Pursuing a strategy shift similar to a number of IT companies like IBM and Cisco, health wearable companies like Fitbit are beginning to emphasize services rather than hardware as discussed in a recent article (see: Fitbit expands healthcare ambitions with new devices, subscription service). Below is an excerpt from it:
Wearables company Fitbit is deepening its reach into healthcare with a new premium subscription service for users that offers coaching and personalized insights mined from the health data it collects from 27.3 million users....Fitbit executives...announced the company plans to roll out a one-on-one coaching service in 2020 to help consumers manage chronic conditions like diabetes, which puts it in competition with digital health players Livongo and Onduo....Six in 10 adults have a chronic condition, and 4 in 10 adults have two or more chronic conditions....The cost of managing chronic diseases globally could reach $47 trillion by 2030....The company is transforming its business model from one of episodic device sales and hardware to focusing on services to support consumers' long-term health....The subscription service is part of that shift to being a services-based company,....Fitbit plans to leverage its consumer health data, collected over 10 years and 27.3 million users, to provide actionable insights on both an individual level and a population level....Fitbit's new premium subscription service will cost $10 a month or $80 a year out of pocket. It will also be available through the company’s one-year-old Fitbit Care business, a connected health platform for health plans, employers and health systems that combines health coaching and virtual care. Fitbit's Health Solutions business currently works with 100 health plans including Humana, UnitedHealthcare and Blue Cross Blue Shield as well as 1,700 employers. That business saw 42% growth in the first half of 2019 and is on track to reach $100 million in revenue this year....
A major focus on chronic diseases is not only the emerging strategic direction for wearable companies like Fitbit but also other health industry players like CVS (see: CVS Expands Its Healthcare Presence with Its New HealthHUB Stores; Retail Drug Stores Emerging as Healthcare Hubs for First-Tier Primary Care; Defining and Delineating the Changing First Tier of Healthcare). The first question to ask regarding this new direction by Fitbit is why the company is now favoring services over hardware. This question was answered in a recent Deloitte article (see: The shift to flexible consumption):
Over the last several years, the technology industry has seen a significant shift toward the adoption of flexible consumption business models. Flexible consumption models (FCMs)...offer customers product delivery and payment options that allow them to purchase access to products as a service. FCMs provide compelling benefits to companies that effectively deliver them to the market: They enable predictable, renewable revenue streams, deliver greater value to the end customer by allowing them to pay for only what they consume, enable deeper insights into customer consumption patterns to help inform add-on sales, and lower operational costs by enabling a company to serve customers at scale through a common platform.
The advantages of focusing on patients with chronic diseases seems to be obvious but I will restate them briefly here: (1) There are a huge number of such patients globally; (2) the cost of managing chronic diseases globally could reach $47 trillion by 2030; (3) many such patients are motivated to seek help to manage their diseases as opposed to younger people pursuing mainly fitness goals; (4) lifestyle choices, amenable to behavioral therapy, are the root cause of a high percentage of chronic diseases (see: Lifestyle Choices: Root Causes of Chronic Diseases); (5) many such patients are not very mobile and thus receptive to coaching via telemedicine in their homes; (6) health coaching and virtual care can be outsourced, allowing rapid growth and higher corporate profits; (7) providing remediation of chronic illnesses is appealing not only to individual healthcare consumers but also to health plans, employers, and health systems.
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