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How to Start a Successful Company in Healthcare

Tomorrow I am speaking at a Meet Up in Pasadena across from the Huntington Hospital, or in a building at the Hospital; I cannot tell. The topic is about how to succeed in marketing your startup to the healthcare industry, but I plan on talking about how to win in general.

I admit the start time is a little too early, but if you are creating a startup, or a startup focused on healthcare, you might want to join us. We can take espresso shots together. You can RSVP by going here.

Here are just a few things I plan on covering tomorrow:

  1. It’s all about the relationship: If you are building an enterprise level SaaS or software company, aimed at the fortune 1000, you really do not need a marketing budget. Your marketing is you; your marketing is your customer. You need to gain people’s trust by being an expert at what you do, and work hard at creating meaningful relationships. It took us 7 years to become a standard at Kaiser, and it would have never happened if we acted like a vendor. There are amazingly wonderful people in this industry and I only work with people who I know can become a “flient” (aka a friend client).  Besides, life is way too short to work with people you do not like. I will turn revenue down if I feel like I could not create a meaningful relationship with someone. We have a core value at mobileStorm that says “Provide Legendary Customer Service”. It’s about going above and beyond what’s expected of you to blow the customer away. If you focus on blowing them away, they will do your marketing for you and trust you with their goals. Strong relationships are just as strong as a barrier as a patent is when it comes to the competition.
  2. Persistence is Everything: The typical sales cycle for an enterprise deal with a healthcare company is 12 to 18 months. I have seen 3 months and I have seen 24, although those are typically outliers. It’s going to take you time. Literally plan on doing nothing for the next 4 to 5 years of your life. Data also shows that exit multiples increase up after being in business longer than 4 years.  It simply takes time to gain the industries trust, so you have to believe you are going to succeed and just stay with it no matter how tough it gets. If you are an expert at what you do and can prove it to people, they will give you their time. Once you are in the door you now have many more cycles. An investor told me when I first started our healthcare division: “how many of your deals are in production?” I told him: “Well, we have two POCs (proof of concepts) and a pilot”. He said: “call me when they are all in production.” Large companies have a fail forward fast mentality. It’s way too costly for them to tie up their tech teams, integrate your technology, and customize the solution, if they haven’t proven that it works. And it’s not just that the service is successful, but that it can scale, and the rest of the organization buys in. A lifecycle on a typical customer looks like this A) Sales cycle (12-18 months) B) Proof of concept (3 – 6 months) C) Pilot (3 – 6 months) D) Production (3 – 6 months) You could easily be working on a deal and not get any real world data on how your technology is working for over two years. I know this sounds painful but don’t let this turn you off, because when you are in, you are in. A very successful healthcare CEO once told me as a joke: “Your technology doesn’t even have to work.” Because these cycles take so long, when they find someone they like they aren’t going anywhere. They need to make it work because it’s too costly to start the cycle over again with an unknown company. He was clearly joking around in a dramatic way, but his point was simple. You will only last so long if you cannot deliver. So in the same way you can easily block your competitors out of a major client, they can do the same for you. So stay in the game and NEVER let a client wait on you. I have a theory that there are only three things you need to succeed: 1) Persistence 2) Knowledge 3) Networks. If you stay in the game long enough you amass knowledge. The more you become an expert, the more people trust you, and the bigger your network grows. The bigger your network, the more opportunities come your way. As long as you have integrity, with half a brain, you can become a multi-millionaire. Stay in the game. Just stay in the game.
  3. Create Memorable Experiences: Our marketing budget is spent on experiences. So instead of a booth, we get a boat. You heard me. We rent yachts instead of renting trade-show floor space. You need to figure out ways to create experiences that people will not forget. Like Seth Godin talks about, you need to create a Purple Cow to stick out. Nobody will remember you walking by on a trade-show floor as you hand out a brochure that will end up in the trash. But you play some killer house music, serve sushi and an open bar on a boat in the middle of the Potomac, and you will have your customers reminding you of how much fun they had for years to come. Two years ago we threw a boat party during the mHealth Summit in Washington D.C. If I told you the ROI we got from that party, you wouldn’t believe me. Recently we threw a party in the large suite at a Hyatt, and called it the “Sweet Party.” It was in a beach side town in California, so naturally we had to have a California beach theme. Our DJ played California tunes from artists like the Beach Boys. We had a full bar and served In-n-Out Burger on a 10 foot long board. We served all kinds of sweets from famous California bakeries like Sprinkles and Susie Cakes, and littered the suite with beach balls, candles, and beach chairs. We replaced all of the lights in the hotel room with red, yellow, green, blue and red light bulbs (so the whole suite looked like a beach ball), and gave away prizes like an iPad if people answered trivia questions correctly by texting in on their cell phone. We created a text-in trivia game using our SMS platform, and of course had California based questions like “How old is the oldest Sequoia?” All of this was done completely gorilla style because the hotel wouldn’t have allowed it if they found out. Try sneaking in a full sound system, long board, trays of food, bar tables, and stools and hosting over 50 people in a suite that can’t hold 50 people. It wasn’t easy, but so many people told us they have never had an experience like that before. It went over so well that the person in charge of their annual events told us they would like to change the way they interact with their partners in the future and only focus on experiences. People want to enjoy themselves, so if you are going to spend money, spend it on something that will create value for you and your client. With a booth only you are getting value, and I would even argue that.
  4. Do Not Be a Vendor: We think “vendor” is a dirty word.  A vendor is someone who simply takes direction and shuts up. Vendors do not provide solutions, but rather a widget that is commoditized.  If you are a vendor you can be easily used, traded, or dropped. I have walked away from multiple deals where I thought the client only wanted someone to take orders. This is one of the reasons we do not do RFPs. If the client insists on one, we will do it but only if we get to help them write it. Think about this, the total health expenditure in the United States is almost 18% of our GDP! This is the sum of public and private health expenditure which covers a provision of health services (such as preventive and curative), family planning activities, nutrition activities, and emergency aid designated for health. Healthcare is a beast! The industry needs people who know their stuff. They need direction, help, and solutions. I want to work with someone who is open to ideas and change. We need change. We call all of our clients partners, and aren’t afraid to correct a client if they do not call us a partner back. A true partnership is where your clients goals become your own.
  5. Be Nimble & Push Innovation: Healthcare is a slow moving monster. If you look at the major tools in place that run these beasts, they are typically hard to use, ugly to look at, and old. However, it’s not due to a lack of good people; the industry has been hamstrung by government regulations, privacy concerns, and security issues. It’s hard to innovate when you cannot use the latest technologies (like the cloud), or spend time on anything that’s not essential when navigating an industry of this size that’s under a microscope. The average healthcare payer has a 3% – 5% profit margin. If they spend more than 15% to 20% on administrative costs (things like software, direct mail, customer service etc. as opposed to less than 85% on care), they are penalized and have to provide their customers with an annual rebate. It’s an industry where you are not rewarded for getting innovative. One of our clients has 200,000 employees. How does change happen at that level? But make no mistake about it, healthcare is being disrupted. It’s taking a while but due to HIPAA (the Healthcare Insurance Portability & Accountability Act), all health records must become electronic this year; well next year. The Government pushed things back a bit, because let’s face it, giving everyone 10 years just wasn’t enough time. Some of the largest EHR systems in the country have only recently started publishing APIs (Application Programing Interfaces) so if you have a web-based company, you can integrate your platform with them to power real-time transactions. So for mobileStorm that means “Send Ted a text message 30 minutes before his appointment, reminding him where his doctor is located,” as opposed to batching up everyone who has an appointment that day, and messaging them at the same time. Healthcare is slowly becoming real-time, mobile, cloud-based, fast, data driven, and easy-to-use. Help the industry along by implementing these important trends quickly.
  6. Focus: Healthcare is huge, and your clients will pull you in a bunch of different directions.  You need to understand exactly what you will and will not do. Almost every single client wants to customize your solution. I have found that this only works if a) it falls in line with your road map b) it’s something all of your clients can use. If you are running a SaaS company its critical whatever you build can be replicated across all customers. Being focused on one thing and doing that insanely great is your key to success. Healthcare is so big and complex, people want to quickly understand what you do, and what your value is. They have so many solutions coming at them, that if you aren’t focused, and if your message is not focused, you won’t hear back. I read the average exit amount for a healthcare software company is $100m. So don’t worry about being horizontal. Go into a vertical and dominate it. We are constantly having opportunities come at us from different industries within healthcare, but the only way we have been able to thrive is to say no, and to stick to our game plan.
  7. Scale, Security, & Policy First: Features are kind of important. If you do not have them, you really do not have a product. In almost every other industry you worry about what the product does. In healthcare, no matter what you build, there are three things you have to nail, or your features will never see the light of day. You need to make sure what you are going to build can pass the office of a CSO (Chief Security Officer). You then need to pass your client’s compliance department and share with them what your risk plan looks like, how you promote code, where data is stored, what does disaster recovery look like, how are you backing things up, who has access and to what data? You need to have a certain amount of insurance, typically a $5m E&O policy (Errors & Omissions), which isn’t cheap but gives your client some level of comfort you will foot the bill if something goes wrong. For instance, if you have a breach in California (meaning if you get hacked) you have to notify everyone. A typical cost per person is $1.00, so imagine what the cost is if you have to notify 9,000,000 people of a breach? You must sign a BAA agreement (aka Business Associate Agreement) or you will not be signing a new client. I have seen startups sign a BAA, attesting to the fact they can comply with HIPAA, when you know they are nowhere near complying with HIPAA. Their line of thinking is “If we get hacked we are out of business, but if we don’t get this deal, we are still out of business. Soooo I might as well sign this agreement; I can always get certified after we get rolling.” In addition to passing security audits, legal, compliance, and governance, your customer typically has a very, very large customer base. If you sign United Healthcare, in theory you could end up supporting 75,000,000 American’s. No matter how much that VP of Technology loves your solution, they cannot support you if you cannot share with them how you plan on scaling your solution. But wait, I have everything in the cloud so I can scale really fast right? Remember that security thing we just talked about? The industry is still not totally comfortable hosting PHI (aka Protected Health Information) in the cloud. We have been pushing the industry hard for years, and yes you can thank us and the other thousand businesses trying to convince security officers that the cloud is just fine. Actually, every security officer I have met tells me in person they too think the cloud is just fine, but it’s still not a company-wide policy that all of their data can go into it. So you have some real hurdles to manage at the beginning. If you focus on nailing these up front, your meetings will go smoother, and you will bury the competitor who is not focused on these things. Feel free to reach out and I can recommend some great companies to help you manage this.
  8. Make things easy: At mobileStorm, we focus first on the consumer. If the consumer is happy, if they find value in our messaging, then our client will be happy which means we will be happy. It’s a positive or negative feedback loop that is a chain reaction; starting and ending with the consumer. Consumers do not want to think, they just want things to work. They don’t want to spend their time filling out a huge form on a 4” screen. They want the form to move them thru it, and have data filled in already (where possible) so all they have to do is simply verify. Gartner reports that if a consumer cannot accomplish a task on a mobile page in 8 seconds or less, you can lose them. It blows me away how so many large software companies in healthcare have no focus on their design and user experience (UX). Features along with security and policy, have clearly been prioritized. I wrote an entire piece on the importance of having an amazing user experience in healthcare. Amazing design and a great UX, is something that could help the industry realize true change. In a nutshell, if we want consumers to engage, we have to provide them tools and services that a) save their time b) work c) does not make them think d) are attractive to look at e) potentially fun to use (like gamification is so wonderfully doing). I am sure there are more, maybe you could send me some of your thoughts?

I look forward to seeing you bright and early! Paid parking is available in the parking structure on the corner of Fairmount and Congress. Street parking is available on Bellefontaine.

Here is a map and picture of the venue (see screen shots attached)

Thanks!

- JR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



This post first appeared on Entrepreneur Success, please read the originial post: here

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How to Start a Successful Company in Healthcare

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