Prior to now few months, the founders of Instacart, Spotify, and Coinbase have all began latest healthcare firms. This may occasionally seem odd to some–why are these seasoned tech founders jumping into tech-driven healthcare?
In 2013, Marc Andreessen observed that the largest, most successful firms have all done something that seemed completely “crazy” on the time of creation. The examples from the last twenty years are clear. Sleeping in a stranger’s home? Airbnb. Getting in a stranger’s automobile? Lyft. Putting a notebook computer in everyone’s home, after which in everyone’s pocket, after which on everyone’s wrist? Apple.
But what sounds crazy in 2023? Definitely not one other meal delivery service, recruiting tool, or dating app. More broadly, all of us agree that mobile, web, the cloud, and SaaS are consensus and mainstream.
Here’s what sounds crazy in 2023: Attempting to fix the US’ gigantic mess of a healthcare system.
The U.S.’s largest industry–one fifth of the American economy–is unspeakably broken. The US severely lags behind other developed nations by way of health outcomes and value. A whole lot of 1000’s of individuals die every year due to avoidable human errors.
Modern technology has little penetration in healthcare. The industry still largely relies on paper and fax machines for communication.
Probably the most impactful firms are built on the frontier, and healthcare is the following frontier. It’s time to place our tech skills to work. The mother of all markets is ripe for disruption.
Probably the most impactful firms are built on the frontier, and healthcare is the following frontier. It’s time to place our tech skills to work. The mother of all markets is ripe for disruption.
“But….healthcare is tough.”
We hear you. Healthcare IS hard. It’s intimidating. It’s regulated. It’s complex. And that’s why it’s so exciting.
Allow us to address those three concerns head on.
First, healthcare is undoubtedly intimidating. But we’ve learned it, and so are you able to.
The overwhelming nature of healthcare largely could be attributed to the dimensions of the market. It’s unfathomably large–$4 trillion within the US alone–and made up of countless submarkets.
But after all, the large scale of the market is a very good thing. The United States healthcare market is five times the dimensions of the global promoting market wherein nearly all of the main tech firms operate. The American healthcare market could support dozens of FAANG (Facebook, Amazon, Apple, Netflix, Google)-scale firms, but today just one exists (UnitedHealth Group).
Second, we turn to the priority that healthcare is a highly regulated industry. That is indeed true, but lots of essentially the most iconic firms of our time–Lyft, Airbnb–have been in-built complex, regulated markets. Moreover, those who were in-built unregulated markets–Google, Meta, Amazon–have all come to face intense regulatory scrutiny and pressure eventually. Regulation appears to be either an input to or a results of all great firms.
Like Lyft and Airbnb, healthcare faces national and state/local regulation. There’s a federal system, with each state having its own medical board and insurance regulation. While this actually is a source of opportunity, it also provides excellent grounds for experimentation, allowing an organization to check different approaches in numerous geographies.
And the positive flip side of the federal government’s regulation is the federal government’s dollars. The federal and state governments spend over a trillion dollars on healthcare every year through programs like Medicare and Medicaid. This provides healthcare firms with very large, entrenched customers who never go away. Anyone who works in politics will inform you Medicare is untouchable for cost-cutting–seniors (essentially the most reliable voters!) would revolt.
Third, and at last, we agree that healthcare is complex. But so are most markets–whether it’s the hotel industry, taxi industry, or the digital promoting industry. What makes healthcare feel much more complex is its scale, which we’ve established is a very good thing. There are a wide range of entities in healthcare (providers, payors, pharma, etc) which contribute to its complexity, but that is to be expected in any industry of this scale. Plus, complexity has advantages like defensibility–easy markets and solutions have far more competitors and copycats and lend themselves to commoditization.
Why you must come to healthcare.
The above concerns could be summarized as “healthcare is frightening.” We imagine scary is where the chance lies. So here’s why you must bring your tech skills to healthcare.
To start out, healthcare needs tech. While the PhDs developing novel cancer drugs and diagnostics are incredibly necessary, they are only a tiny a part of this market. Even when we cure all cancer, Americans’ lifespan would just increase by three years. As an alternative, a few of the biggest problems in healthcare are going to be solved by technology. Healthcare at its core is (1) a knowledge, operations, and logistics problem, and (2) a consumer experience and engagement problem. Each are areas where the tech world excels.
In relation to data, operations, and logistics, the present state of healthcare leaves infinite opportunity for improvement. $765 billion is wasted annually, with the major driver being human administrative overhead. There still isn’t true data interoperability–one person’s necessary medical records lay across dozens of various doctor’s offices and health systems with little hope of being pieced together. Most promising drugs won’t ever undergo clinical trials and turn out to be accessible to patients because we still haven’t found out how you can recruit trial participants and run studies in a cheap manner. None of those problems require an MD or a PhD to resolve, and every is a multibillion dollar opportunity.
In relation to consumer engagement, we’ve written before about how poor consumer engagement, brought on by poor consumer experience, is one in all the largest problems in healthcare. Most poor health outcomes and deaths are brought on by diseases that we all know how you can prevent or cure. What’s needed in these scenarios will not be more science. Along with cultural change and policy change, what’s needed is individuals who can construct higher experiences to interact patients of their health–whether it’s eating healthier, exercising, going to the doctor, or taking their medication. Nobody is best suited to resolve these problems than the technologists who’ve excelled at consumer engagement in tech.
Furthermore, healthcare provides the very best opportunity on the market to make use of the most well liked tools in tech–especially AI–to displace huge incumbents. As we’ve written about recently, deploying AI in traditional tech software businesses presents a lot of challenges, namely that AI has lower gross margins than SaaS resulting from heavy cloud infrastructure usage and ongoing human support.
In healthcare, this case is the alternative. A lot of the healthcare industry is services, which have low gross margins. In healthcare, AI stands to dramatically improve the previously unpleasant economics, making constructing within the industry much more compelling. Moreover, human-driven services are likely to scale linearly with each incremental human added, but AI-driven services can scale exponentially.
And while margins are nice, mission is nicer. When you consider the limited variety of days you have got on this planet and the insane variety of hours you’ll pour into constructing a startup, wouldn’t or not it’s great should you were working on something that basically mattered? You don’t should be a physician or cancer researcher to avoid wasting lives. An organization detecting medical errors or helping people afford medical care might save countless lives.
Even when this isn’t a motivator for you personally, the mission orientation of healthcare will assist you to attract higher talent that you just’d get in other industries. Eighty percent of faculty graduates say that it is vitally or extremely necessary to derive a way of purpose from their work. Millennials prioritize purpose of their lives even greater than older generations, and they appear to work greater than other sources to seek out it.
Working to enhance healthcare is an obvious solution to find purpose in a single’s work–principally every American can relate on a private level to how broken the American healthcare system is. Who hasn’t been asked to fill out infinite pages of paper medical forms for the fifty-seventh time, received a big and unexpected medical bill, or lost a loved one to preventable or treatable disease?
As well as, the mission orientation of healthcare can likely help your talent perform higher. Gallup reports “there’s a powerful correlation between employees’ purpose and engagement and organizations bottom line.” McKinsey finds that “individuals who live their purpose at work are more productive than individuals who don’t. Also they are healthier, more resilient, and more more likely to stay at the corporate.”
Finally, we expect your tech mindset is usually a huge asset in leading a healthcare company. In fact, tech founders constructing in healthcare must learn healthcare on a deep level, and we recommend surrounding yourself with healthcare veterans to accomplish that (this is particularly true within the ideation phase). But some great benefits of coming from tech are clear. Tech moves faster than healthcare. The tech world produces visionaries who don’t accept that the ways things work today shall be the best way things work in the long run. Your fresh eyes are exactly what healthcare needs.
Attempting to fix healthcare in 2023 sounds crazy and is actually non-consensus. But in what other industry could you construct the largest company on this planet?
