Harvard Case - So-Young: Innovating the Business Model in China
"So-Young: Innovating the Business Model in China" Harvard business case study is written by Xiangyang Ma, Xinyu Shao, Tieshan Li, Xiuhong Wang. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Jun 9, 2020
At Fern Fort University, we recommend So-Young to focus on a multi-pronged growth strategy that leverages its existing strengths in technology, data analytics, and strong brand recognition. This strategy will involve:
- Expanding its service offerings: Introducing new services, particularly in the preventative healthcare and wellness space, catering to the growing demand for holistic health solutions in China.
- Strengthening its digital platform: Investing in AI-powered personalized recommendations, enhancing user experience, and integrating virtual consultations to cater to the evolving digital landscape.
- Expanding geographically: Strategically targeting new cities and regions in China with high growth potential, focusing on areas with strong demand for aesthetic services.
- Exploring strategic partnerships: Collaborating with leading healthcare institutions, technology companies, and international brands to enhance its service offerings and reach a wider customer base.
- Building a robust corporate social responsibility (CSR) program: Focusing on initiatives that promote healthy living, empower women, and contribute to the well-being of the community, enhancing its brand image and attracting a wider customer base.
2. Background
So-Young is a leading online platform in China that connects consumers with qualified plastic surgeons and aesthetic clinics. Founded in 2013, the company has rapidly grown by leveraging technology and data analytics to create a transparent and efficient platform for aesthetic services. So-Young faces challenges in a competitive market with increasing regulation and a growing demand for personalized and holistic healthcare solutions.
The case study focuses on So-Young's CEO, Jin Xing, who is tasked with developing a growth strategy that will allow the company to maintain its leadership position in the rapidly evolving Chinese aesthetic market.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition: So-Young has established a strong brand reputation for its transparency, quality, and customer service.
- Technology and data analytics: The company leverages technology and data analytics to create a user-friendly platform, personalize service recommendations, and track patient outcomes.
- Large customer base: So-Young has a significant customer base in China, providing a strong foundation for future growth.
- Experienced management team: The company has a strong management team with experience in the healthcare and technology industries.
Weaknesses:
- Limited service offerings: So-Young primarily focuses on aesthetic services, limiting its potential to cater to a wider customer base.
- Dependence on third-party providers: The company relies on third-party clinics and surgeons, which can create challenges in quality control and brand consistency.
- Regulatory scrutiny: The Chinese government is increasing regulation in the aesthetic services industry, which can impact So-Young's operations.
Opportunities:
- Growing demand for aesthetic services: China's rapidly growing middle class is driving increased demand for aesthetic services.
- Shift towards preventative healthcare: Consumers are increasingly interested in preventative healthcare and wellness solutions.
- Technological advancements: The development of AI and machine learning can further personalize services and enhance customer experience.
- Expanding into new markets: So-Young can expand its operations to new cities and regions in China with high growth potential.
Threats:
- Increased competition: The aesthetic services market in China is becoming increasingly competitive, with new entrants and established players expanding their offerings.
- Economic slowdown: A potential economic slowdown in China could impact consumer spending on discretionary services like aesthetics.
- Regulatory changes: The Chinese government may introduce new regulations that could impact the industry.
Porter's Five Forces Analysis:
- Threat of new entrants: High, due to the ease of entry and the growing demand for aesthetic services.
- Bargaining power of buyers: Moderate, as consumers have many choices and can compare prices and services online.
- Bargaining power of suppliers: Moderate, as So-Young relies on third-party providers, but can leverage its large customer base for negotiation.
- Threat of substitute products: Moderate, as consumers can choose alternative services or products for achieving similar aesthetic outcomes.
- Rivalry among existing competitors: High, as the market is fragmented and competitive, with many players vying for market share.
Value Chain Analysis:
So-Young's value chain consists of the following key activities:
- Inbound logistics: Sourcing and managing relationships with third-party clinics and surgeons.
- Operations: Managing the online platform, providing customer support, and facilitating bookings.
- Outbound logistics: Delivering services to customers through its network of providers.
- Marketing and sales: Promoting services through online channels, social media, and partnerships.
- Customer service: Providing support and resolving customer inquiries.
Business Model Innovation:
So-Young has successfully innovated its business model by leveraging technology and data analytics to create a transparent and efficient platform for aesthetic services. This has allowed the company to:
- Reduce information asymmetry: Providing consumers with access to information about clinics, surgeons, and prices.
- Simplify the booking process: Streamlining the booking process through its online platform.
- Enhance customer experience: Personalizing service recommendations and providing post-treatment support.
4. Recommendations
To achieve sustainable growth and maintain its leadership position, So-Young should implement the following recommendations:
1. Expand Service Offerings:
- Introduce preventative healthcare and wellness services: Offer services like skin care, nutrition counseling, and fitness programs to cater to the growing demand for holistic health solutions.
- Develop specialized service packages: Create specialized packages for specific needs, such as anti-aging, skin rejuvenation, or body contouring.
- Offer virtual consultations: Provide virtual consultations with qualified professionals to expand reach and cater to a wider customer base.
2. Strengthen Digital Platform:
- Invest in AI-powered personalized recommendations: Leverage AI and machine learning to provide personalized service recommendations based on individual needs and preferences.
- Enhance user experience: Improve the user interface and functionality of the platform to make it more intuitive and user-friendly.
- Integrate virtual consultations: Develop a seamless integration of virtual consultations into the platform, allowing for remote consultations and follow-ups.
3. Expand Geographically:
- Target new cities and regions: Identify cities and regions with high growth potential and strong demand for aesthetic services.
- Develop localized marketing strategies: Tailor marketing campaigns to the specific needs and preferences of different regions.
- Establish partnerships with local clinics and surgeons: Form strategic partnerships with local providers to expand reach and build local expertise.
4. Explore Strategic Partnerships:
- Collaborate with healthcare institutions: Partner with hospitals and clinics to offer integrated healthcare services, including aesthetic procedures.
- Partner with technology companies: Collaborate with technology companies to develop innovative solutions for personalized care and virtual consultations.
- Form alliances with international brands: Partner with international brands in the beauty and wellness industry to expand reach and enhance brand image.
5. Build a Robust CSR Program:
- Focus on promoting healthy living: Support initiatives that promote healthy living, including nutrition education and fitness programs.
- Empower women: Support organizations that empower women and promote gender equality.
- Contribute to the well-being of the community: Invest in community projects that improve the well-being of local communities.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of So-Young's current situation, its competitive landscape, and the evolving trends in the Chinese healthcare market. They are aligned with the company's core competencies in technology and data analytics, and its mission to provide high-quality aesthetic services to consumers.
External Customers and Internal Clients:
The recommendations consider the needs of both external customers and internal clients. They aim to provide consumers with more comprehensive and personalized services while also empowering So-Young's employees with the tools and resources they need to succeed.
Competitors:
The recommendations are designed to differentiate So-Young from its competitors by offering a wider range of services, leveraging advanced technology, and building a strong brand image through CSR initiatives.
Attractiveness:
The recommendations are expected to be attractive to investors and stakeholders by driving revenue growth, improving profitability, and enhancing So-Young's long-term sustainability.
Assumptions:
The recommendations are based on the following assumptions:
- The demand for aesthetic services in China will continue to grow.
- Consumers will increasingly seek preventative healthcare and wellness solutions.
- Technological advancements will continue to drive innovation in the healthcare industry.
- The Chinese government will continue to support the development of the healthcare sector.
6. Conclusion
By implementing these recommendations, So-Young can position itself for continued success in the rapidly evolving Chinese aesthetic market. The company can leverage its strengths in technology, data analytics, and brand recognition to expand its service offerings, strengthen its digital platform, and build a robust CSR program. This will allow So-Young to cater to the growing demand for personalized and holistic healthcare solutions, attract a wider customer base, and maintain its leadership position in the industry.
7. Discussion
Alternative Options:
- Focus solely on cost leadership: This option could lead to lower margins and a weaker brand image.
- Acquire a competitor: This option could be expensive and risky, and may not be feasible in the current regulatory environment.
- Expand internationally: This option could be challenging due to cultural differences and regulatory hurdles.
Risks and Key Assumptions:
- Economic slowdown: A potential economic slowdown in China could impact consumer spending on discretionary services.
- Regulatory changes: The Chinese government may introduce new regulations that could impact the industry.
- Technological disruption: New technologies could emerge that disrupt the aesthetic services market.
Options Grid:
| Option | Pros | Cons | Risk |
|---|---|---|---|
| Expand service offerings | Increased revenue, broader customer base | Increased complexity, potential for cannibalization | Economic slowdown, regulatory changes |
| Strengthen digital platform | Enhanced customer experience, improved efficiency | High investment costs, potential for technical challenges | Technological disruption |
| Expand geographically | Access to new markets, increased revenue | Increased competition, cultural differences | Regulatory changes, economic slowdown |
| Explore strategic partnerships | Access to new resources and capabilities, enhanced brand image | Potential for conflicts of interest, loss of control | Regulatory changes, economic slowdown |
| Build a robust CSR program | Enhanced brand image, increased customer loyalty | High investment costs, potential for negative publicity | Regulatory changes, economic slowdown |
8. Next Steps
- Develop a detailed implementation plan: Outline the specific steps, timelines, and resources required to implement each recommendation.
- Allocate resources and budget: Secure the necessary resources and budget to support the implementation of the recommendations.
- Monitor progress and make adjustments: Track the progress of the implementation plan and make adjustments as needed.
- Communicate with stakeholders: Keep stakeholders informed about the progress of the implementation plan and the company's overall strategy.
By taking these steps, So-Young can ensure that its growth strategy is effectively implemented and that the company continues to thrive in the dynamic Chinese healthcare market.
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Case Description
On May 2, 2019, So-Young International Inc. (So-Young) became the first Chinese Internet-based company in the cosmetic surgery sector to be listed on the Nasdaq Stock Market. With effective use of the Internet and mobile devices, So-Young provided a one-stop resource that allowed consumers to access information about cosmetic treatments, search for and purchase cosmetic surgery services, and benefit from peer and professional support during recovery. With its service, So-Young had positively transformed a fast-growing Chinese cosmetic surgery market that was lacking transparency and trustworthy information. The company had used a process of enterprise business model innovation to build its brand image, expand its audience, and engage the cosmetic surgery industry value chain. While the process had been successful, So-Young faced competitive and internal challenges that it needed to overcome to maintain its leadership position and grow future prospects.
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