We analyse the aggressive strategy Telstra has chosen to develop its digital healthcare business - which relies heavily on acquisitions across the whole eHealth value chain - and discuss how this fits into a wider companywide digital strategy, what it will take for Telstra to succeed in this vertical, and what insights other telcos can take away about their own digital health strategies.
Over the course of 2013-2015, Australian operator Telstra has invested heavily in acquisitions, tapping into the A$11.2bn (US$8.52bn) it received from the Australian government for access to its legacy copper network required to connect the country’s National Broadband Network. Telstra spent $1.2bn on acquiring digital businesses during 2015 alone.
Telstra’s stated aims were: geographic expansion of its core telecoms offerings, as illustrated by its acquisition of Asian carrier and managed services provider Pacnet for US$697Mn, completed in April 2015; and growing its digital service offerings, as illustrated by its multiple acquisitions in the digital platforms and applications space.
The telco has taken a particularly innovative approach to building its offerings in the healthcare vertical, where its ‘new digital’ investments have focused.
Telstra’s approach to establishing its digital (and non-digital) healthcare business is a good indicator of its future overall digital strategy, at the core of which is a highly customer-centric approach and a commitment to bringing agile and lean business practices to all parts of its own business.
Telstra, is, of course, not an established healthcare brand, either in Australia or elsewhere. As we discuss below, this has created a number of challenges, both in engendering relevance with healthcare customers and in achieving Telstra’s particular aims in the health space. The operator has sought to collaborate with or acquire health service providers in order to overcome these challenges.
Telstra’s overall strategy in regard to its digital health care investments and partnerships has been aggressive and unusual, both in terms of the telco’s rapidity in developing such relationships, and in terms of the relatively large number of eHealth companies which it has invested in or partnered with. Perhaps unsurprisingly, many industry observers have questioned the approach. Indeed, one could argue that the diversity of the acquisitions and partnerships points to a lack of clear direction, and that the sheer number of these may be difficult for the operator to manage effectively, let alone consolidate into a healthy and growing digital revenue stream.
This report addresses the following:
- Telstra’s approach to eHealth, and the key drivers for this
- How the Telstra Health acquisition strategy fits with Telstra’s larger digital strategy
- Impact and evidence of success thus far
- Key challenges and lessons learned
The Telstra approach to digital healthcare
The Telstra Health proposition
Telstra has targeted healthcare as the most important focus area for its move into broader digital economy activities, based on the ongoing societal and demographic shifts driving demand for healthcare services and spend on these, and on the high potential for digital technology to be transformative in the sector.
At high level, the primary objective of Telstra’s Health business is to address the central challenges or pain points facing the healthcare industry, and to combine the best features of the services and applications it acquires with the telco’s own core capabilities, to provide relevant digital healthcare solutions. Telstra has identified six healthcare challenge areas its offerings aim to address, shown in Figure 2:
Figure 2: Six Healthcare Pain Points Telstra Health Aims to Address
Source: Telstra Health
Telstra’s business model, its overall strategy in health and its objectives are all centred around using digital technologies to tackle these health pain points. In practical terms, its goal is to bring the advantages of the digital revolution to bear on the specific challenges facing the health industry – and to develop a profitable new revenue stream in the process.
- Executive Summary
- The Telstra approach to digital healthcare
- The Telstra Health proposition
- The Telstra Health offering: ecosystem and target customer segments
- Understanding Telstra’s healthcare acquisition strategy
- Telstra’s eHealth acquisitions and partnerships
- Other Telcos Have Been Far Less Acquisitive in eHealth
- How Telstra Health Fits Into Telstra’s Larger Digital Strategy
- Impact and Evidence of Success
- Revenue impact – A$1 billion by 2020 for Telstra Health?
- Impact on share price – a ‘digital bump’?
- Other measures of success
- Evaluating Telstra’s Objectives and Challenges for the Health Business
- Telstra’s external market objectives
- Telstra’s organisational objectives
- General eHealth market challenges
- Figure 1: Telstra Health’s key objectives and challenges
- Figure 2: Six Healthcare Pain Points Telstra Health Aims to Address
- Figure 3: The Telstra Health ecosystem
- Figure 4: Telstra Health: Provider Apps Offerings and Target Market Segments
- Figure 5: Telstra Health: Connected Care and Telehealth Offerings and Target Market Segments
- Figure 6: Telstra Health: Intelligence (Analytics) Offerings and Target Market Segments
- Figure 7: Telstra Health’s Spine Health Intelligence Ecosystem
- Figure 8: Telstra’s digital health acquisitions, 2013-2016
- Figure 9: Telstra’s digital health direct investments and key partnerships, 2009-2016
- Figure 10: Selected digital health acquisitions and investments – Telefonica
- Figure 11: Telstra Group Key Product Revenues: FY 2013-2015 (AUD billion)
- Figure 12: Telstra Revenue by Business Segment, FY2013-2015 (A$ billions)
- Figure 13: Telstra Share Price Performance – 2000-2016 (A$)
- Figure 14: Telstra Health’s key objectives and challenges