How To Spot a Breakthrough: Tips from Early Amazon Investor Nick Hanauer
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a Seattle healthcare company called Qliance, which has a plan for “how to fix healthcare in America.” The problem, as he explains it, is that “insurance mediates every healthcare transaction.” And that leads to huge administrative costs around every visit to a primary care doctor. “Incentives get inverted, so everyone behaves badly…Insurance consumes 40 cents of every [medical] dollar.” You can’t call or e-mail your doctor, or see them for more than a few minutes, he explains, because they can’t get paid for it.
Qliance’s idea is to make a distinction between catastrophic and non-catastrophic medical problems, and to introduce a payment model similar to that of a health club, where you pay a monthly fee and no administrative costs for routine visits. The company has been open for a year, and is currently working on sales in what Hanauer called a $300 billion market. “It’s a great example of turning a huge industry upside down,” he said. “The entrenched interests hate this. They hate it. The big companies don’t want the world to change. It never fails to amaze me how dug in companies are around their strategy.”
A few more closing thoughts from Hanauer:
—If you have a breakthrough idea, you don’t need a breakthrough way to get it to the market. “If you have transformational value, people will beat down your door…Focus on the product. If the product is good enough, marketing will take care of itself. If the product sucks, no amount of marketing will get you over the hump.”
—“I’m not a technologist. From my point of view, technology is simply a thing that allows you to bring transformational things to customers…People get excited about a particular technology, and they forget the question: what does this do for people? It’s about what the customer gets compared to the alternatives.”
—“As an entrepreneur, I’ve never been concerned about competition. If you’re early, run like hell. It’s all about execution at the end of the day. It’s about having a great idea, executing like hell, and delivering value to customers.”
—As for walking a different path, “I was difficult for my parents, and for my teachers. I’m incredibly uncomfortable in crowds, I never go to sporting events…What that allows is for you to have an idea and be comfortable with people not liking it. Jeff Bezos calls me a high-functioning contrarian.”
—Hanauer grew up in the family business of home furnishings (pillow-making), and started working in it when he was six years old. The business started small and eventually grew to $300 million a year, he said, and yet “it is a shitty business—it’s super hard to transformationally differentiate bed pillows…You grow by taking market share.” By comparison, he said, tech businesses are “like taking candy from a baby”—like “strawberry fields” with high profit margins, great market demand, and strong talent.
—Because of his deep knowledge of what it takes to get a product from the factory to retailers and into the hands of customers, Hanauer looked at Amazon and thought of its traditional retail competitors, “They’re dead.” (He also noted that Jeff Bezos “dynamited” Scott Lipsky out of his role as chief information officer at Barnes & Noble and hired him at Amazon, which helped slow down the competition on the Internet.)
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