Winner take all? Before that, multi sided platforms need to fail small.
It is tempting to look at the disruption that multi sided platforms have caused and the speed in which they have done so, and conclude that first mover advantage and speed to scale are two of the most important lessons for multi sided platforms. After all, in just over a decade one MSP (Airbnb) has become one of the largest real estate companies in the world (and famously owns no real estate).
Yet Facebook was far from the first social media platform (remember Friendster and MySpace?), and eBay was not the early leading online-auction site. So if not first mover advantage, what are important growth considerations important for multi sided platforms? And how do those translate to healthcare?
The use of technology to successfully build and scale MSPs and MSNs is still relatively new, and newer still in healthcare. Therefore, while there are no “out of the box” solutions for startups or more mature companies seeking to shift to an MSP strategy, we have learned some valuable lessons that apply across most MSPs and MSNs and can help to overcome the challenges described above.
Start small: The emerging conventional wisdom about MSPs that they tend to be “winner take all”; this can lead investors and executives to think the most important thing is to sign users on both (or all) sides of the platform as rapidly as possible and scale the platform at a likewise pace. This can (and does) result in tremendous waste, as different sides of the platform will tend to have nuanced market needs that may not be perfect fits with each other. If, as Thomas Edison said, there are 10,000 ways that won't work, it is far better to discover and resolve these issues early, when there is less to lose and the losses are smaller.
Figure out the “most important side”: There is always a side to the platform that is “most important”. It is unlikely to be the paying side, as those users are willing to pay for access to exchange or access something another side has to offer. In healthcare, the most important side is generally going to be the side that is either (i) the one closest to the patient or caregiver or (ii) the one that has greatest influence over what care is provided. For instance, in an MSP connecting labs and ambulatory physicians, it is ambulatory physicians (or patients) who generally influence which lab is ordered, and who refer the patient to a specific lab. For an MSP connecting pharma to health systems, it is the health system providers who determine which prescriptions are most appropriate, and which drugs to stock in their inventory. Determining the most important side to an MSP or MSN is critical, because it leads to a set of discussions about how to attract, maintain, and create compelling value (and network stickiness) for those users above all others.
Understand the “job to be done”, and what is important to end users: Even once an MSP has identified the most important side of users, its job is not done. It must seek to truly understand – to empathize – with its end users to understand what they are trying to accomplish and why, what the current sources of friction are in the process, and how a platform can help to eliminate those sources of friction.
Don’t mistake a distribution partnership for end user adoption: Attracting marquee users (or organizations) to an MSP can certainly help to create a sense of momentum, which is indeed a critical element to an MSPs success. However, too often MSPs seem to think that signing a big name EHR, or announcing an agreement with an industry trade association as a preferred partner, guarantees them success with the EHRs’ practices or the trade association’s organizations. Such agreements tend not to place much emphasis on the EHR or trade association’s business development support efforts. While they can be helpful, they should not be mistaken for the blood, sweat and tears that must be put in by the MSP to actually find organizations and end users willing to try a new service.
Don’t mistake adoption for utilization: In most cases, the value of an MSP increases not just when there are more users on it, but when those end users utilize the platform on a regular basis. Therefore, it is important for MSP operators to focus on the utilization and retention patterns of those users who have adopted the platform. Indeed, many MSPs may appear to be growing substantially and gaining market momentum from the outside, but if their users do not have positive experiences, the platform can start to cave in on itself. As fewer users actually utilize the platform, it has less value to those remaining on the platform, which can lead to a vicious cycle of attrition.
Identify the side with the most to gain: When considering how to generate revenue, MSPs should consider which side of their platform gains the most direct economic benefit, regardless of whether the side is an active participant. In most cases (but not all), firms seeking to stand up an MSP or MSN should consider charging a fee to only that side of the platform, effectively subsidizing adoption and utilization of the platform by other participants. The sooner an MSP figures out which side of the platform this is (and it does invariably depend on the markets involved, the use case, and other factors), the sooner it can reduce barriers to adoption for other users.
Win, change, or get out: Although not all MSP markets wind up being “winner take all”, the phenomenon of network effects tends to lead in the longer term to either winner take all situations (which can be very lucrative for the winning MSP) or highly standardized, commoditized, and low margin businesses. If an MSP operator is in an immature but competitive field, it should strongly consider (i) what advantages it has and whether it can quickly become the de facto platform standard, (ii) if it can redefine its market segments and appeal so strongly to a subset of users on each side that have unique or differentiated needs that it can serve better than competitors, or (iii) an exit strategy.
Start Small, Fail Early, and Learn
Most multi sided platforms just starting out in healthcare can benefit from the above lessons learned. But each multi sided platform will have its own wrinkles to work out. Learning what those wrinkles are – and failing early while trying to iron them out – provides platforms with something more important than scale: a learning opportunity.
Better to fail early - while small - and learn from that failure, than fail late like MySpace did.
Helping MSPs to Transform Healthcare
At Summit Health, we have spent close to a decade as strategists and operators at the intersection of healthcare and of multi sided platforms. We have done more than study multi sided platforms; we have planned and executed commercial and market strategies, and helped develop new MSP products and scale them successfully. We are passionate about solving inefficiencies in the healthcare system, and believe MSPs offer tremendous potential to improve quality of care, reduce costs, and improve patient access to care.
If you are building a technology platform or network to bring together different healthcare stakeholders to interact with each other and break through opaque and inefficient processes, we'd love to hear from you - please comment or contact us!