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Digital health companies should avoid term ‘start-up’: commentary

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Sean Duffy is the CEO of Omada Health, a company (not a start-up) that works with health plans and employers to tackle type 2 diabetes and heart disease.

The American healthcare system is in desperate need of improvement. Costs continue to rise in lockstep with rates of chronic disease, and life spans are declining. Against this backdrop, a generation of young, tech-forward companies have a lot to offer in a space that is often bogged down by the inertia of large-scale incumbents.

But too often, even promising ideas have difficulty gaining widespread commercial traction. With more than $14 billion in venture funding invested in digital health in 2018 alone, many are wondering when we will see the success stories that have disrupted other industries.

Why is it so hard? Well, there are a number of reasons. Some folks argue more physicians must be integrated into development processes, while others suggest that entrepreneurs are underestimating the regulatory hurdles.

But part of the answer may be the way early-stage digital health companies approach the market. There is a delicate chicken-and-egg problem: early-stage digital companies need customers to mature their business; but those potential customers (most often employers and insurers) are only interested in partners who can demonstrate maturity across a range of measures.

Health care is one of the most risk-averse, complex buying markets in the U.S. The reasons for this risk aversion are meaningful, understandable and immutable: the stakes for mistakes are simply higher. The time to deploy and undo deployments is longer. Big missteps can too easily end careers.

Trust is critical in this buying audience. Decision-makers value sophistication, and the ability to work collaboratively with any of them is heavily dependent on the type of back-end “operational innovation” that is essential for effective implementation and rollout. Above all, this is a market that is rarely looking for disruption; buyers value continuity and an iterative approach to innovation that limits downside risk.

So how should entrepreneurs and early-stage companies carry themselves in a sea of health care incumbents? Below are four things I’ve observed in my eight years of leading my company, Omada Health.

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