Selling a Dream

We're lucky. We spent a remarkably short period of time answering the existential startup question. We found surgeons, anesthesiologists, and seasoned healthcare IT executives that believed in our dream, and were willing to fund and pilot it.

We're among the most atypical startups on Earth:

• We have a billion dollars of free marketing (thanks Google)
• No one expects us to or holds us to having market traction
• We are competing in a green field (which we'll burn in our wake)
• Paradoxically, legacy health IT vendors have already validated the market for us, despite the fact that we're competing in a green field
• The CEO writes for what's widely recognized as the leading blog in the industry, HIStalk

The combination of all of the above empowered us to get off the ground faster than the vast majority of startups.

The moral of the story is that selling a dream is 10x more powerful than selling traction. That's why Amazon is worth $50B even though they don't make money. Jeff Bezos is probably the greatest dream salesman of all time.

The Genius of the Glass Explorer Program

I see four distinct forms of genius in the design of the Glass Explorer #ifihadglass program.

1) Ensure that Explorers love Glass.

I've interacted with over 100 Explorers. I've noticed some unique patterns and trends. These aren't unilaterally true, but apply to the overwhelming majority of those that I've talked to.

Explorers seem to love Glass blindly and whole-heartedly. There're lots of negative reviews of Glass the Internet, but the reviewers have incentives to be negative and sensationalist to drive web traffic. The average non-influential explorer has no such incentive. I've found that they're deeply in love with Glass.

Why?

Because Google created arbitrary scarcity, and made Explorers feel special for being chosen in a public contest in which 90% of applicants didn't get chosen. Additionally, Google arbitrarily raised the price of Glass to $1500, even though Glass will be priced at no more than $400 upon release.

http://blog.pristine.io/blog/2013/7/10/kjbs75or8znukxz8wndkfw9dcdpi3j

Who wants to admit that they spent $1500 on a silly product? That inherently implies a lack of intelligence on behalf of the consumer. There've been lots of studies that show that people will justify and rationalize purchases with higher price tags. It's the same psychology that drives flame-wars on the Internet, particularly in the gaming community.

2) Give Glass to the most influential people

How does the world's ultimate data company go about determining the 8000 most influential people in the country? Easy. Just quantify everyone's social media presence, and use that as a proxy for influence.

This also explains how some people won Glass for entries such as  "cut a bitch." Google later revoked those invitations, but the fact that they were handed out to begin with suggests that most of the posts were never actually read by a human.

http://arstechnica.com/gadgets/2013/03/proposal-to-cut-a-bitch-gets-selected-for-google-glass-program/

The combination of these first two traits has been a potent marketing tool.

3) Distribute Patents

The smartphone era induced a massive web of patent battles. Apple sued Samsung and Motorola. There were many others.

Google wants to crowd source every idea, and let the entrepreneurs patent everything as fast as possible so that no single company hordes the patents to sue everyone else.

4) Kickstart development for the app store

Google of course wants to get Glass in the hands of developers so that Glass can launch with lots of fun and interesting apps.

Blogging and Signalling

Blogging was one of the best decisions I've made in my life. It's one of the best signalling mechanisms.

I had a hunch going into 2013 that I would want to start a company, raise capital, attract talent, and ultimately ask for money from customers. In order to do that, I knew that I would have to showcase my brain. No one wants to give money to, work for, or be associated with an idiot. This challenge is even more pronounced in healthcare IT, in which my age works against me.

Blogging is one of the best ways to showcase one's brain in a format that anyone can digest and understand on their own time. Blogging is simple, universally accessible, and still incredibly powerful.

In addition to signalling, I've also discovered that blogging helps me collect and organize my thoughts, improve all facets of written and verbal communications, and calm my nerves. For the first time in my life, I carry fiduciary responsibilities. I am accountable to my investors, and I will do anything and everything to ensure that I return their capital 10x. That responsibility creates real pressure to perform. Since I don't watch TV or play video games anymore, I relax by writing and working out.

Thank you to everyone who's helped me get my writing career off the ground. I want to give special thanks to:

Dr. Robert Marcus, who's edited almost every post I've written since the start of the year.

Tushar Jain, who's held me accountable via stickk.com every week, and provided insightful, honest feedback on many posts.

Ryan Hoover, who's provided inspiration and given crucial feedback on a few key posts.

Dr. Travis Good, who's provided excellent guidance and mentorship as a fellow HIStalk blogger.

Tim, aka Mr. HIStalk, who's provided access to the best writing outlet and publication platform in healthcare IT on the Internet, HIStalk.

Battle of the App Stores: Athena vs. Greenway

This post was originally featured on HIStalk. 

Greenway and athenahealth are two of the more forward-thinking companies in health IT. Although they do have some older technologies in the background, they’ve adopted most of the newer tech stacks when and where possible.

Most importantly, both companies view themselves as platforms on which other apps can be built. They see themselves as app platforms and distributors, similar to the Apple and Google model and their respective iOS and Android app stores.

An app platform exposes application programming interfaces (APIs) that allow other apps to integrate with the core functions that the platform itself provides. Two fundamental types of APIs exist: data APIs and logical APIs. Data APIs expose data to third-party services. Logical APIs allow third-party services to be logically integrated into existing workflows.

A common example of a data API is when a third-party iPhone or Android app pulls up your contact list. A common example of a logical AP is integrating camera functionality into an app. In both examples, Google and Apple performed an enormous amount of work to build contact lists and a camera. They exposed the data and logic behind each function so that developers could integrate those functions into their own apps.

Let’s take a look at the athena and Greenway platforms.

It’s important to note that athena hasn’t actually launched anything of substance. Its current "release" is a soft launch that was timed for HIMSS13. The athena app store won’t be live for another few months at least.

Greenway beat athena to the market by a mile and finished the marathon before anyone else even started. Greenway launched its app store for HIMSS12. It has provided a few updates API updates since then, though I haven’t seen any remarkable jumps forward since the initial launch.

Next, let’s look at technology. Athena is only exposing modern, RESTful APIs. Athena isn’t exposing any logical APIs, only data. That’s not necessarily a bad thing, as data is more important, but it means that third-party apps can’t plug into athena’s existing workflows. All athena third-party apps must exist as standalone, independent entities.

For developers, RESTful APIs are awesome to work with. In many cases, they require just 1-2 lines of code to get a data back in a predefined, Web standards compliant structure (usually JSON).

Greenway doesn’t provide any logical APIs either. Unfortunately, they live on an older tech stack, so not all of their data APIs are RESTful. Many of them use the older SOAP format, which is much more cumbersome for developers to work with. Additionally, some of Greenway’s documentation is lacking. To be fair, that’s still better than athena, which provides no documentation at all since nothing has actually launched.

Both Greenway and Athena hired Mashery to help build their application platforms. Mashery helps technology companies build application platforms and expose APIs. It helps them make decisions about when and where to expose data, how to structure APIs, how to write documentation, and how to evangelize and entice developers to write on top of their platforms. Mashery is widely considered to be the best in the API management business, so it’s no surprise that both athena and Greenway turned to them. Neither company had experience building an application platform, so it was smart to bring in outside help.

Let’s take a quick look at business practices and models. Greenway’s model is not particularly friendly towards startups. They told my company to come back when we had customers, and more importantly, revenue. Greenway only wants to work with established companies that have real customers and real revenue.

From Greenway’s perspective, if they can’t monetize the relationship on Day One, it’s not worth pursuing. While I respect that logic, that defeats the entire premise of an app store — self-proclaimed "innovation at lightning speed." Quite a few pre-revenue companies innovate much faster than those with customers who slow them down.

Greenway also told me explicitly that if the company ever decides that it wants to be in my business (or any other developers’ business), it will gladly copy and steamroll me. Although I disagree with its thinking, it aligns with its business model: selling software as a service. Sell more modules and charge more money. I think the best thing Greenway can do is to grow the app store as fast as possible and create developer and customer lock-in. Stickiness is more valuable than marginal revenue.

Athena on the other hand is much more like Apple and Google. They don’t play favorites with their developers. Whether you’re a guy in a garage living on ramen or a $50M company, they treat you the same. This model reflects athena’s business model: give away software for free to sell administrative services and take money off the back end.

Athena doesn’t care if you replicate every function they offer and do it 10 times better. As long as the practice is an athena customer, athena is monetizing the billing and collections at the end of the day, not the use of any particular function of its many first-party apps. Athena’s interests are more aligned with those of its developers and customers.

I should make a grand statement of which app store is better, but that’s silly. Athena’s isn’t even out yet and I’m inherently biased against Greenway since they told me to go away. I would rather level the playing field, make knowledge public, and encourage all of the EHR vendors to learn from both the successes and the mistakes of athenahealth and Greenway. Hopefully other EHR vendors can learn to make better decisions on behalf of their customers and third-party developer partners.

EHR vendors, please, for the love of God, open up your platforms. It’s in your long-term best interest. EHR churn is rampant and only getting worse. Stickiness is way more valuable than marginal revenue. You’ve already built a castle, now build a moat. I’m especially looking at you, Epic, Cerner, Meditech, and McKesson.

Scorch the Earth

“In business, I look for economic castles protected by

unbreachable moats.” - Warren Buffett

I'm an intellectual. I like thinking about stuff. My favorite subject is business models. I love thinking through and analyzing business models. I find them to be fascinating. Nothing turns me on like a well-crafted business model. I'm also a writer that loves telling stories through analogies.

The best businesses on Earth are, as Buffet described, economic castles with by moats. By definition, every mega-cap company is a castle with wide moats. Otherwise the king at the nearest castle would have already stormed the new, massively profitable castle as it was being built next door.

A few examples of castles and their respective moats:

Coca Cola - marketing and distribution

Amazon - economies of scale

Walmart - economies of scale with retail presence

Microsoft - the Windows ecosystem (high switching costs)

Facebook - the Facebook ecosystem (high switching costs)

Google - search and the user data needed to optimize search

But the best kings aren't just those that build moats. After building moats, the best kings burn everything surrounding their castle to the ground, destroying any chance of prosperity in nearby lands. The further the enemy from the king's castle, the harder it will be to wage war at home.

What separates moat-building from earth-scorching? Earth-scorching is the process of making it unprofitable, and thus undesirable, to exist in related markets.

There's an old video of Eric Schmidt (that I can't find) in which he talks about some of Google's guiding philosophies. Schmidt learned the hard way what it means to lose on price. During the rise of business productivity apps in the early 90s, his team at Sun never thought that Microsoft could simply undercut them on price as they did. His strategic miscalculation cost him one of the largest fortunes in the history of humanity. He learned his lesson the hard way. That's why Google gives everything away for free. It's difficult to compete with free.

Being free is economically feasible in certain layers of the technology value chain, such as search, but obviously not in others, such as hardware. In hardware businesses, Google doesn't try to make money. They sell hardware at negligible margins to promote the use of their services at a higher level of the value chain. In the process of doing so, they're making it undesirable and unprofitable to be in the businesses on which Google relies to deliver customers to its front door. Android, Chrome, Fiber, the Nexus line, and the acquisition of Motorola were all driven by this meta strategy. Over time, Google will continue to milk profits at the end of the value chain while those who fall earlier in the value chain see their profits, cash, and resources wither. Google doesn't want anyone to even think about competing with them.

The best businesses aren't castles with moats. They're castles with moats that are oases in deserts.