When IBM Watson announced it was expanding into healthcare, one of their first announced partners was Welltok, a digital health startup with the mission of transforming our healthcare system from one of sickcare to preventative care. Through its flagship software platform, CafeWell, Welltok guides all consumers, not just sick patients, towards healthy behaviors by providing personalized guidance, tools, and support to keep them healthy. At its core, Welltok is a consumer engagement company, using rewards (gift cards), social network (connecting them to others with common interest), and gamification (leaderboards) to help consumers meet their goals. However, Welltok’s secret to success is its diverse portfolio of healthcare solutions, helping consumers with everything from nutrition to smoking cessation to fitness. Instead of developing all these solutions in-house, Welltok has a suite of Cafewell Connect partners, organizations ranging from the American Heart Association to Fitbit to deliver the most up-to-date content and offerings.
Scaling Rapidly Through B2B2C and Partnerships
Welltok’s key to success has been its Business-to-Business-to-Consumer focus and its ability to continuously provide innovative solutions to meet consumer unmet needs. In the US, payers (insurance companies, government, and employers/unions) ultimately bear the cost of doctor visits, hospitalizations, and prescription drugs. For this reason, Welltok’s business model is Business-to-Business-to-Consumer (B2B2C), a model where instead of selling to each individual consumer, they sell into large sponsors (insurance companies or large employers) who then provide the service free of charge to their entire population. Both the sponsors and customers want the latest and greatest solutions to improve quality and decrease costs. Therefore, a key value proposition is Welltok’s ability to bring innovative new products to CafeWell. Customers know that by signing up with Welltok, they get the simplicity of dealing with one vendor while accessing the suite of solutions and content offered by Welltok’s partners. In that sense, Welltok serves as both a one-stop-shop as well as a curator of the best digital health solutions. One of the most crucial business decisions Welltok made was to not build those solutions in-house, instead choosing to partner with or acquire other companies.
Operating Model: Platform as a Service
Three key aspects of Welltok’s operating model contribute to their ability to align with their business model of finding and delivering the right digital health solution for all consumers.
The first is the design of their Product as a Platform, an overarching infrastructure where consumer data, preferences, and third-party apps can all interact through Welltok’s API. The genius of the platform is that it acts as a sales channel for other companies – Welltok does not need to be the best fitness or nutrition tools because it can deliver MyFitnessPal or Zipongo through its platform. Similar to other two-sided marketplaces, the platform brings innovative new products to consumers and sponsors, while at the same time opening up distribution and revenue opportunities for other health apps. Furthermore, this platform will serve as a virtuous cycle, leveraging its strong customer base to attract the best healthcare apps (and vice versa) and increasing value for all stakeholders.
Testimony from CafeWell Connect Partner, Zipongo
The second driver for their innovation is their People, specifically their leadership team and its strong lineup of well-connected VC investors sitting on their board. Their funding through VCs specifically benefits them in two main ways. The business development opportunities can be directly linked, evidenced by the fact that board observer Jack Young from Qualcomm Ventures is an investor in Fitbit and Predilytics (an analytics company recently acquired by Welltok). Furthermore, Welltok has effectively used their capital as a warchest, using deep-pocketed investors as a competitive advantage to grow through M&A (having acquired 5 healthcare startups to date), continuing to add to their lineup of leading innovators and entrepreneurs.
Finally, the Predilytics acquisition demonstrates the importance of Data to Welltok’s business model and mission. Predilytics uses predictive analytics to deliver actionable insights from wide datasets of healthcare data for insurance companies. Combining Predilytics’ analytical abilities, IBM Watson’s unstructured data interpretation, and Welltok’s rich ecosystem of services enables Welltok to collect and crunch massive amounts of data, leading to even better personalization for their consumers. They will more accurately predict which product offering or incentive structure will most effectively change consumer behavior.
While Welltok’s business-operating model alignment enabled the company to scale quickly (ranked #50 Fastest Growing Company in North America by Deloitte), that alignment has also built a protective moat against potential competitors. Ultimately, Welltok’s success will hinge on its ability to find innovative technologies that can truly and measurably reduce costs and improve outcomes. With the power of its platform, people, and data, I believe Welltok is well positioned to succeed.