Highlights:
Platform models allow for exponential growth, scalability, and expansion of services offered to customers. Big Tech firms such as Apple, Amazon, Meta, Microsoft, and Google all started with one singular product or service and expanded to offer multiple digital services through their platform ecosystems. Services such as these have significantly impacted almost all sectors of the economy but their infiltration into healthcare has been relatively slow. Due to the complex regulatory environment Big Tech companies would have to navigate, healthcare was not considered “low-hanging fruit" in big tech’s market expansion strategy early on. However, this has been changing over the past few years and patients and providers have experienced many cost and efficiency benefits with the implementation of digital platforms. This article breaks down the market entry strategies tech companies are using to enter and compete within the healthcare space.
Major Findings
The market entry strategies used by the Big Tech companies to enter the healthcare sector can be categorized into four steps of “digital colonization.”
Platform companies usually start with a data service offering. This involves a cloud or other digital platform that enables large data storage and management.
Once integrated at a foundational layer, with access to large amounts of data, they use their computing power to begin offering SaaS capabilities such as providing insights on collected data (direct data capture) using machine learning or artificial intelligence.
True integration into the system occurs by pushing into the innovation segment. This is done by creating products (medical devices) that complement their current data infrastructure offerings. The devices might use the computing power or storage capabilities offered by their cloud platforms or the data on it. For example, Apple started using indirect data capture using Apple Watch, to collect its own data and offer APIs that can link to provider’s patient portals to import this patient-collected data into electronic medical records.
Platform companies start partnering with or acquiring Pharma or medical device companies to utilize their expertise in navigating the complex FDA regulatory environment and extend into other areas of the healthcare value chain (i.e., Amazon has entered the prescription drugs market with its PillPack acquisition). These partnerships help tech companies create sophisticated and integral digital products while also helping transform the product pipelines of legacy healthcare organizations (distributors, medical device companies, pharma companies, etc.).
Empirical Basis for Findings
Many of the health systems or organizations employing Big Tech’s cloud/digital services are usually lacking reliable data management systems. Moreover, organizations within highly regulated industries are “notoriously inefficient.” Their onsite systems are no match for the efficiency, security, and scalability of cloud platforms. These cloud platforms are sticky, with few competitors other than Google, Amazon, and Microsoft. The differences among them are few, so once a health system adopts a certain platform, they usually stick with it for long periods of time. These long-term relationships are beneficial to tech companies - they can better understand how to deliver value to the healthcare system in the long run. This value is most often seen in the potential of machine learning and applications of artificial intelligence. The ability to utilize these technologies in a sector with skyrocketing costs and stagnating efficiency is where health leaders see the greatest opportunity for improvement. Big Tech, with its enormous level of talent and resources also see this as an opportunity, but to strengthen an already dominant position in yet another sector.
Implications for Practice Management
Incumbents in the healthcare field can accelerate improvements in efficiency and patient outcomes by partnering with Big Tech companies. Organizations can democratize data and connect data sets to remove data ‘islands,’ in addition to the other value-added products or services they can offer. [Data mentioned here is not necessarily patient data, but data generated at an organizational and operational level.] However, the downside from an antitrust perspective is that Big Tech can use their already dominant position to eliminate competition in a field where barriers to entry are high. Existing services offered by health players in the field can be “commoditized” by Big Tech – something that needs to be considered while creating or deepening these relationships.
Incumbents can also be proactive in creating products or services utilizing cloud platforms. Time is of the essence for health care companies (medical device and equipment companies in this case) since Big Tech is continually looking for new ways to innovate. However, since incumbents have a better grasp of value drivers in the industry, they are better positioned to take advantage by implementing processes to focus on digital product innovation.
Lastly, health leaders and policy makers need to place importance on patient privacy since Big Tech can utilize data and the value it creates to gain power over incumbents in the field. Governments need to balance the value added by any use of personal health data with regulations around privacy of sensitive data and its sharing and use. Leaders of incumbent health systems or organizations should be willing to partner with companies outside of the big 5 (i.e., small- to medium-scale tech companies) while also utilizing the services offered by Big Tech. Diversifying the value chain can decentralize the control that Big Tech stands to gain in the healthcare space while also realizing the benefits they offer for cutting costs, improving efficiency and patient outcomes.
Bibliography
Ozalp, Hakan, Pinar Ozcan, Dize Dinckol, Markos Zachariadis, and Annabelle Gawer. “‘Digital Colonization’ of Highly Regulated Industries: An Analysis of Big Tech Platforms’ Entry into Health Care and Education.” California Management Review. 64.4 (2022): 78–107.
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