A Step Forward For Telehealth

A few weeks ago, the Federation of State Medical Boards passed an updated recommendation for telehealth use.  This is interesting because the federal board often guides policy for state boards and state boards often guide policy for providers.  Two notable things:

1. The recommendation notes that virtual visits can be used for first time provider-patient encounters (a 180 degree turn from their prior position where they recommended that telehealth only be used once a relationship has been established).  This propels telehealth companies deeper into the patient acquisition business.
2. To qualify as a telehealth visit, the board requires that the encounter be done using video (as opposed to just audio).  Phone-based telehealth companies won’t be eligible to provide telehealth based on the updated recommendation. Nor would the board recommend that those visits be eligible for reimbursement.

The news is being reported as both a big step forward for the industry (initial consults can move online) as well as a big step back for the industry (it limits vendors' ability to provide services to patients that don't have internet access). Regardless, it's nice to see this channel becoming more officially recognized and sanctioned. For some segment of provider-patient encounters telehealth will lead to better outcomes and significant reductions in the cost of care.

Oscar Health's Competitive Advantage

A few weeks ago the Wall Street Journal did a short piece on Oscar Health, the New York health insurance startup that is out to revolutionize the industry. If you haven't heard of them, Oscar's goal is to take all of the complexity out of health insurance by providing clarity and top-notch user experience. The article points out that when a new customer receives their health insurance card from Oscar it comes in a box that looks like you're getting an iPhone (see below). The box is even shaped such that it fits perfectly into an Instagram frame so customers can share it easily online. A quick look at their site and you can see that they're really different from the big guys. They're all about the consumer.

But one thing you'll find is that they really aren't that much cheaper than traditional health insurance. Their play doesn't seem to be price. Their play is simplicity, clarity, beauty and ease of use. I love that. They're going to try to compete in a wildly competitive industry by doing nothing other than making their product easier to use and easier to understand. A seemingly minor competitive advantage -- but potentially a massively impactful one.

This product is perfectly aligned with what consumers expect (and are getting in most other aspects of their lives). We expect easy and simple and beautiful in all of the products we use and most healthcare products are not giving it to us.

Oscar is tapping into that consumer (patient) demand and will be a fun company to watch.

The Argument For Net Neutrality

The other day I was writing about how I find it odd that most of the prominent venture capital firms seem to only invest in computer and software engineering companies and seem to avoid things like energy, telecom, transportation and infrastructure. The reason, of course, is that computer and software engineering is really the only big opportunity left that hasn't been significantly regulated. Well, as most of you know, that's about to change. ISPs are preparing to charge web services to use their pipes. This would do great damage to the "permissionless innovation" we've seen in the internet. The big companies that can pay the fees will flourish and the small innovators will be shut off. This would be a horrible thing for the industry, and, in many ways, the world.

But, some would argue, if Netflix is using a ton of bandwidth to make huge profits, the ISPs should have the right to charge them. If the ISP market was a completely free market, that would make a lot of sense. But it's not. Most consumers only have a couple of options for which internet provider they use. If those ISPs want to enjoy "duopoly" status, they're going to have to follow some rules.

With that in mind, I came across a comment from Phil Sugar the other day on Fred Wilson's blog that makes the net neutrality argument perfectly.

To me here is the question. I as a citizen through my elected officials have given the cable company, the phone company, the electric company, the water company, the gas company, the garbage company the right to serve me in a non competitive monopoly or duopoly.

I agreed to this arrangement because it is not cost effective to have twenty people digging up my streets, putting in wiring, plumbing, etc.

However, I demand for this right that I am served as a utility.

I do not want to pay more for electricity because I am running super secret trading algorithms on my computer versus having my daughter leave the light on.

I do not want to pay more for my water because I am crafting the best microbrew in the world versus my wife filling the claw foot tub.

I refuse to pay more per bit because a cable or telco company views it as more profitable for the company that is serving me.

Now if you want to cap my total bandwidth, limit my speed, etc, that is a discussion that we can have at the utility level. I don't necessarily think every plan has to be "unlimited" because I don't necessarily want to subsidize my bandwidth hogging neighbor.

Spot on.

A Word About Employee Stock Options

There's been a bunch of talk in blog circles about employee stock options over the last couple of weeks. I wrote a quick thought on this topic in a comment on a blog post the other day and thought I'd post it here as well. Put simply, in order to have an effective stock option plan that motivates and rewards employees, the employee must know three things:

1. The number of options they have.
2. The current valuation of the company.
3. The total number of shares outstanding in the company.

If an employee doesn't know these three things they should place no economic value on their options. Don't get me wrong, employees should take the options if they're offered, especially if they believe they're working for a high growth company, but the options should not be considered a measurable part of their compensation package.

You can't value something if you don't know its value.

Facebook's Defensibility Is Gone

Traditionally when people have thought of Facebook and their defensiblity, they've pointed to its ubiquity and the size of its network – at last check they had something like 1.1 billion active users. People reasoned that Facebook would continue to dominate social because it's the one place that has profiles for all of your friends. All other social  networks would be forced to plug-in to the Facebook ecosystem. But as Facebook’s defensive purchase of WhatsApp shows, this is no longer the case. Users are bouncing from social network to social network. Social apps are much, much less sticky than initially thought.

Benedict Evans and others have pointed to the seemingly minor but incredibly impactful fact that any newly launched social app can easily tap into your mobile phone's address book and instantly build out a network equal to -- or better than -- Facebook's.

This wasn't a big a issue when most users accessed Facebook through the desktop site, but now that most users access it through their mobile app, Facebook's unbundling has accelerated.

More and more users are migrating to WhatsApp for messaging, Vimeo for video, Instagram for photos, Foursquare for location sharing, etc. And there are niche players internationally that are focused on badges, stickers and other features valued in those communities.  There are now dozens and dozens of social apps in the app store with more than one-million downloads.

Facebook's strategy of running the social ecosystem seems to be shifting more rapidly than they had planned. Because of the mobile phone's address book, the approach of plugging social apps into Facebook may be losing steam. Instead of just letting them plug-in, the better approach, it seems, might be to buy them.

Adaptability

A few weeks ago I read Thomas Friedman's new book, That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back. One of the early chapters begins with this quote from an unknown source:

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.

This is so true. I've been fortunate to work with incredibly smart people with incredible credentials: people who have worked at the top consulting firms and investment banks that have worked at some of the world's most admired companies -- Goldman Sachs, Apple, Google and Amazon -- and have attended the best colleges and business and engineering graduate programs. But when I think back on the people who were successful in the start-ups I've worked in, I've seen that there is almost no positive or negative correlation with those great credentials (great companies, great schools, high standardized test scores) and actual success in the workplace.

As the quote suggests, it really isn't the smartest or the strongest that are the most successful.

To emphasize this point, it's helpful to use a sports analogy here (I like sports analogies because sports is very results-driven and the results are extremely transparent).Regarding strength, you might think that the best NFL players are the strongest and most athletic and come from the best college football programs and had the best college football careers. But this isn't true at all. There are countless instances of great college football players not making it in the NFL -- particularly in the more complex and cerebral positions. Case in point: Tim Tebow won the Heisman trophy and a national championship at the University Florida, Tom Brady was a third string backup at Michigan.

Regarding intelligence, each year every professional football recruits takes the Wonderlic Test. It's a test that measures the intelligence of the player and is often used in making decisions about which players to draft. You might suspect that higher scores lead to greater success. Wrong again. Ryan Fitzpatrick, the Harvard educated, backup quarterback for the Tennessee Titans scored a 50 -- the highest score of any current player in the NFL. Peyton Manning, arguably the best quarterback in the NFL, scored a 28.

I see the exact same thing in the workplace. It isn't great credentials or talent or SAT scores that makes people successful in a start-up, it's traits like grit and humility -- and perhaps most of all, adaptability. Something to keep in mind when looking for "A-players" to join your team.

Attackers & Defenders

A few years ago I had the pleasure of meeting Steve Case -- the original founder of AOL and current CEO of Revolution. He was considering an investment in our company and I was lucky enough to be able to pitch him our business. In the short time that I spent with him I could tell that we were dealing with an extremely savvy investor. He got right to the key issues surrounding our growth and his questions were extremely challenging and relevant.

I came across an interview that he did recently with Adam Bryant from the New York Times. In talking about different types of businesses, he said this:

...I realized the world of business really separates into these two groups. The attackers are the entrepreneurs who are disrupting the status quo, trying to change the world, take the hill, anything is possible, and have nothing to lose in most cases. They’re driven by passion and the idea and intensity. Large organizations — and it’s true of Fortune 500s and it’s also true of governments and other large organizations — are defenders. These guys aren’t trying to pursue the art of the possible, how to maximize opportunity. They actually are trying to minimize the downside, and hedge risk. They’re trying to de-risk situations. Entrepreneurs can’t even think this way. It’s not even a concept they understand.

For the traditional executives running these large companies, of course they want to grow, of course they want to innovate, of course they’d rather have revenue grow faster than slower, but they mostly don’t want to lose what they’ve got. But entrepreneurs are deathly afraid that they won’t be able to change the world, and that somebody else will. Again, these generalizations are a little unfair, but corporate executives are all too often deathly afraid that the business they inherit will be less valuable when they leave than when they started.

This is so true and exactly why no company will last forever. Even the best eventually flame out. The cycle of disrupt >> succeed >> defend is unavoidable and, frankly, perfectly logical. When companies reach a certain level of success, innovation becomes too risky and the smarter, rational move is to protect your turf.

This is why companies like Apple are so impressive and so rare. They somehow continue to attack and innovate despite their immense success.

Internet Marketplaces: Buyer Utility & Seller Reviews

Charles Hudson had a good post this week titled, Marketplaces, Rating Systems, And Leakage. In it, he talks about leakage in online marketplaces. Leakage defined as a user coming to a marketplace to transact and then completing subsequent transactions off of the marketplace.

Once they’ve acquired a new customer through a service, there’s a significant financial incentive for sellers (Open Table restaurant owners, Uber drivers, Task Rabbit workers) to try to get the user to make their second transaction offline – to avoid paying the marketplace a commission.

But these marketplaces aren’t seeing this type of behavior. They’re seeing that subsequent transactions are staying in their marketplace.

The reason for this is twofold:

1. The user values the utility of the service (it’s much easier to book a restaurant reservation on Open Table than it is to call, wait on hold, and find they don't have any tables tonight).
2. As Charles points out, sellers place a high value on reviews from the marketplace. A commenter notes that he once offered to pay for his Task Rabbit project offline and the seller declined. The seller would rather the transaction happen on Task Rabbit so a review gets logged for his work, improving his Task Rabbit reputation. For savvy sellers, a good review on a trusted marketplace is like gold.

Internet marketplaces are always at risk of becoming a lead generation service instead of the central spot where transactions happen. To keep people transacting in the marketplace, it’s important that buyers value the utility of the service and sellers value the reputation gained through post-purchase reviews. Open Table, Uber and Task Rabbit do both of these things well.

Open Conversations

Back in 2005, Union Square Ventures -- the well-known NYC-based venture capital firm -- converted the homepage of their website into a blog. Brad Burnham, one of USV’s partners explained their reasoning at the time.

"We realized that our thesis evolves incrementally as a result of our dialogue with the market, and that the best way to manage that was to accept that we would never get to an answer, so we should just publish the conversation. The best way to do that is with a blog. So here it is."

A few months ago, they took this a step further and turned their website into a conversation, allowing anyone to share links and discuss topics related to the firm and the firm's investments. They also now cross-post their own blog posts and even take pitches from entrepreneurs on their site. Really cool.

In some ways, it’s surprising that an institutional investor would be so open and willing to have a public conversation about their investments and their investment strategy. VCs don’t have hard assets, they don’t have engineering talent, and they don’t have a product. Their entire value is really their investment thesis and their ability to execute on that thesis. So it’s a pretty bold move for them to open up all of that intellectual capital to the world.

But as Brad noted, he believes that opening up the conversation actually puts them at an advantage.

I’d love to see more companies be as open as USV, and to begin having open conversations with their employees, vendors, partners and customers. Personally, I’m constantly having conversations with my colleagues and with the market about the things I’m working on. These conversations help me get better at what I do. Part of the reason I write on this blog is to help me think things through.

What USV has done is scale their conversations and their ability to get better at what they do enormously. Instead of just having conversations with their colleagues that sit across the hall, they're having conversations with (potentially) anyone in the world. That kind of scale has to put them at an advantage over other VCs.

The obvious concern with this approach is that opening up the conversation about your work and what your company does will give away sensitive, proprietary information that would put the company at a disadvantage against the competition.

But I think there are two critical insights here that strongly counter that concern.

1. With very, very few exceptions, companies don’t have some secret and final solution that will drive their success. As Brad notes, most growth and success comes incrementally as a result of perpetual interaction with the market. The thesis is never final, it is always evolving. This is true of nearly every company.
2. Just because you can view and participate in the conversation that a company is having doesn't mean you can recreate what that company is doing. When I write about a new approach I'm taking, by the time someone reads it, internalizes it, and acts on it, I've already moved on and improved on that approach. In addition, my approach is probably wrong for you anyway. You're in a different situation, have different resources, have different connections, have different opportunities and different constraints. It's useful for us to have a conversation, it will help us both. But it doesn't put either of us at risk.

So with very, very few exceptions, I think more companies should begin to open up their internal conversations, challenges and ideas to the public. In the book The Wisdom Of the Crowds, James Surowiecki talks about the fact that across multiple applications (business, military, psychology) large groups of average people are much smarter than any small group of elite thinkers.  I think it's a mistake for companies to think through their challenges in private. A company's likelihood of success is much greater if they open up their challenges to the 6 billion people outside of their walls -- in addition to the small group of individuals inside them.

Put simply, in most cases, the long-term benefits of open conversations are far greater than any potential short-term risk.

Selling Innovation & The Challenger Sale

When you go to market with an innovative product the good news and bad news quickly become obvious. The good news is that, depending on how novel your product is, there’s generally little (if any) competition.

The bad news is that your buyer doesn’t need what you’re selling.

Your buyer has been running their business just fine without your product. They’re busy. They generally don’t want to think about something that isn’t already on their radar.

Trucking companies need tires. Building developers need concrete. Apartment buildings need insurance. Of course selling that stuff is never easy, but buyers have budgets, buying processes and an understood need for those products. If you do the things that good sellers do -- present well, build relationships, follow-up promptly, address concerns, be responsive -- by the end of the year you’ll sell some tires.

But when you’re selling innovation -- that is, selling something that your buyer has never bought and doesn't know they need -- you can do all of the things that good sellers do and still end up selling nothing. Literally nothing. Zero.

This is why the notion of the Challenger Sale is so important. To sell innovation the seller has to challenge the buyer.

• Challenge what business they’re in
• Challenge their buying process
• Challenge their future state
• Challenge their goals
• Challenge their understanding of their own market and where their market is heading
• Challenge how they think of themselves against the competition
• Challenge who their customer is and what that customer wants

A buyer has a point of view on their work that satisfies them, that makes them comfortable. And that point of view, up until now, doesn't include your product. To win, you have to break that point of view and shift the context so that they see a future where your product is a must have. Successful innovation selling is a function of a seller's ability to change the context and point of view of the buyer.

Amazon Drones & Offline Spend

[youtube=http://youtu.be/98BIu9dpwHU]

There’s been a lot of hype around Jeff Bezos’ announcement on 60 Minutes that Amazon is building drones (see above) that will ship packages from warehouses to consumers’ homes within 30 minutes.  While this may seem crazy, it’s really a very well calculated strategy aimed at getting access to one of Amazon’s only untapped markets: offline consumer spend.

Offline commerce remains a trillion-dollar industry that most online sellers have yet to tap. It’s still true that most consumer disposable income is spent locally -- restaurants, bars, coffee shops, gas stations, salons, malls, etc.

Amazon and other online retailers have struggled to tap into this marketplace. But lots of them are trying hard...

Consider a company like Trunk Club that sends consumers a trunk full of clothes every once in a while, allowing the consumer to keep what they like and send back what they don’t. With free shipping.

Or Dollar Shave Club that sends razors and other toiletries each month at rock-bottom prices. Check out their brilliant promotional video that went viral a while back.

Or Warby Parker that ships you three different styles of glasses at no cost so you can try them on. And you ship them back for free. For every pair that's sold they donate a pair to a person in a underdeveloped country.

Or Groupon that sells access to local salons or gym memberships or karate lessons at steep discounts.

All of these companies have built strategies that are attempts to tap into local, offline spend -- and the Amazon drone is no different. By shortening delivery times they're hoping to keep people out of stores and in their homes buying goods online. This is a fun trend to keep an eye on.

Your Product Doesn't Sell Itself

Blake Masters posted his notes from a class that Peter Thiel taught at Stanford a while back. The class was focused on distribution for startups and the notes are awesome, awesome, awesome. I've been meaning to write about them for a while. They're a must read for start-up sales & marketing professionals. The whole thing is great but the piece I want to talk about today is where he points out that the idea that a product can sell itself is a complete myth.

Given all of the focus on product lately – particularly in the consumer internet space – you might be surprised to hear this from Peter Thiel. But he’s spot-on. Here are the key paragraphs:

People say it all the time: this product is so good that it sells itself. This is almost never true. These people are lying, either to themselves, to others, or both. But why do they lie? The straightforward answer is that they are trying to convince other people that their product is, in fact, good.  They do not want to say “our product is so bad that it takes the best salespeople in the world to convince people to buy it.” So one should always evaluate such claims carefully. Is it an empirical fact that product x sells itself? Or is that a sales pitch?

The truth is that selling things—whether we’re talking about advertising, mass marketing, cookie-cutter sales, or complex sales—is not a purely rational enterprise. It is not just about perfect information sharing, where you simply provide prospective customers with all the relevant information that they then use to make dispassionate, rational decisions. There is much stranger stuff at work here.

To emphasize his point, he uses this framework:

Consider the quadrants:

Product sells itself, no sales effort. Does not exist. Product needs selling, no sales effort. You have no revenue. Product needs selling, strong sales piece. This is a sales-driven company. Product sells itself, strong sales piece. This is ideal.

If you believe that your product is so great that it can sell itself you’re either delusional or your aspirations aren't nearly high enough – and it’s great to see a hugely successful, product-driven investor make that point.

The Perfect Social Network

I don't consider myself to be all that active on social networks, though I'm registered for lots of them -- you can see the full list on my About page. I use Foursquare and Instagram fairly frequently, I use LinkedIn for work often, I occasionally Tweet and almost never post to Facebook. That said, there are two social networks where I'm really, really active -- much more than all of the above networks combined. Those social networks are two iMessage threads on my iPhone -- one between a large group of high school friends spread out around the country and another with a group of friends in NYC (mostly former co-workers). On average, I message my high school friends several times a day and my NYC friends about every other day. It's a great way to keep in touch.

That said, it goes without saying that the iMessage app provides me with an extremely sub-optimal social networking experience. It's annoying that the place where I do the majority of my online sharing has absolutely none of the features of a good social network. Many, many people have these ongoing iMessage threads with their friends so I know there's a product opportunity here.

With that in mind, I'm recommending a product that I think would be extremely useful to millions of people. Here's the feature list -- iMessage, with:

• Searchable archives (with advanced search capability by sender, keyword, date and date range)
• Photo logging -- all of the photos in the thread should be compiled, easily accessed and searchable
• Check-in -- instead of having to tell people on the thread where I am, I should be able to check-in to the location and it should message everyone (I think Foursquare has an API for this now)
• Cross platform -- it should work with Android, BlackBerry, iOS, etc.
• Group calling feature -- it should be easy to click on a few names in the thread to start a conference call
• Payment feature -- if I owe money to a friend on the thread or we're planning a trip somewhere that I need to front the money for I should be able to easily transfer the dollars (the app could sync with PayPal, Google Wallet, Bitcoin, etc.)
• Self-destruct option -- for privacy purposes, there should be an option to have a specific photo or text disappear from everyone's phone after it's been viewed for a short period of time (similar to what Snapchat does now)
• Share buttons -- it should have the option to share specific text or media on other social networks
• No download requirement -- if one of the people on the thread doesn't want to download the app, it should work with iMessage (they'll see the texts and media without the added features)
• Reporting -- this isn't critical, but it would be neat to see how many texts have been sent, by who, over a given time period

I realize that WhatsApp has much of this functionality now but it's still missing a lot of useful features.

I think traditionally there's been some hesitancy around building apps for small, closed-loop social networks such as a text message thread because it's only offered to a limited number of users and it doesn't scale well. That may be true, but what's lost in scale is made up for in engagement. I wrote a post a while back about the success of Snapchat and the demand for discreet social networking. Since I wrote that post, Snapchat has exploded -- their users now share 400 million photos per day (more than Facebook and Instagram combined).

I'd argue that if and when Apple, WhatsApp or another app builder releases an enhanced version of text messaging like the one I've described above, they'll see comparable success.

EMR Unbundling (Continued)

The post I wrote about the unbundling of the EMR a few weeks ago received quite a bit of attention. KevinMD republished it and Deanna Pogoreic from the Med City News featured it in her own article on the topic titled, What Craigslist can tell us about the future of health IT startups and the EMR market. Combined, the post was Tweeted well over 100 times. Given some of the commentary around the post, I wanted to provide two quick clarifications:

1.  I actually believe that unbundling is good for the bundler. In my post, I talked about how much value Craigslist brought to consumers when they bundled everything into one place on the web (apartment listings, job listings, personals, etc.). Now they’re finding that niche players are coming in and providing superior value and biting off pieces of their business. On the surface this seems bad for Craigslist. But I don't think it is. Allowing competitors to bite off areas of weakness will make Craigslist better. Back when online classified listings were valuable, simply aggregating them into one place was valuable. But now that's a commodity and Craigslist has spread themselves too thin. Competition will force them to pick an area where they can add real consumer value (as they did back when they started). The same will be true for EMRs. Unbundling (competition) is good for everyone.

2.  I probably wasn't clear enough about how long the process of EMR unbundling is going to take. As I mentioned in the post, there are large switching costs in B2B products that don't exist in B2C products. In addition, because of long-term enterprise contracts, strong vendor relationships, risk mitigation and other factors, it will likely take a lot more time for the EMRs to become unbundled than it will for a consumer website like Craigslist to become unbundled. Also, successful unbundling requires the EMRs to open up their platforms for integration -- which will take time. But my overall point still stands. Demand for the best product, over time, will always overcome switching costs and vendor resistance. Doctors and healthcare execs are consumers just like the rest of us. They want the best value -- it just takes them a bit longer to make the purchase.

Internet Marketplaces Should Be Seller Agnostic

When you're running an internet marketplace (Etsy, OpenTable, eBay, Uber, KickStarter, Yelp, etc.), it's very tempting to give sellers the opportunity to buy premium placement. This could be things like homepage placement, better placement in search results or enhanced profile pages. Selling this stuff is certainly a very logical way to monetize your user base.

But the problem with this approach is that every time you give priority to a seller that pays you more money, you've muddied your value proposition and taken an equal amount of value away from your user base.

A good marketplace is one that creates an easy, beautiful, seamless and open buying experience that enables rating and recommendation systems so that users can decide the best sellers and the worst sellers. Selling premium placement effectively circumvents your users' preferences putting you in a race to the bottom.

Sure, by charging for premium placement, in the short term, you'll generate some cash. And you can use that cash to do some marketing so that you can generate more users. But over time, if you want to continue to grow, you'll need more and more money and more and more marketing. That will force you to create more and more premium placement options (subsequently devaluing your marketplace).

The better approach is to prioritize the user and compete in the race to the top. Give your users the best possible marketplace experience and let them decide which sellers should win and which sellers should lose. Those great experiences will result in buyers telling their friends to use your service and that will result in more people going through the experience and more people telling their friends to use your service and on and on.

That's the way to scale. And you can't do it favoring one seller over another. Give sellers a great experience too, but don't prioritize them. Prioritize the user.

Craigslist, Facebook & EMRs

Benedict Evans has a phenomenal post up on his blog where he discusses the future of LinkedIn. Go read it, it’s excellent. In it he talks about the law of bundling and subsequent unbundling of web services. He uses Andrew Parker's brilliant image below to illustrate the point.

Craigslist came along and bundled everything into one place and, as a result, completely dominated. They destroyed multiple businesses in the process (including the rental and roommate web service I worked with just after college). They were immensely successful.

But now we're seeing the unbundling of Craigslist. Small players are coming in and biting off small pieces of their business and providing superior value. AirBnB does room rentals better than Craigslist, StubHub is a better ticket reselling service, LegalZoom is a better place to find legal services, etc.

Craigslist detractors believe that this will be death by 1,000 cuts.

Craigslist isn't alone. This is exactly what Facebook has been going through over the last several years: Twitter is attacking the status update, Foursquare is attacking the location feature, Instagram is attacking photo sharing (so much so that Facebook was forced to buy them), Vimeo is attacking video sharing, etc.

Of course, while unbundling is bad for the bundler, it’s great for the consumer. Consumers get more value, more features and easier to use web services.

When I saw the Craigslist image I couldn't help but think of the large EMR (Electronic Medical Record) companies -- Epic Systems, Cerner, Athena, Allscripts, etc. These companies have provided immense value by bundling and integrating a massive amount of clinical data with a nearly endless variety of healthcare related software services. They manage ambulatory clinical data, inpatient clinical data, practice management, patient communication, prescription filling, patient scheduling, billing, meaningful use compliance, population health, specialist referrals, patient engagement, risk management and many other things under the same platform. And just like Craigslist and Facebook, they've benefited hugely as a result.

But you can begin to see some cracks in their armor. As clinical data moves to the cloud, more and more startups are coming along and biting off small pieces of the EMR business and providing better value. This is the beginning of the unbundling of the big EMRs.

That said, what's easy to do in b2c software isn't so easy in b2b software. There are significant switching costs associated with switching health IT vendors and most hospitals and health systems are very risk averse and will take their time adopting new technologies (it's much easier for an individual to buy a ticket on StubHub than it is for a hospital to buy a new patient portal).

But with the dollars that are flowing into healthcare focused venture capital and the excitement around those investments, it’s only a matter of time before we see this unbundling accelerate and see more value flowing to providers and patients. And that's a good thing for our healthcare system.

In An Internet Marketplace, Competiton Helps

Fred Wilson had a good post yesterday talking about the Fallacy of Zero Sum Game Thinking in internet marketplaces. The Zero Sum Theory suggests that as more sellers come onto a marketplace it hurts the early adopters. I’ve worked in internet marketplaces in 3 different industries -- real estate, e-commerce and now healthcare -- and I can tell you that this theory is a myth. I posted the following comment on Fred's blog:

The zero sum game theory is really just a misunderstanding of how good marketplaces drive traffic and acquire new users.

If most of Etsy's traffic came from them buying SEM or running TV ads, then yes, there is a fixed amount of traffic that sellers are competing for. But I'd bet that the vast majority of Etsy's new buyers come to them organically. That is, a buyer has a good experience on Etsy, then tells a friend, and that friend tells a friend, and that friend tells a friend, and on and on.

More sellers >> more good buying experiences >> more buyers.

The beautiful thing about marketplaces where traffic is driven by a quality buying experience (and word of mouth) is that instead of sellers competing with one another for traffic, they actually rely on one another for traffic.

I recommend checking out the original post. There's some great stuff in there on how, despite the controversy, Spike Lee raising money on Kickstarter actually increased funding for lesser known filmmakers. Great topic.

Sticking to Your Core Competency

I've been thinking a lot recently about companies and their core competencies. The idea that a company with a few employees and only a little bit of capital that focuses on only one thing can do that thing more effectively than a billion dollar company with tens of thousands of employees is hard for many people to comprehend. Bijan Sabet wrote about this a while back when he pointed out that so many of the embedded iOS apps have been replaced by applications from tiny startups. From his post:

The default notes app has been replaced by Simplenote

The default messenger app has been replaced by Kik

The default calendar app has been replaced by Calvetica

The default music app has been replaced by exfm, soundcloud and rdio

The default mail client has been replaced by Sparrow

Granted, Apple wasn't necessarily competing aggressively in all of these areas.  But the reality remains that a small group of people that focuses on one thing will always outperform a large group that focuses on lots of things.

With some of this in mind, I came across a blog post by Paul Levy last week on the increasing trend of large health systems getting into the payer space. Due to the growing pressure on reimbursement rates and the increasing prevalence of population health, it only makes sense for health systems to be inclined to cut out a middleman (the private insurers) and become more horizontally integrated. Health systems are finding that they can organize and work directly with large pools of patients (employers, trade groups, unions, etc.) and, potentially, insure and care for them more cost effectively.

While on the surface this may seem like a great idea, Levy points out in his post that many large hospitals have enough problems improving their existing businesses in this complex and rapidly changing healthcare environment:

Here's what I think, based on unscientific site visits, surveys, and discussions with hospital leaders. The vast majority of hospitals--and especially academic medical centers--have barely begun to crack the operational problems that exist in their facilities. The quality and safety of patient care are substandard, compared to what they might be and what has been demonstrated in comparable facilities. The degree of patient-centeredness, likewise, needs major work. Finally, the engagement of front-line staff in process improvement efforts is scattered.

Despite this, 1 in 5 health systems intend to become payers by 2018. And this is where the notion of core competency comes in. Given the massive transition that healthcare is going through -- from managing sickness to managing health -- might some health systems be wise to focus on improving and creating a competitive advantage on what they already do well? As opposed to entering a complicated and risky new industry (health insurance company profit margins generally hover around a very low 4% and the industry is subject to paralyzing state and federal regulation).

Just like Apple has wisely decided to focus their best energy on building great tablets and smartphones and to allow someone else to build great mail and calendar apps (on top of their platform), it might make sense for health systems to continue to focus on improving the quality and efficiency of care and cutting the costs of their existing operations, and to let someone else be great at the underwriting and actuarial work.

Spreading Innovation

There’s a long but good Atul Gawande article in this week’s New Yorker worth reading that’s relevant to what many of us are trying to do -- spread innovation and change minds. He writes about why some new innovations spread quickly and others don’t.  Talks about the fact that doctors adopted anesthesia really quickly but it took them years and years to begin sterilizing operating rooms (arguably a more important innovation).

Talks about the critical importance of the human factor in spreading innovation – and how a simple treatment for Cholera (a mix of sugar, salt and water) never spread in Bangladesh until human beings went out on foot and sold it, door to door.  Also uses a more relevant analogy:

This is something that salespeople understand well. I once asked a pharmaceutical rep how he persuaded doctors—who are notoriously stubborn—to adopt a new medicine. Evidence is not remotely enough, he said, however strong a case you may have. You must also apply “the rule of seven touches.” Personally “touch” the doctors seven times, and they will come to know you; if they know you, they might trust you; and, if they trust you, they will change. That’s why he stocked doctors’ closets with free drug samples in person. Then he could poke his head around the corner and ask, “So how did your daughter Debbie’s soccer game go?” Eventually, this can become “Have you seen this study on our new drug? How about giving it a try?” As the rep had recognized, human interaction is the key force in overcoming resistance and speeding change.

The UP By Jawbone

The other day I bought a Jawbone UP, the popular health monitoring device that tracks steps, sleep and sleep quality. I’ve only been using it for a few days but so far so good. I mostly bought it for the sleep monitoring feature, and because I've been generally a bit anxious to test out a health monitoring device.

I’m slightly obsessed about the amount of sleep I get. Often there are nights where I get a good night’s sleep, but I don’t think I did so I worry about it. UP has begun to put my mind at ease – I’m actually getting more sleep than I had thought. The sleep part of the app monitors how long it took me to get to sleep, how long I slept and even deciphers periods of deep sleep versus light sleep.

I measure my daily workouts fairly closely and I use the MapMyRun app for my outdoor runs so the step measuring feature isn’t all that useful to me. Though I think over time it’ll be interesting to look back at the data to see how much I’m moving, and how I'm moving more or less during different periods. I also like being able to view my general activity levels in contrast to my rest.

The wristband itself is good. It looks decent on my wrist, seems durable, the controls are really responsive and it's easy to sync. The iPhone app is fabulous. It’s easy to use and has a seemingly endless number of ways to slice the data it collects.

There are a few more features I haven't used yet that I'll try out in the coming weeks. Lots of people believe that this kind of self-monitoring is the future of healthcare (particularly to help monitor various physiological statistics and behavior change for people with acute illness and/or high risk factors).

I'll write another post on my experience with the UP in a few months after I've compiled a bunch of data.