Barriers for digital health startups: Too many stakeholders, slow pace

By Aditi Pai
Chris Gordon Bain Capital Bain Capital's Chris Gordon

One of the biggest barriers to innovation in healthcare is that, unlike other industries, there are several key stakeholders who must be addressed before a company can successfully bring their product to market, according to a recent panel at The Economist's Health Care Forum in Boston this week.

"Any established company in any industry is always faced with the 'established company vs. innovators' dilemma," Bain Capital Managing Director Chris Gordon said. "Do you want to transform your business and potentially cannibalize yourself and put your business at risk or do you want to be too stagnant and wait for someone else to do it for you? I think it’s a particularly tough thing in healthcare, though, because it’s so much more complicated than companies making products and selling them to people who want to buy them or companies who want to buy them. There are so many stakeholders between the regulators, payors, clinicians, and the patients." 

Because of this, Gordon said that the healthcare system moves more slowly than other industries. He explains that those that want to innovate in the healthcare space know that it moves slowly, so a company also has to make sure their pace of innovation is similar to the pace of the healthcare system. For example, if a company innovates too fast and is a few steps ahead of the industry, it could ruin its business model.

StartUp Health President and Cofounder Unity Stoakes added that healthcare innovation has picked up speed recently because of growing connectivity,  but unlike other industries, startups in healthcare cannot "go completely around the key stakeholders".

"We see this a lot in Silicon Valley, we've seen this in the music industry," Stoakes said. "In healthcare, it really becomes important to work with the stakeholders, whether that’s the government or whether that’s the larger healthcare companies very, very early to try to navigate the system and build your solution into healthcare."

As Gordon explained, startups in healthcare have to do "a lot more than just creating a cool product". After creating the product, he said, companies need to identify all the different stakeholders, figure out how it’s going to get paid for and who’s going to have what incentives. Only at that point can they start working on how to bring the product to market.

Although there are a lot of barriers, Stoakes said that healthcare has reached a point where several drivers, including healthcare reform, a demand issue concerning the aging population, rising rates of chronic disease, and a growing number of digital health offerings, are coming together and creating a good opportunity for innovation.

"You're starting to see a lot of innovators, entrepreneurs from outside of healthcare come and reimagine what’s possible," Stoakes said. "Look at what Apple’s doing as an example, or Google, or some of these other big stakeholders starting to come in. You mix this all together and it creates a very active ecosystem both in terms of the early stage, but also a new environment for these startups to participate in, in the actual healthcare system."