Focus on Distribution 2/13/13

I’ve always approached product development by looking at a problem, talking to users, creating something basic for them to touch and feel, then iterating quickly, assuming that if we talk to enough users and create something valuable it will grow organically or we’ll then figure out how to scale it. It’s always made sense to me to do it that way. 

I’ve been surprised the last several weeks in meetings with advisors and investors that we have been repeatedly told to stop focusing on product and instead focus on distribution. The thinking is that investors understand the problem or agree that the industry or space is big enough to bet on, but they are more concerned about how we plan to get users than what the product actually looks like.

The idea is to focus on distribution –getting users –not features and design. Distribution might drive features and design, but the primary goal needs to be figuring out the best way to get users, whether the target number is one million or one billion. That sometimes means building something (service, app, whatever) that isn’t solving the big problem you are trying to solve, but is a "hack" to get into the pockets of your desired users.

Focusing on distribution is relevant to the mobile health and more generally to the consumer health space. Health app and services developers are identifying real problems — logging glucose readings, med adherence, food trackers — in a very big industry (easier for investment) and building some good-looking products to address those problems. Getting users to download, use, and continue to be engaged is the real problem that needs to be solved. That’s why we see a lot of apps and pilots with nothing at scale despite the backing of monster companies and investors.

How do you solve the distribution problem for consumer and patient-facing apps? There isn’t one answer. Most distribution in healthcare needs to flow through the established system of payers and providers if you want to patient users.

There are certain diseases in which patents are more engaged and can be targeted directly. These are generally patients who are proactively seeking information, education, and connectivity to other patients. PatientsLikeMe and Healthy Labs are good examples, but unusual. These companies use existing group pages on Facebook and forums to get the word out and then grow organically in disease-specific communities.

Another broad area in health that can be targeted is convenience. One example is prescription refills. Walgreens is cheating a bit in the distribution arena because it can and it does market its mobile app to you every time you check out. Walgreens has over a million users of its mobile app for prescription refills. I’m curious to see if companies have success using the new Walgreens Prescription API.

Another convenience is appointment scheduling. This one requires massive resources like those of over-funded ZocDoc to onboard practices and schedules. I’m sure ZocDoc — if it can have success in being a primary entry point into the healthcare system — will layer on additional services and features for both patients and doctors. One more area of convenience is connecting patients to providers (communication) but this again requires selling to providers first and is essentially B2B2C.

A very hot area under convenience is telehealth or virtual visits. There are tons of companies trying to do this in different ways. The ones that will have the most success, assuming they aren’t run or owned by payers or pharmacies, will be those virtual health services and apps that are specific in the service they offer. People are looking to solve specific problems, not find a "virtual clinic." Being targeted is going to get virtual clinics higher rankings in search engines and hopefully these clinics will be solving problems that people are searching.

Technically this could fall under convenience — easy access to health information. Companies like iTriage, WebMD, Sharecare, and Healthtap are all trying to do this, just to name a few. iTriage started and grew by providing basic symptom lookup and then local facility information. It solved an acute problem that people needed to solve. From there it launched premium listings, mobile patient check-ins, and scheduling. Then it got acquired by Aetna. It wasn’t doing diabetes management, but it had pretty phenomenal growth. Sharecare is trying to bring on brands and facilities to answer patient questions, in what I think is an attempt to boost its ranking in search engines. Healthtap, initially only Q&A for patients to ask docs, is now starting to add premium offerings, including doctor verification of all things.

A good strategy to win people directly is financial, but in health this is complicated by the fact that individuals are usually insulated from the actual transactions. Companies like Cake Health and Simplee are trying to be like "Mint for healthcare" and have very nice looking sites for managing and learning about healthcare spending. For HSAs these companies will probably have success direct to consumers, but I’m not sure people with typical insurance plans really care enough. Cake and Simplee have an angle to sell through large employers, which would put them in competition with the other famously over-funded health startup Castlight.

That brings me back to the real problem. If you want to create something for diabetics or hypertensives or people with depression, how to you get them to use your app or service?

For most diseases and big targets in health, the challenge in distribution comes from the fact that most people don’t feel the immediate pain of these conditions. If some of the companies listed above have lots of success ,they might be able to add on services to help diabetics log glucose readings and adjust behavior based on readings. But that is going to take a very long time. I can’t think of many companies that are getting a lot of attention or funding by going directly after these users, but Omada Health seems to be one to watch.

The other approach is obviously going through payers, employers, and providers (B2B2C) but then app developers need to be thinking about what those customers really want and tailoring language and potentially product to meet those needs. I’ve said this before, but if I was developing an app or service for patients, I’d be talking to all the concierge or direct primary care docs I could find. Those practices seem perfectly suited and don’t have huge enterprise IT and legal departments to contend with.

How do you think we solve the distribution problem in healthcare?

TGphoto

Travis Good is an MD/MBA involved with health IT startups. More about me.

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