The New Health Market May Be the Single Greatest Business Opportunity of Our Lifetimes With billions being poured into the medical field, the status quo is no longer an option. It's time for entrepreneurs to enter the fold.
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For decades, health care has been largely exempt from the rampant emergence of technology that has disrupted other industries. But it seems the industry's turn has come at last: In the first half of this year alone, venture capitalists invested $2 billion in health tech and startups. And the influx of investment capital is not expected to slow down anytime soon, with predictions that by 2020, retail pharmacy clinical, coaching and diagnostics will grow from $250 to $400 billion; next-generation diagnostic tools, health tech and wearables will increase from $2 to $150 billion annually; and smart care teams will grow from 4 to 12 percent of spend.
Startups aren't the only players realizing the potential of this health care revolution: Incumbents, including tech firms and retailers, are also investing in health-related projects. In addition to funding 23andMe and launching Calico, a biotech R&D company, Google has invested in a dozen health, wellness and life-science startups through Google Ventures and, perhaps most significantly, is developing cognitive computing to compete with IBM Watson's technology. Meanwhile, CVS Health, which tripled its investment in digital and multichannel ecommerce, is opening a digital innovation lab so it can continue to test meaningful products and services.
Indeed, the creation of a new model of health and healthcare is perhaps the greatest single business opportunity of our lifetimes, both for innovators and incumbents. And the marketplace is ripe for change. Studies show about 40 percent of the $3 trillion the U.S. spends on healthcare each year could be avoided. At the same time, when nearly everything can be purchased with the click of a button, the user experience of healthcare is falling behind, making it hard for patients to understand what doctor to see or if prices are in line with the market. It's perhaps no wonder then that, just as technology has transformed how we shop, so too is it beginning to transform what consumers expect from healthcare providers and health plans.
Tipping supply to demand
In traditional business, you succeed by meeting customer demand. In the digital age, you create it. Tech entrepreneurs, for example, are creating demand for 24/7-health information in the palm of our hands, leading to the increased use of personalized apps, social networks and wearable sensors such as Fitbit, Jawbone's UP band and Livongo that are helping us better understand our health and leading us toward healthier habits.
The upshot of this shift is the emergence of "Health Market 2.0," as healthcare transforms from a supply-oriented industry to one where consumers can take control over their own health. This new market will emerge in the form of three distinct movements, including: The quantified-self movement as personalized apps, wearable sensors and social networks encourage "life logging" for consumers to track their health status in real time; transparency as pricing information starts to become available on online shopping sites and exchanges that consumers can use to compare care and services, shifting the basis of competition from reputation and referrals to price, value and outcomes; and smart care teams of physicians, nurses, social workers, coaches and nutritionists who focus on prevention and prediction. Instilled in the health care workers' approach is the wide-ranging use of information and insights -- including big data and real-time daily living and clinical data.
Health Market 2.0 will bring profound opportunity, but also great risk. Our conversations with incumbents and innovators revealed the following insights for industry players to survive this significant sea change:
Change your frame of reference: With the availability of web services, mobile apps, big data and telehealth, Health Market 2.0 is breaking the "health is local" paradigm. It also combines health and wellness, includes retail and is demand-led vs. supply-led. Operating a business under the assumptions of traditional healthcare as we know it is no longer an option.
Be aware of your place on the value ladder: In a transformational market, you may be an industry standard today and commoditized by a better value alternative tomorrow. Players must know where they stand and always be one step ahead so they're not left in the dust of the competition.
Don't go it alone: To seize the $1 trillion at stake, it will be necessary (and inevitable) for players to converge in new models to meet the massive scale of unmet customer need. Healthcare innovators and incumbents will need to partner, using the best of their collective knowledge to shift roles, blend cultures and maximize customer value.
Leadership is the scarcest commodity: While the vision for Health Market 2.0 is in clear view and capital markets have placed their bets, it still feels risky for many to focus on the future instead of the "today return picture." However, players who only think about today are on a high-risk path to failure. Leading this change -- instead of delaying it -- will put them at a marketplace advantage.
As we enter this new era, different players will have different bottom lines and growth rates, but one truth will remain the same for all: it will no longer be enough for anyone to sit still.