Over the past decade, about 150 companies have achieved skyrocketing valuations of $1 billion or more. This has raised the bar, and made this once unattainable valuation the goal of many companies across all industries.
Healthcare, for example, was traditionally viewed as a slow burn for investors since it was heavily regulated and contingent on the Food and Drug Administration. Today, we are seeing high-growth numbers and more rapid returns on investment with the evolving and in-demand digital health industry that is driving exits such as FitBit, Evolent Health and Teledoc.
Investors are betting high on digital health with more than $4.7 billion invested already this year and $6.5 billion invested in 2014, according to StartUp Health Insights. As an industry veteran and founder of TriZetto, which Cognizant bought last fall for $2.7 billion, I am often asked how to spot a successful company. Here are three tips to keep in mind when building a successful business:
1. Know what your organization is and what it isn't.
Many companies go through an identity crisis early on -- is it a product, service or enterprise company? Define the mission of your organization and keep it focused to set expectations for your investors, create your role in the market and provide both security and purpose for your employees.
This also means understanding your customers and their needs. Do research. Make sure there is a market and demand for your product or service before you invest millions of dollars into it. Even if you think you know what consumers want, your assumptions may be entirely off base.
But if the results of the research don’t support your original plan, don’t be afraid to change. Some of the biggest companies have been the result of a pivot -- they were originally going down one path and recognized that it was prudent to change course. For example, Twitter actually began as a network to find podcasts, but as iTunes grew in popularity, the founders feared the company’s demise and gave employees two weeks to come up with ideas to take the company in a new direction -- hence the birth of the microblogging platform.
I experienced this at my current company when I realized that leveraging social media in healthcare was not enough to really impact health and wellness. There was a bigger, more pressing need to organize and systematize the consumer health world by connecting consumers with the right tools and resources to optimize their health and get rewarded.
2. Create a foundation for growth.
Among the earliest and most crucial hires I make at any organization are in human-capital management and business-development functions. Many health IT companies start staffing up on engineering and sales, thinking that making and selling the product is all that matters. That is important, but you need to have the right people running the “mothership” for it to go intergalactic.
With a strong human-resources function, you can recruit and retain the talent needed to accomplish your goals in a competitive marketplace. And, with an experienced business development executive, you can augment and partner as needed.
3. Grow internally while acquiring other companies.
For today’s companies, to scale and achieve high growth rates organically is rare. It will put undue strain on existing resources with constant onboarding and often leads to hierarchical vs. productive growth.
To make quantum leaps as a company, I find that 50 percent organic and 50 percent inorganic growth is a solid formula. In other words, you continue to ramp up existing teams (organic growth), but also acquire mature companies to bring in new expertise or expand upon current product offerings (inorganic growth). This also provides the opportunity to grow your audience and customer base and retain consistent attention for your company.
Employing these concepts can’t guarantee success, as there are many factors at play. But these proven business strategies have served me well as I have built and sold companies throughout my career. At the end of the day, real success is accomplished by having a sound idea, flawless execution and a dash of luck.