Incumbents Disrupting Incumbents: Tech Giants Begin Entering the Healthcare Arena
There has been a great deal of buzz lately regarding the entry of some very large tech companies, such as Apple, Amazon and Google, in the healthcare industry. The reality is that most tech companies are already involved in healthcare and have been for many years, so healthcare organizations should prepare for a new era of competition. Given the scale of the market, any excursions into the healthcare market by these giants to date have been the proverbial dipping of a toe in the water. In a series of posts, I will outline some of the motivations, considerations and implications of this trend.
Why would tech giants, or any company for that matter, want to get involved in the healthcare space, especially since they have very established positions in their own markets? There are myriad reasons but the two largest are 1) the sheer size of the market and 2) the consistent projected growth estimates. In 2016, the healthcare industry was $3.4 trillion in the US alone with a projected growth rate of approximately 5.6% over the next decade, according to the CMS. To put this in context, the smartphone market in 2016 in the US was $55 billion, a mere 1.6% of the healthcare market. Also, the smartphone market saw its first ever decline in sales in February 2018. The healthcare industry is one of a handful of markets in the US where very, very large companies can look for opportunities that could have a substantial impact on their financials.
Healthcare costs continue to soar and are a significant company expense. Many employers are passing along the increasing premium costs, but most companies are trying to share the increasing burden with their employees. Employers such as Apple and Amazon have a tremendous opportunity to test the market by first offering employees their version of healthcare; test, tweak and repeat. And, once successful, why not offer these services to others? Amazon, in particular, has a successful track record with this strategy – think Amazon Web Services and Fulfilment by Amazon. While reducing their own employee healthcare costs and improving employee satisfaction, these giants will be perfecting yet another offering.
Brand. Brand. Brand. The tech giants compete, not only financially, but also in the brand arena. For these companies, brand impacts almost every aspect of their business, such as customer willingness to pay, value creation and capture, competition for talent, financing, supplier terms, etc. The brand promise of being extremely technologically savvy, design-focused and forward-thinking will appeal to healthcare consumers weary of clunky user interfaces, disconnected systems and redundant paperwork.
Let’s not forget why these giants are so giant – it’s the platform. Most of the largest companies (by market cap) today have mastered the art of managing the scale, complexity, interactions, technology and business of digital platforms. As we have all witnessed, the immense power and reach these platforms wield is staggering and can create tremendous value for the participants, and for the successful companies. Properly creating, marketing, cultivating, governing, improving, growing and most importantly, monetizing these delicate ecosystems is a capability that seems to be missing in the current healthcare industry.
For the biggest technology companies, entering the healthcare market not only makes sense, but may be necessary to continue their growth. The industry is massive and will continue to grow consistently for years to come. These companies already have the platforms, and with these platforms they have millions of users who trust their brand, and are willing and eager to engage with an improved healthcare experience. As technology continues to drive and disrupt virtually all facets of business, expect increased levels of innovation and competition in the healthcare industry from the leading technology companies of our era.