Strategy Lessons from the Crossroads of Retail and Health Tech Industries

The comparison between the spectrum of industries is as old as the concept of competitive benchmarking. The strategy to understand what factors are driving success in a specific business sector and then implementing these principles into another industry could be a resourceful way to innovate.

Let's take sectors such as retail and health-tech. They contribute a significant portion to the country's GDP (say ~5% of US GDP for retail [1] and ~10% of US GDP for health tech [2] respectively). Onlookers may readily find the similarities: emphasis on customer experience, unhurriedness to adopt new trends, high capital intensiveness in service offerings, etc.

Retail, for instance, revolves around the sale of products to customers. Similarly, health tech businesses, especially those focused on telemedicine, are about delivering health services to patients (as opposed to concentrating on medical devices). During the past decades, many transformative startups have tried to revolutionize these industries by efficiently managing the service offerings via software. Some of the most notable ones in healthcare are 'Hello Heart' and 'Mango Health,' which perhaps teach us something about success, scale, and barriers.

So, if we delve deeper into the similarities, what strategy formation patterns can we extract to benefit our businesses?

In 2023, conventional retail and healthtech organisations are:

1. Scale players with diverse missions and ownership. Retail businesses, for instance, focus more on managing financial aspects efficiently, whereas healthtech companies prioritize quality of care, achieved through technological innovation.
2. Wide market penetration – most people you know would be using a traditional service provider for either products or health services.
3. Marginal growth rate and profit compared to rapid growing businesses. High capital intensity.
4. Rely heavily on off-the-shelf technology tools, limiting their ability to drive innovation from within.

When we take a closer look at these similarities and differences, specific strategic approaches begin to surface. Let's skim through these tactics which I have consolidated from various startups and established businesses. I’d like to iterate that these insights have been garnered from my on-ground exploration, market observations, and are shaped by the ever-evolving business environment. Therefore, it's important to understand the evolving nature of strategy in these dynamic markets.

Four key strategic levers I have identified are:

1. A Differentiated Revenue Generation Model: The idea here is to get paid differently from competitors, focusing on dominating the specific service space. To succeed, a retail or healthcare business startup should ideally have contracts and financial strategies in place even before commencing operations.
2. A step-function improvement in delivering customer/patient experience: It's about providing similar or better services at a considerably reduced cost. A differentiated operational model can give you a higher contribution margin in traditional businesses over time which aids in faster scalability.
3. Better Patient/Customer acquisition model: It's all about reaching the end-user, the customers, and the patients in the most cost-effective way. Innovative models usually result in lower customer acquisition costs, thereby allowing the company to attain and retain profitability.
4. Differentiated Operational Model: This step is about transforming the way services get delivered, thus bringing down the cost of providing the service. At the same time, the quality of service gets maintained or enhanced.

New-age tech-driven retail businesses and health tech companies have been constantly innovating around these levers and the results are extraordinary. They’ve left the conventional businesses far behind by challenging the status quo and introducing efficient systems and processes.

Pushing the envelope, I hypothesize that the adoption of these stratagems in reimbursement, operations, or customer acquisition predicts success to a far greater degree than innovations in service delivery do. For the latter to be successful, you must navigate the complex matrix of variables that determine the receptivity of your innovation within your market ecosystem.

Don’t just fervently concentrate on changing the product or delivery model to stay ahead of the curve. Instead, view the business with fresh eyes for economic levers and nuances that could redefine your approach to success.

Ref:
[1] https://www.statista.com/statistics/246567/gross-domestic-product-gdp-of-the-retail-trade-industry-in-the-united-states/
[2] https://www.statista.com/statistics/584152/us-national-health-expenditure-as-percent-of-gdp/