Our detailed analytical model of 217 digital healthcare markets shows that the COVID pandemic has accelerated the global market four years ahead of its prior trajectory. This means that telcos and others seeking to support this welcome acceleration, and thereby grow valuable new businesses, should boost their plans now.
This report introduces a new sizing model for digital healthcare that reflects the recent impact of the COVID pandemic on the sector, with the goal of identifying the new opportunities and risks presented to operators and others attempting or considering investment in the market. A key finding is that market development has been accelerated four years ahead of its prior trajectory, meaning that players should significantly reassess the urgency and scale of their strategic application.
Download the additional file to access the database tool accompanying the analytical report
STL Partners has long argued that if telecoms operators want to build new businesses beyond connectivity, they will need 1) clarity on which customer needs to address and 2) long term commitment to investment and innovation to address them. Adding value farther up the value chain requires significant new skills and capabilities, so we believe telecoms operators must be deliberate in their choice of which customers they want to serve, i.e. which verticals, and what they want to do for them. For more detail, see STL Partners’ report How mobile operators can build winning 5G business models.
We believe that healthcare is a vertical that is well suited to telecoms operators’ strategic scope:
- Healthcare is a consistently growing need in every country in the world
- It is a big sector that can truly move the needle on telcos’ revenues, accounting for nearly 10% of GDP globally in 2018, up from 8.6% of GDP in 2000 according to WHO data
- It operates within national economies of scale (even if the technology is global, implementation of that technology requires local knowledge and relationships)
- The sector has historically been slower than others in its adoption of new technologies, partly due to quality and regulatory demands, factors that telcos are used to dealing with
- Improving healthcare outcomes is meaningful work that all employees and stakeholders can relate to.
Many telcos also believe that healthcare is a vertical with significant opportunity, as demonstrated by operators’ such as TELUS and Telstra’s big investments into building health IT businesses, and smaller but ongoing efforts from many others. See STL Partners’ report How to crack the healthcare opportunity for profiles of nine telecoms operators’ strategies in the healthcare vertical.
Our research into the telecoms industry’s investment priorities in 2021 shows that the accelerated uptake of digital health solutions throughout the COVID pandemic has only shifted health further up the priority list for operators.
Figure 1: Digital health is among telcos’ top investment priorities in 2021
Source: STL Partners, Telecoms priorities: Ready for the crunch?
However, few operators have put their full effort into driving the transformation of healthcare delivery and outcomes through digital solutions. From our conversations with operators around the world, we believe this is in large because they are not yet fully convinced that addressing the challenges associated with transforming healthcare – fragmented and complex systems, slow moving public processes, impact on human lives – will pay off. Are they capable of solving these challenges, and is the business opportunity big enough to justify the risk?
Taking a cautious “wait and see” approach to developing a digital health business, launching a couple of trials or PoCs and seeing if they deliver value, or investing in a digital health start-up or two, may have been a viable approach for operators before the COVID pandemic hit, but with the acceleration in digital health adoption this is no longer the case. Now that COVID has forced healthcare providers and patients to embrace new technologies, the proof points and business cases the industry has been demanding have become a lot clearer. As a result, the digital health market is now four years ahead of where it was at the beginning of 2020, so operators seeking to build a business in healthcare should commit now while momentum and appetite for change is strong.