Healthcare IT startups have become too willing to accept pilot status


“There’s no such thing as a natural-born pilot.” – Chuck Yeager

Today I typed the phrase “famous pilots” into Google and the top response was “Amelia Earhart.” I thought that particularly appropriate since I had planned to write this particular blog post on the plague of healthcare IT pilots that has become a black cloud over the current entrepreneurial world.

For those of you who were raised in a barrel and unaware of the famous pilot, Amelia Earhart is most well-known for heading out over the Pacific and never being seen again. She did a ton of other things too, notably being the first female aviator to fly solo across the Atlantic Ocean; but what she is most recognized for is setting out as a pilot and never completing the trip.

It’s an apt metaphor for what we are seeing happen in the healthcare marketplace today. Small companies, in order to get attention from the large buyers they desire as customers, are consistently required to engage in pilots to prove their worth. Pilots are basically test periods where the product is implemented at the potential customer’s site and the company and would-be buyer work together to determine whether the product’s value proposition is a valid one, especially for that particular customer use case.

Pilots may or may not result in any revenue for the startup and may in fact cost them money to implement. Pilots also cost the customer money and time. The idea behind them is that, by proving efficacy, the potential customer will be compelled to become a permanent one and enter into a long-term agreement to use the company’s wares. But all too often this never happens.

“There are old pilots and bold pilots, but no old, bold pilots.” – E. Hamilton Lee, ‘Ham’ Lee, World War I pilot

Healthcare IT startups have become too willing to accept pilot status, particularly after they have demonstrated that their product works. And payers, providers, pharma companies and others who are interested in digital innovation have become too willing to start pilots that, by and large, never land. It’s become a bit of an epidemic and far too many companies are now engaging in 3,4,5+ pilots, none of which are tied to long-term contracts based on measurable successes.

I was at a the recent Health Datapalooza conference where the epidemic was referred to as both Pilot-Palooza and Pilot Paralysis. Another speaker referred to revenue acquisition as “the path from Pilot to Procurement” as if this were the obligatory predetermined first step in the customer acquisition process. And in fact, that’s what it has become. No one just buys healthcare IT or digital health products these days without a test drive. And that’s somewhat reasonable given the large investment in technology integration, workflow adjustment and capital required to implement a significant new healthcare technology program. But the flight path that ensures the pilot gets to procurement is often left uncharted, and this is a big problem for all involved – in effect, Pilot Error.

“In soloing-as in other activities-it is far easier to start something than it is to finish it.” – Amelia Earhart

Why is this happening? There are so many reasons and entrepreneurs often fail to understand why their pilots never reach a destination called Revenue.

Startup companies have gotten so desperate to put points on the board (mainly to raise money) that they will agree to pilots with big name clients without requiring long-term contractual commitments when and if the pilot is successful; in effect they turn a round trip into a one-way flight.

Too often the metrics that determine success are left far too vague so the buyer can extend the pilot forever without clarity about whether the destination has been reached.

Sometimes the buyers’ role in pilot success is left too open-ended to know why a pilot doesn’t reach its destination; and sometimes the people responsible for implementing pilots at customer sites are the ones who might be disintermediated or have their job changed if the pilot succeeds.

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Sometimes the startup fails to understand the buyer’s actual implementation and operational requirements and stalls out failing to engage users in a way that would produce real results.

At times entrepreneurs will enter into pilots promising product features that aren’t quite ready yet and that extends the pilot’s runway until it disappears into the horizon – a kamikaze mission that has no chance of ending well.

I have also noticed that some large company innovation groups measure their own success by the number of new companies/ideas they bring in to pilot. “Look,” they say, “we got operations to try some new things so we are innovating.” What they sometimes forget to do is jump in the co-pilot seat and share ownership of the pilot’s success with the startup and the operations team. Just throwing a pilot over the wall tends to irritate operations (which has to support it) and does little for entrepreneurs, who can’t succeed inside a large organization without a real champion sitting next to them to weather the inevitable storm of change.

“The quality of the box matters little. Success depends upon the man who sits in it.” – Baron Manfred von Richthofen, AKA The Red Baron

So what? You ask. Here’s what: a few pieces of advice for those engaging in pilots:

For customers:

  • Only pilot what you intend to buy (assuming it works).
  • Think hard about whether a pilot is really necessary. Maybe it’s just better to take the time to vet a company’s existing implementations and then commit to each other for real as vendor and customer. If the product has been well-vetted by other paying customers and the operations team is actually trying to solve a problem, go for it. A well-written contract can address a lot of problems but an interminable pilot gives all parties an excuse not to go all-in.
  • Vendors should get paid for pilots. It ensures the young company can commit the resources to a customer’s success and ensures the customer puts a real value on the experience. Things that are free are often considered value-less.
  • Avoid pilots that have to be managed by internal team members whose jobs may change as a result of success. People hate change and fear job loss and sometimes justifiably so. When you ask team members to judge a product that, in effect, results in their lighting themselves on fire, assume they will find your pilot lacking.
  • Be honest with yourself about how much customization you really need from a vendor. Customers have a tendency to think they are each unique and it’s rarely true when push comes to shove. But if you do need customization, don’t expect startups to deliver it in a pilot where you haven’t made a long-term commitment to pay. Customization comes with a long-term contract.

For startups/vendors:

  • Be sure your pilot customer has intention and budget to buy. If you are giving a reluctant customer a free product, they won’t value it.
  • Pilots must have a distinct beginning and end and concrete, measurable, mutually agreed metrics for measuring outcome. Achieving those outcomes should automatically trigger an operating agreement negotiated as part of the pilot contract. Failing to achieve them should result in the end of the pilot and the end of the project, not the interminable extension of the pilot.
  • Don’t do pilots that operations “has to do” to support innovation groups that have no stake in the outcome. Make sure everyone’s interests are tightly aligned before agreeing to go forward. If they’re not, don’t.
  • Don’t commit to pilots that will require features you can’t deliver. Be honest with yourself about readiness and ability to meet the customer’s needs because you only get one chance. If you’re not ready, don’t start the engine.
  • If you agree to do a pilot, make sure you put your best people on the team and deliver unbelievable service, not just technical or clinical results. Build a real relationship with the customer because you expect to be with them a long time.
    Be choosy about agreeing to and/or offering up pilots. Small companies can only do so many things at once and even fewer if doing them well.
  • When you have proven you can deliver great results for multiple clients, you shouldn’t be doing pilots anymore; instead you should be entering into contracts with performance guarantees.

“There are always door openings. And gradually, it accumulates. The opportunities open up in front of you.” – Buzz Aldrin

For Everyone:

  • If it’s clear the pilot isn’t working, stop it early. Why waste time and money perfecting your mistake?
  • Put your A team on the pit crew; products are nice but people are essential to success. Effective implementation will require skills, collegiality and a mutual commitment to success even when the process is turbulent.

Image pulled from original article

This article first appeared on MedCityNews and was written by Lisa Suennen

About MedCityNews

MedCityNews is the leading online news source for the business of innovation in healthcare. It offers insight into what’s next and what matters with a mix of breaking news and analysis on startups and established industry leaders, personalities, policies and the most important deals. Read more from MedCity News

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