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People do not often think of healthcare providers in the context of startups like venture-backed startups or software companies. For instance, organizations that go through stages go through that ideation phase, developing the concept, putting in place some minimal product, some prototype, getting it out into the marketplace, getting some traction, and trying to grow the business.
People think of healthcare providers, I think, in a very different context. It’s divorced from that startup world that is primarily backed by venture capital. Still, I think it would be beneficial in some respects to think of healthcare providers in this way.
Think like a startup
There’s a framework that I like called the traction gap that was developed by a venture capital group called Wildcat Ventures. At some point, we’re going to talk about Lean Startup and all kinds of other methodologies. This one talks about the minimum viable category, initial product release, minimum viable product, minimum viable repeats (I think it is or something like that) as you get to the minimum possible traction.
Those individual names don’t matter so much. It’s just a concept, but there are stages that you go through that you need to progress through to jump the traction gap to get to a larger scale.
They emphasize statistically verifying that any product or service concept has merit in the marketplace. Healthcare providers don’t think like startups when entering the marketplace or even once already in the market, but they really should. I can’t tell you how many times we’ve seen healthcare providers, whether it’s a physician practice, a laboratory, an imaging center, or even hospitals, go through a startup process.
Reevaluate your current processes
We’ve watched them go through these processes. Many of them have been relatively well-founded, where they have large amounts of backing from investors. Maybe, some of them think about where they’re going to locate or products and services physically they’re going to provide.
The real question, though, was, “How much analysis do they do before making that decision?” We’ve seen some organizations, healthcare providers, physicians, for example, that might select rural places like Wyoming or a way out in the middle of nowhere in Oregon to make more money. So they may be incorporating some information into their decision-making process. We’ve seen laboratories, for example, try to plunk themselves down in locations that are better for reimbursement.
Collect and analyze the right data
However, very rarely have we seen a lot of data collection and analysis. I don’t think we’ve ever seen anybody do systematic data collection to validate their original concepts or continue improving and getting much more prominent once they decide to enter the market. They open their doors, whatever that means.
Even once you have entered a market, I think it can be helpful to take a step back and think, “How do we collect data that helps us learn more so that we can be more successful?” I’m just going to pick an example of an imaging center. You may say, “Okay, we’ve already got an imaging center, so why would we collect data? We’ve been running for five years.” Let’s say, for example. You’re considering adding additional modalities. You want to put in an MRI or something like that.
Validate your data
Using data, collecting data, creating hypotheses, and then going out and validating that can be extraordinarily useful if you think about it as a startup. In many respects, each new product launch is a startup. Each new location you’ve plunked down is a startup.
Statistically, verifying those things is critical to success. Most providers don’t think of themselves as going through an MVP (Minimum Viable Product) when they open their doors. But realistically, they should think of that stage as being an initial product release. It’s the first time that patients get to see something about your organization. It would help if you were collecting data as that happens all the time in statistically significant volumes.
Revamp the system
How do you test the waters when it’s healthcare? I think our industry assumes that you can only go all in. You’ve got to sort of do it entirely or not at all. We see this all the time in a wide range of industries, not just healthcare, not just providers. We see it in service organizations.
I just ran into this past week, where I met with a team where I’m on the board of an immersive art exhibits startup. They want to do these massive installations, think like 50-foot sculptures, where the location to do this would have places for people to stay overnight, like hotel suites. It would have a restaurant on-site. It would have these massive immersive installations.
Wow the public
It’s a $6 million launch that they’re talking about doing, and they’re entrenched in this idea of doing a $6 million launch because they’re convinced that if you don’t do it right, the business will tank. It’s a binary “all or nothing” because if they come and people don’t like it enough, they won’t tell other people about it. They won’t have that “wow!” kind of moments, and their eyes light up and go, “This is incredible!” I think it’s easy to get caught in that thought process.
I use this as an example to help us think about this from a healthcare standpoint. We drilled down and said, “Who’s going to give you 6 million bucks? And what do they need to know to give you 6 million bucks?” Well, they need to know how much it’s going to cost to attract a customer and how much you’re going to make from the customer.
Further, there are some models out there for some immersive exhibits where they say, “Okay, they make 30 bucks for every person that shows up” or whatever it is, but they have zero data about how much it costs to attract a customer. So I said, “Okay, you need that data, and you need to get that before they are going to give you 6 million bucks. So how are you going to do that?”
Data as currency
I spent days trying to convince them to do something smaller to collect data, where the concept is, “Do the absolute smallest thing you can to collect some data that helps you learn and make some improvement or make some decisions based on it.” It’s a sort of a go-no-go or “invest more don’t invest more,” “Is this a good idea?”
After about three days of starting with a $6 million project, a half-million-dollar project, we were discussing, by the end, a $10,000 initial launch, which is minuscule compared to what they were initially thinking. I mean, it’s several orders of magnitude, almost three orders of magnitude less than what they originally conceived. And not just originally conceived of but had massive spreadsheets on, that they pitched this to investors. I mean, PowerPoint decks and all kinds of stuff.
That minimum amount was going to allow them to be able to collect some data about how many people they could attract. Not how much money they can make per person, not all those things, but it actually would allow them to collect some data.
The reason why I give you this example is, if we think about collecting data, it’s so crucial for a healthcare provider, even if you’re five years into this, ten years into it. What are you doing to collect data, to analyze data to help you validate, “Does this business make sense?” What are the profitable components? Where do we need to reinvest? What can we identify as opportunities? Suppose we’re going to launch new business lines or product lines or services or different locations. How do we put in place the mechanism to capture data to validate this concept and grow dramatically?
That’s the moral of the story. So check out the traction gap.