East Coast vs West Coast Health Technology Innovation

Warning:  The following post makes crude oversimplifications for illustrative purposes. If you are prone to taking blogs too seriously, or are offended by generalizations, there is no need to read on. All characters appearing in this work are fictitious. Any resemblance to real persons, living or dead, is purely coincidental.

There seems to be some fairly consistent chatter in the circles I travel in that draws a distinction between the way West Coast health tech entrepreneurs and investors differ from their colleagues on the East. It is a vague notion, but let me see if I can tease it out.

If I understand the sentiment, it appears to relate to the idea that the West Coast views consumerism in healthcare differently from the East. To oversimplify, the idea is this:  Silicon Valley will disrupt healthcare in the same way that it disrupted other major markets, perhaps coming at it with something completely new, without regard for entrenched thinking or infrastructure, and with a specific intent to disrupt the status quo.

When you disrupt like this, the thinking goes, a perfect business model coming out of the gate is less important, because in new markets this gets sorted out later.  What is more important is to capture the hearts and minds of the consumers, to build a network effect, and to use this momentum and energy to topple the barriers in the system that are standing in the way of progress.  If you take it to the extreme, I think the logic plays all the way out to something like, “My cellphone with this super-cool app that measures this or that bodily metric and connects me to something or other will prevent me from becoming ill and help me pay less to see one of the 80% of doctors who are soon to be out of business and replaced by my app.”

The East Coast rebuttal views this West Coast mindset as, not surprisingly, a little less grounded than it needs to be.  The East coast “sensibility” is that left-coast pie-in-the-sky thinking and “if we build it they will come” attitude are flawed when applied to such a complex system as healthcare, given its many entrenched and influential stakeholders.  In other words, it’s great that there is an app that does some kind of whizbang thing that consumers dig, but despite all of the engagement generated, we will still be faced with illness — and lots of it.  And, there’s already a massive, well-intended, and frankly quite exquisite system in place to help deal with that illness.  The East Coast thinking struggles to understand how that wellness app leverages the existing healthcare infrastructure, how a real and sustainable business is going to be built, and how the innovation becomes adopted not just by the consumer or the network, but by the totality of the system.

The West Coast response, in return, is that such thinking is too conservative and incremental.  After all, Twitter and Amazon would not exist if we took just one baby step at a time building off the existing and flawed infrastructure.

The East Coast, fighting back, says:  just because Twitter and Amazon are great companies doesn’t mean that every health IT company with a big idea and little or no revenue warrants investors pumping cash into it at an inflated valuation.  They then get into a discussion about a recent health tech IPO with a valuation of 100X revenues and debate whether it is a buy or a short. And the debate continues, on script: You don’t understand the power of the consumer (West).  But you underestimate the power of the system (East).

I work at a national technology venture capital firm, grounded by key limited partners across the country — in the Midwest and on both coasts — who are global leaders in healthcare.  Our view is neither East nor West.  We’re coast-agnostic. We’re confident that youthful consumer apps and big-industry healthcare will act in concert to drive meaningful transformation.  We are catalyzing collaboration between the twenty-somethings in hoodies and the fifty-somethings in suits.

For example, Cleveland Clinic has publicly stated that they will bring unprecedented levels of transparency to healthcare and that they will compete for the healthcare consumer — not just with the best clinical outcomes, but also with the best prices, connectivity, and customer satisfaction. We believe that this kind of unifying voice, from a healthcare giant, is where it is all heading. We think the best innovations will involve consumers, cool apps, great underlying technology, existing infrastructure partners, physicians, hospital systems, and health plans — all working together. The magic happens when all of these stars are aligned and each stakeholder knows what needs to happen. And they are all now trying to make it happen.  Innovations that bring all of these elements together will lead in driving the transformation.

At my firm, we are investing in the best entrepreneurs, who view their solutions as solving multiple facets of the equation by bringing together multiple stakeholders.  Our strategy is to leverage the widest possible network of those diverse resources to help our companies innovate, grow, and make the biggest possible difference. We believe that the battle is not about toppling the system from the outside or about gradually tweaking it from the inside:  It is about fueling the massive transformation, happening right now, with inputs, contributions, and collaboration from all involved.  This is where the big ideas are heading.  And it is happening across the entire country.