Advice

How Our Market Made Us Leap

We were sailing along enjoying success when the Great Recession struck a direct blow at our customers’ budgets — and thus at our business model.

Since 2007, Get Real Health had been developing custom patient engagement and personal health applications for clients — typically large healthcare providers. We were successful in that market and things were good and stable.

Then the economic downturn hit. Our customers’ ability to afford hundreds of thousands of dollars for a custom build deteriorated quickly.

We could have become just another casualty of the recession at that point, were it not for an important observation about our market. We realized that a large number of our customers had been ordering similar features and functionality in the custom apps we were creating for them. For example, many wanted to help patients manage their weight, diet, exercise, hypertension, diabetes, and so on.

Based on that observation, we concluded that we could shift from offering clients an expensive bespoke solution to selling them an affordable off-the-rack product. By building a set of reusable application pieces that could be assembled cost effectively into solutions — think high-tech Legos — we could create a suite of prebuilt modules that could be assembled more quickly and less expensively at the client site. The result was our flagship product: InstantPHR™.

Changing from a custom services provider to an off-the-shelf product developer, however, would require enormous effort re-focusing our processes and resources. The new direction would change how we go to market, since marketing and selling a product that has fixed pricing and fixed features is fundamentally different from marketing a custom solution. We would have to change how we treat intellectual property, since we would be licensing software that we own instead of building software for the customer to own.

As we transformed Get Real Health from a custom solutions shop to a product licensing company, we changed not only our business model — how we make money — but also our operating model — how we organize ourselves to research, develop, price, deliver and service our product. We had to revamp our management tools to evaluate profitability per customer in a completely different way.

Fast-forward to today: The new strategy has enabled us to deliver offerings to the market at a lower price but, ironically, with a higher profit margin. Get Real Health is bigger and growing faster than ever.

The transition taught us a lot about business and leadership. The old crisis-as-opportunity aphorism is true — but it requires scary and difficult changes to embrace. The idea of becoming a licensed software company was not novel to us. We had actually considered it for a long time. Having spent nearly nine years as a professional services company, however, we really knew that business and we were very comfortable. Thus, we had been hesitant to change.

When we saw the recession-caused market tsunami coming, we knew we faced a choice: either shrink to survive amid reduced business — or make the leap. Without the market forcing us to that cliff, I’m honestly not sure we would have jumped.

I learned that it’s critical for CEOs to regularly think about their overall business model. How well is it working? How well would it work under different economic conditions? What options exist — even if no one in the company is ready to hear them? Discuss the pros and cons and risks of changes with the entire senior management team.

By getting out in front of these questions, a company’s leadership will have already figured out some alternatives and decided how it would navigate change if necessary. That way, a crisis really can be an “opportunity” to execute a detailed new business plan, rather than having to start from zero in panic mode.

As we waded into our transformation, our leadership team learned to prioritize, delaying permanent solutions in favor of stopgap measures while we developed our new corporate infrastructure. We recognized that our needs would change once we reached a certain scale, but that we wouldn’t have to actually handle that scale until later.

We decided to stay reactive on those fronts while being proactive on building the best product for the market and getting it out there, even if every detail wasn’t fully proficient right out of the gate, because we saw that we couldn’t do everything at once. We first had to make some sales and satisfy real customers before we would know if we truly had the potential to achieve scale.

We had always listened to our customers, but we had done so in isolation. We learned to listen differently, asking not only what our customers want, but analyzing how their feedback fit with market trends. We now listen to many stakeholders, then bring all that information together to prioritize and make decisions as we focus on innovating new solutions and enhancements.

The principles of agile corporations and agile development very much informed our new approach. We could have sat in a room with a big white board and tried to design something we thought was perfect, only to realize we had missed the market. Instead, we learned to iterate quickly and not fear mistakes — to “fail fast” by quickly going to market and getting rapid feedback.

Finally, we didn’t go it alone. We talked to business partners who had started licensed software companies. We looked at the company 37 Signals as an example of a business that had used this agile approach. We really listened to people in our networks to understand the fundamental challenges and priorities facing us.

Most importantly, we had those conversations ahead of time, so we wouldn’t feel like we were just blindly leaping off a cliff. We did the groundwork to understand the best way for our company to identify and adapt to changing market conditions — and it made all the difference in helping us land on our feet.

Mark-headshot-1# # #

Mark Heaney is the CEO and Founding Partner of Get Real Health, an award-winning global health information technology pioneer specializing in patient engagement and connected care solution.

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This post is courtesy of a guest post from a contributor to CEO Blog Nation. CEO Blog Nation is a community of niche blogs for entrepreneurs, startups and business owners. For more information on contributing a guest post read here: http://ceoblognation.com/guest-post/

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