Will Your Health Business Model Survive?

Stress-testing your business for a new policy agenda

Since the election, US stocks are mostly up. Except hospital stocks. Public hospitals like HCA are worth looking at the stock charts to see how wrong we were about the election – rising high the day before, tanking the day after.

HCA Post Election Ticker

Then there are the health insurance companies like Aetna and Cigna are on the rise. United Healthcare is the best-performing stock of the year.

United Healthcare Ticker

The promised repeal of the Affordable Care Act (ACA, a.k.a. Obamacare) is expected to impact hospitals more negatively than insurers. A recent Barrons survey of C-Suite executives in healthcare found that “MCO (Managed Care Organization) executives are more optimistic than acute-care hospital executives about the outlook for the respective fundamentals in their industries.”

But as of today, we only know which way the winds are blowing. We do not know exactly how the ACA will change, or when, or what it specifically means for any given company strategy.

Do the same trends play out if you are a startup? Were your pre-election business model assumptions correct? Does the recent shift in political stance change your trajectory?

In short, yes. No matter what your political views, it’s time to stress test your assumptions, and determine how dependent you are on policy-driven shifts in your future plan.

First, Re-Locate that North Star

Look up from your to-do list, your weekly calendar, your scrum, sprint, or annual operating plan. Why did you get into healthcare in the first place? Answer that question on a personal level. Convene a futuring session with your team.

Has the ACA been positive for your business or are you still struggling to implement technology and systems to manage and measure care? How should healthcare happen? What are your ideas for a better future?

For inspiration, The Institute for the Future published a Health Futures Map to help navigate the post-ACA decade. The Institute for Health Improvement recently partnered with five foundations to produce the Better Care Playbook to help accelerate system transformation. What questions do these future statements and best practices generate for your team?

IFTF Post ACA Care Models

Ask big questions to frame and reframe your company’s direction. What role do you have to play in healthcare transformation driven not by federal policy shifts, but through connections and partnerships with other companies in the healthcare industry, not-for-profit organizations, advocacy groups, and your local community?

Second, Check Your Customer Target Assumptions

Who are your core customer segments? Were you selling to hospitals? Insurance companies? Pharma? Should your priorities shift in preparation for what comes next?

Even if you’re up and running and executing against your defined plan, it’s worth re-engaging in customer discovery. Pick a selection of health systems leaders, clinicians, administrators, and ask everyone how they envision the shift. You may find that your question is the first time they have stopped to pause and think about what is to come.

Third, Re-Validate Your Core Business Model Hypotheses

It’s time to go back to your original business model assumptions. If you haven’t been tracking changes to your assumptions using a Business Model Canvas tool, now is a good time.

Value Proposition Design

List your target customer segments, in order, and based on your customer discovery findings, consider how your core value proposition may need to shift.

Take a hard look at your core resources, activities, and partners – do you need to think about what you do differently?

Lastly, your biggest and boldest question is to re-consider your costs and revenues and stress-test where you fall in the shift to value-based reimbursement.

Fourth: Take a Stand on Value-Based Reimbursement

The hardest element to predict is how and when we start to shift to value-based care, payment based on outcome, rather than traditional fee-for-service.

The shift to value-based payment and care will cause health providers and everyone delivering to the healthcare system to change the way they bill for care. Instead of being paid by the number of visits and tests they order, devices used, and pharmaceuticals prescribed (fee-for service), providers’ payments will start to be based on the value of care they deliver (value-based care).

This shift is happening, but not everywhere. A number of health systems, not-for-profits and health companies and startups have each chosen where to play; with a number of stakeholders claiming bold stakes and risks, and others avoiding the change for as long as they can.

A rollback of key elements of the ACA will affect the contours of this shift, but the “train has left the station” according to many health leaders. Payers are demanding value-based payment models, integrated hospital systems are taking on population risk, and startups are experimenting with pay-for-outcomes and pay-for-performance models. Will you be a leader? Or a follower?

Finally: Rinse, Repeat and Lead

To be sure, those that work inside of healthcare complain that the pace of change is slow and incremental, particularly in front line health delivery systems. Startups have had to play at the edges, selling solutions consumers who can afford to pay, to workplace wellness efforts where ROI can be proven, or are living off of a derivative data-selling business model. Incumbent technology and service vendors are deeply locked in and want to protect their market share and flows of revenue and profit.

But one thing is certain – there is no comfortable status quo in healthcare. Even in the heart of the most cynical, money-minded hospital administrator, there is an acknowledgment that patients matter. The US is an outlier in health, and “not in a good way:”

US Healthcare System

 

If you believe your initiative or technology innovation can bend this curve away from more cost/worse outcome, then it’s time to double down. Change will come from government, but progress will come from leaders in the patient communities, advocates, caregivers, healthcare systems, and innovative companies that can move beyond our current trend. We only have our health and our lives to improve.

Why Your HealthTech Market Analysis is Probably Wrong

Broken Eyeglasses on White Background

Have you had an eye exam at Warby Parker? If you’re in health tech, or just healthcare, and you wear glasses, I recommend you make your way to a Warby Retail location soon just for the experience. Go to the website – you can make an appointment Apple-Genius-bar-style. (Sorry Bay Area folks – their first eye exam locations are East Coast and Midwest).

Why? Because how we look at trying to predict the future, current market dynamics, and competitive threats is wrong if we’re only looking at incumbent competition.

The optician was brisk, thorough, and sophisticated about my questions. When I asked about her experience working at Warby Parker, she took extra time to tell me the best part. She was able to spend time to help people, without having to worry about insurance codes and billing and revenue lifecycle management.

She told me a story about a man who walked around with masking tape on his 20 year old glasses – not just on the bridge – but holding together the lenses and obstructing his vision. He was finally able to afford the exam ($75 flat fee), and the replacement glasses ($95), verses his previous pair from 20 years ago that cost him $400. Thanks to Warby Parker.

If you’re an incumbent in the healthcare field, or a startup aiming to disrupt, there are lessons in this story for both sides.

1/ Look beyond competitors

Are you conducting a competitive analysis for your hospital, pharmaceutical product launch, or medical device? Is Warby Parker’s $75 flat fee eye exam on your map?

“The strategy playbook today needs to be based on the idea of transient competitive advantage- that is, where you compete, how you compete, and how you win is very different when competitive advantage is no longer sustainable” – Rita McGrath, The End of Competitive Advantage.

McGrath recommends a new level of analysis at a granular level – connecting the market segment, offer and geographic location. She calls this looking at an Arena – not focused on “near substitutes” seen in competitive analysis – but down to the level of customer needs, and connections with customer solutions.

I’d recommend also creating space in your analysis for emerging successful business models versus cool tech. Sure we can all imagine drone-based emergency services and virtual reality doctor visits. What insights can you extract from Airbnb’s marketplace model, Netflix’s subscription model, or Amazon Web Services’ pay-per-use model?

2/ Practice radical customer centricity

In the healthcare field, customer centricity is NOT a given. In fact in many conferences and panel discussions in health tech, leading luminaries predict that we will not have a consumer-focused healthcare system for many more years to come.

What’s in the way? Healthcare is a massive $3 Trillion that is 17.5% of our GDP, and is based fundamentally on delivering services, paid through third parties, and doctors and healthcare administrators who are more resistant to change.

While the Centers for Medicare and Medicaid Services (CMS), private insurers and self-insured employers aim to shift a bulk of those payments to value based care, a type of pay for performance measured in health care outcomes, everyone expects a hybrid system for the foreseeable future. Value-based programs (payment deals tied to health outcomes) will exist on top of a dominant logic business model that is still based on services (payment tied to the quantity of hospital stays, MRIs, or hip replacement surgeries).

Sure, you can aim to disrupt with your consumer tech solution or wearable by working outside the system – but even the $3.2 Billion Fitbit market cap (down from a high of $10.7 Billion) is but a rounding error on in that $3 Trillion. You’re not going to move the mountain.

Yet the fact that something like Warby Parker absolutely disrupted my customer experience of eyecare is a sign that maybe it could be possible to be radically customer centric, now. The lower cost, brisk efficient service was 10x better than the hassle of visiting an eye doctor, dealing with the billing codes, and paying for my last pair of $800 glasses from the Luxottica Corporation. Let’s compare that experience to the not-yet-awesome retail clinics and you can begin to see how a new front line health services offering could emerge.

3/ Compete to win on business model, not product or experience

To be sure, charging for eye exams in a retail location is not radical nor breakthrough innovation. Luxottica, which owns LensCrafters and Pearle Vision, have been offering this service from the start, competing with local optometrist offices. Luxottica is the world leader in frames, lenses, and eyewear, with over 80% of the market.

What is radical? Warby Parker recognized the weaknesses in Luxottica’s business model – high margins for frames and lenses – and built their own vertically integrated system to reduce costs, reduce prices, and still afford a buy-one give-one model.

The social impact story is no mere marketing gimmick; the company is a certified benefit corporation and strongly advocates a stakeholder management model, emphasizing its treatment of workers, the environment, and helping provide eyeglasses to the developing world. Social impact is built into their business model and powers Warby Parker to take on a true giant in their field.

What does this mean for an emerging or incumbent health tech player? It’s worth looking at the current incumbent models in health and thinking through the shifting business models. But make sure you’re tracking companies and sectors outside of health for ideas and experiences – what may be an inspiration today may be a competitor tomorrow. Finally while incumbents dance slowly towards a pay for performance business model, imagine how your organization can leapfrog ahead and actually deliver superior quality and experience, demonstrated in actual end customer value.

Bodies and Buildings Class 5: Ebola outbreak, the power to change the rules

The past two weeks in class we spent time first paying attention to the Ebola crisis, then trying to map out the system as we understand it.

While much of health technology has come to focus on in hospital systems, electronic health records, and chronic disease management, we wanted to see what we could envision for an acute and rapidly growing outbreak.

Students presented ideas for what to do about the crisis using their skills as creative technologists at ITP. It was a humbling reminder of how hard it is to be helpful when the core underlying technologies are not present – available internet, handheld devices.

Here are two sources students found that were hard to read and watch but gave more context than TV news sources:

VICE News: Monrovia in Chaos

WSJ: For Want of Gloves Doctors Die

We then shifted to talk about the power to change the rules in a system, and began the shift to “buildings” and how a much the less threatening but still pervasive problem of sick building syndrome was addressed through rule changes.

For midterms, students will write an OpEd – considering the format as if it were an interaction design to get you to do something, or change your mind.

 

 

 

Bodies and Buildings Class 3: Health Systems and Open Data

We mapped the obesity systems of Japan, Mongolia, Korea, Columbia, and the NJ Path Conductors.

Last week students not born in the US were surprised that the obesity epidemic “snuck up” on Americans. So students looked at other countries, and those that focused on their home countries were surprised to find the epidemic at its roots.

Global trends in non US countries:

  • Japan is the least obese country, but not uniformly. In Okinawa, were Western lifestyle was introduced, obesity rates are at 50%.
  • Peer pressure keeps women at low BMI rates in Bogota, Columbia and the rest of Japan among women, but the reverse is true for men.
  • Depression and Korea and Japan are a growing problem, but not correlated to obesity the way this happens in the US.
  • In Columbia and Mongolia, governments have introduced efforts to discourage malnourishment – yet only a few years later the problem shifts to an increase in obesity.
  • Ethnographic observation of American work conditions vs. other countries reveals a profound difference in respect, dignity, and life experience. We compared the PATH train conductor to the Russian museum security guard with the Japanese shinkansen train conductor, and the connections between work, dignity, and obesity.

Here are class notes:

 

And next week’s assignment:

Write a one-page essay to be presented in class.

Assume someone you love has been prescribed a wearable device to track their glucose levels, heart rate, and emotional state, and the doctor is at a research organization asking for the data to be donated to a larger research effort.

What do you advise and why?

Would this change if the research study was also measuring the quality and quantity of interactions between caregivers (yourself) and your loved one?

 

Bodies and Buildings Class 2: Bodies and the Obesity Epidemic

Tracking the global 20-30 something at ITP.

No students have a TV.
No students use Foursquare (abandoned), or Swarm (never downloaded) but most still tethered to Facebook.
Half of students have paid money for in game purchases, up to $800 to keep up with virtual friends.
No one is actively wearing a fitness wearable.

Wow.

For next week:

When developing ideas and concepts for our student projects, and future projects, business ideas, and save-the-world ideas, we often start by designing for ourselves.

For this assignment, research a part of the world at a local level (city, state, province, county) that has a problem with obesity.

In a one page essay, describe the social, cultural, technological, economic, and other conditions of this region that may be contributing to a growth in the prevalence of obesity. Map the system of obesity in this country. What is the one recommendation you would make to government, business, or the citizens of this country to slow the growth of obesity.

 

Bodies and Buildings Class 1: Intro to Systems Thinking

Have we reached the limits of growth:

[slideshare id=38840063&doc=bodiesandbuildings1nyuitp982014-140908144525-phpapp01]

 

Bodies are in trouble right now – despite reaching the peak of productivity the US now leads the world in the rampant growth of chronic diseases that lower life expectancy, and reduce life quality.

“People are living longer than projected in 1990 — on average, 10.7 more years for men, and 12.6 more years for women. But for many of them, the quality of life during those years is not good. On average, people are plagued by illness or pain during the last 14 years of life.”

Buildings account for the largest source of both electricity consumption (68% of global use) and greenhouse gas emissions (48% of global emissions) in the world. –UNEP.

Purpose of this course:

You are better equipped than MBAs to envision and build our way out of this trap, but often lack an understanding of the mega forces of business, regulation, and bad cultural habits that keep us from saving ourselves.

What we will cover in this course:

  • Meta view
  • Focus on points of intervention
  • Conceptual scaffolding

“Folks who do systems analysis have a great belief in ‘leverage points.’ These are places within a complex system (a corporation, an economy, a living body, a city, an ecosystem) where a small shift in one thing can produce big change in everything .”

Introduction to Donella Meadows, and learning about stocks, flows, and hands on the faucets.

 

 

 

Bodies and Buildings NYU ITP Syllabus for 2014

Bodies and Buildings
Fall 2014 Syllabus
NYU ITP
Instructor: Jen van der Meer
jd1159 at nyu dot edu
Mondays 6:30 – 9:25 PM 721 Broadway at Waverly

Generative Spiral

Why is it so hard to care for our planet and ourselves? We seem hungover from a century of prosperity and ingenuity, unable to invent economic models that create jobs, improve health, and restore the earth. Eager ITP students are better equipped than MBAs to envision and hack our way out of this trap, but often lack an understanding of the mega forces of business, regulation, and bad cultural habits that keep us from saving ourselves. But don’t despair! We’ll get busy, and make things again – but also provide you with conceptual scaffolding upon which to build your world changing ideas.

Our tools of understanding include deep design thinking, and systems thinking. By focusing on two systems in particular: human bodies, and the buildings that humans make, we will examine the environmental and social impacts of the economic systems. Bodies are in trouble right now – despite reaching the peak of productivity the US now leads the world in the rampant growth of chronic diseases that lower life expectancy, and reduced life quality. Buildings are not in enough trouble – they account for the largest source of both electricity consumption (68% of global use) and greenhouse gas emissions (48% of global emissions) in the world.

In this course we will discover what Dana Meadows calls “leverage points” as places to intervene that would transform the system as a whole.

Goals:

This is a lecture course, and the syllabus is built to provide students with a systems thinking approach to problem solving. The objective for the final presentations is for students to generate a concept that can be applied to improve human health, building health, or both. The goal is for students to articulate a solution, and argue persuasively for ideas to become reality (vs. moving straight to working prototype in usual ITP fashion). Assignments will involve in person class presentation, and class participation is required. The course is structured to provide iterative opportunities to build and strengthen ideas – rooted in user-centered design, grounded in the realities of sustainable cost models and growth plans, validated by lean and iterative solution development, and strengthened by students’ ability to stand up and tell their stories.

dna

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Craving Tactile, Human Connections through Technology

The 4th Annual NYU ITP Pitchfest

For the past four years I’ve had the honor of organizing the NYU ITP Pitchfest, a workshop series and pitch day for entrepreneurial ITP students and their creative technology companies. Student teams iterate on their thesis and course projects to build them into companies, pitching to New York’s most generous VC and Angel investors for feedback and counsel. Joanne Wilson, Gotham Gal and the WE Festival, Andy Weissman of Union Square Ventures, Amy Millman of Springboard Enterprises, Frank Rimalovski of NYU Innovation Fund and the Entrepreneurial Institute, and Taylor Davidson of kbs+ Ventures served as our esteemed panel of compassionate critics.

For those that don’t know the school, ITP is a two-year graduate program founded by the late Red Burns, and located in the Tisch School of the Arts. Described as “MIT’s Artier Cousin” the school’s mission is to explore the imaginative use of communications technologies — how they might augment, improve, and bring delight and art into people’s lives. ITP is a technology school in an art school, and long before the recent rise of wearables, connected devices, and the internet of things, students learned physical computing – how code could power real things in the real world. Stepping into ITP feels like a trip into the future, but the aim of the course is to use the technologies available today to manifest a world we want to live in, best described as the Center for the Recently Possible.

Students graduate with the skills to make, to code, to visualize, and to start companies – from Foursquare which originally began as Dennis Crowley’s thesis project, Dodgeball, to Project Noah, Yasser Ansari’s citizen science app for documenting nature that was enveloped by National Geographic after presenting in the first annual Pitchfest.

Jewliebots

Jewliebots

Maria Paula Saba, a recent graduate of ITP, and Sara Chipps are the co-founders of Jewliebots, an open source programmable jewelry company. Aiming for the teenage market, and building on the trend of celebrity wearables, Jewliebots plans to sell direct to teens, with an added benefit to parents that their girls will learn to code while customizing their jewelry. Maria showcased the Lillybot, which allows teens to program their jewelry to change colors and react to sensors, and the Daisybot, for teens reveal how they feel through their Twitter or Facebook updates. www.jewliebots.com.

Aqua Bridge

Aqua-Bridge

Aqua-Bridge

Youjin Shin presented Aqua-Bridge, a platform that empowers citizens to solve their own water problems by allowing them to test their water quality easily and share it with the world. Originally deployed in Nigeria, Tanzania and Ghana, Aqua-Bridge has worked with NGO groups to test the water quality of donated water filter technology, and share quality outcomes data transparently. While working on the project at ITP, Youjin responded to requests from local New Yorkers to test their water quality as well, and quickly learned that while NYC’s municipal water supply is one of the most successful in the country, building water towers, old pipes, and defunct water filters contaminate the system. Aqua-Bridge hopes to encourage citizen science on a global scale, selling testing kits in the US to fund testing in the developing world. www.aqua-bridge.org.

Glance

glance

Natasha Dzurny, otherwise known as TechnoChic on her successful Etsy shop, described her inspiration for GLANCE in the high design furniture showrooms of SoHo. GLANCE displays real-time personal information as a beautiful abstract wall piece for the home or office. Dzumy uses fitness trackers and other devices to discover and use information, but finds it takes too long to continuously take out her handset, unlock the screen, find the app, and use the app – often with little insight or understanding. GLANCE gives personal data a place to influence its creator and bridges the worlds of kinetic displays, like a clock, with programmable influential information, designed for the home. Individuals choose a single goal, like steps walked or miles run, and GLANCE shows you your progress for the period of time you’re tracking. www.just-glance.com.

NutureMe

NutureMe Minigame

NutureMe Minigame

Ilwon Yoon and Woonyung Choi are inspired to build a mobile game that offers a fun way to interact with fitness data to stay fit. Influenced by Pokemon tamagotchi toys they played with as kids back in South Korea, and mobile avatar games, NutureMe is an iteration of Yoon’s thesis project, Walk to the Moon, and addresses a core problem with activity trackers: motivation. Wearables and trackers deliver insights in the form of a single number or progress towards an arbitrary goal, but Yoon and Choi wanted an emotional, fun connection. NutureMe works off of the Moves app API, and connects the user to a mobile game about a pet dog. The more steps you take, the healthier your puppy grows and thrives.

healthiecare

Diana Freed addresses a key unmet need in health: the ability for patients to comprehend their diagnosis and care. Freed’s credentials are astounding – a Clinical Psychologist, Pediatric Neurosurgery researcher, Technologist in Residence at Cornell Tech, former EVP of Communications at Rosetta, Freed is now at ITP to develop technologies that improve patients’ lives. In all of her previous efforts to connect with patients, Freed noticed a common problem that human-centered technology could solve – the ability for patients to follow up and understand their care using questions and quick surveys written in patient language. Healthiecare has already been tested at Cornell Weill Hospital, and is in consideration for a pilot with Johns Hopkins Hospital Pediatric Neurosurgery to study patient and caregiver comprehension of breakthrough seizures.

Tiya

Tiya

Tiya

Su Hyun Kim created Tiya –a mobile app paired with robotic ears that are programmed to deliver physical interaction when somebody sends you a message. The robotic ears are designed to encase an iPhone, enabling users to squeeze, tap, or scratch the case and ears for immediate emotional reaction. Frustrated with the coldness of constant screen swiping as a primary form of human communication, Kim is seeking a more intimate connection through the use of tactile physical computing. Tiya is building on the huge global growth of messaging apps like WhatsApp, and more visually-driven apps like Line, but delivering a tactile connection. www.MyTiya.com.

Wear

Wear

Wear

ITP Adjunct Professor and Scientist in Residence, former VP R&D of Disney Imagineering Eric Rosenthal teamed up with ITP Grad, Design Engineer, and Interpreter for the Hard of Hearing Michelle Temple to create Wear, a wearable assisted living device. Wear is a directional microphone with no latency or delay that sells for under $200. Aimed at portion of all of us with mild or moderate hearing loss, Wear aims to be as prevalent and socially acceptable as eyeglasses – available to the people who are just starting to lose their hearing from too many concerts and earbud wearing, and the people that want to engage in conversations with their loved ones. Wear completed a successful Kickstarter project, and aims to build the company to accelerate market adoption and launch new form factors, features, and products. www.w-ear.com.

VidCode

Vidcode.io

Vidcode.io

ITP grad Alexandra Diracles and Melissa Halfon are co-founders of VidCode, an educational software company igniting girls interest in programming through video art, to get more girls to love to code. From personal experience and through direct observation of middle school and high school computer sciences classes, Diracles and Halfon noticed not just the small percentage of teen girls but the social isolation that they face when learning these core skills. Girls told VidCode that they wanted programming to be built into an existing hobby, more fun, and more community. VidCode is built on the fact that over 60% of teengirls are using video app creation and sharing platforms as a primary communications medium, and they enable girls to edit and augment their created videos through dragging and dropping filters and interacting with the code to create the look they want. With interest from a number of schools, parents, and a the 4.0 Schools Incubator in New Orleans, VidCode will test their product and validate their business model this summer, sharing their own passion for code, and to bring girls the tools to discover the role technology can play in their lives. www.vidcode.io.

To present in the Pitchfest, student teams were selected for variety and preparedness to start a business, and then facilitated through a number of workshops to clarify their company vision, their business model hypothesis, and their company story. This year’s Pitchfest was augmented by the efforts of the NYU ITP Lean LaunchPad mentors: Tom Igoe of ITP and Arduino, Nancy Hechinger of ITP and the WE Festival, Julie Berkun Fajgenbaum of Yolko, John Bachir of Medstro.com, Michael Levitz of R/GA, Josh Knowles of Frescher Southern, Ajay Revels of Polite Machines, and our newest mentor: Ambika Nigam of IDEO. We all wish the students and recent grads success, and want to see all of these companies succeed for our own health, relationships, creativity, and happiness.

Every year a member of the audience shares the same feeling I had when I first learn about ITP – “why did I not know about ITP before I went to grad school?” So we invite you learn by proxy, becoming a mentors and advisors to future Pitchfests.

Lean Customer Discovery Needs Design Research

When you are in a startup, under the gun, trying to execute – how do you find time for empathy?

Lean launchpad simulates entrepreneurship by requiring founders to get out of the building…and into their customer’s world.

Teams succeed when they start talking to people, and find the magic in actually validating their hypotheses with customers, potential partners, and even fellow founders who may have tried to pursue the same dream. But it’s hard to get underneath.

What we heard:

“I think I only scratched the surface, and never really got to the core problems.”

“I don’t know if my customers really understand what they need enough to articulate it to me.”

“Customers said they would pay, but then they didn’t when it came time to pay.”

The truth is that when you are just TALKING – you fail to yield anything but the obvious facts, the surface level insights. For greater learning, Ajay Revels and I reviewed all of the design research literature. Not all of ethnography or design research is relevant for a startup founder – but there are critical skills and techniques that will radically accelerate your ability to understand the pain for which you are trying to solve.

In this slideshare, we highlight the core techniques we’ve curated from D-School, Steve Portigal’s great source, Interviewing Users, Universal Methods of Design, and Ajay herself from Polite Machines.

Have you used design research techniques have you used to get to the underlying needs of your customers?