Is Digital Health Destined for "Meh"?

“Meh” sucks. It’s definitely not why any bright-eyed entrepreneur decided to take a big risk and start something that might just change the trajectory of healthcare in America.  “Meh” does not yield great unicorn companies, outstanding exits, or demonstrable impact on the health of millions. But “meh” is safe for many buyers of digital healthcare technology and that safety risks creating a vicious cycle of dumbing down innovation.

Dave Chase wrote a great article on November 12th that 98% of digital health startups (not sure about this stat) are zombies and that the problem they have is a lack of a creative business model or clever go to market strategy. I’m not sure I’d attribute a lack of a creative business model or clever go to market strategy as the death knell for the digital health startup. Sure, these are contributors but if you believe that 98% statistic then I think it’s worth looking at the buying obstacles of the customer that might be hastening the demise of digital health innovation. 

The more that digital health startups can grasp buyer behavior the better prepared they will be to accelerate the flywheel to greatness. Here are seven obstacles to avoid devolving to “meh” status: 

1. Not Invented Here: Anytime I have run up against IT in a health plan I have to face the comment, “Well we could build this.” or “This is on our roadmap.” You're done. Cooked. You’ve been sabotaged. Forget about the fact that most health plans are spending the vast majority of their IT resources on band-aiding their claims processing system and customer support function.  Solution: Avoid the IT vortex and deploy a solution that does not require integration at the outset.
2. Show Me the Data: Of course, who doesn’t want to see that your solution delivers results? The problem here is twofold. First, many new digital health companies are, well, new. This means that they need early adopter customers and those customers have to be willing to see a future state of success and work collaboratively to get there. Second, there is often no data benchmark yet to assert what is good or not. Solution: Find the right early customer that wants to learn, experiment and drive toward results with you who is willing to set a benchmark standard.
3. I Have No budget:  There is never enough budget, right? That is the safest line of defense for any buyer. The problem is that in many areas of healthcare there really is no budget and that has become even more strained with the losses under the Affordable Care Act. Solution: Take risk and get paid for performance. Also, make sure that your results can be tied to an ROI where your service becomes an income generator vs. an expense.
4. Regulatory Issues Will Delay This a Year…At Least:  Regulatory hurdles are real and complicated. From filing timelines to incentives to disclosures and reasonable alternatives, there is no lack of regulatory landmines that can take your awesome idea and turn it into mush. Solution: Know exactly what the regulatory environment is like when you walk into the customer and give them comfort that you understand it and are prepared to navigate it.
5. Who Owns It: Healthcare is a vast landscape of silos which is partly why we’re in this healthcare mess. But silos create problems for innovators who are trying to stitch together solutions that improve the process of care (which by definition will cross silos). When this happens it becomes hard to identify an owner of the effort because many companies don’t have an organizational structure around processes. Solution: Sell in at a senior enough level where there will be cross functional visibility. Then, when you have an owner, make sure they will be measured based on the success of your program.
6. Death by Trial: Trials are safe. Pilots are comfortable. Companies die in the pilot/trial vortex because they can’t scale or get enough credible data to validate their solution. Trials are scary because they represent a “playing not to lose” mentality of the customer and that tends to create the “meh” results. Solution: Paint a clear roadmap to move from trial to rollout. “If we show results of X, Y, Z it will trigger expansion to the rest of the population, right?”
7. Velocity vs. .....Not: Startups live and die on velocity to validate data, acquire customers, market, and build an infrastructure to scale. Many buyers in healthcare don’t operate on a high velocity timeline. This creates vulnerability for businesses not sufficiently capitalized or not precision timed for where the market is today. Startups will be challenged to play to “where the puck is going” if they aren’t well capitalized. Solution: Unless you raise big dollars to be a game changer (revenue be damned), keep incredibly low burn until you demonstrate an economic engine.

Companies like Collective Health, Clover, Oscar and Zoom are a handful of examples of companies that decided to avoid many of these landmines and get closer to the end user (results TBD). At EveryMove, we have shifted our pricing model to pay for performance and only get paid when we can show actual bottom line value for our customer. We can avoid the “meh” in digital health but it will require buyers and sellers aligning to make it happen. I know there are some great examples of this out there and would love to hear your thoughts.