Even with a share of just about 9% of all venture capital investments in the US, digital health start-ups raised a whopping $14.7 billion in the first six months of 2021. The investor interest underlines the expected bright prospects for delivering traditional health services online, as well as enabling new services through connectivity and mobile/wearable devices. If you have plans to jump on this trend, here are four key mistakes to avoid.
- Not appreciating the complexity of the healthcare industry
Don’t just start working on an idea you think is great; start with a vision and mission to offer effective and easy-to-use healthcare and lifestyle management solutions. Find a gap, i.e., a significant need to address. Your value proposition should be central to your customers’ need. The solution should add value for a well-defined customer base and have benefits that are measurable and scalable. The success of a digital health solution requires an integrated effort. Choose a core team with the right business and technical skills. The former needs to include a solid knowledge of the healthcare industry. Make care providers a part of your team from the start, even if in an advisory capacity. The latter needs to actualize the software platform and (when applicable) device integrations.
- Coming up with an innovation that may not be adopted
Do not fall for high-flown business talks revolving only around disruption. Though it sounds like music to the ears and fuel for enthusiasm, it does not always work—particularly in an industry with well-established supply chains and workflows. Focus on solving an existing problem, instead of ‘disrupting healthcare’. Your aim should be improving quality, accessibility and/or cost of care—be it health or wellness. It is also wise to remember that regulations and the number of stakeholders involved affect innovation adoption in the healthcare industry. Another important consideration is who will pay for your solution. In healthcare, the user is often not the payer—complicating the matters. If the user has not been paying for a certain service, expectation that they do for your version is likely unrealistic.
- Preoccupation with app-specific success metrics
- Miscalculating profit margins
A badly researched pricing strategy, overestimated or underestimated profit margin, or a product/service that is not well priced—any one of these can lead to the downfall of a promising digital health start-up. If your revenue model relies on reimbursement, keep this in mind. Reimbursement rates may be changed without warning. Revisions are usually to the down side. If you have discovered a profitable gap, keep in mind that competition will grow as your success becomes evident. Pricing power usually suffers as competitors step in to exploit the same gap.
In closing, remember that consumers are using technology and apps more than ever to monitor their health and change their lifestyle. Avoiding the foregoing pitfalls and staying relevant will help you succeed and hold court.