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

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.