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Partner or Die: How to Succeed Even After the Digital Health Hype Quiets Down

Opinion

Xconomy Seattle — 

Editor’s note: This is Part 1 of a two-part piece on innovation in digital health, co-authored by Bryony Winn, chief strategy and innovation officer at Blue Cross and Blue Shield of North Carolina. Read Part 2 here.

More than 6,500 people descended on HLTH in Las Vegas in late October to “solve the most pressing problems facing health care today.” Walking the halls, we couldn’t shake a nagging question: Who are all these people? Contrary to some of our own predictions, digital health is not dead yet. The hype cycle is still going strong. So strong in fact that attendees were treated to Mark Cuban cursing big pharma, an ever-present DJ, and several overly earnest hackathons. Importantly, we counted no fewer than 1,000 tweets and selfies posted from the private Flo Rida concert.

Against this backdrop reminiscent of Corporate Burning Man, we participated in a panel discussion focused on what it takes for health care innovators and incumbents to cut through the noise and truly be successful in today’s market, and we are pleased that this conversation has continued in the weeks following the conference. We want to share several key points that aim to help both startups and legacy companies build differentiated and sustainable business models (even after the digital health hype quiets down).

Digital Health Survivors

While venture capital continues to flow freely and every Rock Health report is more positive than the last, our conversations in Vegas confirmed what we already sensed—the digital health sector continues to divide between winners and losers.

Today’s successful companies understand the importance of enterprise relationships and channel access. They have hired health care experts, partnered effectively, and have even co-developed their models alongside legacy players. Many raised venture capital from strategic corporate investors who have helped them refine their product, accelerate channel access, and get past the risk of “death by pilot.” These “Digital Health Survivors” have taken a road that is unfortunately less traveled.

The other road is cluttered with well-intentioned point solutions still looking for “product-market fit” and “sales traction.” These companies are facing numerous challenges, and raising capital is very difficult for them (or will soon be). Most have failed to craft meaningful channel partnerships or leverage scaled partners to find early, credible proof points. Surprisingly, many highly respected venture capital firms have invested in these companies; venture capitalists that do not have a reputation for overlooking product-market fit problems, sales traction hiccups, or lack of credible proof points in other industries.

There is still time for some of these companies (and investors) to adjust direction and retool. However, it will require new thinking and new talent in many of their C-suites and boardrooms.

Advantage: Innovative Incumbents

Despite being attacked on all sides from innovative startups, well-capitalized tech companies, big retail brands, and government regulators, traditional health care services companies simply don’t seem disrupted yet. In fact, driven by consolidation and strong financial performance, many are healthier and appear more confident than ever. And some of the more successful ones even seem downright innovative themselves, having learned from innovators to build, buy, and partner their way to new capabilities.

Upon closer inspection, these “Innovative Incumbents” have a few things in common. First, many of them are on a similar mission, in pursuit of the “triple aim” of improved affordability, outcomes, and experience. They also have risk-tolerant, innovation-embracing boards and management teams, strong balance sheets, and the ability to attract top talent.

Most importantly, these Innovative Incumbents are differentiated by their commitment to becoming good partners with the “Digital Health Survivors.” They have realized that winning in the future means bringing together better solutions and consumer experiences than their competitors. We have seen them add new technology and nimble operating models to their existing business with a focus on bringing enhanced value propositions to market at scale. They have created teams and set aside budget to make these partnerships successful, and many are creating technological, data, and operational APIs to drive efficiency in standing up partnerships with innovators.