• Kate Hickey

Envisioning Something That Doesn't Exist: How Jon Warner Thinks About Early Platform Challenges

Five-time company CEO Jon Warner is a widely respected entrepreneur, having founded and led three startups (with two successful exits). His career started with 15 years in the corporate world before founding and growing The Worldwide Center for Organizational Development. This management consulting business introduced him to healthcare through work with global clients, including GSK, Johnson and Johnson, The UK NHS, United Healthcare, and Roche.

In addition to his position as CEO of Silver Moonshots, Jon is a deal flow adviser at Adaptive Health Capital, ambassador at Aging 2.0, and author of 40 business books.

SH: Following 15 years in the corporate world, you founded and grew a management consulting business -The Worldwide Center for Organizational Development, which worked with several large healthcare companies. How did you end up in healthcare, and what types of projects were your focus?

JW: I ended up in the world of healthcare entirely by accident, via the vehicle

of consulting. I was working in the oil industry and not excited about what was ahead of me in my career. So I jumped out, and consulting seemed to be a great way to go and figure things out. Very early on, I was getting called in either because there were organizational development challenges or because there were efficiency and effectiveness shortfalls. My first three clients were all in healthcare entirely by accident. First was a pharma company, then a biotech, and then a large hospital system.

I found out very quickly that the advice clients wanted most was perspective about their blind spots. My advice to those companies was don't become too insular. Look at the context around you. Many interesting things are going on, and it's probably the case that the smartest people in the room are not inside your company, they're well beyond it, and you better be looking for them because if you don't, someone's going to eat your lunch.

SH: How did you help companies think about digitizing portions of their business?

JW: I've been in this sector for more than 25 years, and no one thought about platforms back then. How do organizations think about slicing away a portion of what they do, making it independent, and digitizing it? I think you have to think about giving it the oxygen that it needs to survive.

When it comes to platforms, it has only been the last ten years or so in health that the thinking and systems have matured. The lessons are similar in broad terms, but specifically, I think there are risks because you need to think about what your platform is going to do in context before you build anything. For me, that comes down to whether the business is a startup or a mature company and, either way, how willing it is to engage in solid customer discovery on their target customers? If it's a two-sided market, who are those two sides, and what are their needs, and will your platform meet that need? (Not to even speak about a new platform that stands out competitively from another platform that might be at least proportionally similar).

SH: After your time as a management consultant, you were a CEO of two startup companies, a digital publishing company, and a payments software platform. Can you talk about the differences between standing up a more traditional pipeline business and a platform?

JW: The publishing business was very much in the physical world. That was a significant difference versus being in the virtual world where software data platforms operate. In a traditional business, there's a lot of literature and best practices on how to run a startup. You can read books and articles and listen to podcasts, and people talk a lot about building a business. You can almost guess some of the steps that are in the mix, much more than you can in a more virtualized business.

The challenge for my FinTech platform startup was conceptualizing it.

Your customer discovery challenges are greater because you're asking people to envisage something that does not yet exist.

Then it's about crafting the solution and the whole usability of it for the customers that you're targeting before they've got a good idea of what you’re presenting to them. So it's about keeping the conceptual nature of what you have in mind as congruous with customer needs as possible.

SH: As you are scaling, do you think different metrics are important to track the growth of a platform?

JW: I think you still need to acquire customers and be well-capitalized. You need a team that's pulling together in the right way and processes that are well-designed. I think that's common on both sides of the fence--a traditional ‘brick and mortar’ business and a more virtual software platform. An important focus for digitized startups is your need to pay more attention to customer acquisition.

This includes the rate users come to the platform, why they're coming and problems of churn, and why that's happening so you can learn and pivot quickly.

The difference in speed and agility to pivot is much greater in a digitized environment than in a physical one.

SH: Can you talk discuss how you thought about network effects?

JW: I've seen a lot more of that recently. I spend a lot of my time now in investment and advisory in early-stage startups. I changed my view of this because of other companies I've seen in recent years.

Network effect problems are the bane of the early startup’s life because it rarely has the capital to grow both sides of the business at the rate and pace you need to grow it.

Typically what a startup will do is pick one side of the equation and build that up and then turn to the other partner side. That's a problem later on because you've either got no customers for what you've built and lots of vendors or have lots of people who want a product or service but few or no vendors. So you've got to be balanced.

I also spend a lot of my time on the strategy side of things, helping people figure out the product-market fit journey on two sides rather than one, that it's not a single path to product-market fit, you've got to double your efforts.

I can’t emphasize enough that every startup has to do as much customer discovery as it can. Let's say you're an Airbnb that you've got to dig in independently and separately to those two sides to evolve a strategy. It's a dual strategy. You've got to have a strategy for the consumer who wants to travel in their case and stay in other people's homes, and then you've got to go and dig into the people who might want to make their homes available, whether or not they're traveling themselves. Sometimes that's the same person. We can all rent our homes potentially and use other people's homes in that model. But our expectations and needs are not the same.

The great problem is that if you blend those two, especially early on, and don't separate them in the way you need to be successful, you can get this very wrong and lose a lot of time and money (and maybe your startup!).

SH: What is a company in the healthcare space that you think has done a good job of that, particularly with network effects?

JW: I think healthcare is playing catch-up a little bit in building well-balanced platforms. It's learning as in most things in health, from models and other industries. I don't see a standout that is doing a fantastic job. Still, I think in recent times with particular populations. I believe we are seeing some exciting results in companies like CityBlock Health. They are one example in New York that understands that community health starts with the customer side, and the service they're rendering the provider side of that equation in their case for the Medicaid population has to be matched carefully to grow that business.

There are others in health, but we're at the early stages compared to other industries. The lessons are coming in from the Airbnbs, the Ubers, and companies whose platforms have created the rubrics for others to follow. We've just seen companies like Sharecare come to market, for example, with a very big SPAC that I think will be interesting because it's so well-capitalized just to see how quickly they can get from A to B as a platform play.

And, and that's ignoring the tech platforms that are all moving into health care. You could say that Amazon, Apple, Microsoft, Google, and other tech giants all have their platform plays. Still, in healthcare, they've all stumbled a bit because it's not as easy to get it right because of its fragmentation and complexity versus other marketplaces.

If you're a taxi business, it's straightforward to imagine the idea of someone standing on the corner and wanting to hail a taxi via their mobile phone, and then the person who drives the car comes along and gets to you within five minutes, and Uber and Lyft are created. That's not so easy to imagine in healthcare generally.

SH: You bring up these big tech companies that are trying to break into healthcare. Do you think that they'll be successful? Do you believe one will take the lead?

JW: I think the Platform Wars are going to be huge in the next five years. I don't think there's any emergent winner yet, but I'm excited by the possibility of several initiatives.

Take what Apple has done with the Apple Watch as a platform and what it builds on top. It started in a very odd place initially, but they're starting to get what it has to do in the longer term.

The experiment at Amazon Cares, which was internal to their employees early on, is exciting as a platform when they broaden that out (despite the failure of Haven as a JV structure). In some ways, this failure might help Amazon make some decisions quicker without having three stakeholders in the mix.

Of course, you can never ignore any of the other big players- Google, Samsung, Microsoft, and several others. The trick for them will be to bring healthcare expertise to guide them to play in the market and get people to use their platform successfully.

The major tech companies’ early problems were being too proprietary. They would be better served to create platforms that enable others to build upon and be creative or even buy the technology on top of their platform.

An excellent example of this would be Salesforce. The Salesforce platform is now an enabling platform and it has gone a long way away from its original, simple model. Now people are building all sorts of things on the back of Salesforce that they never even envisaged. That’s what healthcare has to do.

This means that there's room for multiple platforms.

SH: What do you think makes a successful platform?

JW: Apple’s iTunes is probably the most successful platform ever built because we don’t actually talk about the platform. It was a more important strategy in many ways than the iPhone itself because it was the key to get developers to come and play. When we know nothing about the platform or how it was built, we know many people are building on top of that platform doing exciting things; that’s when a platform is successful. So the lesson for me is how important it is to eliminate as much friction as possible to let people get creative and take the platform in directions you’d never envisaged.

SH: You manage the deal flow into a healthcare investment fund, Adaptive Health Capital. How do you suggest investors think about evaluating platform-like companies?

JW: In some ways, it's the same traditional metrics.

I think they've got to look for a value proposition that is meeting an unmet need.

Too often, I see pitches with a ‘build it, and they will come, look here's our platform, and it's great’ approach, and expect customers to be impressed with all the bells and whistles. That's a pretty, uninvestable start. I like to find a real problem that the startup can solve.

If you take the Livongo platform, they solved a real problem for Type II Diabetes. Their platform said, let's understand the customer's needs regarding the friction points they have for diabetes and manage their A1C as the proxy for diabetes. Let's build the infrastructure on the other side that they can utilize or be connected to via the platform, and they took a long time working that through. It took them about eight years and several rounds of capital. People think this is an overnight success, and it wasn't.

Livongo is an excellent example of a platform understanding that investors want to see real customers with real problems, solutions they like and become sticky to in a microcosm market that they can extend beyond to see the growth potential.

It's that extrapolation curve, and that's true of most startups. There's nothing particularly magic in that, but you've got to see the evidence of it more firmly in healthcare.

SH: What do you think are the biggest mistakes that platform companies make when approaching VCs?

JW: It's building too early and spending a lot of money on a feature set because it looks as if it's needed, but without any real evidence that it is. Or to emulate the competition. Again, I don't want to keep using Livongo, but a Type II Diabetic is different from a Type I Diabetic or a pre-diabetic. So managing them isn't the same thing. Livongo was wise to say that Type II Diabetes is a big enough segment all by itself.

It's about being focused and bringing a narrow story to investors rather than a broader one.

The temptation for a startup is to go and say, we're solving a global problem in a multi-faceted way, and we're going to solve many problems simultaneously. That feels very scary to investors. I know it does to me. If I hear someone say they're about to go out and change the world, I'm always wary of what's coming.

SH: You are now co-founder and CEO of Silver Moonshots, a base to mentor and invest in disruptive startup companies, especially in the area of technology deployment and aging tech. What advice do you have for companies targeting this market?

JW: The older adult community is perhaps the most significant and certainly costly consumer to treat in healthcare. At least 70% of our public health dollars are spent in the older adult community. So, it's a sector that needs a lot of new thinking, innovation, and technology.

There aren’t enough entrepreneurs in the older adult space solving problems, and when there are startup/early-stage companies, they're leveraging solutions that are often built for a younger marketplace. So the biggest problem is that we don't think about the older adult community in all of each variety and nuance. We tend to see it as one monolithic whole.

We should recognize that the US 50+ population includes 120 million individuals and understanding that whole community takes a lot of time and effort. That's what Silver Moonshots was formed to help startups do. I wanted to give startups a deeper appreciation of the older adult marketplace in all of its forms so that the beachhead markets they are starting with are narrow enough for them to gain traction and survive in the long term because that's where investability comes from.

SH: When it comes to digital health and the use of technology. Do you think that there is a misrepresentation of the utilization of technology for the 65 plus population?

JW: Let me give you an example; if you take the senior population, about 30% do not have access to smart devices. This doesn’t necessarily mean they know how to use technology. Perhaps they don't have access or have no internet at home because they can't afford the monthly fee.

Some of the older population struggles a bit, and we, therefore, can't be all in on certain types of technology. That said, If you look at adults between 50 and 70, we're at something like 95% penetration with a small device. Therefore, we can genuinely start to look at digital health in that population as something they have access to. Consequently, I think digital health has a very healthy future, and we've seen significant investment.

SH: Another company you are advising is ORCHA, a platform play curating the World’s digital health apps.

JW: Yes, it's an exciting startup out of the UK. There are around 375,000 apps in both of the major app stores. How can we possibly pay attention to that volume? But we also know that about 85% of those apps have almost no traffic or users. ORCHA is trying to rigorously review the ones that do have users for their efficacy. I think the fascinating next step is then on the so-called activation side. It's weaving digital health into the patient journey, whether on the wellness side or the curative side. That's exciting because you have to start with what's available in terms of the creativity of the app developers that can be rendered to be successful in a patient journey.

SH: Is ORCHA also looking to step in and fill the gap where the FDA hasn't entirely caught up when it comes to digital health?

JW: The FDA has not jumped into the space, despite the fact we've just seen the European digital health standards. The Germans have taken the lead on that, and I talked to the FDA a month ago about this. They want to leave this open and let things take their course for another 18 months or so before putting a standard together. Their view is they want to put an enabling standard together, not unlike what has been put together in Europe. That means there's room for the organizations thinking about standards commercially to play a part in influencing what does get created by the FDA, and ORCHA is pretty well-positioned to assist.

The goal with regulation with health and healthcare is to protect the consumer but make sure that creativity and innovation are not limited or stifled.

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