Annual Strategic Review

Annual Strategic Review

It's been just over a year since the first edition of "strategy & digital health" and so it seems appropriate to end 2024 with a strategic review of the digital health sector.

Let me start by using the services of the "tech star of the year" AI... with an a AI-generated review of 2024 courtesy of "Bing Pilot":


Please review the digital health trends of 2024.


1. Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML are revolutionizing healthcare by enhancing diagnostic accuracy, optimizing predictive analytics, and personalizing treatment plans. These technologies analyze vast amounts of data to identify patterns and insights, leading to more effective and patient-centered care.

2. Wearable Devices and At-Home Monitoring

The synergy between wearable devices and at-home monitoring tools is enhancing patient care. Continuous monitoring through these devices reduces the need for in-person hospital visits and empowers patients to manage their health more autonomously.

3. GenAI (Generative AI)

GenAI is making significant strides in healthcare, from drug development to consumer billing and cost improvement. Its ability to process unstructured data is transforming various aspects of the industry, leading to what some experts call "the AI era".

4. Women's Health

Data-driven companies are leading the way in women's health, offering integrated, end-to-end care pathways. The rise of FemTech is bringing innovative digital solutions to advance women's healthcare.

5. Mental Health and Well-Being Solutions

Digital tools are increasingly being used to address mental health and well-being. These solutions bridge care gaps, expand access, and offer personalized treatment options, making mental health services more accessible.

6. Nutritional Interventions

The concept of using food as medicine is gaining traction. Digitally-delivered nutritional recommendations are being used to prevent and treat various conditions, highlighting the importance of holistic approaches to healthcare.

7. Digital Obesity Care

Innovations in digital obesity care focus on remote monitoring, lifestyle coaching, and mental health support. This trend aims to provide comprehensive care for individuals struggling with obesity.

8. Telehealth and Remote Patient Monitoring

Telehealth continues to be a vital component of healthcare, offering remote consultations and monitoring. This trend has been accelerated by the global pandemic and is expected to continue growing in 2024.

These trends are shaping the future of healthcare, making it more accessible, personalized, and efficient. It's an exciting time for digital health innovation!

Is there a specific trend you're particularly interested in?

Okay.... can I add a little value?



Current State Of Play

The digital health market has bounced back after the post pandemic slump but what does this look like in terms of market value? Here are two estimations:



As you can see, these two reports offer very different market valuations and growth projections. Such variation arises, I suspect, largely because digital health is difficult to define and as a result, these estimations are based on two different definitions. Before our review even gets going, this highlights two strategic issues:

  • Some strategists attempt to define digital health and build strategy upon this. I would argue this is a fundamentally flawed approach and is factor that has contributed to the failure of many digital health strategies even in 2024.
  • It's difficult for larger organizations in particular to value something which is appears to be fluid and nebulous; a major strategic obstacle which can be tackled with a learning & dissemination strategy (these I feel are not common place even in 2024).


With such doubt about what's being measured, perhaps further segmentation/definition of the digital health market might be more helpful.

Here's a quick overview:



Market Sizes

What do the market subsegments look like now? That's arguably important information for strategists operating in the commercial/financial realm.


Other reports are of course available and they differ somewhat in their valuation but not so much as to be problematic for this review.


DTx: After a tough time in recent years, the future of DTx appears to be brighter. National reimbursement mechanisms are becoming relatively common with undoubtedly more to follow and the critical success factors underpinning these schemes are becoming clearer. The US employers market now has incumbent players and DTx increasingly features in the employee benefits markets in other geographies. Many alternative routes to revenue are available although it's still early days and its true to say that commercial models have yet to be firmly established. That said a 31.5% CAGR is believable even from my pragmatic view point but although the DTx community is very active and vocal, it's a relatively small market and I offer a word of caution after the next paragraph on digital biomarkers.

Digital Biomarkers: There's good reason to be optimistic about the digital biomarker market. Whilst their potential application is very broad, realistic growth will be driven by pharma using this technology to support its long-standing processes; growth is not so reliant on highly resistant payers/providers. Whilst this is a market very much in its infancy and pharma is still on its learning curve, any aspect of digital health that has a fundamental role to play in supporting/advancing pharma's core interests has a bright future. This is where I offer a cautionary thought about Dtx in that although there is still interest in DTx from pharma, it is not necessarily supportive of its core business.

The Telemedicine market is an interesting one and it may pay to have a more cautious outlook on its growth. The pandemic saw a real boost for this segment but video-enabled consultation is a saturated market and vendors are going to have to offer something more - and payers/providers will need good reason to pay for this.

The XR market is exciting but small. The XR market represents "new technologies looking for a home" in healthcare; very challenging.... but promising areas include training & education. There is an overlap with DTx too but XR faces the same and perhaps greater challenges due to the novelty of the approach. There is what has become a hidden upside for such technologies that I'll finish the article with.

Wearables is a complex market but from a strategic perspective, it can be divided into two distinct areas:

  • There is a large wellness-oriented consumer market which is beginning to offer medical grade data. Whilst regulated devices in the hands of consumers may become increasingly common, there is little sign that mainstream healthcare is either willing or able to accommodate data from these devices into everyday practice. Providing medical grade data was a way to create differentiation in a very crowded market but until our healthcare systems learn to accommodate what could be very valuable output from such devices, the success of strategic moves into more medical territory will be limited in the short to medium term. Other factors that create meaning and value in our lives are more likely to be key differentiators.
  • Digital health wearables issued by/paid for by payers/providers is a much more constrained market with one major exception; devices enabling continuous blood glucose monitoring. Beyond this exception, it will take (more) time for mainstream healthcare to understand the value of such devices and to integrate them into everyday practice at any scale.


Trying to link these two markets is essential for healthcare to progress such that users/patients/people/consumers feel more in control of their own healthcare and can readily participate in partnership with their HCPs to shape their own health and well being. The current reality is that attempts to link these two markets result in confusion in terms of technical design and output. Try presenting the data from your wearable device at your next GP appointment to gauge the reality of this situation.


There are of course many other ways to segment the digital health market and digital mental health deserves a mention.



We are going to take a deep dive into this market asking "what next for digital mental health?" at the next Corporate Working Group meeting. It was one of the first sub-segments to move and is arguably well established. It is also a market with many small players operating in individual geographies raising the possibility of M&A activity but also, the majority of offerings are based on CBT inviting the question "is it time for disruptive approaches to advance what has become an established digital health market?". In the face of growing need, what will happen in terms of technical/scientific advances and the commercial landscape?

So digital health has grown but the various market segments have progressed at different rates. There are now digital health segments with incumbents and technology approaches which are ripe for disruption whilst other segments are still emerging with everything to play for (from technical/scientific approach to commercial models). The market shake-out of 23/24 has provided clarity on the status of these markets. Companies choosing to enter these markets will need to understand the status of different subsegments within these market segments in 2025 and will need to apply very different market entry strategies accordingly.


AI

You can't have a review of digital health without mentioning AI. I'm not sure I have a mainstream view on this subject but let me try to illustrate this.

The key barrier to the advancement and scaling of digital health solutions isn't the need for better technology (although it would help)

So what am I implying?

  • I acknowledge that AI is truly a ground-breaking technology that will significantly impact healthcare.
  • It will provide a major competitive advantage to companies that embrace it.
  • But its impact won't be quick - the pace of change is not determined by companies developing AI-based products and services - it's largely dictated by regulatory timelines and payers/providers appetite. (check out this article for current status - radiology dominates followed by cardiology and then...)
  • Also whilst AI will help us more effectively digitize our existing sick care systems it won't necessarily help us create sustainable systems. There is a danger that AI's ability to make existing processes more intelligent and more efficient, may (consciously or unconsciously) prevent necessary efforts to fundamentally change the way we deliver healthcare. You can imagine a hospital with a limited budget choosing technology to create efficiencies in its core processes (which simply reinforce current methods of healthcare delivery) over more risky technologies that deliver new ways of working - risk being inherent in changing away from core processes (see the later section on funding that illustrates this dilemma for founders).


2025 will continue to see money thrown at companies using AI in the digital health arena and just as with DTx, many investors will eventually lose their money because they didn't do effective due diligence on routes to revenue and the timelines involved.... just as many companies won't have thought these through in enough detail.

Cutting edge technology is not enough to guarantee success, particularly if there's no way for buyers to buy it or the timelines are too great (see the previous edition of this news letter for more detail on this). They say history repeats itself - look back over the previous decade+ of digital health for learning. Ai may be a particularly powerful technology but it is still a technology. No other technology has succeeded in markedly accelerating the adoption of digital health because the the barrier to adoption is not "we don't have enough/good technology"... the barriers to adoption lie beyond technology in 2025 just as they have been since the beginning of digital health.



2024 Going On 2017?

In Europe, the digital health market began to pick up the pace in 2017. In this year we held our first "Corporate Working Group In Digital Health" in which execs from global companies were invited to network and learn about digital health. When we reconvened earlier this year after a pandemic induced pause, one of the most telling comments was:

"Nothing's really changed!".

Whilst a little tongue in cheek, I think it's true that many of the issues that affected digital health in 2017 are still affecting the sector now.



More Pilots Than The RAF

That's the phrase I used to hear when talking about the NHS and digital health in 2017. From the mouth of pharma in 2024:

“We’ve seen a lot of pilots that have sadly led to nowhere, echoing a frustration common among digital health innovators."

A workshop at the same conference highlighted a long-standing but avoidable strategic issue:

“Attendees shared examples of projects that floundered due to a misplaced focus on the tools, as opposed to the issues they were meant to address.

From a strategic perspective this is entirely avoidable whether 2017 or 2025. A digital health strategy shouldn't focus on technology but should focus on an organization's problems/challenges and how digital health technologies can address these.



Rising Need, Limited Demand

In one of the previous editions I used a "grim quiz" to illustrate that for all our combined efforts, unmet need is still rising and is predicted to rise steadily. In recent years we have seen digital health solutions helping people to manage their long term conditions which is a good start but we need to cut the problem off at source.

We still have sick care systems. Whilst everyone knows that healthcare needs to become more predictive and preventative, change has been slow.

  • Prevention and prediction are not well represented in the payer/provider landscape.
  • As such, it is incredibly difficult to build a business based on prediction or prevention.
  • Innovation in this space is therefore stifled and does not scale.
  • Also human beings do not generally value prevention.

As such, governments need to make significant funding available and drive change though "policy with teeth". Until this happens, the consequences of our poor life style choices, an ageing population and worker (HCP) shortages will carry on increasing the pressure on our healthcare systems.

What is different now when compared to 2017 is that the pressure has increased considerably. We are now seeing, with more regularity, the consequences of rising need and our inability to create more sustainable healthcare systems. We are now seeing periodic crises around the globe. This trend is set to continue.

  • In 2025 and onwards, periodic crises are likely to lead sustained periods of crisis and from a strategic perspective, could offer a trigger point for substantial change.
  • (BUT) Is it any more likely in 2025 that governments will drive necessary change with policy and funding, than in any other year? Would you bet your business/career on this?



Pharma

As with DTx, pharma's activity in digital health attracts a lot of attention. Given the resistance of healthcare to change, pharma has played an important role in the development of digital health to date even though pharma is a conservative sector. From a strategic perspective there are choices to be made in 2025.

  • Is digital health a way for pharma to make money?
  • Can digital health be used to enhance its long-standing internal processes?

The answer to the second question is a solid "yes"; the answer to the first question is up in the air and subject to many "commercial experiments".

It's perfectly feasible to develop a digital health strategy that adds value to an organization by using digital health to improve competitiveness (from more efficient marketing, to enhanced in-market intelligence to efficiencies in clinical trials). In such circumstances, the main barrier to advancement is provided by the organizations itself.

From my understanding, AstraZeneca made a smart move by forming Evinova. AZ built expertise in digital health largely applied to clinical development and is now selling this to its competitors. Of course the quality of the offering and the appetite by competitors will reveal whether success is scalable and sustainable.

A more challenging way forward is the development of digital health products and services to be sold into healthcare. The graveyard of start-ups illustrates how difficult this has been and the scale required to make a dent in a pharma companies P&L is significant so the challenge shouldn't be underestimated.

A recent article by Gary Monk on top DTx stories caught my eye that nicely illustrates where pharma is on this front. As summarized:

"I agree with your choices :) these are interesting and exciting, but its worth noting these are at the early stage of commercialisation - e.g. approval and early launch"



A stark illustration of the challenge facing teams "going beyond the pill" is simply illustrated by the following two market valuations.



Selling pills is big business. Whilst there are concerns about the future of pharma, it is unlikely that "selling pills" won't be the mainstay of this major industry for the foreseeable future.

Can digital health as a revenue generator, capture the attention/excitement of these behemoths beyond the enthusiasts that populate the digital teams? Will revenue generated by digital health products & services make any noticeable difference to the top line?

...or it it more feasible to implement digital health technologies to enhance core processes to significantly affect the bottom line?

Choices (strategic decisions)...



2024: Funding

2023 was a wipe out with a recovery in 2024. I have mixed feelings about this. A lot of dumb money was thrown at the sector and some companies didn't put the necessary foundations in place wrt commercial strategy so the post-pandemic shake-out was no surprise. On the other hand it was painful to see my adopted sector suffer and I always feel for anyone who has to live through job losses and/or company shut downs.

Whilst a well thought out and verified GTM strategy doesn't guarantee success, it's a critical success factor. From real world experience (from introductory coffee conversations to assessment of business proposals through mentoring and formal due diligence activity) I would estimate that over 50% of digital health companies haven't put this essential foundation in place enough to survive thorough and informed due diligence.

Probably the most disheartening aspect of 24 was the edict "follow the money" by some industry experts (there was also a notable academic paper issuing similar thoughts) implying that digital health companies should in effect give up on trying to offer change and that they should focus on becoming part of the healthcare establishment in order to get paid. If that's what digital health was to become, I would walk away.

On a more hopeful front, there were excellent presentations from Gallen Growth and USB at CWG meeting in September, suggesting the funding outlook for 2025 will improve. In general, there appears to be more optimism around the funding landscape in digital health in 2025 (a brief call with USB earlier this week confirmed activity is picking up).



New Factors

Long-standing issues in the sector are still with us and change is slow but there are some new factors that may shape digital health in the coming year(s).


Health Equity & Value

It won't have escaped anyone's attention that the world has become more polarized with respect to both politics and beliefs - this polarization appears set to grow.

In addition and perhaps related to this, the wealth divide is becoming ever greater in many countries and with it, healthcare is becoming less affordable and less accessible. Whilst the motive behind the recent murder of a US healthcare executive has not been confirmed, the words “deny,” “defend” and “depose” written on the bullet casings indicate a likely grievance and an issue that is likely to shape healthcare.


"Almost immediately after Mr Thompson was shot dead, the internet began to lionise his suspected killer. On TikTok, people posted videos of a "CEO assassin" New York City walking tour. On Spotify, playlists dedicated to the suspect started to appear.Once Mr Mangione was arrested, these fans came to his defence.The start of his legal battles prompted anonymous donors to chip in thousands of dollars towards his defence through various online fundraisers.Etsy was flooded with pro-Mangione apparel, while Amazon pulled similar products from their site.


The internet actively connects people with similar belief systems irrespective of rationale or evidence. The vast majority of people reading this text will be horrified by the murder of a healthcare executive but as evidenced by the BBC article above, there is much support for the killer and his (likely) motives. Such extreme views are likely to become normalized and grow within online communities. It raises the possibility of a new phenomenon with a spectrum of activity. At one end of this spectrum will be the growing voice of consumers who feel profit is being unfairly put before their welfare but at its most extreme could become an organized movement promoting violence as a form of social justice with every possibility between these extremes.

The situation may or may not not exacerbate but any growing activity across this spectrum could be an important strategic factor for healthcare and life science companies and how they position themselves in terms of behaviors and perception.



Life Science Driving Digital Health

When I "signed up" for digital health in 2008, it was because I understood the compelling need to change the way in which healthcare is delivered and the ever more pressing drivers. Like many others I saw digital health's potential to meet some of healthcare's greatest challenges. I haven't changed my view in the intervening years but what has changed is that I now understand why this change is more prolonged and the many factors inhibiting this change.

This year has perhaps bought home to me that "traditional life sciences" (my original hunting ground) is likely to produce solutions to problems that seemed intractable and these may actually drive the growth of digital health in its wake.


"Ro didn’t start out as a company focused on weight loss. Reitano launched it to sell treatments online for erectile dysfunction before moving on to hair loss and other pathologies.

In 2020, Ro switched to obesity management and, after Wegovy was approved by the Food and Drug Adminstration the following year, Reitano said patient inquiries started pouring in by the “tens of thousands.”

Now, Ro is shoveling marketing dollars into its GLP-1 program — from digital ads, TV commercials and posters lining subway stations, to influencer campaigns featuring patients such as Beard

Ro has raised around $1 billion in funding to date, according to PitchBook. The company was valued at about $7 billion as of early 2022"


This striking example of life science offerings driving digital health activity might offer hope new routes to revenue for struggling digital health companies in other areas too. Whilst the effects of GLP1s are significant a similar opportunity may be opening up in other areas such as dementia treatment where the benefit of new drugs might be more marginal but could be coupled with digital health offerings to provide a more compelling package. The ability to add value by offering digital health program and services round drug-based treatments is likely to become a significant factor in the evolution of digital health.

Related to this are the areas of nutrition and ageing. 2024 saw the link between nutrition and digital health strengthened and it's very likely that anti-ageing therapies and digital health could experience the same dynamics in future years.

Will pharma start to lead the way or are other companies better positioned in 25 and beyond?



What's Been Missing?

Every other headline seemed to be about the Metaverse in 2022. DHV-NET took a deep dive into the intersection of healthcare and the metaverse delivering what we think was the first white paper exploring the subject. It certainly opened my eyes but the metaverse seems to have disappeared from healthcare in 2024... but it's still there.

The global metaverse market size was estimated at USD 82.02 billion in 2023 and is projected to grow at a CAGR of 43.9% from 2024 to 2030.

I don't think that the metaverse will feature in 2025's healthcare headlines either but it is building steadily outside of the general consciousness of healthcare and the life sciences, being easily dismissed with a roll of the eyes. From our research it seems inevitable that the metaverse will come to pass and will have major implications for healthcare and digital health in particular.

Just because something doesn't appear in an Gen-AI authored article doesn't mean its not happening... and equally, what you read in the news (LinkedIn industry press) shouldn't be taken at face value.


As We Enter 2025

2024 has been a year of sobering reflection for digital health and its headlines require some thought and analysis to guide future activity. The sector has long-standing issues which will still be key factors in 2025 and the ever present hype in the sector will still lay traps for the unwary.

Many strategic issues are well known but somehow still hidden. The ability of companies to acquire grant funding and private funding without a solid commercial strategy shouldn't feature in 2025 but it will. The want for large corporations and/or healthcare providers to develop strategy based on "finding a home for technology" rather than identifying need/problem/challenge and then technology-based solutions, should be a thing of the past ... but in 2028 we'll inevitably hear of workshops with delegates bemoaning the proliferation of pilots and lack of real progress. All avoidable.

The digital health market is set to become even more complex as we see a mix of segments at different stages, all requiring slightly different commercial approaches. Not so long ago digital health was new and everything was up for grabs. We have now entered a perverse period where commercial models in some segments are still undefined with any level of confidence whereas other sectors are full of incumbents with clear routes to revenue.

In 2025 we can layer in the hype and reality of AI across healthcare's resistance to change and growing need for healthcare that does not match with the demand for digital health solutions from our payers and providers. Mix this with the progress of the life science juggernaut that is pharma in delivering new therapeutics that stimulates digital health - and their slow but steady adoption of digital health technologies, experimenting as they go.

It's a fascinating time to be involved in digital health whatever your role and strategists playing in this arena have increasing complexity to consider, combining well established and emerging factors that will shape the field. A new chapter which mixes maturity and uncertainty is in the process of unfolding.



Summary

When considering strategy for 2025, here are some bullet points to help summarize the key points in this article but this is not exhaustive....


Influencing Factors:

  • Digital health funding is likely to return in 2025 to some degree, fueling more activity.
  • Companies with well constructed, tested and evidenced GTM strategy are more likely to be funded with "dumb money" less available.
  • As ever, supply chain companies will prosper on the back of both informed investment and dumb money.
  • Growth in demand by mainstream healthcare (payers/providers), for digital health solutions that drive change, will continue to be modest.
  • Demand by mainstream healthcare for increasing efficiency of core processes will increase, fueled in the short term by unregulated AI solutions.
  • Unmet need will continue to grow unabated.
  • Access to healthcare and the quality of healthcare will continue to decline in many parts of the world.
  • Major crises will affect global healthcare systems on a periodic basis, leading to more sustained periods of crisis.
  • Pharma will play an increasingly important role in helping digital health to grow (but there will still be high profile failures).
  • Digital health technologies that support pharma's business model will grow.
  • Positioning and behavior of (digital) health companies is more likely to be the focus of public scrutiny, leading to increased risk in terms of reputation and the safety of staff/premises.
  • The trajectory of the life sciences and digital healthcare continues to merge with increased synergy between both sectors offering new opportunity.


Strategic Actions

  • Commercial Organizations: Deep dive into the market dynamics of any proposed target market to understand the nature of competition, level of demand and routes to revenue for all associated market subsegments.
  • Commercial Organizations: Identify and test clear routes to revenue prior to product/service development.
  • Commercial Organizations: Seek competitive edge through new technologies in market subsegments that have become static and require new approaches to advance.
  • Medium & Larger Organizations: Develop change and innovation strategies that are not based on technology but focus on problems to be solved (by technology) to avoid pilots with no sustained outcomes and/or failed commercial ventures.
  • Medium to Large Organizations: Implement L&D strategy coupled to either/both innovation and implementation strategy which are focused on providing technology-based solutions to identified problems/challenges.
  • Review public perception and risk and reposition based on behaviors and market communication if necessary.

What would you add?



DHV-NET in 2025

We're starting the year strongly.

On-line strategy training: The Access Strategy program starts its rolling program again in Feb 2025. We are going to shake up the order of the modules but will still provide insight, tools and frameworks into the main strategic areas relevant to digital health. Note: this is a paid for program (which we can bespoke to suit your needs) but feel free to join us as our guest for a session to see what we do and how we do it (fill in the form to let us know).


The first meeting of the Corporate Working Group (in Digital Health) in 2025 will take place at the Royal Society of Medicine in London on the morning of March 11th (we hold 3 such events per year).

This session will focus on two subjects:

  • How to create effective partnerships (a topic suggested by the delegation at September’s meeting)
  • What next for digital mental health?

The CWG is an intimate, discussion-based forum for execs from global companies to network and learn about digital health in a small peer group.

The art of creating partnerships (in particular between start-ups and corporates) is a challenge shared by most large companies working in this space and will be explored with the help of speakers from Jazz, Novartis and Huma.

Digital Mental health is an established segment with many smaller players largely offering NLP-based approaches; a digital health segment ripe for disruption (and likely M&A activity) with relevance to many physical conditions. Having deep dived into this topic in the last CWG session before the pandemic, we’re looking forward to revisit this in 2025... and will look forward to announcing an excellent speaker line up in January


We finished the year with a live session on entering the US market co-hosted by DHV-NET and the Mansfield Incubator (East Coast US): Catch the recording here. We'll be doing more with Mansfield in 2025 but look out for sessions that will cover market entry in the UK, France and SE Asia in 2025 as we expand our international network and share our hard won knowledge and expertise in market entry strategy in different territories.


Wishing you a happy holiday season and a prosperous 2025.

Joyeux Noël!



Carlos Battyán

Innovation Projects Coach, Mentor & Consultant

1mo

Thanks Steven Dodsworth for adding Us a lot of Value !

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