Healthcare Innovation: Digital Health in The Life Sciences

April 10, 2023 Karl Hess

healthcare innovation concept

There’s been a lot of hype surrounding innovation in healthcare. Most life science companies—even in Big Pharma—have embraced the idea of leveraging digital health technologies to go “beyond the pill” and drive change. But progress has been evolutionary.

In part, that’s thanks to well-established hierarchies and business models, where stakeholders are reluctant to abandon proven channels and processes. In part, it’s because “digital health” seems to mean something different to the life science industry than it does to payers, providers, and employers. People embrace digital health solutions to enhance their health and well-being—to improve outcomes, in other words. The life science industry, on the other hand, is still largely focused on using digital health to increase patient engagement and adherence—and to both expand and streamline data collection efforts.

When your main source of revenue is (still) selling pills and devices, how can you build solutions that go beyond traditional business models, power healthcare innovations, and fulfill the digital health industry’s much-hyped expectations?

In this guide, I’ll unpack the options—and examine some best practices for one of the most common paths established companies take when they enter this domain, namely partnering with a digital health startup.

Starting Your Healthcare Innovation Journey: Build vs. Partner vs. Buy

When it comes to driving innovation and implementing new digital health offerings and capabilities, life science leaders have three high-level options: Build, partner, or buy. Each option comes with its own set of decision-making inputs and downstream implications and challenges.

Your first step should always be to determine what your organization’s core competencies are—or will be, e.g., after an acquisition. Building your own digital health solutions requires at least three of the following competencies, not to mention a rock-solid strategy and a cross-functional business plan:

  • Digital health expertise. Be objective about whether or not you have digital health experts on your team—if you have doubts, then you probably don’t. And note that “digital” experience in other industries or functions like digital marketing don’t count.
  • Time. When does the solution need to reach the market and achieve its revenue goals?
  • Resources. Will existing budgets or organizational structures hamstring your efforts before they get off the ground?
  • Market knowledge. What does success look like? How do we maximize our positive ROI?

If you fall short across two or more of these areas, then a DIY approach is not likely your best bet, and you should move on to the next set of options. Partnerships are most effective when the prospective opportunity is adjacent to your core business and related competencies. Your prospective partner should complement your core, not compete with it.

If you have only one of these, i.e., a budget, and the desire to learn more about “what’s possible” in the space, then it’s time to “buy” (or even rent-to-own) proven digital health expertise—and be prepared to listen/learn. There are several ways to do this, from the utilization of consultants, to formation of a strategic partnership or joint venture to an investment or even an outright acquisition.

More sophisticated, mature, and practiced organizations might deploy a hybrid strategy, utilizing elements of “build”, “partner,” and/or “buy” across a single project or even their entire portfolio of digital health offerings. They might find partners to implement across a specific aspect of the portfolio, like IT infrastructure, or at a specific stage of the project—from managing ongoing patient engagement to communications and device fulfillment.

Your first step should always be to determine what your organization’s core competencies are—or will be, e.g., after an acquisition.

When Partnership Is The Right Option

Everyone wants to be successful, and everyone wants to have their shiny, new digital health initiative succeed. And sometimes the best chance of success comes via partnership, i.e., 1 + 1 = 3.

But successful partnership is really all about knowledge—of your company, of your potential partner, and of your customers and your market—along with properly-aligned incentives. In the rest of this article, I’ll focus on a few key ways to give your partnerships the best footing for what will be a challenging climb to the top of the mountain of success, a peak that still has plenty of unclaimed space at its summit.

Driving Successful Digital Health Partnerships

Successful strategy execution is difficult and time-consuming. The importance of arming yourself with the right expertise, expectations, and processes is clear—yet often far easier said than done. What follows are a few shortcuts to getting those basics right, speeding your time to market, and reducing risk across all stages of your initiative.

Remember the old adage that when something seems too good to be true, it is? The same applies to the assessment of both internal and external capabilities. So how can we maximize certainty in the decision-making process? We need to push to the “next level” of expertise, starting with a solid, high-level understanding of “what’s possible” with regard to the S.M.A.R.T. utilization and deployment of the latest available digital health technologies.

Unfortunately, and perhaps a bit surprisingly, this kind of expertise isn’t widely available or even easily intuited. Even the bluest of blue-chip venture capital firms often take no more than a cursory look “under the hood” at technological and IT infrastructure. Additionally, to increase the likelihood of reaching their own respective summit(s), vendors and potential partners often sell their future product roadmaps today. They might even overstate their current capabilities or understate the risks associated with their product or platform.

Startups also tend to underestimate how much effort and time is required across governance, communications, project management, development, execution, support, and so on—not because they want to mislead, but more often because they lack the expertise, experience, and/or resources to do so.

Successful partnership is about knowledge—of your company, of your potential partner, and of your customers and your market—along with properly-aligned incentives.

To mitigate these issues, here are seven places to dive deeper and bulk up your due diligence process, along with some specific examples for each:

1. Macro and other industry trends: The trends that impact the digital health world can be daunting. There are fast-moving developments in the regulatory, judicial, political, financial, technological arenas, not to mention reimbursement, supply chain, quality, clinical workflows and care settings, the consumerization of healthcare, automation, and data science. Before you start evaluating partners, you’ll need to set a process for tracking and keeping pace with them—and for monitoring the many signposts associated with these types of macro environmental changes.

You’ll also need to figure out how your digital health initiatives fit into your organization’s broader corporate strategic, executional, and transformational objectives. Leading life science companies are beginning to think about the social determinants of health (SDOH), population health management (PHM), value-based care (VBC), and clinically-integrated networks (CINs), though their understanding and practice of these concepts is rudimentary relative to that of payers and providers. On the other hand, the industry is farther ahead on the innovation curve when it comes to precision medicine and personal genomics. Digital health can help you address all of these issues—but only you can determine how it fits with your company’s goals.

On a related note, think about how you source potential partners. Do you conduct and maintain active market landscape assessments by category or need or do you rely 100% on inbound contacts and opportunities?

Case study: I recently helped a digital health and innovation group within an F500 pharmaceutical company structure, resource, and establish a dedicated team to monitor new industry trends, technologies, and potential partners across a number of categories that were critically important to the organization’s 3- and 5-year strategic objectives. Examples included technologies to support and enable clinical trials (virtual and otherwise), connected medical device platforms and manufacturers, digital therapeutics, and population health management. Once it was up and running, the newly established group was able to quickly identify about half a dozen potential new partners, and subsequently proceeded to enter into multi-year agreements with three of them.

2. Enterprise-level data management, governance, and IT infrastructure: As you think about how digital health fits into the broader world and your own strategic roadmap, you’ll also need to consider where it fits into your organization’s technology roadmap. Doing that requires true cross-functional understanding and collaboration—and the knowledge that technology investment decisions can no longer be made in a box, that is, in a siloed or unilateral fashion, by a single region, business unit, or brand.

Take the example of remote patient monitoring or patient-generated health data (PGHD). Let’s say you want to enable this capability in your own organization, whether to support virtual clinical trials, real-time data insights, or even as part of some “beyond the pill” service offering. If you do not already have a framework in place for quickly getting high-level answers on considerations like interoperability, connectivity, data sharing, security, privacy, compliance, consent, patient matching, data normalization, storage, and access, you run the risk of “reinventing the wheel” with each partnership—and greatly increasing complexity, risk, and time-to-market. To be successful over time, your organization will need to design and deploy an IT or systems architecture that supports and enables your digital health business model in as seamless and frictionless way as is possible.

Case study: Over the last several years, I have helped numerous clients identify the most appropriate enterprise-level platform technologies for meeting their mid- and long-term strategic aims. One example involved the selection of Salesforce Health Cloud and several other Salesforce ecosystem solutions. After establishing a cross-functional search and selection team, we collaboratively walked through a stage-gate search process, including initial requirements gathering, market survey, identification, due diligence, and finalist selection phases. Establishing a cross-functional core team (consisting of members who would later be functional champions during the implementation and training stages) in such circumstances is key to securing and maintaining organizational support. We were also able to successfully identify a solution set that fulfilled many cross-functional needs and supported a myriad number of organizational and business processes: Clinical, operational, sales, marketing, service, CRM, security, regulatory, CRM and financial.

3. Scalability: You wouldn’t be evaluating a digital health partnership if you didn’t think it could scale. But have you evaluated all the strategic, technological, clinical, operational, and even personal factors that will drive its broader success? Has the platform you’re reviewing been architected and load tested to support that first big concurrent user milestone? What kind of tests have been conducted, and what assurances do you have that your first largescale campaign won’t be derailed by crashing servers? (Yes, this happens.)

Those are a few technical examples. But the same applies to other factors that impact scalability—and thus your ultimate definition of “success”—from people resource requirements and the balance between manual and automated processes to implementation, onboarding, and the amount of sales and marketing effort that’s required. Identify the pieces that are most likely to slow you down during high-growth phases, and then map out how you’ll mitigate those risks.

Case study: In addition to helping organizations realize that they do not have the appropriate level of risk management expertise or processes in place, I have also helped them source credentialed third parties for what I consider to be requisite platform testing and certification (e.g., load and penetration testing, security, privacy, GDPR, HIPAA, HITRUST, and so on). I was hired by a prominent digital health platform startup a number of years ago, not too long after their servers and site had crashed upon reaching a pretty minimal threshold of ~1,000 concurrent users. Unfortunately, the crash came during the initial onboarding of their largest customer at the time. The lesson: Plan ahead and leave as few stones unturned as possible through robust, comprehensive product development and risk management processes. If you don’t have the requisite expertise, find someone who does.

4. Current customers: It’s common for companies to talk to their prospective partners’ own partners and customers, but don’t stop with the list of references or case studies that you’re given. Instead, try to get as complete a picture as possible of real-world, historical, and current development, delivery, support, and service issues. Then, use that knowledge to inform your due diligence, create clearer agreements and contracts, and develop metrics to measure milestone attainment and success in your collaborative execution.

Case study: Relying solely on the list of reference customers that your potential partner provides is…risky. They are most likely going to cherry pick only the most satisfied subset of their customer base, leaving potential horror stories unheard. I’ve helped several companies compile much more comprehensive customer reports, grouping collated feedback into useful categories across the sales process, general communications, responsiveness, technical and customer support, product delivery / launch, integration / implementation, quality, upgrades, fixes and maintenance, billing, compliance, etc. While this process can’t identify all potential risks, it will help you go just a bit beyond the norm in selecting and maintaining the best possible partners or vendors.

5. Complexity: Two or three partnerships are pretty easy to manage, even if they’re very different from each other in type or scope. Now imagine managing 30+ partnerships, each with its own contract or agreement, across multiple geographic regions. I’ve managed up to ~50 partnerships at one time, and I’ve learned two things about developing and growing successful digital health portfolios:

  • Keep it simple when building your boilerplate partnership agreement template. In particular, you’ll need to standardize across key metrics like efficacy, adoption, engagement and utilization.
  • Strive to only include performance metrics that you are actually going to measure and in which you find real value. Then, make sure that you have a fairly easy way to derive the measurement value and even compare partnership metrics across your portfolio. A useful example is service levels. What’s your minimum threshold for site or application uptime? How important is this metric, and how are you going to measure it? Another critical set of service levels are customer and technical support. Who is supporting the offering across the various support tiers, and what are the acceptable lead times and issue resolution metrics? What are the processes around bug fixes, custom development, updates, upgrades and new releases? Oh, and how are you going to calculate and compare return on investment (ROI) by partner?

It’s not difficult to envision that these types of considerations can get pretty complex, pretty quickly. The downstream impact is that they all need to be clearly reflected in the partnership agreement—and that as your portfolio or ecosystem of partners grows, so too will the resource requirements for managing these partnerships. The work required here will be much like that of the “alliance management” function that exists in many large life sciences companies, but with a greater emphasis on technology, data (from many diverse sources) and experience, and with a much higher day-to-day level of effort typically required. A creative, open-minded, outside-the-box-thinking legal counsel / contracting resource won’t hurt, either!

Case study: Successful digital health partnerships require a skillset that is not yet broadly appreciated. The flip side? It also represents an opportunity for substantial competitive advantage for those life science firms that get it “right.” Traditional life science partnership efforts revolve around a substantial amount of clinical, technical, and scientific data. Digital health partnerships compound that complexity by adding substantial information technology, consumer, educational, experiential, motivational, behavioral and workflow components. Developing a full understanding of the real-world impacts of these additional components requires several years of hands-on management—because they are complex, because there are few teachers / subject-matter experts, and because, quite frankly, most companies underestimate the issues until they’ve experienced them firsthand, often in a very negative way.

The answer? Here are few that I’ve shared with my clients. Hire employees and consultants with relevant, proven bona fides. Establish clearly delineated steps for the entire process, as you would for any traditional partnering or even development effort. Utilize cross-functional teams and governance bodies for stage-gate decision making along the way. Keep contracts and contracting as simple as is possible, while still covering all of your important bases (i.e., risk categories). Measure your partners’ performance, continually reassess the health of each of your current partnerships, and be prepared to replace underperforming or problematic partners.

6. Downstream communications: In the life sciences, there are long and well-established guidelines for any direct-to-consumer (DTC) communications. But to set your digital health partnership up for success, you’ll need to think through the process steps for engaging with your consumers, particularly if the message(s) will be delivered by someone else.

Unfortunately, these questions are typically not answered until after the agreement is inked, i.e., too far along in the partnering process. As an example of a “worst-case” scenario, I’ve seen entities on either side of the partnership equation just flat out refuse to budge from their standard frequency of contact norms, and thus miss out on some very real and tangible opportunities to engage with their customers, influence or change behaviors or simply provide for a better experience.

7. Return on Partnership (ROP): Is it “pie in the sky” to want a way to measure and compare each partner’s performance across an organization’s portfolio of partnerships? Only insofar as so few life sciences companies attempt it—at least with regard to their digital health partnerships and portfolios. The above metric, ROP, is an example of one way to solve for the value that each partner contributes to your enterprise’s aggregate digital health endeavors, and thus provides for a mechanism to compare partners in a given niche area of focus, or even across regions, products and services.

Of course, there are many ways to measure the current health and historical performance of a partner, the key is that you are doing this. Despite your best efforts to create an ecosystem of 100% “win-win” partnerships, you will inevitably have underperforming partners. Some of them may even need to be replaced—so build this critical set of partnership metrics and measurement capabilities as early on in your partnering efforts as you can.

Calculating your Return on Partnerships can help you solve for the value that each partner contributes to your aggregate digital health endeavors and provide a mechanism to compare partners in a given niche area of focus, or even across regions, products and services.

Partnering Thoughts

Organizations that launch successful digital health initiatives give them the same kind of priority, consideration, and support they do their core offerings. The specifics, scale, and expertise required may vary, but the components do not: Strategy, business case, budget, cross-functional team(s), stage-gate development, product lifecycle management (PLM), and governance processes.

The areas I’ve highlighted here aren’t unheard of, but they do not typically receive the kind of attention that they deserve, particularly early on. The digital world tends to move much faster than traditional life science companies. To stay ahead and create partnerships that drive real innovation in healthcare, you’ll need to pay attention to these fundamentals—and make sure you’ve got specific expertise, a few new frameworks, scaled and flexible processes, and a sustained, dedicated effort.


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About the Author

Karl Hess

Karl Hess is a healthcare executive and consultant with more than 20 years of product, market, and corporate development experience across medical devices, biotech, pharma, and digital health.

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