The healthcare industry is demanding change, and thousands of healthcare entrepreneurs are vying to deliver. They’re building companies focused on changing the system by reducing waste, increasing quality, and decreasing costs. And investors have responded, leading to 60 percent more deals in 2012 over the previous year and almost 50 percent more venture capital funding.
Even many of the companies that do receive funding, however, will fail soon after launch. Why? Over and over, you hear that simple solutions will solve our healthcare crisis—everything from scheduling software to healthy eating trackers. But to grow a sustainable company is complex. Entrepreneurs must exist within an extremely complicated and risk-adverse system, recognizing that there is a range of healthcare challenges that cannot be solved simply.
How can startups get up to speed quickly, navigate the system, and realize their true value? They need to know three things.
1. Focus on Curing the Diagnosis, Not the Symptoms
Many startups are born because a person has an original idea—often embedded in a technology—to solve a problem that exists within his or her own daily life. The early-stage company’s focus remains primarily on the technology itself: the unique algorithm, the cool app, or the whiz-bang gadget, applying it ad hoc to cure the symptoms of the problem the company was created to solve.
While technology is an extremely important piece, it is essential for the startup to balance technological product development with a structured analysis to determine the root of the problem, ending up with a complete diagnosis. In many cases, a startup’s customers include a variety of stakeholders all whom exhibit different, and possibly even conflicting, symptoms of the problem. A successful entrepreneur must navigate these symptoms in order to fit the technology to create the appropriate cure.
Consider Smart Scheduling, a predictive data analytics platform to increase efficiency in a physician’s office or clinic. Administrators want to forecast which patients will attend their appointments to maximize physician productivity. Physicians want to provide effective care, varying appointment length to fit patient need. Schedulers want to maintain an accurate schedule, pleasing physicians, administrators and patients. Each of these sets of symptoms could be answered with a different startup to meet individual stakeholder needs. Smart Scheduling, however, used the combined diagnosis—the inability to predict patient behavior in the physician’s office—as a basis to create its predictive analytics platform, applicable to all involved parties.
2. Mentors are Not One-Size-Fits-All
A mentor to advise a company as it launches and grows is a precious resource in the startup world. But not all mentors are created equal, and many startups struggle with interpreting well-intentioned and sometimes conflicting advice from a variety of sources that aren’t necessarily appropriate for their life stage or target market segment. Healthcare is an enormous industry with many nuanced sub-segments. Startups need to collaborate with mentors more deliberately, seeking them out to assist with concrete challenges that fit with their areas of expertise, and applying their judgment at the right stage.
Working with these industry experts thoughtfully can be invaluable for two reasons. First, they can be an excellent source of insight and access and can help you move quickly to address the right problems. Though he might not know “healthcare,” a serial entrepreneur with a track record of taking devices to market will be far more valuable to you in determining the right amount of money needed to develop your device than the healthcare provider who will eventually use the device.
Second, the right mentors can also become powerful facilitators and advocates for you as you navigate the landscape of potential partners and beta customers, sometimes within their own organizations.
Startups are typically focused on quickly gaining traction, and mentors are a key to progress. However, taking the time to build the appropriate relationships and coming prepared to those introductory meetings by familiarizing yourself with the mentor’s area of expertise can pay healthy dividends.
3. Speak the Right Language to the Right Person
Traditionally startups have focused on developing products for their end users, who in many cases are also their customers. But in healthcare, startups often find that those who support, use, purchase, and benefit from their products are all different people, and each can play a key role in the product’s success or failure. Therefore, healthcare entrepreneurs must find ways to communicate their unique value proposition in the language of each stakeholder group involved, including doctors, patients, administrators, and financial professionals.
Abiogenix has created the uBox, an intelligent pillbox to increase medication adherence. The company asserts that if it can increase adherence by 1%, it can save over 1,000 lives and almost $2 billion in spending—which no one will argue is a bad thing at the macro level. Yet, to each stakeholder, there are more urgent needs to be met. Patients are concerned with the effectiveness of their own medication regimes, a need uBox speaks to by connecting to an online platform that texts reminders if slots remain unopened. Physicians are concerned with the effectiveness for their individual patients, which uBox addresses by providing access to patient adherence data so doctors can prioritize needs. Policy organizations will be interested in the aggregate financial and quality outcomes.
Recognizing that these stakeholders each play an important role in your success is important, since most purchasing decisions are ultimately made, directly or indirectly, as a group. Understanding and finding ways to address their specific problems within the context of your overall solution is crucial. Speak to each stakeholder in ways that show you understand their goals and what they’re trying to accomplish, and you’ll find that gaining traction will come much more easily.
Despite the tremendous need for system-wide solutions, there are no guarantees that any healthcare startup will succeed. Any entrepreneurial venture necessarily comes with risks. But following these three guidelines will help improve the chances that your startup will one day provide true benefits to doctors, patients, and the industry as a whole.
By Nina Nashif and Tony Driscoll