Digital health has been a promising, growing space over the past decade. And with the pandemic putting new demands on the healthcare system, demand for digitally-enabled care and services spiked overnight. Even as a light has emerged at the end of the pandemic tunnel, momentum toward digital health shows no signs of slowing down. Over $14B was invested across 2020 in private US digital health companies, a number likely to be dwarfed by 2021 investment, with $6.7B already put to work in Q1 2021. With plenty of funding in tow, more companies are on their way to advancing the promise of digital transformation and achieving meaningful scale.
To help overcome the challenges of scaling in digital health, Rock Health member ZS Associates draws on over 30 years of industry expertise to guide companies through the complex process of developing sustainable commercial strategies. We chatted with ZS Associates Principal Vijesh Unnikrishnan and Consultant Dan MacLeod to discuss how companies can chart the right commercialization path to profitably scale, starting by developing a coherent go-to-market strategy.
What does building a coherent go-to-market strategy in digital health mean?
It means answering a key set of commercialization questions in a logical and clear fashion. In practice, the first step typically requires defining your value proposition and customer archetypes: what is your value, and for whom? Then, based on the value created, who should pay for the solution, with what payment model and what level of pricing? And lastly, which direct and indirect channels most effectively support reaching your target customer after accounting for revenue model, pricing, and other key factors like channel economics and scale?
Getting the pieces above to fit together is easier said than done, and we’ve seen companies make mistakes across the spectrum. These range from creating an incoherent value proposition that provided clear benefits to the end user but not to the paying customer; to revenue models focused on back-end at-risk payments that cannot support high up-front costs of customer acquisition and onboarding; to channel strategies where the high-cost direct approach cannot be supported by the total opportunity per customer. Missteps like these are all too easy to make when it comes to digital health solutions, and they can cause even the best-designed products to fall short of achieving scale.
What steps can companies take to create their own coherent GTM strategy?
ZS tracks GTM (go-to-market) choices of digital health companies across product / market segments to study the choices they make and the success they have had. Digital disease management solutions have thus far offered the best recipe for success in GTM strategy and execution, delivering patient impact at scale and stellar company valuations. Lessons from these companies offer a few clear steps for creating a coherent GTM strategy.
The first thing to get right is proving you have product / market fit, for which you’ll need to validate that your product not only improves clinical outcomes for end users, but also sees strong adoption and ongoing engagement scores. Without support from end users, any value to the paying customer will fall flat.
You’ll also need to assess your product’s clinical and economic value by asking: how does my product compare with the economic buyer’s next best option—current standard of care, competitive offerings, etc.—and how easy am I making it for buyers to try the product?
Next, your revenue model needs to balance your company’s needs and your customers’ needs. You should consider factors such as: adoption barriers (more risk-taking = easier to get a foot in the door), your company’s operating costs and the associated need for consistent or front-loaded revenue, and the feasibility of pursuing traditional healthcare revenue models such as reimbursement.
When it comes to pricing, you need to clearly tie it to the value created for your customers. This can be either clinical value offering a substantial improvement over the current standard of care, or, more powerfully for supporting a high price, economic value that offers clear ROI via incremental revenue generation or reduced costs.
Lastly, you’ll need to create a channel strategy that matches customer preferences with your solution’s revenue model and pricing. To do this, you can evaluate channels from two lenses: opportunity and feasibility. 1) Opportunity: does the channel offer the reach, access, and credibility needed to scale your solution with relevant customer decisions-makers? And 2) Feasibility: does the channel offer economics that work with your revenue model and pricing, and is there a precedent for the channel to partner with companies like yours?
What should companies focus on after creating a coherent GTM?
To successfully scale digital health solutions, you can’t hit pause after creating a coherent GTM strategy. You need to tactically execute the conversion and retention funnel, develop a land-and-expand growth strategy to penetrate the addressable user base, and evolve capabilities (people and tech) to support the GTM operations.
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