Bridging the Gap: Combining Virtual and Physical Care for Better Healthcare

Bridging the Gap: Combining Virtual and Physical Care for Better Healthcare

In today's digital age, the power of network effects cannot be overstated. Network effects are responsible for 70% of the value created by tech companies since the Internet became a thing in 1994. They are the 1 way to create defensibility in the digital world, making companies with strong network effects built into their core business models the winners in their industries.

But what exactly are network effects? They are not viral effects, which are about getting new users for free. Network effects, on the other hand, are about creating defensibility. They occur when increased usage of a product leads to a direct increase in its value to its users. The more people that join a network, the more valuable it becomes.

One area where network effects are particularly relevant is in healthcare. Connor Hailey, the founder of Axle Health, understands the importance of bridging the gap between virtual and physical care. He believes that all stakeholders, including providers, health systems, payers, and patients, should benefit from healthcare offerings. In an industry where the person receiving services is often not the one paying for them, it is crucial to ensure that everyone involved gains something from the solution.

Hailey's advice to entrepreneurs in the healthcare space is to power through rejections and not let anyone tell them they can't achieve something. Belief in the product and the love of customers are strong motivators to continue pushing forward.

In terms of network effects in healthcare, there are several different types to consider. Personal Utility Networks, for example, are typically used for tasks that need to get done. They provide practical utility to the user and are more focused on private communication rather than public communication.

Marketplaces and platforms also rely on network effects to create defensibility. By aggregating sellers in one location, marketplaces like Uber or Airbnb can provide more value to customers. One weakness of these platforms, however, is the phenomenon of "multi-tenanting," where both sides of the platform can be easily replicated on different platforms. To combat this, platforms must design their products to add so much value or "lock-in" that members won't be tempted to move elsewhere.

Data network effects are another important aspect to consider. When a product's value increases with more data, and additional usage yields more data, a data network effect is at play. This can be seen in various industries where data-driven solutions provide valuable insights and improve outcomes.

Tech Performance network effects, on the other hand, occur when being the first out of the gate gives a product a runaway advantage. Technological advantages have a short half-life, but being the first to market can give a product a significant head start.

Social network effects are perhaps the hardest to deploy for long-term defensibility. They work through psychology and the interactions between people, making them challenging to replicate. However, if a startup can successfully leverage psychology to their advantage, they can gain a significant edge over competitors.

Belief network effects are another powerful force. The more people believe in something, the more valuable those beliefs become to believers. This can lead to bandwagoning, where social pressure to join a network causes people to feel they don't want to be left out. Apple, for example, has mastered the art of creating FOMO (fear of missing out) with their carefully scripted product launches.

To summarize, bridging the gap between virtual and physical care in healthcare requires leveraging the power of network effects. By ensuring that all stakeholders benefit from healthcare offerings, entrepreneurs can create defensibility and drive value in the industry. Here are three actionable pieces of advice for entrepreneurs looking to make an impact in healthcare:

1. Power through rejections: Rejections are a part of the entrepreneurial journey. Don't let them invalidate your belief in what you're doing. Keep pushing forward and believe in the value of your product.

2. Serve all stakeholders: In healthcare, it's not enough to serve just one group. Make sure that providers, health systems, payers, and patients all benefit from your offering. This will create a stronger network effect and increase the chances of success.

3. Leverage network effects strategically: Understand the different types of network effects and how they apply to your industry. Whether it's personal utility networks, marketplaces, data networks, or social networks, find ways to create defensibility and add value to your users.

By following these three pieces of advice, entrepreneurs can navigate the complexities of healthcare and bridge the gap between virtual and physical care, ultimately improving outcomes for all stakeholders.