What it takes to make it in digital health, based on companies that already have

A McKinsey report breaks down the six strategic steps taken by established players in digital health.
By Mallory Hackett
11:51 am
A McKinsey report breaks down the six strategic steps taken by established players in digital health.

After the digital health sector raised $13.8 billion in capital last year, it’s no wonder that everyone from established life sciences companies to budding startups is looking for a way to break into the market.

Achieving success takes more than a clever idea though, and according to a McKinsey report based on the business strategies of six digital health startups, it takes six steps to build a lucrative digital health business.

Although a clever idea isn’t all it takes, it is the foundation of any successful business. For digital health companies, the starting point has to be identifying and addressing an unmet need within the healthcare system, according to McKinsey.

For the Internet-enabled cognitive behavioral therapy-provider Ieso Digital Health, that need was a shortage of cognitive behavioral therapists in the U.K. Instead of waiting months for an appointment, people can use the company’s ThinkWell platform, which uses secure real-time messaging to provide confidential therapy.

Once the target has been identified, the next step is to create an enjoyable user experience. Whether the end user is a patient, caregiver, healthcare provider or payer, a human-centered design is crucial for ensuring long-term engagement, the report said.

Companies can deploy a range of techniques to increase engagement, whether that’s a personified artificial intelligence coach like Happify Health’s therapist, called Ana, or by gamifying the experience with quizzes, avatars and rewards to engage users.

“User-centric design is a continuous process throughout a product’s life cycle,” the report said. “All of the companies we interviewed have adopted an agile working model, developing software in short, iterative cycles, testing it, and adapting it.”

Regardless of the expertise of the founding members, successful digital health companies will employ individuals with deep medical and technical backgrounds, according to the report.

Having team members with backgrounds in healthcare and technology allows digital health companies to have a better understanding of the disease and treatment paradigms, the regulatory approval process, back-end architecture development, data management and advanced analytics.

“It can be difficult to marry the two approaches, but doing so is critical for success,” the report said. “A hybrid model that adopts the technical world’s cross-functional working approach and culture is the way forward, but with the appropriate clinical and regulatory safeguards learned from the life sciences industry.”

Being able to prove the credibility of a digital health product is essential, according to the report.

One way of doing so is through regulatory approval, but the effort and time involved in that route can be a deterrent for some companies.

In fact, some experts suggest staying away from the Food and Drug Administration all together in 2021 as it deals with the workload of the pandemic.

If a company decides to hold off on approval like was the case with Happify Health, it could launch preapproval and then use the real-world data generated when seeking clearance, the report said.

Another key in gaining a competitive edge is to define a core asset and develop proprietary technology around that, according to the report. While most of the companies McKinsey looked at reported having a digital solution as their core asset, other options could be hardware or data.

The final piece that goes into a successful digital health company is its ability to scale.

There are a number of business models up for grabs in this space: prescription digital therapeutics, employers as the customer, payers as the customer, healthcare or pharmaceutical companies as the customer, or direct-to-consumer.

“Companies do not necessarily choose a single model and stick to it,” the report said. “Some find the right model through trial and error, and some transition to a new model as they build the business.”

Wherever companies choose to start, it’s important to focus on one area at launch and then begin growing, according to McKinsey.

For example, Pear Therapeutics began with products for addiction treatment before growing into different disease areas, as in the launch of Somryst for insomnia.

“To build a successful digital health business, each of the six building blocks should be considered,” the report said. “Every company’s journey will be unique, and past success does not guarantee future success. Nevertheless, those just setting out can learn from those that have gone before.”


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