Some of you will know that HealthXL started life as an accelerator of early stage digital health companies. It was the hardest thing we have ever done and hats off to those to continue down this road. We changed course almost 5 years ago as we recognised the major challenges associated with the long term sustainability of the accelerator model in healthcare. Today, our clients are leading global healthcare and life-science firms who are looking for innovation. And it is interesting to see many of them launching or running accelerators in search of innovation. Are they right ? Will there be success where we (HealthXL) failed?
This week as most kids in Ireland (HealthXL has not-so-secret Irish roots) returned to school and we followed in their footsteps. On Tuesday, we headed back to Business School to learn about innovation and how we could apply those principles to improve HealthXL. The session, lead by Fergal Brophy, was strategic, practical and fun. If you are in the ‘innovation space’ and haven’t come across Fergal before, I strongly recommend checking out his YouTube channel.
Innovation = New ways of doing things that add value
For the past 10+ years, innovation has been a major focus for my work at IBM and HealthXL and yet, when asked for a good definition, it isn’t so easy to explain. For the purposes of this post we are going to use the following definition:
Simple! In these times of rapid change and competition, innovation is held out as the panacea to many of our major strategic challenges. The problem is it is really easy to say the word - it is very hard to live it day in, day out. There is general agreement that, like motherhood and apple pie, innovation is a good thing. The challenge is how to do it.
Back at Dublin Business School, we focused on the ‘How’ of innovation using the following model:
For the purpose of this post we are focusing on the top of the diagram - those areas that have the potential to add the most learning. From a corporate or large organisation point of view, there are many ways to engage with internal and external startups.
While there are many types of models (some focused on investment, some on spin-outs) they all revolve around the hands-on creation of companies or business models.
As there is so much activity and hype, we thought it may be useful to deep dive into one of the approaches - namely accelerator models based on a cohort of teams working over a short period of time to get to a milestone (usually funding via investment or customer traction). So, what is the recipe for a successful digital health accelerator?
1. Define the purpose from the start
Why are you and the company doing this? What is the point? Are you focused on building companies or building your company’s innovation brand via PR? Are you focused on building a network of external innovators or educating your leadership team? Do not pass GO until everyone has agreed and discussed what success will look like in 1-5 years’ time. This is a long term commitment and being clear on the end-point is really important.
“Make sure it is clear why we’re doing this, and get buy-in.”
Alexander Grunewald, Global Head, Health Tech Investment Strategy J&J
2. Patience - building a company takes more than 3 months
Building a company takes years. We can debate and argue about the number of years but hopefully, you’ll concur that most 3 month accelerators are just the start of the process. As the program starts, you’ll find your days filling to the brim with competing demands and before you know it, demo day will have arrived and the formal program is over. Now what? Finding ways to keep people engaged over the longer term is difficult but important. Hopefully, you will have created quite a unique community of entrepreneurs and mentors - many of them will want to continue engaging, albeit less frequently. How do you keep the community alive? Hint Harvard and McKinsey do an amazing job supporting their alumni and might offer some insights.
“Persistence, Persistence, Persistence”
Eugene Borukhovich Global Head, Digital Health Incubation & Innovation at Bayer
3. Align and manage your investors and their expectations
Someone has to pay for all this. Going back to point 1 above, clarity on the objective is key. Understanding your investors’ needs and expectations is important as there will probably not be a return unless there is a Black Swan. Investing in early stage companies for purely financial return is difficult and better to under promise and over deliver than the other way around.
Getting the balance between aligning with your investors/corporate executives is a common theme.
“One of the most critical success factors for us is to ensure a perfect match between ongoing strategic initiatives and projects within Roche and startups that have an innovative solution that can add value for them, while next to the content fit there also needs to be a fit between the teams and a willingness to co-create within the 3 months of the accelerator.”
Jochen Hurlebaus, Head of Innovation & IP at Roche Diagnostics
4. Protect against the antibodies
Innovation is hard at the best of times and even harder within a corporation which is specifically designed to deliver to a fixed business model and plan. Getting the balance right between having strategic support of senior execs is important coupled with new group freedom to operate differently.
After the initial excitement has waned, there maybe a tendency to put corporate structures and processes in place. The one advantage that the accelerator and the portfolio companies have is speed and flexibility - you do not want to give that away in search of optimising a process or aligning with corporate procedures.
“Empowering the accelerator to make decisions while keeping the group insulated from the day-to-day operations of the corporate office is important”
Maynd Jolly Head of Business Development, Innovation & Incubation @ Siemens Healthineers
5. Find a great COO to run the operations which will be 24x7
In my case, it was my wife - the role was well below her pay-grade, but she managed to engage with all the stakeholders in a meaningful way and keep them happy. You need a superstar to run the program. PERIOD.
6. Pre bake for success
Sourcing and attracting the best entrepreneurs and companies is critical. You can significantly increase the probability of success by improving the quality of inputs (read applications). The challenge is that the entrepreneurs you want are busy building their businesses and are unlikely to waste time filling out your application forms. In short, you’ll need to hunt them down and build a relationship about 6 months before the start. This also helps explore if there is alignment in advance and avoids discrepancies down the road.
Health warning: it will take 3 months, at the very least, to raise funding in most parts of the world. So, you might want to bring in a couple of companies who have some moolah lined up already, but can benefit from the others aspects of your program and voila - you have some success stories.
7. Stop driving and learn to navigate
Most drivers find it hard to switch to the passenger seat - I once heard a wise French VC say that being an investor is often like sitting in the front seat of fast car driving towards a wall - it takes guts and skill to stay calm and be a great navigator vs. going for the wheel.
Ensuring your mentors and team understand their role is to mentor vs run the operations is important - it is simply not possible for anyone to run 10 companies at the same time. The power is leveraging the collective experience (see next point)
8. Leverage the peer network
The real power of accelerators is the opportunity to leverage the collective experience of the startups vs. teaching them the lean canvas. Good entrepreneurs and teams can find education materials online. Finding customers and investors online is much harder.
“Ensuring startups have access to the best mentors/ collaborators/ navigators to grow their business is critical for a successful program”
Dr Junaid Bajwa , Global Lead for Strategic Alliances, Digital Centre of Excellence at MSD
9. Stop reinventing the wheel
Time and time again we see very similar companies tackling the same problem the same way - HIMSS every year brings together thousands of EHR vendors who have very similar offerings - same for accelerators - yet another patient support community - starting with the problem or the gap is super important. Figure out the gaps before you start and focus on recruiting great teams in those spaces
10. Fun - Enjoy the journey
Prepare for the rollercoaster ride. Great accelerator programs are infectious. They create a ball of energy focused on solving real problems. They are also exhausting and everyone will feel overloaded at some point. As the operator, you will share the joys and pains of the teams as they pivot and learn, or fail. It is easy to get swamped and get distracted with the sheer volume of work.
“Add the “fun” factor: Innovation teams/accelerators should think freely and incorporate new concepts (e.g. events, communication channels) to encourage engagement with the rest of institution. Examples include a hospital-based hackathon and idea labs.”
Dr. Adam Landman - Emergency Physician and CIO, Brigham and Women's Hospital.
We don’t pretend to have all the answers
We would love to hear your thoughts and feedback. Do you agree with our recipe or did we miss a few key ingredients? Any examples of success (or failure) that you want to share?