Two-Sided Networks in Healthcare - a Founder's Playbook | Summary and Q&A

TL;DR

This video discusses the strategy of building two-sided networks in healthcare, explaining what they are, why they are becoming popular, and how investors evaluate such businesses.

Key Insights

• 😶‍🌫️ Healthcare data availability, cloud storage, and improved data processing capabilities are fueling the rise of two-sided networks in healthcare.
• 👤 Trust and single user utility are essential for building the initial side of the network and attracting early adopters.
• 👤 Pricing complexity should be minimized to drive adoption and reduce barriers for users.
• 😒 Identifying channels and opportunities to help customers use the product can facilitate network growth.
• 😀 Constant iteration and product expansion are necessary to keep both sides of the network engaged and happy.
• 😒 Qualitative examples of customer use cases that are only possible because of the network's connectivity are indicators of success.
• ☠️ Defensibility is crucial, both in terms of avoiding disintermediation and addressing margin or take rate compression.
• 👨‍💼 Investors evaluate two-sided network businesses based on adoption, engagement, retention, and efficiency metrics, as well as the theory of defensibility and monetization model.

Transcript

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Questions & Answers

Q: What is a two-sided network in healthcare?

A two-sided network in healthcare is a business that connects different entities, such as patients, providers, payers, pharma companies, and pharmacies, to enable seamless transactions and data sharing between them.

Q: What are the benefits of building a two-sided network in healthcare?

Building a two-sided network in healthcare helps overcome the fragmentation and lack of connectivity in the industry, enabling better data flow, collaboration, and access to services. It also creates a network effect, where each side of the network reinforces the other, leading to exponential growth.

Q: How can founders choose which side of the network to focus on first?

Founders can start with the demand side or the supply side of the network, depending on which aspect of the market is more constrained or has the greatest potential for impact. It's important to focus on the most pressing user needs and build trust with initial users before expanding to the other side.

Q: What metrics can founders use to gauge success in building a two-sided network?

Founders should look at metrics such as adoption, engagement, retention, and efficiency to assess the growth and viability of their network. It's crucial to establish a north star metric that aligns with the mission of the network and drives value for both sides.

Summary

In this video, the hosts discuss the concept of a two-sided network in the healthcare industry. They explain what a two-sided network is, how it works, and why it is becoming a popular go-to-market strategy in digital health. The hosts also interview founders of companies that have successfully built two-sided networks in healthcare, sharing their insights and experiences.

Questions & Answers

Q: What is a two-sided network in healthcare?

A two-sided network is a business that connects two distinct groups of customers and creates value for both sides. In the healthcare industry, it typically involves connecting major players like pharma companies, providers, payers, patients, and pharmacies.

Q: Why is the healthcare industry seen as fragmented and siloed?

The healthcare industry is seen as fragmented and siloed because data and information often do not flow seamlessly between different parts of the industry. This leads to challenges in communication and collaboration between different players in healthcare.

Q: How do two-sided network businesses in healthcare tackle the fragmentation problem?

Two-sided network businesses in healthcare build channels and connections between different players in the industry to enable better data flow and collaboration. By integrating data from various sources, they create a more connected and seamless healthcare ecosystem.

Q: How does a two-sided network differ from a company with two distinct business units?

While both a two-sided network and a company with two distinct business units execute separate go-to-market motions for each customer set, a two-sided network goes a step further. The delivery of a product or service to one set of customers enables them to do something for the other set of customers, creating a powerful network effect.

Q: Can you provide examples of successful two-sided networks?

Google is a well-known example of a two-sided network that indirectly connects consumers with advertisers. In the healthcare industry, Flatiron Health built a two-sided network connecting healthcare providers with pharmaceutical companies to improve oncology drug discovery and development.

Q: What are the three tailwinds driving the rise of two-sided network strategies in healthcare?

The three tailwinds driving the rise of two-sided network strategies in healthcare are the availability of more healthcare data in a digital format, the increased use of cloud storage for healthcare data, and the advancement of tools and capabilities for processing and analyzing healthcare data.

Q: Why do founders choose to build two-sided network businesses in healthcare?

Founders choose to build two-sided network businesses in healthcare to address situations such as broken data flows between different constituents, severe fragmentation in the market, and highly elastic demand where direct monetization may not be feasible.

Q: What are some considerations for founders when deciding which side of the business to start with first?

Founders should focus on the most constrained aspect of the market to jumpstart the network. They may choose to start with the supply side or the demand side, or even both in parallel. Regardless, building trust with the initial users is crucial.

Q: How do founders engage their initial users in a two-sided network?

Founders prioritize identifying single user utility and addressing the core problem for their initial users. They focus on building trust, providing value, and creating a seamless user experience. Engagement metrics, feedback, and customer success stories are key indicators of success.

Q: What metrics do founders look at to gauge if they are on the right track for both sides of the network?

Founders look at various metrics, both qualitative and quantitative, depending on the nature of their business. Some founders focus on moments of truth, customer feedback, revenue retention, user acquisition, engagement, and overall business growth.

Q: How can founders effectively build the second side of their network once the first side is established?

Founders can leverage the data stream and engagement from the first side to drive growth on the second side. They can also proactively seek partnerships and collaborations with stakeholders from the second side. Keeping the product discovery and iteration process aligned with the second side is crucial.

Takeaways

Building a two-sided network business in healthcare requires careful consideration of the initial side to start with – whether it's the supply side, demand side, or both in parallel. Founders should focus on the most constrained aspect of the market and prioritize building trust with their initial users. It's important to identify single user utility, engage users, and iterate the product to achieve product-market fit. Metrics should be chosen wisely to gauge success and drive business value. As the second side of the network is built, complexity should be minimized, and the north star metric should be aligned with the overall mission of the network. Continuous product expansion, nurturing demand, and maintaining a clear alignment with both sides of the network are keys to sustaining and growing the business.

Summary & Key Takeaways

• Two-sided networks in healthcare connect different entities, such as patients, providers, payers, pharma companies, and pharmacies, to address the fragmented nature of the industry.

• Three tailwinds driving the rise of this strategy are the abundance of healthcare data, the availability of cloud storage, and improved tools for data processing and analysis.

• Founders can start with either the demand side or the supply side of the network, but regardless of the approach, trust and single user utility are crucial for success.