The mobile health revolution is occurring in the midst of a much broader shift in business models around computing and software. For decades, IT suppliers sold proprietary hardware by locking customers in and upselling them for decades with add-ons and upgrades. The concept of switching costs became a tool for building barriers –barriers for customers to choose new suppliers and barriers for entry for new businesses.
One of the first visionaries to buck this trend in IT was Bill Gates. His choice to focus on the desktop operating system in a world where IBM was making huge profits selling hardware must have seemed foolish to many. He saw the potential for that desktop to be both the basis for a profitable business and a platform for innovation. Legend has it, he drew the analogy that “each desktop computer is a razor and our software products are the blades,” alluding to the business model made famous by Gillette.
As IT strategies have evolved, it’s common to ask new entrants, “Are you a product company or a platform company?” The idea is that a business can succeed if they develop a bit of roadway or plumbing that others find it advantageous to ride on (or through). The fun part of watching platform companies execute is how they decide what to keep proprietary and what they open for innovators to ride on. Google guards its core Page Rank algorithm sacredly, but exposes many other services including its maps API, Google docs and, of course, the now powerful Android operating system. Long ago, Google decided it was going to make money by aggregating large numbers of people on the web, initially through search and increasingly through other means, such as its mobile operating system.
I suppose all of this thinking originated even further back, when toll gates were introduced as a way to make money through controlling a transportation route. Software platforms are like this. You innovate on top of the platform and someone (you or an advertiser) pays a toll for access.
So what does that have to do with connected health?
About 10 years ago, we started in earnest to focus on the problem of home monitoring for chronic illness management and prevention. At the time, the sensors we used were ‘dumb’ and extracting the data required tethering them to a central hub, which in turn connected through the patient’s phone line to a server computer somewhere. The early visionaries who offered home monitoring systems provided end-to-end solutions. By putting together the sensors (scales, blood pressure cuffs, oximeters, etc.), the home communication hubs, the connectivity to the server and the various software components, these companies were able to develop vertically integrated, high margin services. And we were grateful because we could not manage all of that integration on our own. We focused instead on showing the clinical efficacy of home monitoring.
As we moved from monitoring congestive heart failure (CHF) to hypertension and diabetes, we couldn’t make the numbers work for these vendor proprietary systems. Their integration and resulting profit margins were too expensive to justify for these lighter touch applications.