The healthcare burden continues to increase and the complexity continues to grow. There is a high volume of inefficiencies in the market, which is becoming increasingly fragmented due to the infusion of venture capital dollars over the last five-plus years and the thousands of start-up companies focused on addressing some aspect of healthcare.
A digital platform typically refers to a digital service or digital product with an integrated business model and operational model. Digital platforms are characterized by: asymmetrical ownership among the creators of value around the platform and its participants. By definition, digital platforms seek to capitalize on network effects so that as new parties join the participant group, it becomes more valuable for everyone involved. In healthcare, this requires a willingness to work across silos amongst competing health systems, payers, providers, entrepreneurs, and other stakeholders who must collaborate in order to deliver sustainable innovations that result in better outcomes at lower costs.
Healthcare digital platforms have three fundamental attributes which are critical factors when evaluating their ability to be successful today and into the future…digital platforms must:
- Have a clear User Experience strategy and be designed around the intended user experience to engage participants that are willing to interact and provide value
- Be Digital-first insofar as it becomes part of a Digital Health Ecosystem where both people and things are connected in ways that allow them to communicate, collaborate and generate outcomes or benefits for users across their ecosystem
- Deliver on key performance elements including Anti-Fragility, Scalability/Scalable Network Effects, Observability and Resiliency (which includes load balancing inherent in the platform design)
Platform businesses rely on networks of users
A Digital Platform is essentially an online marketplace that provides information and tools to enable individuals, organizations, or other entities to do business. Digital platforms are the dominant model for most of today’s Internet companies, including Google, Facebook, Amazon, and eBay. Digital platforms create value by enabling parties that would otherwise interact with each other very infrequently (or not at all), to find each other and conduct exchanges in a convenient manner. They do this by providing certain core capabilities needed in order to achieve the goal of the platform:
Exchange – digital platforms facilitate transactions between two or more groups of users with different needs/capabilities -> at a basic level, this means matching up buyers with sellers who can satisfy their needs.
Digital platforms may also play a more direct role in getting the exchange started, e.g., platforms may match buyers and sellers together or they might act as market-makers who find suitable matches between buyers and sellers.
The platforms that facilitate these exchanges often also provide value by streamlining communications between users, keeping trade secrets safe from competitors, and creating a brand identity for themselves.
Businesses offering platforms aren’t always selling platform software/services – Many successful digital platforms are “free” to use (e.g., Facebook). Digital platforms can be sold on-premise or through a Software as a Service (SaaS) subscription model (e.g., Salesforce) or even through licensing fees paid by the partners.
Competitors in this space include government entities, big technology companies and industry players such as healthcare information technology players along with pharma and medical technology companies.
The keys to success are to focus on customer experience, providing fewer, vetted choices, building trust and transparency, and ensuring that there is a focus on evidence generation and willingness to pay.
Based on these observations, I believe digital platforms will be a key component in shaping the future of value-based healthcare.
Platforms serve as a means to connect buyers and sellers with mutually beneficial outcomes. Digital platform leaders have been successful by focusing on productivity and efficiency while creating new opportunities for economic growth. Digital platforms have also been used to promote innovation from within their organizations by selecting experiments that can scale quickly with high business impact, and have also proven useful for supporting customer relationships through an enhanced omnichannel experience. Digital platform companies have led the way towards developing more innovative business models which has presented opportunities for other organizations to improve how they deliver products and services across the healthcare continuum.
There has been a shift towards a platform approach that includes focus on bundles of products and recurring revenue. This strategy and business model has been popular with companies like Etsy, Fiverr and LinkedIn – all becoming platform-based companies and multi-sided marketplaces.
The concept of network effects is one reason for the shift to digital platforms. Digital platforms have been able to fill gaps and solve problems that were ignored by large enterprises and government services. Digital platforms have been able to leverage digital networks in order to capitalize on a variety of other advantages such as better data, pricing psychology and marketing methodology. Digital platforms are also able to overcome issues relating to drawbacks related to traditional business models using techniques including user reviews, publishing content, and increasing search engine optimization. Network effects can be realized with digital platforms because they appeal very broadly across the target market due its abundance of participants.
Effective partnering is also critical in a successful platform business and the ability to quickly identify the companies that will add value to the platform. Digital platforms also have the advantage of scalability through the use of automated scaling. Digital platforms can also be utilized to create strong network effects which are critical in successful platforms. Many different strategies can be used to implement novel business models that offer flexibility, better customer service, create new revenue opportunities, and take advantage of emerging trends in the digital economy.
The idea of platforms is not new, but the application to healthcare is growing and will have an impact in the future of health systems around the world. Platforms in Healthcare can provide a strategic advantage to Health Systems, Digital Platform Vendors and Hospitals as they endeavor to strengthen partnerships, deliver better care to patients, align incentives across providers and encourage innovation among clinicians. Platforms will continue to play an important role as these organizations seek opportunities for growth.
However, digital platforms are not easy businesses to enter or manage, but given the intense competition for market share, companies focused on successfully delivering a platform can expect to be on a growth curve. Digital platforms offer significant advantages over traditional business models, by creating customer stickiness, reducing cost and improving quality. Digital platform businesses can have evergreen revenue streams because they often require very little incremental effort to add new customers.
The race is on. Healthcare companies that do not keep up with digital innovation will be left in the dust. Digital platforms are becoming more prominent and digital innovators are able to thrive because of the potential for scalable revenue through scaling the marketplace and leveraging consumer data.
What are your thoughts on platforms in healthcare and ripping a page from big tech players?