Chris Bergstrom, Chief Strategy & Commercial Officer, WellDoc
What business are you in? If you answered making or selling pharmaceuticals or medical devices it may be time to rethink your answer. Today, those “widgets” have value, but that value is slipping away. With fierce competition from brand names, generics, and low-cost international suppliers many widgets are becoming a commodity.
Even those products with a unique position are losing value because the market is demanding consumer-friendly products and healthcare reform is requiring products to improve quality, engage patients, enhance care coordination, and drive patient satisfaction – all while reducing costs and improving outcomes.
Success in the future will require going beyond the widget. To start conceptualizing this we can consider what cars, iPods, and healthcare widgets have in common. All three are physical products that are at a competitive disadvantage without an integrated service component. Indeed, no healthcare product, however useful by itself, exists in a vacuum outside a connected web of other products, services, and stakeholders. The opportunity is to leverage this web to create value above and beyond your current products.
Reinventing the Entertainment and Automotive Value Proposition
One example of business model innovation is the iPod/iTunes combination. A decade ago, Napster and other free music-sharing services were threatening to collapse the music recording industry. Then, Apple transformed this grim situation by introducing a combined hardware + services solution. To implement this model, Apple had to create radically new types of contracts with record companies, while at the same time convincing consumers to purchase music via a new distribution channel. This concept was further repeated with books, movies, TV shows and then, thanks to the app store, nearly every other industry on the planet began combining services with their widgets. Until recently, healthcare had been a laggard, but that is changing quickly. We too are now seeing innovative healthcare models that require radically new payor contracts and disruptive distribution channels.
A second example can be seen in the U.S. auto industry, which recently came within inches of collapse. Yet, during those dark days one aberrational bright spot was occurring. Car companies were marrying services with their vehicles, and doing so drove both revenue and profits. In fact, while GM was losing billions, OnStar became a profitable $1B division. And while Ford Motor Company was turning down the government’s bailout money, they accelerated their investment in FordSync. Each of these telematic services added value above and beyond a car’s inherent transportation value. They provide safety, entertainment, and peace-of-mind, and as a result, have become a top five purchase criterion for new car shoppers. Does this sound far removed from the world of healthcare products? It shouldn’t. In fact, Ford has on-going research programs with healthcare companies like WellDoc and Medtronic, and pharma companies like Novartis are creating “smart pills” with embedded ingestible sensors to improve adherence.
The Unmet Need for Innovation
What does this kind of innovation mean on a broader scale? Let’s consider three fundamental realities of the emerging healthcare marketplace. First, we have a perfect storm: concomitant demands for increased quality and clinical results from any product or service, an aging population exacerbated by a chronic disease pandemic, commoditization and competitive pressures among healthcare manufacturers, and decreasing healthcare provider resources. This situation is unlikely to improve. Second, the market—the consumers and payors of healthcare—are demanding decentralized, efficient, technology-savvy methods for delivering patient care. Third, because of advances in technology, there is now a broad opportunity to tap into telecommunications technologies, especially mobile devices, which have become ubiquitous among patients worldwide.
By leveraging this “mobile internet tsunami,” healthcare companies can begin to connect devices, therapies, and medical software with patients and healthcare professionals in ways never before imagined. As a result, these integrated solutions can address issues ranging from therapy adherence to chronic care management, or even fraud, waste, and abuse.
What does this mean for your strategy?
All of these elements speak to a real opportunity for product + service integration that links devices together in a wrap-around service model encompassing patient engagement, mobile technologies, analytics, behavioral science, care team coordination, and continuous monitoring and feedback (from coaching to intervention). In other words, it’s no longer about traditional “widgets,” but about higher-value solutions.
The distinctions between and among devices, products, and services will increasingly blur over time, with customers of all types demanding holistic solutions, rather than just components, to support their needs. Therefore, it is critical to look at whatever business you are in today—in most cases, making some kind of widget, such as a device or medication—and recognize that five years from now you can’t be delivering a product with the same intrinsic value as today. If you do, you’re looking at margin and share erosion as your competitors relegate your products to a mere subcomponent of their holistic solution. The key will be in wrapping previously siloed widgets together with other products and services to provide comprehensive solutions of unquestioned value.
You need to ask yourself “Is our company simply supplying widgets?” If you are, dash to the drawing table. You need to craft a new vision. Going forward, success in the healthcare space will increasingly hinge on two service models:
• efficiently providing the right information to the right people, in the right place, at the right time
• seamlessly turning that information into knowledge, actions, and better health outcomes, through the integration and transformation of data from your products and other sources into proven medical value for your customers
Over time, the definition of value in our industry will shift to a broader, higher plane, with the trend towards connectivity, integration, and data-leveraging. This is what will create winners and losers. Your current competitive landscape will look much different in the future, too, as companies outside your industry enter your space in order to mine your business opportunities. Companies like AT&T, Samsung, Nike, & Qualcomm have already begun to make serious moves within our industry.
So whether you make a scalpel, a syringe, a pump, a pill, or a diagnostic device – each one is a widget designed to do one thing well. However, these need to interact with a larger ecosystem through physical integration and via connectivity with phones, EHR’s, and various cloud networks. Tomorrow, your widget will need to continue to do that one thing well, but it also must connect into the broader healthcare ecosystem to share its full value and tap into the value of other devices and inputs around them. Particularly in healthcare, there is an especially strong influx of IT, telecom, systems integrators, service providers, and data analytics companies moving into the market. Time is of the essence for medical companies to learn to work collaboratively with these companies, before their competitors do.
Bottom line: are you going beyond the widget? Do you see an integrated product + service that meets the most strategic needs of your current (and future) customers? If not, get busy. •
Chris Bergstrom is the Chief Strategy & Commercial Officer at WellDoc, a leader in the emerging mobile health market. He has held progressive positions at P&G Healthcare, Roche Diagnostics, and in Strategic Marketing and Business Development for Becton Dickinson (BD) Diabetes Care. He has grown business through industry partnerships, turning around declining businesses, and adding new revenue sources. He also served as an Adviser to the CEO of Alere Home Monitoring, a remote home coagulation management service. See more about Chris in this interview at the Digital Health Summit.