Can Big Tech Disrupt Healthcare 2: Electric Boogaloo
Or 'why the reports of big tech's failure in healthcare have been greatly exaggerated'
tl;dr-
On February 8th, Amazon announced national availability of its Amazon Care healthcare service1 - a hybrid care delivery model that Amazon offers to employers as part of their employee health benefits2
Originally starting as an employee benefit for Amazon employees, Amazon Care - serviced through provider partner Care Medical3 - operates as a full-stack patient experience focused on primary care, including features such as telemedicine, in-home visits (i.e. for situations require blood draw, etc.), and managing prescription refills
Patient OOP costs for Amazon Care services will depend on the patient’s own health plan4
Amazon Care competes against other telehealth / virtual care / hybrid care platforms (including Teladoc5), other retail giants such as Walmart6, and healthcare incumbents in virtual care (e.g. Cigna7, CVS-Aetna8)
Commentary around Amazon - and more broadly, big tech forays into healthcare as a whole - has tended to be negative; healthcare is seen often as a highly complex unicorn industry that technologists ‘do not understand’9, resulting in high profile ‘failures’ (e.g. Google Health disbandment10, Apple Health being scaled back11, Amazon’s own Haven initiative ending12)
What often goes unsaid is that a core advantage of tech companies is the ability to flexibly evolve their operating models13 & organizational structures14 - compared to legacy healthcare companies
As healthcare continues to undergo forced evolution, strategic optionality & agility - e.g. ability to reallocate resources, align teams to solve emergent problems, and ability to spin up or acquire new capabilities - grants greater competitive advantage
So long as technology companies outperform native healthcare companies on this measure, it is likely that they will eventually overcome the barrier of specialized knowledge to outcompete incumbents in the future - just as how Amazon is able to leverage its Amazon Care platform against incumbent healthcare companies even in competitive marketplaces like telehealth / virtual health
* * *
I was originally going to write just about Amazon Care as a full stack primary care platform and how it compares to competitor products, but it sent me down a (familiar) rabbit hole on industry commentary surrounding big tech in healthcare. There seems to be a strange dichotomy among incumbent healthcare stakeholders - whether it is pharma, medtech, a payer, or even a native HCP-founded digital health company - surrounding big tech. One day, we’re discussing how Google or Microsoft initiatives will take over the world. The next, likely due to some event, we’re talking about how difficult healthcare as an industry is to break in, almost to the point of celebrating another failed initative from big tech to add value. There’s probably a great deal to unpack there when it comes to the culture of innovation in healthcare - but that’s a topic for another time.
One of the questions I got frequently at Novo Nordisk - from C-suite down to peer managers - was ‘is Amazon going to take over the world?’ My answer - as it is now more than ever - is still a strong ‘maybe.’ Healthcare, though strategically simple, is incredibly complex tactically; a vast array of incentives & stakeholders that is on one hand, incredibly relationship-based (as any EBC, digital health founder, or distributor may tell you) and on the other, incredibly data driven (e.g. clinical outcomes, economic outcomes, etc.). This means a multitude of different users to consider, each with different expectations, level of competency regarding digital, revenue models, culture, and other key factors from a design perspective. From this perspective, there are many headwinds facing big tech’s inroads into healthcare - and the failures big tech has faced are easily understood.
I tend to hold a different view. That isn’t to say that these headwinds don’t exist - even small, focused start-ups run into them pretty frequently - but it is to say that I feel large tech companies hold a strong innate advantage that many other companies are unable to cultivate. This advantage is optionality.
To understand what I mean by optionality, one has to consider a central feature to technology-based business models - the feedback loop. While this loop is present & needed in every industry to be successful, technology companies hold an innate advantage in this arena because the ability to collect feedback & send it back to the innovator company is inherent to the product. This means that the cost of creating the feedback loop is minimized drastically compared to other types of products. Consider, for example, a pharmaceutical product. In order to close the feedback loop, pharma companies have to invest in entirely new processes & capabilities - market research, big data analytics, data partnerships, etc. - in order to obtain feedback on their product. A new tech platform, on the other hand, innately collects that feedback, allowing technology companies to rapidly iterate & adjust their product strategy as needed.
The amazing thing about this feedback loop is that it also applies to entire organizations as well. At its heart, an organization can be viewed as any other product - and linking employee feedback, customer feedback, and financial performance back to strategy & management functions is how organizations are able to iterate & adjust their internal structure & priorities. This can be very expensive - and why large, corporate companies have to invest in entire departments - like HR or McKinsey consultants - in order to complete this feedback loop. Part of why this is so difficult is that organizational design & key corporate-level decisions - strategic priorities, investment decisions, etc. - while having the veneer of being very data driven are actually very human-centered and influenced heavily by a company’s culture.
Because technology companies are quite used to operationalizing this feedback loop on the product level, there is a greater emphasis on operationalizing it across the entire organization. Accordingly, technology companies seem to possess a unique agility not only at the product level, but at the organizational level. This empowers large tech companies to rapidly stand up structures to address emergent needs - and break down them when they are no longer needed. In contrast, this level of agility is more rare in traditional companies, as the culture, decision-making cascade, and organizational structure all serve as potential impediments. While much has been written about this topic - with much evidence collected in HBS reviews and the like, the easiest evidence can be found in how organizations manage individual projects via waterfall or agile methods. Depending on how a company has always ‘done things,’ the overall organization often becomes a fractal of the collective approach a company takes with regard to project management.
Waterfall fractals - because I don’t personally know a better word - are fantastic approaches to low complexity markets not subject to rapid change; where decision-making speed is less important compared to the ‘quality’ or ‘fit’ of the decision itself. This is where the healthcare industry has traditionally been due to the importance of the industry and its high regulatory burden. However, as the rapid evolution of other sectors begins to bleed into healthcare - consumerism, new economic considerations, fintech, etc. - the speed-quality ratio has begun shifting in favor of speed17. The more ‘timing’ becomes important, the more organizations who can make decisions more quickly - even if they aren’t 100% optimal - can outcompete others. Sounds a great deal like tech vs. the world to me.
But, you may be asking, what about all the failures that big tech has had? My response to that is that when you consider all of the above, the more failures a tech company has in healthcare, the closer they are to solving it. Reframed, while failures can be viewed as executional failures (i.e. ‘we did the thing badly’), I would argue that they are a sign of learning for tech companies - another data point on what works, and what doesn’t. Take for example, Haven. One key contribution to Haven’s closure was the fact that despite joint agreement on ideas between members Amazon, JP Morgan, and Berkshire Hathaway, they all executed on their ideas separately (likely with varying degrees of success). This likely resulted in Amazon learning something rather valuable - that implementation and scale of healthcare solutions is highly dependant on the population, and the structure in which that population accesses & pays for healthcare.
We see that learning bear fruit with Amazon’s rather measured roll-out of Amazon Care. Given their scale, they could have easily rolled it out nationally from the very beginning - they certainly have the capital, the brand name, and the reach to do so. Instead, Amazon first chose to collect as many learnings on one population - its employees! - and then launch methodically starting with city-by-city18. This sounds like an organization who learned the challenges of aligning execution at scale - and is now applying those learnings to grow & expand, not a company who ‘failed.’
But don’t worry if you’re a waterfall incumbent. Your silver lining is that aside from the innately low cost of creating product-level feedback loops, technology companies organizationally don’t have anything you can’t build or develop yourself. Tech companies don’t have a monopoly on developing an innovative, growth-based culture - and designing your organization & business processes around these feedback loops. Accordingly, while it is easy for incumbent healthcare companies to quake with fear at each big tech foray into healthcare - and cheer loudly when they fail - it is less efficient in the long run than learning from them. Copy what worked for big tech, avoid what didn’t, and see where it takes you. You may be surprised at how much more your organization may be able to achieve in the long run.
At least it may upgrade your future outlook from ‘probably lose’ to ‘strong maybe’ for success! Maybe.
-WY
https://www.aboutamazon.com/news/retail/amazon-care-now-available-nationwide-as-demand-continues-to-grow
https://amazon.care/for-employers
https://www.healthcareitnews.com/news/amazon-cares-health-provider-signaling-potential-expansion-says-stat
https://amazon.care/faqs
https://www.cnbc.com/2021/06/06/amazon-health-care-threat-teladoc-ceo-says-its-overrated-.html
https://www.mobihealthnews.com/news/how-retail-giant-walmart-plans-disrupt-healthcare-industry
https://mhealthintelligence.com/news/cigna-expands-telehealth-platform-launches-virtual-first-plan
https://www.healthcarefinancenews.com/news/aetna-cvs-health-enter-virtual-primary-care-space
https://www.healthcareitnews.com/blog/healthcare-too-hard-big-tech-firms
https://www.healthcaredive.com/news/google-disbands-health-unit-as-chief-departs-for-cerner/605387/
https://appleinsider.com/articles/21/08/19/apple-health-division-faces-reduction-after-internal-initiatives-scale-back
https://www.ipi.org/ipi_issues/detail/amazon-failed-at-health-care-because-it-wasnt-a-disrupter
https://assets.ey.com/content/dam/ey-sites/ey-com/en_ca/topics/strategy/ey-operating-models-design-and-implementation.pdf?download
https://www.aihr.com/blog/organizational-design/
https://en.wikipedia.org/wiki/Survivorship_bias
https://ideascale.com/innovation-metrics-ideation-rate-vs-implementation-rate/
Assuming equal access to information, naturally.
https://www.fiercehealthcare.com/tech/amazon-expanding-virtual-care-service-to-5-additional-cities-year