Sean Duffy is the CEO of Omada Health, a company (not a start-up) that works with health plans and employers to tackle type 2 diabetes and heart disease.
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The American healthcare system is in desperate need of improvement. Costs continue to rise in lockstep with rates of chronic disease, and life spans are declining. Against this backdrop, a generation of young, tech-forward companies have a lot to offer in a space that is often bogged down by the inertia of large-scale incumbents.
But too often, even promising ideas have difficulty gaining widespread commercial traction. With more than $14 billion in venture funding invested in digital health in 2018 alone, many are wondering when we will see the success stories that have disrupted other industries.
Why is it so hard? Well, there are a number of reasons. Some folks argue more physicians must be integrated into development processes, while others suggest that entrepreneurs are underestimating the regulatory hurdles.
But part of the answer may be the way early-stage digital health companies approach the market. There is a delicate chicken-and-egg problem: early-stage digital companies need customers to mature their business; but those potential customers (most often employers and insurers) are only interested in partners who can demonstrate maturity across a range of measures.
Health care is one of the most risk-averse, complex buying markets in the U.S. The reasons for this risk aversion are meaningful, understandable and immutable: the stakes for mistakes are simply higher. The time to deploy and undo deployments is longer. Big missteps can too easily end careers.
Trust is critical in this buying audience. Decision-makers value sophistication, and the ability to work collaboratively with any of them is heavily dependent on the type of back-end “operational innovation” that is essential for effective implementation and rollout. Above all, this is a market that is rarely looking for disruption; buyers value continuity and an iterative approach to innovation that limits downside risk.
So how should entrepreneurs and early-stage companies carry themselves in a sea of health care incumbents? Below are four things I’ve observed in my eight years of leading my company, Omada Health.
In every company’s life cycle, there’s a moment. You’re sitting across from a much larger organization’s decision makers, on the cusp of a deal that can vault your entrepreneurial venture to a completely new level. For Omada, it was seven years ago, in a rented conference room across from the medical director of a major health plan. The potential partner believed deeply in our mission, our clinical data, and potential value, and yet raised concerns about us being so young. We needed this customer to mature our business, but we also needed to demonstrate maturity to close this customer.
This balancing act is the reason I’ve never called Omada Health a “start-up.” We’ve always been a “digital health company.” To this day I advise companies to do the same.
“Disruptive digital health startup” is a phrase that might win short-term headlines and impress an uninitiated investor in an early meeting. But using it in a meeting with a head of benefits or a health plan medical director is a good way to ensure that you won’t get another meeting.
Instead, hone the capabilities that mature companies expect out of a partner. Be familiar with the inherent pressures faced by your potential customer. Immerse yourself in the operational side of innovation. Invest in a technical team to connect systems for real-time eligibility checks and billing through claims. Leverage participant insights to co-develop custom enrollment campaigns that speak to the specific needs of a population that has a very different demographic makeup than your office.
Certainty and bravado are stereotypical characteristics of the upstart CEO working to re-engineer an industry. But one of the first realizations I had after founding Omada was just how much I had to learn. Health care’s issues can’t simply be chalked up to a lack of brilliant people working tirelessly to solve problems. Every interaction with a health system, insurer, actuary, clinician, researcher, policy wonk, or other expert is an opportunity to learn.
Bring a growth mindset to your endeavors, and overturn every stone with curiosity. Demand that your company conduct clinically-validated studies to prove effectiveness, and learn what needs to be reworked. Become fluent in the language of your potential customers and empathize with their problems and realities. Ensure your organizational capabilities are hitting on things that matter now, and are pointed toward things that will matter tomorrow.
Many start-up success myths often get simplified to: ‘”new entrant intentionally disturbs an entrenched order to the benefit of consumers.” In these narratives, sometimes these moves are made brashly, ignoring established procedures (or local regulations). There may be an uncomfortable intermediary period, but the end result is a better system for all.
Health care doesn’t work like that. Speed may get you to market first, but intentionality in design and approach drives lasting power. Instead of demanding the most disruptive solution, respect incremental improvements. Work to make these improvements as quickly as possible within the system, but respect the existing infrastructure as you go.
In the movie “Apollo 13” (a personal favorite), a NASA team in Houston is rebuilding an air filter, using only what the astronauts have available onboard. They must fit a square peg into a round hole before three men suffocate in space.
Throughout the high-stakes problem-solving, the Houston team keeps returning to a simple phrase: Work the Problem. They can’t solve everything at once. Their job is to find a workable solution, bit-by-bit, without the benefit of a roadmap.
Too many times to count, a potential customer or partner has come back with a request or demand that we haven’t even thought of before. More often than not, by tightening our focus, we solve the present problem, and potentially create a roadmap useful in future situations.
Building towards sustainable company growth — not to mention industry change — requires becoming accustomed to this mode of action. Succeeding in the rapidly-changing landscape of of healthcare means being able to mature just as rapidly. Part of that maturity is leaving behind labels that hold you back.