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Time Capsule: Small Vendors With Good Ideas Can Carve a Niche In Healthcare

June 3, 2011 Time Capsule 4 Comments

I wrote weekly editorials for a boutique industry newsletter for several years, anxious for both audience and income. I learned a lot about coming up with ideas for the weekly grind, trying to be simultaneously opinionated and entertaining in a few hundred words, and not sleeping much because I was working all the time. They’re fun to read as a look back at what was important then (and often still important now).

I wrote this piece in March 2006.

Small Vendors With Good Ideas Can Carve a Niche In Healthcare
By Mr. HIStalk


A just-announced study found that Michigan’s CPOE adoption rate of about 10% is nearly double the national average. I thought about how I would read those results if I were a software vendor unfamiliar with healthcare. Would I see health care as a market ripe for new entrants? Or would I steer clear of what looks like a mature market with low potential for growth due to poor customer acceptance of the 10 or so available CPOE products?

Assuming for a moment that the market is attractive, how would I compete with the big healthcare vendors? I’d need a fast development cycle, reference sites, and leverage from existing technologies. That rules out applications like CPOE, ERP, nursing documentation, surgery, and patient billing. Those are long, ugly slogs for both the vendor and the customer.

Healthcare has a few products that enjoy high acceptance: PACS, laboratory systems, AP/GL, HR information systems, online clinical references, and wireless networking. Those require a lot of domain expertise and development, however, and those markets already have entrenched players. Pass.

As a vendor, I want to make money. Healthcare seems to be one of few industries in which vendors of expensive software still can’t turn a profit in many cases.

So what’s left? My best ally as a little guy is innovation. It’s uncommon in healthcare IT, whose longstanding culture is more mainframe than MySpace. That means I should:

  • Build something that supports what healthcare users themselves want to do, not what someone else wants them to do. Sounds obvious, but think about CPOE, nursing documentation, and other software that forces change on users who don’t want it, often leading to fierce resistance and vendor acrimony.
  • Create a product around off-the-shelf technologies that can be tweaked into a healthcare-specific package. By now we should have seen more healthcare applications built around office suites, voice over IP, Intranets, search engines, knowledge management, and instant messaging.
  • Build something that isn’t stodgy and dead serious. Think Google or Skype instead of Invision or Star. When’s the last time you saw a “cool” healthcare application with devoted admirers?
  • Sell your product shrink-wrapped, or nearly so. The last thing healthcare customers need is another cadre of consultants that cost more than what they’re installing.
  • Price for volume, not the once-a-year home run. Lower prices mean shorter sales cycles and a lower level of approval authority. Market penetration means more opportunities for add-ons and upselling.
  • Provide flexibility without customization or automate areas where processes are consistent. If you can build a system that even 20% of hospitals can use as-is, you’ll have more customers than you can handle.
  • Target your decision-makers. Who has the influence needed to get your product in the door? In hospitals, that’s usually predictable (the nursing vice president — no; the finance vice president — yes). Can you reach them easily and explain your concept in a paragraph or two? Is the number of people affected small enough so that concerns about upheaval are minimized?

The Michigan study tells me to forget CPOE and carve myself a niche. The big vendors are locked in long, messy implementations of aging, high-ticket products, often trying to keep Wall Street and/or conglomerate parents happy rather than delighting customers with fresh thinking. Someone with good ideas and low overhead might be able to build a nice little business from the crumbs they drop.

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Currently there are "4 comments" on this Article:

  1. A…wait for it…MEN!

    Well espoused, Mr. H. Perhaps even more applicable today than in ’06. Your visionary-ness is a little scary.

  2. Speaking from the point of view of a startup company trying to innovate in the space, it’s just not easy.

    In healthcare, integration is the missing link. Sure I can provide a service without integration, but then I get in the business of providing content. As you correctly stated the content business is not somewhere for a startup to operate (too many established players). How can I provide an off-the-shelf product without integration?

    As an example, our newest app is an application for automating the medication refill process esp. for PCPs. Think of it as paper refill protocols on steroids. The app would work optimally in a highly integrated environment. Thus, whenever I talk with a potential client the first question is “What is your integration strategy?” How can innovators focus on building a great product, when they always have to deal with integration?

  3. Jonathan, isn’t that what CIOs are for? If it’s always a vendor’s job to provide integration, what is the defined role of a hospital CIO, and what is the standard by which they are judged? Is the hospital CIO the biggest barrier to innovation in HIT? Not saying they are, just asking the question.

  4. I don’t think that is the defined role of the hospital CIO. Correct me if I’m wrong, but CIOs are paid to be ultra-conservative IT stakeholders whose sole purpose is to make sure the hospital system never goes down. As it relates to purchasing decisions, the CIO will always lean towards stability rather than innovation. Being a small vendor, I have to convince the CIO that our product is going to add more value than the trouble it will cause.

    With that said, I still do think the hospital CIO is one of the biggest barriers to innovation within HIT. As it always does in healthcare, it comes back to incentives. As the CIO of a hospital I have little incentive to take a product risk on an unproven company. I risk my job security when I put my name on the line. Then if I decide to take a risk on a new company, the sales cycles does not support the needs of a small business. I can’t afford to put out a huge salesforce into a sale that might occur 12-16 months from now. Startups need money now.

    Lets just say the path to innovation is not through the CIO.

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