Driving Value: Strategies for Digital Health Innovators

Naomi Schwimmer: Welcome to the digital healthcare experience, brought to you by Taylor Healthcare.

Chris Civitarese: Hello and welcome to the Digital Healthcare Experience presented by Taylor Healthcare. I’m your host, Chris Civitarese, and today I’m joined by Tray Chamberlin, principal consultant with the Alexander Group. As leader of the firm’s digital health practice, Trey works with IT and digital health companies to refine their sales, marketing and commercial approach. Welcome, Trey. It’s great to have you on the podcast.

Tray Chamberlin: Thanks for having me.

Chris Civitarese: Tray, let’s start with your background and the type of work that you’re doing with the Alexander Group. Can you share a little bit about your role and the types of clients that you’re working with?

Tray Chamberlin: Sure, absolutely. So as mentioned at the Alexander Group we focus on revenue growth consulting, helping organizations within digital health hit top-line growth objectives. And my background has always been in healthcare. About 3 or 4 years ago, what we noticed in the market is healthcare, is that the traditional pharma or even med product organizations just weren’t adopting technology and tools like maybe some of their brethren in media or manufacturing were. We saw this deficit and then certainly some legislative acts, in particular, the Affordable Care Act mandated better patient outcomes, efficiencies, and this convergence of what I might consider a very immature adoption of systems and tools, plus the legislation and better outcomes needed, drove a lot of activity in the market around investment and then proliferation of digital health offerings. And these companies came to us and they said, we need help Alexander Group. And what we found is that we had a great point of view in traditional healthcare. We had a good point of view in technology and SaaS programs, but nothing really hit the mark. And that was kind of the “aha” moment where we set up our digital health practice. What we do very specifically in that practice is we think about what are the insights and the market trends that we’re seeing. What are the data points very specific to commercial productivity commercial organizations and control. What does that telling us. And how can we then in turn help our clients optimize their marketing, sales and service engines? It might be something as big as we need to stand up a sales force from scratch. It might be a more programmatic fix. I need to think about targeting, segmentation, value prop, all the way down to sales compensation optimization. So the practice overall was born from a need, certainly in the market, and we’ve been fortunate to help companies kind of focus on that top-line growth.

Chris Civitarese: That’s fantastic. And as you say, the market has just been accelerating at a breakneck pace over especially the last few years. Of course, you know, the Affordable Care Act was kind of that shot in the arm. And then there have been a number of sort of game changers that have happened over the last several years. Obviously, the pandemic was a massive shift. And I’m curious about what you’re seeing in terms of that evolution in the space over the last couple of years.

Tray Chamberlin: Yeah. Well, certainly the products are evolving at a unbelievable pace, and it’s really cool. We get the chance to talk to a lot of companies, and every week I’m just amazed when a company might reach out and they’ll tell me what they’re doing. And I say, that is such a fantastic offering. And that’s kind of creates that story, though the evolution that we’re seeing overall, with maybe an exception of a couple of very large digital health unicorns with very large revenue numbers and massive sales forces, most digital health companies kind of followed this very set evolution path is a best in breed product. They found a need in the product and it was very founder led. You likely didn’t have a dedicated marketing or sales team, and in many cases it might be a founder, a CMO, COO or someone else within the organization going out and doing the quote unquote selling. It’s very product and feature led, uh, maybe relying on a Rolodex or past relationships. And that was kind of the first evolution, by the way, many companies are still there, and that’s okay. But the next evolution then becomes, as you think about, how does my product evolve, how do I bring more products to market? And of course, the inevitable how does competition enter the market and think about maybe taking some of my market share? It’s forced these organizations then to well, the first step is usually just standing up a dedicated sales force.

Tray Chamberlin: I know that seems very basic, but the reality is that’s a kind of a big step of going from founder led to a professional sales organization. And in that step, a lot of these sales organizations, these sellers, usually a handful, usually not very large. It’s a single flavor, one resource or one conduit from the company back to the buyer, to the provider, to the payer, to the clinician, whatever it might be. They’re doing everything. They’re prospecting. They’re finding accounts. They’re going they’re developing relationships, they’re selling features, and then they’re persuading the purchasing decision. And then they’ll likely stick around for the service. And in some cases, even implementation, that’s kind of the middle ground and the next step of the evolution, And we’re seeing that a lot more in organizations as they scale very quickly with big growth objectives, is you’re getting more of a complex go-to-market model. So there’s certainly, and you’ll hear me say this time and time again, we believe there’s 15 archetypes in the market for go-to-market models within digital health.

Tray Chamberlin: There’s no one single right answer. However, though the evolution step is that they just become more complex, that single one seller owns everything to a more complex model, whatever it might look like. It’s doing a couple of things. It’s helping the buyer, whether it is, again, a payer, a provider, a clinician, whatever it might be. Well, they’re getting different value props, different touch points in their buyer journey. In addition to that, it also allows the digital health vendor, an organization to deploy resources to write points and write stakeholders or decision makers to relay that value prop. And not to mention it also de-risk the model. If I’m the single conduit back to a buyer and I a trip, I decide to retire, I don’t do a good job. Whatever it is, I’m the only experience from a personnel perspective that my buyer has. And so these more complex go to market models have really gotten a lot of traction. It’s good for the organization and it’s good for the buyer as well. And so that’s certainly a trend that we’re seeing progress pretty rapidly.

Chris Civitarese: Yeah. That makes a lot of sense. I’m curious, you touched on something that I’d love to get your perspective on. I mean, a lot has obviously been written about the Great Migration and the state of kind of the labor market and all that. I’m curious, are your customers are your clients approaching their strategies any differently today as they were maybe, let’s say 4 or 5 years ago before the Great Migration and the labor market, as it’s kind of constituted today. Is that driving any differences in terms of the way that you’re seeing the structure, the commercialization strategies set up with the clients that you’re working with?

Tray Chamberlin: I think somewhat I think we see two things there, Chris. The first thing is probably a lot around the labor economics is that in many cases the value prop is less features and functions. Here’s what my product does to what is a fundamental business problem that our product is solving. And we go out to market and we survey providers and hospital admins on a quarterly basis. And you get some really interesting insights. One of them is consistently As a provider. I have a staffing issue. And you kind of mentioned about labor issues and the shortage of talent and I would kind of put that on the buyer and the provider side or digital health vendor side in this case, in that we are seeing again, the value prop now becomes “I’m helping you solve that staffing issue” or I might be helping you solve patient outcomes or whatever it is. But the big change there is that it’s a shift from products and features to what is the patient outcome or buyer outcome and real business problem that we’re solving. So that would be the first thing I would say.

Tray Chamberlin: Then the second thing that we’re also seeing is more of an emphasis on service and adoption. So kind of going back to what we would consider those nascent founder led and even very early immature commercial models where you might have one single seller doing everything. Now you have a much larger emphasis on that post land motion and service and adoption of the solution. If you sell a solution and it never gets implemented or it’s implemented and not fully leveraged, that’s a failure. And so organizations are finding that and certainly the client you have and keep is the easiest dollar of revenue that you can get as an organization. And so that’s kind of the low hanging fruit where you’re seeing organizations look at what’s happening – the migration, the labor shortage, whatever it is, just these macro factors and saying, here’s how our commercial models can very specifically address that. Again, experience post land adoption is an area we’re seeing a ton of emphasis in.

Chris Civitarese: That’s fantastic. And then obviously, I mean the next big game changer in healthcare, and kind of the world, is going to be AI. We’re seeing just a ton of investment across companies of all sizes. Even at Taylor, a fairly mature company in the industry has our own AI strategy. So, I’m wondering kind of what you’re seeing as AI begins to take hold. How are you seeing it getting leveraged in your space?

Tray Chamberlin: Yeah. Well, if we had two days to go over this, we could really deep dive into AI. And so, if you don’t mind, I’ll probably put the AI the product and embedded AI and machine learning off to the side. I think that’s a very fascinating conversation. However, I’ll maybe reframe that and talk a little bit about AI as it pertains to the commercial model or where we spend our time. Yes, products are fantastic and the AI is great. By the way, all of our research and data would also support that. Providers expect AI and embedded machine learning in a lot of their products, and that’s only increased over our past studies that we’ve conducted. But we’re seeing AI as a game changer on the commercial side, because what it’s really doing is it’s increasing productivity per rep. What’s a bookings number or a net revenue retention number for your post land roles or whatever it is, all these metrics that are important that companies care about, but how does AI enable those resources to be more productive? How does it allow them to be more effective in their day to day activities, in particular how they engage with clients? And that’s the second part, is how do I make that engagement with my clients that much more rich? How am I thinking about not just face-to-face personal promotion, but what are the other channels and things that a provider is thinking about? How can I get my message across? And then how does that AI essentially support that, getting the right message to the right buyer at the right time? How does it tell me what’s the next best value prop to deliver or the next best cadence or sales call I should make? And that’s where kind of these tools behind the scene, many of which are AI driven, are really becoming a game changer.

Tray Chamberlin: Interesting enough, I’ll share one stat I always find kind of shocking when we share it is we go out lots of studies at the Alexander Group. It’s kind of what we do is as consultants. And we went out and said, digital health companies, where are you putting your investment from a marketing perspective, from a sales perspective, from a service perspective, three different questions. And traditionally the sales response was almost always the same. It was a quota carrying resource. I’m going to add more field reps. I’m going to add more adoption reps so that we have less churn. However, this past go round, our digital health companies actually told us something different. They said our number one investment from a sales perspective, personnel in particular was sales operations. Why? Because sales operations are usually the teams, revOps, salesOps, i’m going to use those somewhat interchangeably here, but those are the teams that are standing up these AI tools that allow the sellers to be more effective. And so we are seeing a tremendous adoption and even proliferation of AI tools to support the sales team primarily. Although I would also tell you, they’re in marketing and service as well.

Chris Civitarese: Are you starting to see those lines get a little bit more blurred in terms of the sales and marketing sort of arms? Traditionally those two functions, while they seem related sometimes in a lot of organizations we’re sort of at odds with each other as well. I’m curious if you’re starting to see both the technology and also kind of the way that ultimate customers are buying these days. I’m wondering if you’re starting to see those lines among sales and marketing blur just a little bit.

Tray Chamberlin: Absolutely. I would say without a doubt, our remits, previously, I might even go back 4 or 5 years ago at the genesis of this. And help us think about our sales team. Well, what about marketing? Don’t worry, marketing is fine. They’re doing their own thing. And we would always call that out as a miss because you are missing synergies there. Now, almost every single client I talked to let’s let’s look at marketing and sales holistically. And a lot of times probably the key indicator that we see most often of an organization that has embraced this, hey, it’s no longer two silos, but this synergistic group of individuals that are thinking about the full buyer journey, the full life cycle, and how we can influence and add value throughout. That is the appointment of a chief revenue officer. You might previously have had a VP of sales, maybe a CMO or a chief marketing officer or a VP of marketing, whatever it is. And now it’s much more common to have that chief revenue officer who has the remit over marketing and sales and in many cases also service as well. When I say service, for the most part I’m usually talking about that customer success role, which is also critically important.

Chris Civitarese: Yeah, absolutely. I think that’s been a fascinating evolution. Obviously, at the end of the day, it’s a lot of times our customers that are driving the ultimate customer, the hospital, the health system, you know, the payer, the lab, what have you. That’s driving, I think, those innovations in terms of the way that companies like ours talk to the market. So that blending, that evolution of sales, marketing, services being thought of as a whole is, is, is something that I think is just going to continue to accelerate as we get deeper into it. And the technology, of course, is going to be the real game changer that really affects the the proliferation of that. So it’s very exciting.

Tray Chamberlin: Absolutely. I agree, and I would take it maybe one step further as well and not probably just restating a little bit what you said, but some really interesting data points around. The marketing and sales is blending, but sales and service is also blending. I kind of talked about the experience and post land motion. That customer success manager, our data would tell you that only about 12% of companies that are over 100 million in revenue, have a commercial model that doesn’t include a customer success manager. And again, so it’s the three facets that are just very quickly coming together to create that seamless experience for our end buyer and whoever the end buyer might be, as much as that now has gone outside, usually users and clinicians all the way to CTOs and even chief medical officers. So really interesting kind of evolution there.

Chris Civitarese: Yeah. And it’s good for everybody. Right? I mean as vendors are creating more value for the customer, they’re able to capture more value for the customer and being able to take that 360 degree view kind of across that entirety of the life cycle of the relationship has to be driving both value creation for the companies that you work with and the ultimate end, you know, quote unquote, consumer of those products, services, solutions, things of that nature, too. So it’s a really symbiotic relationship. It sounds like.

Tray Chamberlin: Yes. Agreed.

Chris Civitarese: So as we look to the remainder of 2024 and into the coming years, I’m curious about what trends you foresee shaping the digital health space. And as companies that service the health care industry sort of think about what they should be concerned with, what do you think they should be focusing on and what’s going to drive the winners and the losers in this space?

Tray Chamberlin: Yeah, I think there’s two things. One of them we’ve already talked about, you can’t get away from AI, and if you’re going to bury your head in the sand and try to continue with business status quo, I think you’re going to be.

Chris Civitarese: That’s a fad, right?

Tray Chamberlin: Yeah. Absolutely. So that that one goes without saying. The other one I think is really interesting and I think it’s probably two factors, but it’s driving a lot of the same outcomes, is the continued presence of M&A activity in the market and just overall consolidation. Now that consolidation can be an M&A event or it can be some other thing that’s driving it. But you know, again, outside some really big organizations and unicorns, digital health for the most part is a collection of a long right tail of lots and lots and lots of small companies with great products that are relatively small in size, but growing and I do believe that as some buyers mature and they have to make that decision in between “do I buy a best in breed product” or do I think about different partners for our practice management, patient engagement, HCM, whatever it is, or do I buy the stack solution. There’s there is a little bit of a migration over to I just want a stack solution. I want a one size fits all. We’re seeing that in our data. It doesn’t mean that new companies and products won’t enter the market and continue to kind of grow that long. Right tail I mentioned, but consolidation is happening. And that M&A activity we think is a really big one. The one thing in terms of trends, though, consolidation is real. The M&A activity, though, is in kind of a tale of two sides.

Tray Chamberlin: We looked at, again, going back to some of our studies in real data points. 62% of companies surveyed in digital health said we just had an M&A event or we expect one within the next 12 months. Of those that had already completed the M&A activity, less than half said it was is a successful integration from a commercial perspective. Why we didn’t have the same process. We overestimated the appetite of the product in our installed base. We hadn’t thought about how you merge culture, systems, tools, etc. and so some of the trends we are seeing is continued consolidation, and we expect that to continue. But also as M&A continues, companies are going to figure this out. And mainly the institutional investment and private equity organizations that are driving a lot of these events that are now coming in saying, my investment thesis can no longer be about two really, really good products. I just have a better mousetrap. I just have something that is superior to to what exists in the market. There has to be more thoughtful what does it look like post acquisition and how do we win in the market? Otherwise, you’re going to miss out on the value creation plan or the synergies that in many cases, the investment thesis is predicated upon. So those are really the two big things I think we’ll continue to see.

Chris Civitarese: It makes perfect sense. And I mean, I think about all the things that that are driving sort of the M&A space, both from the macroeconomic level but also from the flurry of technology startups and development, particularly around the AI space. If you had to sort of look into your crystal ball, does the M&A activity kind of stay flat over the next couple of years? Increase, decrease? What do you think we’re going to see?

Tray Chamberlin: I wish I knew that answer exactly, because then I would be very rich and probably have better investments in the stock market. But nonetheless, I think we’re on a positive trajectory. I think there’s a lot of macro factors that are going to influence the amount of investment that’s put back, but I don’t think it’s going to be a spigot maybe like we’ve seen in the past 12 months over in the SaaS world and in tech, where there is very, very little investment overall. I think you’re still going to see a healthy amount of investment in digital health, and I fully expect it to accelerate, especially as these institutional investors and private equity companies are looking at the opportunity in this space and saying it is AI absolutely, but I think we would also be a little shortsighted to say there’s no other opportunities within the existing product sets just to get better. And so, I do expect that M&A activity to continue at a very aggressive pace. What it looks like, I’ll be just as interested to see where the funds flow. But my guess is it’s going to go into the digital health industry. What sector of that TBD.

Chris Civitarese: It’s fantastic. So as we wrap up, anything else that you want to share that you’re working on that you’re excited about? Anything at all?

Tray Chamberlin: Gosh, excited about a lot of stuff. Maybe two things that are most pertinent at the Alexander Group, what we’re focusing on, and some of it is just education of the industry. We have ongoing benchmarking studies that are continuously being rolled out. And so I think that’s a really good opportunity, especially for a lot of these startup companies or early stage, what we consider phase one companies kind of experience rapid growth and trying to figure out how to mature their commercial model. We offer a lot of benchmarks and things so that these companies can look at that and say, here’s what good could look like, or here’s maybe what I want to structure my team around in the future. And that’s one thing that we really love sharing because we find it really impacts those companies.

Tray Chamberlin: The second one is I’ve mentioned a lot of research and we’re consistently going out. We’re talking to digital health companies, we’re talking to the buyers. We’re just gathering large data points. And so at the Alexander Group, we run virtual roundtables on a very regular basis as opposed to our benchmarking practices. While they are data driven events, most of the time we’re looking at more programmatic topics. Is it demand generation? Is it customer success managers and how they operate in the market? Is it X, Y, z, whatever? It is very programmer topic specific events. And we run those quarterly, sometimes even on a more frequent basis. And so that’s something I’m really excited about because it gives us the opportunity to, to talk to 60, 70, 80 digital health companies who want to show up and hear about these insights. But I also learn, because I get to hear them chime in and share their experiences through this event, which is always a really humbling but exciting experience for us. And so those are probably the two things we’re probably the most excited about is we come into 2024 here.

Chris Civitarese: Excellent. And finally, if the audience wants to learn more about the work that the Alexander Group is doing, where can they go to find it?

Tray Chamberlin: Absolutely. Alexander Group.com, We’ve got a lot about our events, our research, our consulting services there, and hope we get the chance to interact with you.

Chris Civitarese: That’s fantastic. Thank you so much for joining us today, Tray. It was a real pleasure having you.

Tray Chamberlin: Absolutely. Thanks for having me on, Chris, and I appreciate the time.

Chris Civitarese: And to our listeners, if you enjoyed the conversation, please like, share and subscribe and help us to keep growing the show. And that’s it for today. Until next time, this is Chris Civitarese. Wishing you health and good cheer.

Naomi Schwimmer: To learn more about Taylor Healthcare, please visit Taylor.com/DigitalHealthcare. This podcast is for educational purposes only and is provided with the understanding that it does not constitute medical, legal or financial advice or services. The Digital Healthcare Experience is produced by Naomi Schwimmer. Podcast music by Nicholas Bach.