Digital health venture fund and advisory team Rock Health recently published an excellent blog post outlining what they call healthcare’s “middle children,” defined as large-but-not-huge companies that should be eyeing expansion into healthcare.
The authors argue that these middle children have distinct competitive advantages over the cohort of technology giants that have recently been pursuing the healthcare space, which include the likes of Amazon, Alphabet, and Apple.
- Middle children with market capitalizations between $10b and $350b are large enough to make an impact in healthcare, but small enough to avoid the scrutiny of massive players. They are often consumer-facing, with business lines that could pivot towards a healthcare use case (picture Lululemon’s acquisition of Mirror).
- Larger middle children have deep pockets and talents pools (Salesforce, Nike), with the capabilities to pursue large healthcare goals.
- Smaller middle children have more specialized capabilities (Garmin, Airbnb), that could help with solving more focused problems.
Middle Children Advantages
- Smaller healthcare goals are big enough for middle children to pursue for growth, whereas much larger companies need loftier projects to warrant market expansion.
- Loyal customer bases can be activated by middle children to establish initial users while avoiding the regulatory attention quickly drawn by larger competitors.
- Specialized assets from middle children, such as logistics expertise or data analytics, can provide a competitive edge in healthcare.
Potential Middle Children Plays
- Blizzard could passively monitor behavioral health conditions for children playing its games
- Paypal could integrate Health Savings Accounts to help users manage healthcare spending
- Hello Fresh could offer health insights and recommend food products for delivery
The Takeaway
Gaining share within the $3.5t US healthcare market is a powerful motivator for any company looking to pursue a strategy shift, but even consumer-favorite brands will need humility to navigate the complex and quickly evolving environment.
Although middle children don’t specialize in the sector, Rock Health makes a solid case that they might be some of the best-positioned companies for healthcare disruption, and I wouldn’t be surprised if we’re reading about some of the plays listed in this blog post in next year’s business news.
