What makes a business successful? What is the economic model to follow in order to make a business work? What assumptions should be done? In our final lecture on business planning we tried to figure out all of these questions as well as many others. For this we tried to reverse analyze a business plan.
What is reverse engeneering?
During our Colombia trip we are going to be working on a project that has already started in the region of Caldas: Bienestar. This social business tries to grant access to primary healthcare to the poorest of the poor. It is a type of insurance in which people enroll paying for their membership to the plan, to later receive big discounts when they visit the doctor. One may say it's economy of scale, doctors receive less money for each visit, but in return they get more visits. Thinking on this, everybody wins.
But how do we know if people are willing to pay? How do we know if the doctors are willing to charge less? In that sense, how do we know if the model is going to work? After several conversations with the people putting up the project, we saw that they didn't have a structured idea of how this business would become economically sustainable, so it was hands on!
This is when reverse engineering came into action. For this to happen, we started to do collaborative desktop research, looking for important facts and data (relevant to healthcare and economy) of the region where the business is implemented. This was crucial, since it gave us an overview of the set in which this business is being implemented and it gave us a solid ground in which to base our own assumptions. After having all of the information within our hands, we researched for other business plans and tried to figure out the economic engine of this concrete case.
In this case we analyzed how this membership would benefit the patients (making them save money on healthcare) the doctors (making them make more money) and Bienestar (becoming economically sustainable). After finding some key parameters and making some assumptions based on our findings, we developed the economic engine, and, in fact we discovered this business model was viable. The economy of scale worked both ways (patients & doctors) and if the Bienestar project reaches the goals it has in mind, it would become economically sustainable, making it a successful business.
For us this was an important step, since it gave us a way of dealing with a business plan in which the economic engine is constructed from scratch (even if the business is already running) this can modify the way the business has been operating so far since it gives them key data that helps them to become economically viable. This can modify the strategy, the potential target, and even the organization of the whole business. In other words, the reverse analyzing can put a business back on track.
In that sense, this exercise also gave us the ability to think about the economics within a business in order to make it successful, and this can be applied to any case that we may have in our hands. Our research and knowledge gave us the tools to think about a different approach in the construction of a business model, analyzing it and going to its core.
This is still work in progress and we still need to develop it further and confirm our own assumptions while on site. But at the moment we think we are in the right path.