A Consumer-First Healthcare Vision — Anne Wojcicki, CEO 23andMe

The Industrialist’s Dilemma — January 28, 2016

In the fourth session of class, we turned to our last speaker from the new economy. And as class came to session, it couldn’t have been any more clear that the choice of order was perfect. In our first few sessions, our speakers spoke about re-inventing broken pieces of the value chain — obviating the industrial companies that struggled to deliver value to customers. In our last session, we were joined by Anne Wojcicki, the founder of 23andMe. 23andMe offers genetic testing to consumers and provides individuals with information about their family history, their gene mutations, and the likelihood they’ll experience physical changes like baldness or the like.

With her robust information, Anne is not focused on attacking a piece of the value chain, she is playing her part in trying to build a completely new type of health care system. With 23andMe, Anne’s goal was to use information to put power back in the hands of the consumer. That mission, and a willingness to invest over the long term, put her in a position to ride some of the most disruptive trends of this era.

While the discussion ebbed and flowed, we couldn’t help but take away a handful of key lessons.

The Customer Isn’t Always the Customer

During class, Anne mentioned being at a healthcare conference early in her career where the subject of conversation was medicare billing rates. Hordes of people descended to discuss how much they could bill back to the government and to insurers — smart people, who otherwise might be able to use their collective brainpower to solve the actual problems of their consumer.

This was a wake up call. Healthcare companies weren’t focused on the patient. They were focused on the rest of the value network. Doctors cared how much they could bill for procedures, not whether they could prevent those procedures at all. Insurers were more focused on influencing regulatory action than enabling disease prevention. Hospitals were trying to maximize collections, not trying to reduce re-admittances.

Anne didn’t blame individuals for this focus; it was a structural problem.

With so many interdependent parties in the system, so far removed from the actual patient, it was almost impossible to maintain that connective tissue to the customer. Without stepping back, it was virtually unfeasible to realize your actions weren’t actually creating value.

This wasn’t the first time we’d heard this story — that the customer of industrial-era businesses wasn’t the customer of the products and services in question. In our previous session with Tony Fadell, there was a lot of discussion about how Nest’s disruption was playing out against Honeywell. Tony’s take was that Honeywell’s focus on driving performance for installers, not end users, kept Honeywell from delivering delightful products. Namely, because what delighted installers did not delight end users.

As Anne detailed the endless layers of abstraction within the healthcare system and how this kept the right type of care from being provided to patients, it became clear that one of the largest challenges facing industrial businesses is that the customer they serve is not always the customer using their products.

With the Right Information, New Revenues Can Be Added Later

23andMe’s focus was to offer value back to consumers through genetic screening. Understanding your own genome could provide patients much needed reasons to get extra exercise, change their diets, and avoid potentially hazardous behaviors.

Building that understanding of a genome was no simple task. To deliver real insight, 23andMe needed to go beyond what others in the industry were doing. Instead of just performing genetic screenings, the company uses their direct relationship to the consumer to ask questions — allowing Anne and her team to augment their massive genome data with incremental insights about who each individual contributor is.

Building the engine to collect this data set and offer users insight into themselves was only the first act. 23andMe’s second act is taking the data they created and massively simplifying medical research.

But unlocking a massive pool of genetic information is also going to allow Anne to change the way things worked in healthcare. In an industrial era, services were rendered to patients and then transactions ended. While there may have been a paper information trail of that patient, it was almost unusable for the research community. In part this is because insurance companies, doctors, and research institutions have few connections to individual patients. Even if it might have been previously useful for research, it is almost impossible to touch a patient’s data for scientific purposes.

Anne’s thesis is if she can both build a big enough database of genetic data — today 23andMe houses more than 1.2 million patient genomes — and maintain a connection to individual patients, she can just ask them if they’re open to answering questions later on or releasing their information for research. Her thesis, most individuals will be happy to offer consent to use their data if they believed it could help fight disease. As the data set 23andMe manages became more and more robust, it has enabled new research processes to be created. The company can monetize some of these research processes. Other processes they simply enable out of a mission to improve healthcare. But enabling any of these new processes was only possible with their information.

Many of our disruptors share these sentiments. Building a digital footprint seems to be the first step. Layering on additional products or services atop a data platform becomes the next step. For 23andMe, they know that having millions of patient records will allow them to disrupt a multi-billion dollar research industry. But they need a strategy that provides them with the information and the connectivity to patients before they can set about in this transformation.

Sometimes the Reaction to Innovation Is Unexpected

The last takeaway we had was that sometimes the impact of your disruption is non-obvious. Early in the class, we asked our students who 23andMe would impact most dramatically. The responses favored the existing drug development companies. If Anne can capture enough data, then why can’t she be able to simply build the next great pharmaceutical business.

The reality that Anne detailed was actually quite different. She always set out to empower individuals, but expected that her data would actually make the lives of clinical researchers and drug development companies easier. She could capture this information and help drive down the cost of healthcare R&D precipitously. In theory, while she was empowering individual patients to demand better care, she could simultaneously help improve the system that existed.

What she experienced was different. The academic researchers that she expected would make the best use out of this new pool of information reacted adversely. All the infrastructure and processes they’d put in place to obtain federal research funding was being made obsolete. And as opposed to embracing this new approach, many looked for reasons to reject it.

Call it culture shock or call it disruption. But the reaction from the academic community was certainly surprising to the team. Today, it’s actually the pharmaceutical companies that have best embraced 23andMe’s research approach, understanding how much more effective it can make them. Genentech and Johnson and Johnson have both gone so far as to invest in the business to help drive its growth.

Our takeaway for the many disruptors out there was that the reactions of potential partners and competitors may surprise you.