Entrepreneurial business solutions can lead to better outcomes in every economic endeavor. In the field of medical care, entrepreneurship has been hampered by non-market arrangements. There’s some sense of an emerging trend towards better choices for users, a trend that we discuss with economist Dr. Murray Sabrin.

Knowledge Capsule

All systems evolve. The current system of medical care uncoupled from private markets evolved in ways that result in higher costs and poorer outcomes.

Our economy — and the economic experience of all of us as individuals — would be improved (i.e., greater customer value would be experienced) if we could lighten the burdensome weight of government regulation and its consequent effects on the system of medical care and medical insurance.

Our homeowners insurance, our automobile insurance and our life insurance are market products that give us the experience of seeking information and making informed choices based on pricing and perceived benefits. Medical insurance has evolved differently — it’s tied to work and puts us in a medical system where prices and choices are opaque and highly constrained. The associated costs are a great burden on the economy, and they result in diversions of productive investment from better uses.

The evolution of employment-linked healthcare began in dangerous industries like forestry logging, when employers introduced on—site medical care to treat on-the-job accidents — employers understood the mutual benefit of a healthy workforce. During and after World War II, the incentives for employers shifted: wage controls prevented them from attracting workers with higher pay, and so they introduced the benefit of tax-free healthcare benefits. An industry linking employment and medical care grew by leaps and bounds.

Today, both employers and employees are beginning to understand the drawbacks of the evolved system.

In the evolved medical care system today, employees feel constrained because they can’t freely choose their doctors and service providers, and healthcare treatments they might want are often made unavailable to them. They’re not made aware of pricing, and therefore unable to make informed choices.

Employers are beginning to understand the high costs for traditional indemnity insurance, and many of them are seeking alternatives. Dr. Sabrin listed a number of these emerging innovations.

1. Employer self-insurance.

Instead of incurring the heavy cost of insuring via the conglomerates like Blue Cross Blue Shield, Humana, Aetna, United Healthcare and others, many employers are shifting to self-insurance, hiring an independent third-party administrator to set premiums for normal expenses, and utilizing re-insurance against the cost of catastrophic medical events.

2. Medical savings accounts.

Financial innovation has opened the possibility of utilizing current savings for future medical expenses, ideally deposited tax free, appreciating tax free and withdrawn tax free (although, inevitably, there are government restrictions). It’s another component in the free-market medicine revolution.

3. Medical cost sharing.

Some affinity groups take the route of medical cost sharing — groups pooling funds to pay individual medical costs. Some of these groups may create membership lifestyle qualifications — non-drinkers, non-smokers, etc. — to link healthy behaviors to lower medical care costs.

5. Wellness rather than healthcare.

The realization is dawning that medical care costs are inflated by unhealthy lifestyles. Employers and employees share a mutual interest in a healthier workplace and healthier workforce. Better alignment of incentives could encourage healthier eating and drinking habits, greater levels of exercise, and generally more health-conscious behavior. The feeling of entitlement to healthcare that can result in a lowered drive to stay healthy is a moral hazard that has been induced by the current medical care system. Reducing medical care costs via a healthier workforce is a win-win for employee and employer alike.

Restoring the doctor-patient relationship via Direct Primary Care.

The primary care doctor who has a knowing and caring relationship with individual patients, and who knows their ailments and their lifestyle, and their family and economic circumstances, is a historical tradition in American life, a part of the American dream. The corporate medical care system took this relationship away in many ways, replacing it with an impersonal system of “in-network” availability of physicians with no personal relationship component.

Direct Primary Care is restoring the doctor-patient relationship following principles of entrepreneurial business design. A doctor contracts with a small number of patients — few enough to ensure availability and access — who pay a subscription fee, sufficient to provide cash flow for the doctor’s office and immediate support functions. The doctor constructs a personally curated set of network connections to specialists, such as cardiologists or urologists, and to services such as imaging and lab analysis, so that patients can be directly connected with pre-selected and approved providers for specialist needs.

Direct Primary Care can eliminate or circumnavigate much of the bureaucracy, paperwork, and creativity-stifling sclerosis of current day corporate medical care systems.

6. Pricing transparency.

A parallel innovation to DPC is demonstrated in transparent pricing clinics and surgeries, the clearest example being provided by Surgery Center Of Oklahoma (SCOO) which famously provides an open price list for commonplace surgeries, with no surprise surcharges or hidden fees. These prices are often much, much lower than would be charged for the same service by corporate hospitals; the quality is often higher; the speed of getting an appointment is faster; and the most important trait is that the pricing is transparent to the end-user. Patients become consumers in the traditional sense of the word — able to make a free choice based on open pricing information.

7. Better self-monitoring.

How’s your health? You may not have sufficient information for a good answer – the medical care system often makes information hard to access. One improvement is the self-monitoring that is technologically enabled today. Your Apple watch, for example, can tell you a lot about your vital signs, as can apps+devices like Kardia or a simple scale.

Consumers may also be able to find a local DPC doctor or naturopath with whom to share the data for recommendations on natural solutions for any signals they might detect. This is a decentralized approach to healthcare that’s consistent with the general trend away from restrictive top-down centralized structures and processes.

Additional Resources

The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance by Murray Sabrin: Mises.org/E4B_202_Book1

From Immigrant to Public Intellectual: An American Story by Murray Sabrin: Mises.org/E4B_202_Book2

MurraySabrin.com

MurraySabrin.Substack.com

We’ve conducted 99 conversations with value-creating entrepreneurs, and we’ve conducted about 100 Q&As with business school professors who research and teach value creation. Here’s a headline summary of what we’ve learned.

Knowledge Capsule

1) A firm is defined by its purpose.

Firms with a clear purpose that aligns everyone who works there, along with all suppliers and partners and customers, perform at a high level over the long term. Lack of clarity of purpose is associated with fluctuating performance and often with “fade” — permitting competitors and market changes to erode away a firm’s advantage.

Knowledge Capsule #199: Mises.org/E4B_200_A

2) A successful firm’s purpose is always based on value for customers.

Purposeful firms identify a vision of value received by the customer, and commit themselves to it. They craft a business model to deliver the vision, including continuous increases in efficiency and continuous innovation, thus expanding the value space in which they operate. They build and maintain strong relationships in all directions. They look to the long term, including future generations.

Per Bylund and Mark Packard on Subjective Value, The New Economics Of Value and Value Creation: Mises.org/E4B_200_B

Econ4Business.com/value

3) Firms need a deep understanding of value.

We say in Austrian economics that value is subjective. It’s formed entirely in the mind of the customer, as result of a customer’s learning process: becoming aware of a firm’s offering, evaluating its attractiveness, comparing it with alternatives, putting it to use and assessing whether the usage experience met expectations. They learn from their own perspective, in their own context, and in the process of running their own system (their household, their office, their factory) and living through dynamic changes that alter their perspective. Value is a 2-way flow: the value proposition flows to the customer, and the value experience flows back to the firm as cash flow and feedback.

The value cycle is complex and understanding it is very demanding, as is understanding the customer and their system. Winning firms work hard to build a deep value knowledge.

The Value Learning Process: Mises.org/E4B_200_C

4) Purpose + Value Creation + Entrepreneurship.

In Austrian economics, entrepreneurship is the driver of the business system. The term is often misinterpreted as pertaining to start-ups and small business innovation. It actually pertains to value creation. Entrepreneurship is an approach to business that starts with the customer and their needs — a definition of what new value opportunities are currently unmet — and develops the knowledge and assembles the capability to craft a product or service to meet those needs. There is time uncertainty and resource risk in committing to this development. Any firm and any project that pursues this new knowledge with the intent of creating new customer value is entrepreneurial, irrespective of scale.

Entrepreneurship also weeds out elements that are not value drivers — bureaucracy, obsolete assets and unproductive infrastructure such as luxury office suites. Entrepreneurial firms are focused and efficient.

This is Value Entrepreneurship: Mises.org/E4B_200_D

5) Entrepreneurial firms operate unique value-centric business models.

Entrepreneurship is action, and the set of actions the firm takes to make money consistently over the long term is called the business model. Business models vary by industry — some industries are more profitable than others — and by firm — in every industry, there is something about some firms that makes them more profitable than others. That something is their business model.

The business model that emerges from 199 Economics For Business episodes is the 4V’s model:

Value understanding: building an advantaged and exclusive knowledge base on understanding your chosen customers and their value needs and value preferences.

Value facilitation: designing and assembling a system to meet those needs and preferences and taking it to market for feedback on customer acceptance and approval.

Value exchange: market implementation at scale to generate reliable recurring cash flows from customer purchases and relationships.

Value agility: systems to receive and respond to feedback in a dynamic, responsive flow.

Per Bylund introduces the Austrian Business Model: Mises.org/E4B_200_E

The Austrian Business Model Video: Mises.org/E4B_200_F

Hermann Morris’s Business Model: Educate The Industry: Mises.org/E4B_200_G

6. The entrepreneurial mindset is different.

Over 199 episodes, we observed the following characteristics of the entrepreneurial mindset:

Greater capacity for imagination: imagining great futures for customers;

Better judgment: judgment is intent (the strong emotional relationship with a desired successful outcome), plus intuitive decision-making when data are incomplete, plus confidence in action-as-experimentation, whatever the degree of uncertainty;

Learning: entrepreneurial firms are learning machines, and especially good at challenging their own assumptions.

Empathy: the skill to understand how customers feel subjective value, and to process data through the customer’s mental model;

Orchestration: entrepreneurial firms seldom have direct control over all the resources required to deliver value, and they are expert at orchestrating others’ resources, including their time and skills and knowledge.

Embrace of change: entrepreneurs don’t fear change, they welcome it as an opportunity.

Peter Klein: Opportunities Don’t “Exist”. Entrepreneurs Create Them: Mises.org/E4B_200_H

Victor Chor’s Entrepreneurial Orientation: Mises.org/E4B_200_I

7. Explore and expand.

Entrepreneurial firms not only embrace change, they make it, through a process we call explore and expand. It means always running lots of experiments to see what works unexpectedly. Experiments should be designed to refute existing assumptions. There should be a wide variation of experiments, not just a series of nuanced changes. Entrepreneurs look for a big variation in outcome and so they make big variations in inputs.

The Age Of Strategy Is Over: The Replacement Is Explore And Expand: Mises.org/E4B_200_J

8. Harnessing the highest values.

What guides customers’ behaviors are not features and attributes, like pricing and performance metrics and guarantees, but values. The firmest guidance comes from the highest values. If a customer’s highest value is family security, they’ll never buy any offering that doesn’t align with their value system. Successful entrepreneurial firms know how to climb the values ladder from features to highest value, providing strong rungs at every level, and always going all the way to the top.

Internally for business, the highest values are service to others, delivered in the form of value creation, and ethical behavior.

Value As A Basis For Business Building: Mises.org/E4B_200_K

9. Managing the loop

Business is a flow. In business-as-a-flow, there’s no start and no finish. It’s non-linear. The environment is entirely uncertain and unpredictable. A business forms its intent, and then chooses and implements actions it judges will advance that intent. There’s no way to know what the result will be, and so the business commits to receiving and reading the feedback, making appropriate adjustments, and then implementing new, adjusted actions, to gain the next round of feedback.

This is the flow of knowledge-building, and it flows as a repeated loop, with the same process but different actions, new learning and continuous adjustment.

With sound and active monitoring and management, the loop will generate some durable learning that merit repeated action. Cash flow will flow back to the company, and profitable returns will grow. The loop can be self-reinforcing.

Mark McGrath: OODA Loop: Mises.org/E4B_200_L

Bart Madden: Proficiency With The Knowledge-Building Loop Is The Key To Value Creation: Mises.org/E4B_200_M

Brands are prized by corporations as significant value-driving economic assets. Brands help customers enjoy more valuable experiences, raising willingness-to-pay levels and thus improving cash flows — higher cash flows as a result of higher prices, faster cash flows because branded products tend to turn faster than their non-branded counterparts, longer lasting cash flows because brands have longevity in customers’ perceptions, and less volatile cash flows because brand loyalty can smooth out the effects of economic booms and busts.

For these reasons, corporations invest in brands and brand building. Catherine Kaputa makes the case that individuals should invest in themselves as brands, and makes the tools of brand-building available to individuals for personal brand-building: the brand of you.

Knowledge Capsule

You are a brand, assessed subjectively by your customers.

Think of yourself as a brand. Think of your customers – your boss, other leaders and decision-makers in your firm, your colleagues, your clients, your suppliers. They all have a subjective perception of you and the value to which you can contribute in any business situation. Is it the perception you want? Do people see you as the problem solver and solution designer for their problems? Like any brand owner, you can work to actively shape that perception. As Catherine Kaputa puts it: If you don’t brand yourself, others will, and they may not brand you the way you want to be branded.

The first tool in the branding toolbox is positioning.

The branding community has developed the idea of brand positioning. In the perception space in which your brand operates, you seek to identify a unique, highly differentiated position. You want to be perceived as different and better. Positioning is the identification and selection of that unique space in the minds of customers and the basis of the of credibility, reputation and trust to be able to make the claim.

Importantly, positioning requires outside-in thinking. Think of your customers first, their needs, their mindset, and their perception of the other brands in the space. Your positioning must be in their minds, not yours.

Differentiation is a most important element of positioning.

Typically, perception spaces are competitive. Customers looking for solutions to problems and better experiences scan the space for alternatives and make comparisons between them. Know your competitors, assess them through the eyes of your customers, and find a positioning that is both different from and better than alternatives for your customer, using their mental model and assessment criteria. Aim to “own” that unique space – meaning that the customer identifies you as the only one or the best one of their alternatives to meet a particular need.

Attach an idea to yourself.

A way to pin down a perception in a customer’s mind is to attach an idea to a brand, in this case yourself as a brand, in a way that the connection is immediate and becomes automatic. The idea should be singular and highly focused. Catherine Kaputa recommends a process of subtraction to reach a singular idea — you’ll start with a multi-layered and possibly complicated idea, but if you keep subtracting the least relevant, least important and least differentiated elements, you’ll arrive at the pared-down singularity. You should be able to express it in a phrase or a sentence, one that you can keep repeating to embed it.

Her own example in her marketing career was to brand herself as “good with difficult clients”. Every marketing services company has clients or accounts or marketing challenges that are deemed to be difficult and not everyone wants to be exposed to that risk. Someone who steps up and enjoys performing well on such a stage is both differentiated and highly sought after.

Personal brand positioning strategy templates provide another tool for self-branding.

In her book The New Brand You, Catherine Kaputa provides 10 brand positioning templates as examples of how an individual might approach the process of self-branding and build their own brand.

Download “Ten Personal Brand Positioning Strategies” in PDF: Mises.org/E4B_198_PDF

These are complete templates for rigorous use and application, appropriate for individual interpretation, embellishment and nuance.

One example is the Innovator strategy. Let’s use this template as an example of the self-brand positioning process.

1. What’s the customer need that the Innovator addresses? Identify your target audience and the problem they want solved. Innovators are needed to create something new, when existing strategies are failing or sales are declining or new market entrants are redefining the terms of competition. New solutions are sought, and Innovators are the ones people turn to. Innovators are recognized as the creative resource that’s required.

2. What are the attributes to point to in order to claim the Innovator positioning? Catherine Kaputa lists 5:

Visionary with clear objectives: not just creative, but capable of identifying business objectives for creativity and of seizing opportunities.

Brilliant at problem-solving: full of ideas, but always directed towards solving important problems.

Bold risk-taking: when others hold back, Innovators are eager to design and run experiments from which to learn, knowing there’s no such thing as failure, just new knowledge.

Fresh thinking: not following the crowd but diverging from the norm.

Inventive: Innovators demonstrate the capacity to be first in new designs, new thinking and new ideas.

The point is to evaluate yourself against the attributes of the positioning type: is this you?

3. The next step is a positioning statement. Catherine provides examples:

Sample Positioning Statement: An innovative professional in an industry beset by mergers and dynamic change positioned herself in the following way.

Draft Sentence: For senior managers, boss, clients, industry who need new products and services I stand for innovative problem solver in industries undergoing massive change.

The format to use is: For (target audience) who needs (problem you solve) I stand for (value proposition).

4. Add reasons to believe. Pick three reasons and 3 keywords or phrases as to why customers should invest in your positioning statement by hiring you or giving you the project.

Innovator is just one of multiple possible strategies. Yours may be one of these or a combination of several. There’s a personal test you can take at Mises.org/E4B_198_Test for initial input to start your positioning process.

Positioning is a means not an end: there is more work to do.

Catherine Kaputa follows the logic of brand positioning all the way to implementation. It’s not a theory, it’s a practice. There are actions that brand marketers take to communicate and embed their positioning. She cites three major ones: visual identity, verbal identity and brand marketing.

Commercial brands spend a lot of time, effort and resources on a brand’s look: logo design, package design, website colors and typefaces, video style, and so on. The goal is to communicate a style and an engaging and brand-appropriate visual personality. The same principles apply to personal branding – choose your look, your dress-style and fashion carefully and thoughtfully.

Verbal identity comes from the words you use, the story you tell, and how you communicate in presentations, e-mails, tweets, speeches and conversations, whether in the conference room, the auditorium or on zoom. Work on it.

Marketing your brand should be guided by your goals for your personal brand. Once you have them defined, choose your media, your message, your content, your campaign tactics and your metrics.

Additional Resources

The New Brand You: How to Wow in the New World of Work by Catherine Kaputa: Mises.org/E4B_198_Book

Find your own brand positioning (Mises.org/E4B_198_Test) on SelfBrand.com

“Ten Personal Brand Positioning Strategies” (PDF): Mises.org/E4B_198_PDF