To tech companies entering healthcare: proceed with caution... please

November 13, 2018
By C. Anthony Jones

Remember the Sirens in ancient Greek mythology? These seductive creatures would use their enchanting music and singing to lure nearby sailors to shipwreck on the rocky coast of their island. For the past few decades, healthcare market opportunities have become something of a modern-day Siren, laying an almost irresistible trap for the largest technology giants.


To be fair to tech companies, the allure of healthcare from a distance is obvious. It is a massive market, driven by a purpose that motivates employees to go to work every day. The problems are challenging, and the consequences of failure are significant. And lastly, its maturity with respect to digital technology is still relatively primitive.

At the same time, healthcare desperately needs innovation, if not blunt disruption, to break out of the status quo that is doing more collective harm than good. And more than any other industry, tech companies embrace a culture where risk-taking and disruption are highly valued and rewarded. The attraction of one to the other is obvious and potentially valuable.

But in a rush to seize these opportunities, too many tech companies fail to recognize the actual harm that they cause along the way. And harm in healthcare can have lasting and potentially life-threatening consequences.

Healthcare and the tech industry: a study in contrasts
Comparing and contrasting the healthcare and tech industries reveals some critical differences that explain both the persistent attraction as well as the inherent problems when their orbits intersect. Let’s look at some examples:
• In healthcare, the general market approach is to avoid risks; yet in tech, it’s to take risks.
• In healthcare, there’s an extremely low tolerance for failure; but in tech, there’s a reasonably moderate to high tolerance for failure.
• Healthcare’s approach to innovation is incremental; whereas tech’s innovation approach is disruptive.

The differences between a defective drug or medical device versus a mobile navigation app are plain to see. Less obvious, though, are a host of areas where the tech industry’s pattern of hyperbolic public announcements followed by quiet market retreats has real, but less obvious, effects that actually stunt innovation across healthcare.

• Diminished investment. The mere announcement that Amazon or Google is excited about a particular area of healthcare has an immediate and severe chilling effect on venture investing in that category. Never mind that the tech giant typically has a superficial understanding of the problem, little that resembles an actionable strategy and no subject matter expertise; investors immediately decide that the battle is over before the first shot has been fired. As a result, investment into companies that have plans, people and products slows to a trickle.
• Talent drain. If the tech giant actually hires subject matter experts, those people are naturally recruited from established healthcare companies. This exodus of talent can severely halt meaningful innovation that has a better chance of being launched in the market. Admittedly, it’s healthy for all companies to compete for top talent, but it can be a very one-sided competition when reality has to square off against fantasy.
• Falling tide. Just as rising tides lift all boats, falling tides strand them just as quickly. Tech companies absolutely love to deploy platforms where they build the core tech stack then entice other developers to launch applications on the new platform. Unfortunately, when these platforms fail (and they often do), they leave a host of stranded applications, damaging developers and users alike.

Being a catalyst for innovation
Does this mean tech giants should stay away from healthcare and leave the spoils to the traditional, often slow-moving players that currently occupy the space? Absolutely not. Innovation and ideas can literally come from anywhere and anyone. Likewise, competition is often the catalyst for breakthrough inventions and innovations. The most persistent problems in healthcare desperately need cross-industry expertise to introduce novel solutions and infuse fresh thinking.

So how should tech companies proceed?
• Be realistic. No matter how much time and money you think it will cost, the true costs and time commitment are going to be greater. Admit this to yourself, shareholders and potential customers. If the solution was quick and easy, some other company would have done it long ago.
• Stay focused. Start with something (anything) that is not mission critical to someone’s survival. Slow behemoths that they are, traditional healthcare companies have earned their seat at the table through decades of hard work, massive investments and painful failures. It’s much harder than it looks from the outside.
• Persevere. When the ROI does not materialize after the first year, don’t throw in the towel. Healthcare is hard. If you’re not willing to sign up for the long haul, don’t sign up at all.
• Partner then purchase. If you snap up companies that are still in their formative stages and then shutter your entire healthcare effort a year later, these companies and their innovations usually get crushed in the process. Instead, first try partnering with these early ventures as you get your feet wet in the space. You can always buy them later.
• Be humble. Assume there are people in most healthcare companies who have tried to solve the exact same problem you’re looking at now. There are probably three or four key reasons why it’s still a problem and you would do well to know what those reasons are before putting that hockey-stick earnings forecast in your next quarterly report.

Having worked in and around traditional healthcare companies as well as some tech giants, it’s clear that they are very different animals. Healthcare desperately needs to evolve, and tech giants should not ignore the opportunities that fall so close to their respective sweet spots. But for both healthcare and tech companies to thrive, they need to abandon some old habits and adopt some new ones. First, they need to accept their own shortcomings and respect the strengths that the other brings to the table. Second, they have to move beyond merely coexisting and actually embrace collaboration. And, perhaps more than anything else, have some patience. This will not happen overnight.


About the author: C. Anthony Jones is the CEO of Frontive