According to Startup Health’s mid-year funding report, Austin is the 9th largest player in the US in terms healthcare funded deals at $29M, but is dwarfed in comparison to the 8th player (Seattle at $83M) on up. While the addition of a medical school and innovation institute will play an important role for Austin’s health tech growth in the future, there are more immediate steps that Austin area companies can take to grow their enterprise valuations. The first step is diagnostic - to identify how healthy their approach to innovation and differentiation in the marketplace is. The second step is to tell the story: I believe that while regulatory and proof building efforts can't be ignored, many health tech companies do not adequately invest in explaining how they're different from the pack in order to improve perception in market. The third step is to is to utilize design as a means to ensure valuable end-to-end workflows and software are being built to create value - not one off point solutions.
On my first day at Thinktiv, our CEO dropped Play Bigger on my desk. “Read this,” he said, before turning.
Play Bigger authors Al Ramadan, Dave Peterson, Christopher Lochhead, Kevin Maney provide one framework in which innovation can thrive: it is where category design, product design, and company design work together and mutually reinforce themselves across business disciplines. There is definitely some Conjoined Triangles of Success a la Silicon Valley happening in this explanation, although to be fair, simple diagrams convey adequate truths. Category design is the authors’ answer to creating and servicing markets that have vast growth potential, and at its core is about driving a top down approach to differentiation and market positioning that fans out across the company. They retroactively apply their concept of category design to players like Amazon, Starbucks, and Google - the lesson being, if you evangelize a new problem that needs solving and present the differentiated solution to do so, you’ll be handsomely rewarded in market so much so that the problem itself will be associated with your brand; you will be the “category king” that the competition will never catch up with due to ingrained recall among customers.
This behavioral economic insight for general consumer products and applications is apt: customers are looking for different - not better - solutions to their challenges. In our ever-more networked world, in a sea of solutions that all look the same, the answer that is unique, aesthetically pleasing, and easy to understand pops to the fore. As a consumer, I know this to be true. I see it when I consider new ways to have my pup watched, buy a car, or buy home insurance. The key is in framing a problem in a new way, and getting people to understand that they have that problem before presenting the unique solution. That communication effort requires perseverance, evangelism, and a penchant for storytelling to consumers and the market more broadly that makes the story simple to retell (and go viral).
Like anything else, category design is something that we should pick and choose from in a manner that works for our context. Our clients tend to have exit windows of 5-7 years in mind, and so the work, effort, and capital required for that level of risk can seem unwieldy. While efforts to create and highlight differentiation are broadly of strategic value in both product and messaging, companies operating within the digital health space have three additional concerns: regulation, proof, and adoption.
Healthcare is rightly a highly regulated space where certifying bodies including federal organizations such as the FDA, or industry groups with their own evaluations and standards such as KLAS or HITRUST, must be considered and thoroughly involved from the first. Particularly as any physical product design is concerned, getting design right up front can reduce investment and go-to-market hurdles enabled by regulation by millions of dollars. And in many cases, getting certified as meeting a regulation is basic “pay-to-play” for certain markets. The risk of focusing on differentiation at the expense of regulations is typically untenable.
The further along the path to proven clinical trials a medical technology, process, or procedure is, the more valuable that company will be considered.
I recently sat in on a presentation by Robert Mittendorf, MD, MBA and Partner, Norwest Venture Partners, on investments they make in healthcare IT. Norwest focuses investments on three flavors of companies: those that improve labor efficiency through leveraging technology, sensors, and applications to increase capacity to treat with the existing labor force; those that utilize engagement and persuasively designed technology that enables patients to self manage conditions; and those that support intervention enablement, typically through the use of artificial intelligence or machine learning algorithms that support clinical and enterprise decision making. Across these type of investments, Dr. Mittendorf returned to the point of providing proof of efficacy, and the further down the path towards actual clinical trials, the more valuable the company would be. Some venture firms such as Andreessen Horowitz won't invest without proof from the latter.
The more traction a healthcare technology company has, the more valuable that company will be considered.
Once the hurdles of regulation and proof are surmounted, healthcare companies need to ensure that their product is either bought in a B2B model or adopted by end users in a B2C model. In a B2B model, the end user is often a clinician or staff member; adoption may be a requirement for the job. In this case, product usability is a core concern as a means to ensure clinical staff can be effective and efficient in caring for patients; and at the least not being so frustrated that they want to throw that technology at a wall. The unique challenge to the adoption of healthcare technologies in the consumer space is that they are inherently not fun - typically they are assigned but not elected; promote action and not inertia; and deal with serious instead of frivolous topics that can lead to a variety of negative emotions and detachment in place of engagement. Healthcare investors and designers like to point to gamification as one potential solution to improve the adoption and persistence within solutions, although there are limited large-scale successes as of yet to point to. I tend to believe that the right combination of levers include a combination of honesty and transparency; rapid learning - meaning that a user has to leverage a minimal amount of effort to learn contextually important information; and mechanisms to not feel alone on the personal health journey.
How These Concepts Play Together
Healthcare technology companies, particularly startups, are limited on what they can focus on. Wisely, they need to get regulation and proof right to survive; but they need market differentiation - namely, storytelling, positioning, branding, and an experience that stands up to them to grow and thrive. Unfortunately, that coordinated capacity seems to be added late or not at all for many of the healthcare technology companies I have seen.
Thinktiv has found and proven that these topics cannot be ignored or dealt with separately - they need to be driven from the top down, as part of coherent strategy, in concert with regulatory and proof making. In our client work, this coherent strategy or roadmap is determined for each specific case based on an assessment phase. This phase maps a client’s unique potential for innovation and enterprise value generation based broadly on the factors of category leadership (our trimmed down or more practical approach to category kingdom-ry), potential for solution differentiation (via protectable IP), business model potential to support innovation, and customer value and velocity (defined by the ability to find and convert customers).
By assessing a client’s needs for these value levers, we can determine what work needs to be done and in prioritized order of value to the business in a second phase. What sets us apart from groups like strategy consulting firms is that we can both diagnose and fix the innovation challenge because we have in-house, veteran expertise across strategy, design, and development. Recent efforts by these firms to acquire or start digital design practices show their desire to enter into the fray, but are still immature, unproven, and too expensive for start-ups and even mid sized companies.
What is an Austin company to do or make of this?
Review your innovation capacity.
Regardless of whether you’re considering working with Thinktiv, these are useful frames in which to view your company’s efforts to be innovative - frames that help one ensure that innovation is not some bright and shiny object, but part of a cohesive implementation strategy which is likely going to be hard (but worth it!) to execute on. Given the context of increasing funding and competition in the healthcare IT space, it’s more important than ever to holistically consider these frames as well as aiming for a practical level of innovation that will enable you to win in your market of choosing.
Tell your story well.
Remember to talk about the specific pain point your solution solves and for whom. It's easy to forget this step when focused on future forward technology.
Once you are clear on how you are differentiated in the market, work with marketing and brand strategists (or clever wordsmiths) to ensure that this message is clear and resonant across your channels. Provide comparisons to others, as well as results that prove your claims. Make sure this is done so in an attractive, buttoned up manner that makes you look as good as any technology company coming from Silicon Valley, so when buyers reflect on whether or not to choose you, you won't be discounted simply because your solution looks janky and closer to a prototype than an enterprise product.
Utilize design thinking in your approach to product development & strategy.
At its core, design thinking is about creating solutions for ill-defined problems that are inspired by real human behavior. Many individuals who build products initially do not spend much time with the users they hope to serve - or assume that the user is like them. Ensure that you spend time with your customers in context of their workplace. If you sit in the lab, doctors office, or home of an individual, you'll immediately see how your solution fits in the context of other solutions and workflows, as well as what's missing. You can develop an entire product roadmap based on the missing - starting with the most valuable feature, first.
Collaborate & Prepare.
What makes the Austin business community unique to me is the willingness people show to meet, have coffee, and carry on discussions that are impactful to business. In the short term, individuals can reach out to experts within Austin communities such as HIMSS, The Texas E-Health Alliance, Austin Healthcare Council, or Health Technology Forum to network and troubleshoot business challenges. In the longer term, these relationships can result in partnerships that provide value to the Austin health technology ecosystem. Down the road, interoperability will become the reality - just how far down is hard to tell. When that time comes, those relationships will result in new systems of interoperable products and services that further drive market innovation.
Eric Boggs is a senior associate within the Thinktiv Health practice in Austin, TX, and is focused on inventing and transforming companies within healthcare.