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April 27, 2015 Readers Write 3 Comments

Chicken or Egg?
By Niko Skievaski

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HIStalk recently released these poll results: “Which #1 reason would cause you to avoid doing business with a startup?” (*n=350):

  • Fears that the company isn’t financially viable (47 percent )
  • Offering a product that solves a non-strategic problem (21 percent)
  • Lack of integration with existing IT systems (17 percent)
  • Lack of comparable reference sites (10 percent)
  • A CEO who doesn’t have poise, polish, or healthcare experience (5 percent)

These embody much of the technology adoption barriers facing healthcare. Startups are perceived as being unable to commit to long-term contracts and lack reference sites to build confidence in buyers– just as the first chicken couldn’t have been hatched without the egg from which it came. These things combined make for a very difficult landscape for healthcare technology startups to thrive in. So who lays the egg?

Fears that the company isn’t financially viable. It’s extremely costly for a health system to adopt new technology. Beyond the price tag, there are real costs associated with implementation and training necessary to successfully go live. The last thing they want is to be left hanging if your company goes under. Jason Bornhorst, who exhibited the last two years in the HIMSS startup neighborhood, said, “I’d estimate that about two-thirds of the companies that were here last year aren’t around any more.” The fact of the matter is that you need to have the resilience to ride the bone-breaking sales cycle. They’ve been practicing medicine without your software for 100 years; they can wait another 1-2. How do you bootstrap financial viability to last the long sales cycles and combat this perception? Raise more money, find alternative revenue sources, join an accelerator or two to buddy up with health systems, and surf the cycle efficiently.

Offering a product that solves a non-strategic problem. This isn’t so much a market failure as it is a customer development failure. Start a better startup. Don’t start a bakery because you’re a good baker. Start a bakery because there is excess demand for baked goods. I just hope that the buyers at health systems are delivering this intuition directly to the startup in addition to anonymous HIStalk polls.

Lack of integration with existing IT systems. Integration is a must. It’s not enough to say, “Use our product in a standalone capacity during the pilot and we’ll figure out integration later.” Providers hate double documenting and clicking. Forget switching windows. Their complaints bog down IT teams. Both of these groups will throw a block at your pitch if you don’t have a solid answer for interoperability with existing systems, both from a technical perspective as well as implementation. There’s a new wave of startups out there providing modern integration strategies for startups attempting to interoperate with the EHR.

Lack of comparable reference sites. One of the mantras I learned back at Epic is that every single customer should be able to be considered a reference site. It’s that level of customer service and do-anything-ness that makes them stand apart as a vendor. The space is too small to simply write off any customer as a lost cause. If a health system chooses to work with us, we need to do everything possible to make sure they’re a good reference site for future customers.

A CEO who doesn’t have poise, polish, or healthcare experience. Have you met Judy Faulkner, Chris Patterson, or Jonathan Bush?  Just a few examples of eccentric, throw-caution-to-the-wind type personalities who oversaw a successful EHR startups. But you need to know the audience of decision makers. If you’re new to healthcare, welcome to the wild world of buzzword bingo. Get conversational stat (yep, that’s a healthcare word). Read books, blogs, HIStalk.  Listen to podcasts. Go to HIMSS and actually listen to some sessions that relate to your domain. You wouldn’t buy a car from a guy that didn’t know the difference between a carburetor and catalytic converter. Be sure that you can demonstrate that this isn’t your first rodeo. Manufacture your “experience” by becoming an expert in the domain.

Mr. H, maybe a survey on top reasons to work with a startup next time?

Niko Skievaski is  co-founder of Redox.

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Currently there are "3 comments" on this Article:

  1. Pedantic peeve: The egg did come before the chicken and there should be no dilemma. What produced the chicken was clearly an egg (maybe not a chicken egg!), but what produced the egg was not yet a chicken. It was the chicken’s ancestor. The predecessor is clearly defined here, and I wish people would stop using it as an example.

  2. Another great post with great perspective. Most importantly – managers and investors alike need to understand the “commitment” it takes to crack this egg (funny?). Many a “good for healthcare” product/service has died along the long road to sales – more based on unrealistic expectations than anything else…







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