I See Whitespace

In my travels to HIMSS (Chicago) and American Telemedicine Association (ATA) (Los Angeles) over the past couple of weeks, I ran into a lot of friends and colleagues that asked me about my next venture. My reply was non-committal (but honest), usually saying that I am here to learn and observe where the market is heading and then choose a direction. I could start my next venture or I could choose to lead a strategic vision for a large enterprise player. Most of my close friends know me way too well and understand that startup and new ventures are in my blood and that's where I'm headed again, especially given the current market conditions.

Over and over again, I talked to individuals saying "Boy this space is really getting crowded". "Everything is being done". "Where would you go if you started a new venture?" I guess I didn't see it from their perspective (as a true entrepreneur I wouldn't). I see areas of crowds standing together, but huge white space in between them. I'm a true believer that "If you build it, they may not come" and that "One solution doesn't fit all" (Ok, I think I have all the rhetoric out now). But it is true, I do see people shoving new apps and solutions in my face and saying "Look what I did, its the last mile of connecting the patient to their doctor and solving the healthcare problem".  There are a few things that they are missing: Efficacy, Business Model, Patient Usability, Total Cost of Ownership, Deployment and Distribution, Seamless Integration, etc. Just because you can get a BLE Scale to talk to an iPhone and can put the data into a proprietary repository and you can show it online, doesn't mean its going to catch on like wild fire. Once you have that done, you are about 6 years behind the current lessons learned in the mHealth market today! (But I digress)

One of the more glaring observations for me in looking at this space, occurred at the ATA conference in Los Angeles a few weeks back. Where I once strolled the floor and saw massive installations from the big Telecom Carriers, Semi-Conductor Manufacturers and others – there were now many more modest booths and fewer of the usual players (at least exhibiting) – quite a change from the previous 7+ years. Vendors that once took large scale booth space, downsized their presence or they had no presence at all. 

Why is this? Especially since I attended some great sessions on reimbursement and got real examples of how far we have come in just 2 years. (even the last 6 months) There are over 140 state and federal pieces of legislation that are under consideration right now to help with parity of reimbursement and codes (combo codes) which are just now starting to being utilized. On top of that, I am getting feedback from investors that they now want to invest in this space, especially since there is a path to reimbursement or revenue.  

So why now the pull back? (if there is one)  I do have to admit that when I attend other shows (mHealth Summit, Wireless Life Science, etc.) some of those companies have a presence at those shows. Is it because ATA is more concentrated on "Chronic Care Management" (B2B) and others are more Wellness and Fitness oriented (B2C)? Is Chronic Care too risky of a venture and Wellness / Fitness is easier (non-regulated / self management / consumer paid)? This is NOT a criticism in anyway of ATA, they do a fantastic job in the market and the attendance was the highest yet at over 5000. In my conversations with individuals that are or used to be employed at these large enterprise players, is the fact that their programs are or have shut down surrounding mHealth. Why, especially now?

The one thing that I realize is that the market has had to hype itself for years in order to get the large players involved, especially with no pathway for reimbursement or investment and efficacy was still being documented. If you know me, I constantly say "It takes a village to raise a new and disruptive healthcare delivery platform". (Whoops, more rhetoric) We need the entrepreneurialism and risk taking of the small companies (able to change direction quickly, unlike the larger enterprises), but we need the large enterprises to help with cost reduction, scaling, investment and distribution. Everyone I talk with agrees that this market is taking off and WILL be huge, but in healthcare things happen slower because of workflow alignment, efficacy / pilots, reimbursement, licensure, seamless integration, regulatory constraints, etc. So we need the large enterprise players to be part of the eco-system. We need Cellular and Chip manufacturers to get together to create Ultra (I mean Ultra) low cost, low power devices in order to connect to individuals in a variety of ways outside of the hospital.

Why are so many of them backed out right now to the side lines? (That is at least my interpretation). 2 of the largest Telecom companies in the US have downsized their mHealth operations or stopped them all together. Several of the large Semi-Conductor manufacturers have disbanded their mHealth initiatives and refocused their teams. 1 of the largest healthcare providers has disbanded its "Innovation" center and dispersed the teams. I am coming across a lot of great individuals on the market today that were in very strategic positions with large enterprises that have had to take new positions because the enterprise players have stopped the mHealth initiative (for the time being) Is this just unfortunate timing? Now that reimbursement is here and investment is starting to flow in, isn't this the time to seize upon lesson learned in the market to-date?

One of my main observations in talking with individuals is that the large enterprises have to deal in very large volumes (millions of units). Many of them are used to lower margins and higher volumes. The healthcare market absolutely has that potential to deliver, in spades, but it is not going to happen over night.  And for many of the mHealth programs in these large enterprise customers, it is getting very hard to justify to top executives of the company who look across multiple industries / sectors and say, "Its coming. I know I said it last year, but with reimbursement in place its this year!". The execs have had to cut their loss and move to the side line and re-direct their resources to other endeavors that may make money (and their bonus' and keeping their jobs) in the short term. They would rather be a fast follower, then on the bleeding edge.  Are they having trouble explaining to their board that although we made or committed to make a $100M investment in mHealth, last year we did $1M in sales, doubling to $2M this year? (For another $20M in investment) The numbers just aren't adding up at the top levels. When the execs get judged / chopped based on profitability, they don't the luxury of experimenting and each decision has to be a home run, the only thing they can do is sit it out.

In addition, the large enterprise players spanning multiple industries / sectors with their products are not willing to go to the next level in mHealth by offering comprehensive services. (not just a hard product offering) Because this is a regulated environment, with real live patients and real live risk, most want to offer the product to others, but don't want the responsibility and risk associated with caring for the patient. 

In addition, I have noted that many large healthcare organizations (that are financially responsible for the patient) will try out cost reducing solutions, but at the end of the day, if they get the noted efficacy, they want to own the solution as their own, integrating it into their own proprietary solution. I could sit here and probably name 100+ companies that are or want to do this. So this makes it extremely hard to start with an enterprise player and their solution and then move to owning the solution (you typically can't own or buy the enterprise player - at least not everyone can). I have seen many enterprise healthcare players with this mentality acquire the smaller companies because they could own and incorporate the solution and the risk of development and efficacy has been taken out of the equation. (proving the technology, solution, service and business model) This means that there is tremendous opportunity today for creating solutions that healthcare enterprise players want to individually own.

So what does this have to do with Whitespace? 

I see a lot of people crowding together in certain areas (EHR/EMR, Analytics, Hardware, Connectivity, Diagnostics, PERS, Nurse Call Centers, Video Conferencing, etc.) but because of the large players are sitting on the sidelines, I see the opportunities for the entrepreneurs coming in and filling the gaps and maybe partnering with the large enterprise players that are sitting on the side line.  It is also incredibly important to concentrate on revenue generation, bottomline (yours and the customers) and to produce a low cost, scalable solution that can be "owned" in the market by one of the large healthcare enterprise players (if you ultimately are seeking a successful exit). Above all, I see this market place as one that is a green field; chapter 2. In chapter 1, we (the industry) did a great job getting everything lined up to show efficacy of the technology and solutions in order to get reimbursement and investment dollars flowing (it also helps that we are farther away from 2008-2010 economic crisis and that there is a pathway to reimbursement). Its now time for the entrepreneurs to see the whitespace, partner with companies (instead of creating burdensome technology), connect the eco-system (integration), offer services, assimilate as quickly as possible and move! The market is there more than ever, we just need to fill the whitespace to create new and exciting solutions.

Obviously, I am a big believer in low cost, high quality of care for patients that have 1 or more Chronic conditions. My beliefs in this area have not wavered. How we enable patients to be connected (plugged in) and to take care of themselves or stay ahead of their disease, stay out of the hospital and reducing healthcare costs is the ultimate goal. How we leverage the new market dynamics is even more important in order to scale this market.

I would like to hear your thoughts. Is anyone experiencing the same or have another viewpoint?