearse a detailed review of the literature on value propositions. For a review of this literature, see Frow and Payne (2008). Rather, we wish to provide a brief overview of the concept which was first introduced by Bower and Garda (1985). Some years later, Lanning and Michaels (1988) described a value proposition as “what precise benefit or benefits at what price will be offered to what customer group, at what cost” (p. 3). Despite more than two decades passing, this topic has received relatively little detailed academic attention. We identify three key themes relating to work in this area. First, value propositions and the identification of competitive strategies. For example, Treacy and Wiersema (1995) describe value propositions in the context of three value disciplines and Kambil, Ginsberg and Blosch (1996) develop a value map aimed at identifying strategies relating to the benefits and price of different competitive propositions. Second, some limited work considers the construction of value propositions. For example, Anderson, Narus and Van Rossum (2006) propose that organizations typically adopt one of three approaches in developing value propositions: all benefits; favorable points of difference; and resonating focus. Rintamaki, Kuusela and Mitronen (2007) propose four broad categories of value propositions including those that reflect: economic value; functional value; emotional value; and symbolic value. Third, value propositions described in the context of experiential value. For example, Lanning (1998) emphasizes the co-creation perspective with less emphasis on ‘delivery’ of value propositions. Vargo and Lusch (2004; 2008) extend these ideas in their foundational premise dealing with value propositions. Our overview of the value proposition literature and earlier work (Frow & Payne, 2008) suggests that there is limited research on this topic and none that addresses a structured process for deconstruction of existing value propositions. We contend that an in-depth analysis of best-in-class exemplar companies through value propositions deconstruction is important as it can yield new insights for managers seeking to develop their own innovative value propositions.

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Page 1: Deconstructing the Value Proposition of a Service … Deconstructing the Value Proposition of a Service Innovation Exemplar The value proposition has become one of the terms most widely

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Deconstructing the Value Proposition of a Service Innovation ExemplarThe value proposition has become one of the terms most widely used in business (Anderson,Narus & van Rossum, 2006). Webster (2002) suggests that the value proposition “should bethe firm’s single most important organizing principle” (p.61). Research into the identificationand development of value propositions has been highlighted as one of the key researchpriorities for the period 2010-2012 by the Marketing Science Institute (MSI, 2010).However, despite its importance there is surprisingly little academic research on how valuepropositions are identified and constructed. A literature review revealed few examples orillustrations of how value propositions are developed by organizations and little effort aimedat deconstructing value propositions into their constituent components. The process ofdeconstructing an organization’s value proposition is important, as it permits identification ofthe key building blocks by which superior value is offered to customers. This gap in theliterature, together with the importance of this topic (Webster, 2002), motivates this study.

The aim of this paper is to (1) develop an approach for deconstructing the valueproposition of a service innovator and (2) identify the key components of this proposition thatconstitute value. The paper is structured as follows. First, we provide a brief overview of thevalue proposition concept. Second, we discuss the concept of deconstruction and explain howwe selected one service enterprise, Shouldice Hospital, for analysis. Shouldice is an exemplarenterprise that has revolutionized the service experience of repairing hernias, by offering ahighly innovative value proposition. Third, we outline the data sources and research method.Fourth, we deconstruct the Shouldice value proposition into its constituent components.Finally, the research contribution, managerial implications and future research are discussed.

The Value PropositionIt is not our purpose to rehearse a detailed review of the literature on value propositions. For areview of this literature, see Frow and Payne (2008). Rather, we wish to provide a briefoverview of the concept which was first introduced by Bower and Garda (1985). Some yearslater, Lanning and Michaels (1988) described a value proposition as “what precise benefit orbenefits at what price will be offered to what customer group, at what cost” (p. 3).

Despite more than two decades passing, this topic has received relatively littledetailed academic attention. We identify three key themes relating to work in this area. First,value propositions and the identification of competitive strategies. For example, Treacy andWiersema (1995) describe value propositions in the context of three value disciplines andKambil, Ginsberg and Blosch (1996) develop a value map aimed at identifying strategiesrelating to the benefits and price of different competitive propositions. Second, some limitedwork considers the construction of value propositions. For example, Anderson, Narus andVan Rossum (2006) propose that organizations typically adopt one of three approaches indeveloping value propositions: all benefits; favorable points of difference; and resonatingfocus. Rintamaki, Kuusela and Mitronen (2007) propose four broad categories of valuepropositions including those that reflect: economic value; functional value; emotional value;and symbolic value. Third, value propositions described in the context of experiential value.For example, Lanning (1998) emphasizes the co-creation perspective with less emphasis on‘delivery’ of value propositions. Vargo and Lusch (2004; 2008) extend these ideas in theirfoundational premise dealing with value propositions.

Our overview of the value proposition literature and earlier work (Frow & Payne,2008) suggests that there is limited research on this topic and none that addresses a structuredprocess for deconstruction of existing value propositions. We contend that an in-depthanalysis of best-in-class exemplar companies through value propositions deconstruction isimportant as it can yield new insights for managers seeking to develop their own innovativevalue propositions.

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Deconstruction and Selection of a Best-in-Class ExemplarDeconstruction is a form of analysis that involves the critical practice of literally taking apartthe meanings of that which is socially-constructed (Goodall, 1991). The purpose ofdeconstruction is to question what is ‘taken for granted’ and how things ‘got this way’(Eisenberg & Phillips, 1991). Within the management marketing literatures there is anincreasing interest in the concept of deconstruction (Ehrensberger et al., 2000) in a number ofindustry and managerial contexts.

The business system concept developed by consulting firm McKinsey & Co. (Gluck,1980; Bauron, 1981; Bales et al., 2000) provides a structure for analyzing and deconstructingan enterprise’s value proposition. The value chain developed by Porter (1985) draws heavilyon the notion of the business system concept. In this paper we utilize the business systemconcept as a framework, rather than the value chain for several reasons. First, we are lessconcerned with the value chain’s ‘support activities’ (Porter, 1985). Second, the linkagebetween the value proposition and the business system is more explicitly made in theliterature (Coyne, 2009). Third, the business system addresses criticisms of linearity andunidirectionality (e.g., Normann & Ramírez, 1993), which argue that the value chainrepresentation does not sufficiently emphasize the value-creating system itself.

We used three criteria in determining a suitable service enterprise. First, to identify aservice enterprise that is a highly regarded best-practice exemplar within its sector. Second,to select an enterprise recognized as having an outstanding and innovative value proposition.Finally, given recent emphasis on co-creation of value, to select an enterprise where co-creation makes an important contribution to the value proposition.

The researchers independently compiled a shortlist of alternatives case studies andusing the three selection criteria, they choose Shouldice Hospital. It is described as one of theworld's best service companies and the ‘world’s best hospital’ (e.g., Heskett, Schlesinger &Sasser, 2003), with an outstanding, innovative value proposition (Hwang, 2009) and co-creation forms an integral part of its service system (Heskett, Sasser & Wheeler, 2008).

Data Collection and MethodIn the context of academic research, scholars such as Yardley (2000) emphasize that it isdesirable to employ “triangulation of data collection” in order “to achieve a roundedmultilayered understanding of the research topic” (p. 222) by gathering data from differentsources and by different methods. Our data generation involved triangulation of datacollected from different sources and by different methods, as shown in Appendix 1.

As outlined in Appendix 1 in the ‘research method’ section, using these data sources,the researchers progressively examined and interpreted the data to: provide an overview ofthe operation of Shouldice Hospital; identify Shouldice’s value proposition; determine thediscrete elements of Shouldice’s business system; and, more substantively, identify andcategorize the many components of value adding activity that collectively represent adeconstruction of Shouldice’s value proposition. Given the scope of Shouldice’s activities,we purposively selected these multiple data sources to gain a comprehensive, richunderstanding of the organization and to permit triangulation of data.

Shouldice Hospital - a Best-Practice ExemplarThe Shouldice Hospital Hernia Centre is located in a suburb of Toronto, Canada. The hospitalis renowned globally for its innovation and sole specialization in repair of external abdominalhernias. Dr. E. E. Shouldice founded the Shouldice Hospital focusing on a surgical techniquehe developed during World War II. At this time, this form of surgery normally involved threeweeks of hospitalization. Dr Shouldice reduced this time to less than one week. This new

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innovative method of hernia surgery involved several breakthrough ideas. First, the herniaoperation can be performed with a local anesthetic, rather than a general anesthetic. Second,early ambulation following surgery contributes to a faster recovery. Third, Dr Shouldiceproposed the design of a totally integrated hospital environment for hernia repair andrecovery that would facilitate patients moving about and exercising to hasten recover.

The Shouldice Method, as practiced at Shouldice Hospital, is recognized as the goldstandard in hernia repair (Hay et al., 1995). It has proved to be an exceptionally reliable, safeand cost-effective method of external abdominal hernia repair. Because the operation iscarried out under local anesthesia, the risks associated with general anesthesia are avoided.Shouldice Hospital also benefits from scale and standardization. An average general surgeonmight only perform 25-50 hernia operations in one year. Shouldice Hospital surgeons eachperform up to 700 operations a year. Shouldice has repaired more than 330,000 hernias with agreater than 99% success rate. As Gummesson (2009) points out, the almost nil recurrencerate is as close to zero defects, or Six Sigma, that you can possibly get in a hospital.

Shouldice Hospital does not have a formal explicit statement of its value proposition(Urquart, 2010). This is not surprising. Some implicit value propositions are successfulbecause an entrepreneur has a clear vision (Lanning & Michaels, 1988), as is the case withShouldice. Lanning and Michaels (1988), propose a structure for representing a valueproposition through a formal statement of: the target customers; the key benefits offered; theprice relative to the competition; and a concise summary of the value proposition. Using thisstructure and following a subsequent member check (Hirschman, 1986; Wallendorf & Belk,1989) with Shouldice’s Business Development Director, where minor adjustments weremade, we present a value proposition statement for Shouldice Hospital in Figure 1.

Figure 1: Shouldice Hospital Value Proposition

Ta rg et cu s to m ers :• O th e rw is e h e a lth y m a le s w ith e x te rn a l in g u in a l h e rn ia w illin g to tra v e l to O n ta rio C a n a d a

to re ce iv e ‘g o ld s ta n d a rd ’ h e rn ia re p a ir

K ey b en ef its o f f ered :• h ig h ly s k ille d a n d s p e cia liz e d s u rg e o n s p e rf o rm in g ju s t o n e f o rm o f o p e ra t io n• f a s t s p e e d o f s u rg e ry

• h ig h s u cce s s ra te• e x ce p tio n a lly lo w co m p lica t io n s a n d re cu rre n ce• f a s t re co v e ry a n d re tu rn to n o rm a l d u t ie s• lo w lik e lih o o d o f in f e ct io n• a n x ie ty a n d te n s io n re d u ct io n• clu b - lik e a tm o s p h e re a n d g ro u p th e ra p y – m o re lik e a re s o rt h o te l th a n a h o s p ita l• A f te rca re , ch e ck u p s f o r lif e a n d lo n g - te rm re la t io n s h ip s

P rice re la tiv e to co m p etitio n :• Lo w , h ig h ly co m p e tit iv e p rice - ty p ica lly a b o u t h a lf co m p a ra b le co s ts f o r h e rn ia s u rg e ry a n d re co v e ry

S u m m a ry o f v a lu e p ro p o s itio n :• H ig h ly s u cce s s f u l h e rn ia s u rg e ry u s in g a p ro v e n te ch n iq u e – “T h e S h o u ld ice M e th o d ” - u n d e rta k e n in

a co m f o rta b le a n d s u p p o rt iv e e n v iro n m e n t, w ith f a s t re co v e ry a n d lit t le lik e lih o o d o f f u tu re p ro b le m s

Deconstruction of the Shouldice Value PropositionWe adopted a deconstruction methodology, breaking down the business system intocomponent parts and analyzing their contribution to the value creation process in terms ofdifferentiators and cost drivers. The key business system activities for Shouldice identifiedduring the research process (see Appendix 1) consist of seven elements: facilities design;

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diagnosis; admission & pre-operation; the operation; patient recovery; post-operativeservice; and marketing. The business system concept also provides a structure forunderstanding the cost drivers and differentiators that collectively form the key componentsof the Shouldice value proposition. As outlined in in Appendix 1, our analysis identified 116component differentiators and cost drivers through a process of independent coding of thedata by the two researchers. Appendix 2 summarizes these key cost drivers and differentiatorsfor each part of the business system. Given the page limits, it is not feasible to discuss allthese differentiators [D] and cost drivers [C]. Instead, for each of the seven elements of thebusiness system, we provide some brief illustrations of them below and we provide a detailedsummary of the full range of differentiators and cost drivers in Appendix 2.

(1) Facilities Design: The facilities have been carefully designed to make the patient’sexperience positive and memorable rather than a traumatic one [D]. The facilities ofShouldice Hospital have also been configured with low-cost in mind. All the bedrooms in thehospital are double occupancy and have a high room utilization rate [C].

(2) Diagnosis: Carefully planned procedures have been developed to ensure that onlypatients who are healthy, apart from their hernia, are operated on at Shouldice [C&D]. Allaspects of diagnosis carried out before arriving at Shouldice and before admission are aimedat providing a suitably qualified and screened patient base [D].

(3) Admission and Pre-operation: On arrival at the hospital, patients are examined bya surgeon to confirm that they are acceptable for admission. Following a check, they areadmitted and undertake a new patient orientation [D]. After dinner and recreation they retireto bed in preparation for the operation on the next day.

(4) Operation: As outlined above, the development of the Shouldice Method involvedseveral highly innovative concepts including undertaking hernia operations under a localanesthetic [C&D], utilizing early ambulation after surgery to facilitate faster recovery [C&D],and the benefits of a totally integrated hospital environment that involves ‘mental medicine’and ‘group healing’ [D].

(5) Recovery: Shouldice encourages patients to interact extensively with one anotherand build relationships with each other during their recovery [D]. Many aspects of therecovery process act as both a cost driver and a differentiator.

(6) Post-operative service: Once the patient leaves Shouldice Hospital, considerableeffort is placed on maintaining the patient relationship [D]. In what is possibly the longestrunning post-operative follow-up medical research program in the world, Shouldice gatherspost-operative condition and satisfaction reports from all former patients annually [D].

(7) Marketing: Shouldice is in an enviable position in that much of the marketing isthrough the word-of-mouth of patients and their relatives, as well as intermediaries such asreferring doctors [C].

The identification of cost drivers and differentiators discussed above and summarizedin Appendix 2 provides a framework for understanding the key components of Shouldice’svalue proposition. Our representation in the central element of Appendix 2 develops thebusiness system further and, importantly, highlights its systemic nature. It also addressescriticisms (e.g., Normann & Ramirez, 1993) which argue that a value chain representation istoo linear and unidirectional and does not sufficiently emphasize the value-creating systemitself. Our development of the business system concept in Appendix 2 explicitly recognizesthat value arises from the customer’s processes as well as those of the firm. This is shown inthe central section of Appendix 2. It highlights the value-in-use (e.g., Vargo & Lusch, 2004;2008) that results from the communication encounter, the service encounter and the usageencounter. The importance of these three elements has been highlighted both conceptuallyand empirically in recent literature (Payne, Storbacka & Frow, 2008; Lemke, Clark &Wilson, 2010)

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Conclusions, Managerial Implications and Future ResearchA key Marketing Science Institute research priority for 2010-2012 is the identification anddevelopment of value propositions. Our research makes two contributions to the literature onthe identification and development of value propositions. First, we develop a structuredapproach to the identification, analysis and deconstruction of the value proposition and weuse this approach to explore the anatomy of a service innovation exemplar. Second, existingconceptualizations of the business system fail to explicitly acknowledge the value-in-use(Vargo & Lusch, 2004; 2008) that results from key encounters and to reflect the interactiveand recursive nature of learning processes within the business system. Our extension of thebusiness system concept, shown in the central section of Appendix 2, explicitly addressesthese aspects of value creation.

This research has important managerial implications for both the health care sectorand industry more generally. Developing improved value propositions through deconstructingthe business system and identifying differentiators and cost drivers as outlined above, shouldresult in better health outcomes. Hernia repair is the most common operation in generalsurgery. In the US alone, some 700,000 patients seek hernia treatment and nearly 800,000patients seek to avoid hernia surgery, often claiming disability because of the presence of ahernia – this represents a health care cost of over US$3 billion (Stylopoulos, Gazelle &Rattner, 2003). Further, there is a cost to the economy incurred by some 15 million perannum lost working days because of hernias (Memon & Fitgibbons, 1998). A furtherimportant managerial implications is that specialisation in healthcare is likely to create betteroutcomes (differentiation) and realize lower costs (cost drivers).

Some more general managerial implications also emerge from our study. Whilst thefocus of this paper has been on the service sector, managers in firms in all industry sectorsneed to consider their value propositions. They should consider how their value propositionmight be deconstructed and consider under what conditions value could be reconfigured.Importantly, the deconstruction of the value proposition outlined in this paper freesexecutives from only gaining general learning from best-in-class case studies. As oneexecutive we exposed this research to commented: “It permits a shift from ‘it’s reallyinteresting what they have done’ to ‘this is how they did it’. This provides great insight intohow we can develop an improved value proposition for my company”.

Research into value propositions is at an early stage of development, hence thediscovery-oriented approach adopted in this study. This topic has considerable researchpotential. There are also limitations relating to the current study which suggest areas forpotential future research. First, more general research into the value proposition concept isrequired. There is the need for a definitive review of the value proposition concept, itsadoption in industry and the development of a conceptual framework that integrates differentperspectives, contributions and insights from the literature. Second, this study has focused onvalue proposition deconstruction for only one service innovator. Future research could extendthe analysis to other health care exemplars, other organizations in the service sector, andother industry sectors such as business-to-business and consumer goods. Third, application ofthe learning from value proposition deconstruction in other best-in-class companiesrepresents an area with considerable potential. Finally, the role of co-creation in developingimproved value propositions requires further investigation. Prahalad and Ramaswamy (2004)highlight the co-creation opportunities resulting from the transformation of customers from‘passive audiences’ to ‘active players’. The obvious benefits of co-creation in enhancingShouldice’s value proposition and the recent heightened interest in co-creation in theliterature suggest this as an area of research opportunity.

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Appendix 1: Data Collection, Sources and Research Method

Data Sources Source DetailsInterviews, discussion and correspondence Business Development Director, Shouldice HospitalFormal Presentation Business Development Director, Shouldice Hospital

Video documentary and audio transcript Observation and analysis of transcription of video from Canadian BroadcastingCommission

Documentation from Shouldice Hospital Written materials and extensive on-line materials produced by Shouldice

Discussion forum involving 35 former patients onwebsite

Health forum website (ehealthforum.com, 2010)

In-depth case studies of Shouldice Hospital Heskett & Hallowell, 2004; Pope, Stephenson & Haywood, 1997Shouldice Hospital patient surveys Ferguson, Paulin & Leiriao, 2007; Ferguson, Paulin & Bergeron, 2010Observation of hernia operation Observation in operating theatre of a hernia clinic during an operationReview of academic and managerial literature onShouldice Hospital

Heskett, Schlesinger & Sasser, 2003; Herzlinger, 2004; Urquhart & O'Dell, 2004;Christensen, 2007; Ferguson, Paulin & Leiriao, 2007; Frei, 2008; Gummesson,2009

Review of medical literature on Shouldice Method andother methods of hernia repair

Bendavid, 1989; 1995; 2003; Froom et al., 2001; Papadakis & Greenburg 2002;Shouldice, 2003; Welsh and Alexander, 1993; Hay, et al., 1995; Rutkow, 1998;Bax et al.,, 1999; Schneider et al. 2008

Research Method

1. This exploratory research used mixed methods and data sources that were selected to provide a rich picture of the organisation, itsbusiness system and value creation. Initially, extant literature was reviewed, with additional literature and data sources purposivelyselected to enrich understanding and provide a comprehensive picture of Shoudice, its business system and value proposition.

2. Starting with the most detailed and comprehensive sources, including a transcription of the video documentary, each set of data wasstudied in detail to ensure a ‘rich picture’ (Hoskisson, Hitt, Wan & Yiu, 1999) of the organization, including its unique context andidiosyncrasies.

3. The two researchers independently reviewed the data sources outlined above and made detailed notes on their views of Shouldice’svalue proposition. Using the structure suggested by the originators of the value proposition concept, they iteratively developed a finaldraft of a value proposition statement for Shouldice. This draft was subject to a ‘member check’ (Wallendorf & Belk, 1989) by theBusiness Development Director of Shouldice and following minor modification, a final value proposition statement was developed.

4. The researchers next considered Shouldice’s business system. A draft of the business system elements was developedindependently by the researchers and then compared. An initial business system representation was then developed. This wentthrough some minor modification and a member check before finalization. It aimed at providing a framework for value propositiondeconstruction rather than attempting to include mundane day-to-day ‘support activities’ common to other organizations.

5. The researchers then considered cost drivers and differentiators for each element of the business system. In order to achieve‘triangulation across researchers’ (Belk, Wallendorf & Sherry, 1989), which permits with a check on completeness and interpretationfrom different researchers’ viewpoints, the researchers worked independently. The researchers each highlighted relevant sections inseparate copies of the text of the materials and transcript and noted what they observed in the video material. They then coded eachidentified component, including where each cost driver or differentiator fitted within the business system. Analysis followed theconstant comparative method (e.g., Glasser & Strauss, 1967), whereby findings from the next piece of data were progressivelycompared to previous data. The researchers continued this process until they each felt confident that they had identified keycomponents of Shouldice’s value proposition.

6. The researchers reviewed and refined their findings during several lengthy review sessions in order to determine the keycomponents of the deconstructed value proposition. Finally, they developed a joint list of some 116 component differentiators andcost drivers. These components were then coded in a spreadsheet so their role as a differentiator or cost driver for different parts ofthe business system was classified. Overall, there was a very high degree of unanimity amongst the two researchers in theirrepresentation of the deconstruction of the value proposition, although there were some minor differences. A small number ofvariances were resolved through discussion, revisiting the data sources and the subsequent ‘member check’ by Shouldice’sBusiness Development Director. Thus, the cost driver and differentiation elements, the structure of the business system and thedescription are based on research that reflects researcher consensus substantiated by member check.

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BUSINESSSYSTEM

DI F

ER

EN

TIA

TOR

SCO

ST

DR

I VE

RS

• Suburban rather than anexpensive city centrelocation• Facilities represent low

cost by today's standards•One type of operation• Integrated basement

activities• Rooms in the hospital are

double occupancy• Rooms have a high

utilization rate• Bedrooms have "low

capital investment"•Meals are served in the

dining room rather thanbeing delivered topatients’ rooms

•Wide catchment area forits patients, includingUSA, lowers average costof diagnosis• Low cost initial self-

diagnosis using on-lineMedical InformationQuestionnaire• Screen out unhealthy

patients.• Patients who are

overweight are retained,they are counseled to loseweight and be at anacceptable weight beforeShouldice will admit them• Low cost lay staff review

questionnaires

• Group briefing isundertaken by a nursewith around 30 newpatients•Meals before operation

taken in a communaldining room rather thanserved in patientbedrooms.•Minimal need for trolleys

and orderlies to take andcollect meal trays fromrooms• Patients teamed up with

roommates who haveexperience of operationand can answer patientqueries them afterwards

•Only one operation type• 340,000 operations• Specialized &

standardized procedure• High throughput•No errors/rework• Experience curve• ‘Surgeons assisting

surgeons program’• Relatively low technology• Limited medical

equipment required• Local anesthetic• Specialized anesthetist

not required• Specialized & inexpensive

surgical pack• Focused training for

doctors and for nurses

• Patient s are encouragedto manage their ownrecovery• Group exercise classes

involve around 60patients and areconducted by relativelylow cost nurse.• Group therapy through

patient to patientinteraction makescontact with the doctors& nurses less necessary.•No meals in rooms

(except for first one afteroperation)• Less post-operative

recovery rooms neededfor patients

• Low recurrence leads toless post-operativecontact with hospitalstaff• Patient follow-up data

helps identify medicalissues that can beaddressed at earlier stage• Follow-up program uses

low cost e-mail• Post-operative follow-up

data build support andendorsement by themedical community.• Follow-up program helps

builds patient confidenceand high levels of post-operative satisfaction

• High level of referralsmeans no sales force isneeded• Extensive free publicity

including press coverageand TV coverage• Clergy act as an referral

source• Low cost exposure

though academic sourcese.g., over 300,000 copiesof one case study sold• Check-up keeps Shouldice

“top of mind”• Reputation of the

hospital is so strong avery large number ofpatients are recruitedfrom outside Canada

FACILITIESDESIGN DIAGNOSIS

ADMISSION& PRE-

OPERATIONOPERATION RECOVERY

POST-OPERATIVE

SERVICEMARKETING

• Country club, rather thana hospital•Operating theatres out of

sight in basement• Investments in assets

important to patientcomfort and recovery• Areas where patients can

meet and engage insocial interaction andgroup activities• Beautiful landscaped

grounds• Club-like atmosphere• “Guest” not patient• Low-rise stairs facilitates

mobility.

• A thorough diagnosis ismade before admission• Very specific target

market.• “Shouldice is for me”• Low risk• Patients receive

assurance• Communication of the

substantially highersuccess rate and lack ofcomplications• Branding: “the Shouldice

Method•Overall cost - benefit for

patient of having theiroperation performed atShouldice

• Procedure is explained indetail and sets patientexpectations , patientsare not kept in the dark• Expectations are set :“you

will survive -- everybodydoes”• Briefing represents the

start of Shouldice’s“sharing” culture andaims at reduction ofpatient fear and anxiety• Reassurance and

managing mental state ofpatients• Length of stay.• Educating the patient

• Innovative technique• Proven technique• High order reliability• Very skilled surgeons• Local anesthetic rather

than general anesthetic• Patients are awake

during surgery• Surgeons who are experts

in procedure• Vast amount of total

accumulated experience• Short time in the

operating theatre•Quality control• High success rate• Low risk associated with

the operation.

• Fast recovery time•No recurrence is ever

likely• Fun atmosphere• Exercise classes• Group activities

golf putting pool/billiards exercise in extensive

grounds• Length of stay• Experience sharing• Low risk• Hospital staff encourages

continual engagementwith other patients• Group therapy• Self healing

• Low recurrence rate forhernia repairs undertakenat Shouldice•Members of an alumni

club• Regular newsletter

contact•Over 130,000 annual

follow-up letters• Five travelling clinics are

conducted annually• 12,000 patient follow-up

examinations each year• Part of a “club”• Shouldice patient alumni

reunion• Continuing relationship• ‘Esprits de corps’

• Track record• Patients confidence• 65 years of operations• 340,000 success stories• High customer advocacy• Branding “the Shouldice

method”•Overall cost/benefit•No-one dies!• Little chance of problems• Clergy probono

operations• Strong alumni bond• Extensive media exposure• Reputation: “the best

hospital in the world• Stay 72 hours vs. 6 days

Appendix 2: Deconstruction of the Shouldice Hospital Value Proposition

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REFERENCES

Anderson, J, Narus, J, & Van Rossum, W. (2006). Customer value propositions in businessmarkets. Harvard Business Review, (March), 91-99.

Bales, C F., Chatterjee, P. C., Gluck, F. W., Gogel, D., Puri, A. & Watters, D. C. (2000). Themicroeconomics of industry supply. McKinsey Quarterly, (June), 22-25.

Bauron, R (1981). New game strategies. The McKinsey Quarterly, (Spring), 24-40.

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