Creating Niche Software to Disrupt an Industry’s Leaders

Dan Godla is a guest contributor on the subject of entrepreneurship. Dan is the founder and CEO of ThoroughCare, a healthcare software startup. Dan has worked in the healthcare industry for the past 8 years. He holds B.S and M.S degrees in Management Information Systems. Dan can be reached at dan@thoroughcare.net.

I’ve always been impressed by the innovations in the healthcare industry. Innovations such as Laparoscopic surgery, the CAT scan and the MRI have changed healthcare in ways that were impossible to imagine. We can’t forget the medicines that so many people couldn’t live without today. We are truly fortunate to live in a country where such amazing medical care is available. Despite the great care which patients have come to expect, it’s ironic that much of this care is provided by medical professionals who use computer systems and software programs that don’t always make their job easier.

One of the reasons why this happens in healthcare is due to the massive size and scope of the industry’s software programs. This industry is known for gigantic enterprise software programs that are literally designed to do everything an organization needs (or thinks they need). While it might sound like a smart business decision to purchase one “Do it All” solution, there are often ramifications which are passed down to the actual users. Most software programs were created around a core competency. For example, a company known for their excellent claims software begins adding medical records, billing and case management. Their core claims solution is great, but the other solutions require the users to “settle” for something less than ideal. There is a lot of “settling” in healthcare. In many cases, the victims are often the doctors and nurses.

This creates an incredible opportunity for entrepreneurs to find “niches” where users are “settling.” The healthcare industry is full of startups that are doing just that. By focusing on just one solution and doing it well, entrepreneurs can build a growing business by satisfying an under-served niche. As an entrepreneur in the healthcare industry, my company, ThoroughCare, is attempting to disrupt “healthcare assessments.” Our research shows that nurses in particular are settling for assessment solutions that are not aligning with their clinical workflows. In many cases, they are creating workarounds in order to perform their tasks in the existing software, often at the expense of their engagement with the patients. This scenario begins to create many problems, especially in an era when patient satisfaction is a key factor into the payments that providers receive.

Once a niche solution is identified, the most important next step is customer validation. As Steve Blank discusses in his book “The Four Steps to the Epiphany,” entrepreneurs need to be 100% sure that not only will the customer like the solution, but that customers are willing to use it and (most importantly) pay for it. This is often a challenge in the healthcare industry when the users and customers are different groups of people. For example, in ThoroughCare’s patient-assessment solution, the nurses are the users and the customer (or buyer) is typically an executive at the organization. Each has different priorities. The nurse’s goal might be to become more productive with her patients. The executive’s goal may be to cut costs. This creates a dilemma for the startup. The entrepreneur shouldn’t be forced to compromise, but rather identify how each party will benefit. In ThoroughCare’s case, we identified a “pain point” of the executive. The new healthcare law has brought new penalties around 30-day readmissions. The executive wants to lower the organization’s readmission rate as much as possible. The nurse also believes in this objective in addition to becoming more productive with her patients. The end result is to create an assessment solution that excels at identifying risky patients, particularly those who are likely to be readmitted to the hospital.

One additional “wrench” to throw into this mix is that the industry’s leading enterprise software companies do not always want to “play nice” with startups addressing a niche. Many large companies believe that their “Do it All” solutions are just fine and that it’s the users who aren’t using it correctly. The best thing an entrepreneur can hope for is to find a “customer champion.” When a healthcare organization goes to bat for a startup, the larger software company will be more likely to collaborative with the startup per the customer’s request. The best thing a startup can do when presented with this opportunity is to come to the table with a niche solution that is really easy to integrate. For example, building out an API, creating web services and saving data as XML are some ways in which the startup‘s solution can become well received. For ThoroughCare, this initially seemed like a daunting task. We decided to work with Charlotte based Levvel to help us with this task. The Levvel team has an impressive background around software integration. Many of their team came from Bank of America and had expertise in integrating bank software. As the software was designed with integration in mind, protecting and securing the data is equally important, especially with regulations like HIPAA. If all of these criteria are met, the “integration discussion” is much easier when the time comes.

The good news for entrepreneurs is that if the startup truly creates a niche solution that 1) users want, 2) customers will pay for and 3) software companies will integrate with, the business has a great chance at succeeding in a world dominated by large players. To prove this point, in the first 6 months of 2014, MobiHealthnews reports that 16 digital health companies have already been acquired by larger companies. While my examples are from the healthcare industry, the same philosophy applies to other industries. In fact, depending on the industry, it might even be easier since you won’t have to worry about the healthcare industry’s HIPAA and patient confidentiality requirements. If the entrepreneur has done their homework and has truly identified an under-served niche, the possibilities are endless. Maybe because of your idea, people won’t be “settling” anymore.

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