Vertical Innovation Leaders: How Telstra’s Healthcare Jigsaw is Coming Together

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.

Introduction

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.

 

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