Wednesday, October 16, 2013

Health Exchanges

Utility and Scale. When we think of the next best, best thing in terms of the evolution of a new company providing a new service or product we need to think utility and scale; the corporations of past accomplished this via product cycles that literally took decades (some often centuries), but the new paradigm is a content-based platform that accomplishes some utility on a massive scale.

Along those lines, I wanted to illustrate (via the image above courtesy of Milward Brown) how NOT to capture scale, even with arguably a very, very good utility. What can we learn from this as financial farmers? Well, if you truly want to Invest Like A Farmer then you MUST have an understanding of utility and scale. On the Oct. 2 blog post we touched on this subject as the next best website or business being one that can capture the economies of scale that the web offers by providing a utility. We further went on to discuss the viability of having a DNA or health-based solution. should have been the Next Big Thing; why did it fail (at least initially?) Sadly, it didn't mimic the ease of enrollment of nearly every other massive-scale website; think about the large online auction site, the social networks, the retailers, etc. ALL of them require approximately 5 minutes to enroll. 5 minutes. They are masters of utilizing a lean enrollment process to secure the largest, and fastest, exponential growth of a platform. A user wants to access the utility (see Oct. 2 post for further detail) as soon as possible otherwise interest is lost.

Utility and Scale; to Invest Like A Farmer we want to identify and consider putting capital to work with companies that have an effective process in place to rapidly acquire new customers and provide them with a useful utility immediately. This can be accomplished with a strong brand, accessible price point, and proven utility to the buyer; any impediment to the purchasing cycle ultimately drives buyers to alternative, more effective sellers; whether in automobiles, soda pop, or health care. The system that provides superior utility and scale wins.