Wellness trends in 2018:  A glimpse into the future

by Dec 1, 2017

As thought-leaders in the industry, we’re frequently asked what we think the future will bring to this quickly morphing world of wellbeing.  So far, we’ve built a pretty good track-record for predicting these things … let’s see how we fare with the wellness trends we think are in store for our industry in 2018.

  • Bloodier waters. Especially as vendors continue to acquire others and grow, all of the “big” players are battling for the same Fortune 1,000 clientele.  It’s a zero-sum game, and there are only so many opportunities to win business in that arena.  The middle-market (the actual size of which varies greatly depending on who you ask) is the hottest sector, but few companies have figured out how to offer enterprise-level programs for mid-market clients at reasonable prices, while still remaining scalable.  We expect the intense competition to continue at the “top,” with a smaller handful of vendors stepping up as leaders in the opportunity-rich middle market.
  • Innovation slow-down. First, we should clarify what we mean by innovation.  For many, innovation is partnering with another vendor to offer more services – in our book, that’s not really innovation as much as it’s a “snap-on” approach.  It can be beneficial, in some cases providing clients with additional features, but it’s not what we classify as real innovation.  We define innovation as product and feature enhancement and improvement developed internally and systemically … and this is something we see slowing down in 2018 even more than it already has.  There are a few reasons for this, many a result of the massive consolidation we’ve seen in the last few years:
    1. Resources are spent on merging platforms.  When one vendor acquires another, technical resources are focused on how to merge the two platforms.  Which features stay … which go away … what will branding be …  not to mention the incredibly arduous task of merging code bases, which may or may not even be written in the same language.  With development teams busy tending to the housekeeping involved in the merger itself, it’s tough to allocate dev resources to true innovation.
    2. It’s tough to please all of the people.  As the large vendors acquire other vendors and become even larger, their client list grows dramatically, to the point that some vendors have several hundred or even thousands of clients.  Clients who select huge vendors like that are looking for stability and predictability.  Making changes in program features, even if resulting in significant improvements, is typically risky for vendors like this, because the last thing they want to do is rock the boat.
    3. Large clients don’t like change.  As vendors grow larger, whether by investment or by acquisition, the average client size typically grows.  Some vendors in this space have minimums of 5,000 or 10,000 lives.  Groups that big are likely to take a more “generic” approach when selecting a vendor, because they need to make sure they appeal to as many people as possible within their own organization.  While “pink bubblegum” is more exciting, stimulating, and may enjoy greater sustainability, many larger clients will opt for “vanilla.”
    4. Brakes from the board.  Bigger companies typically have bigger outside Boards of Directors (especially if they’ve accepted any of the aforementioned capital investments). Some board seats go to business people – institutional investors – who know a lot about how to make money, but little about our industry.  Their interest is in maximizing top-line (revenue) growth as opposed to client happiness, product enhancement, and additional program features.  Because it costs a lot to innovate, a board – especially after an acquisition – will often direct an organization to focus on sales before or even instead of innovation.
    5. It takes guts to innovate.  Let’s face it.  Not every idea is a good one.  We’ve certainly come up with some crazy ideas that failed for good reason (did I mention the wellness “blings” we came up with in 2007?  But I digress…).  But in stumbling and finding out the hard way what doesn’t work, we’ve learned a whole lot about what does. It’s that risk-taking mentality that pushes the wellbeing industry to think outside the box, and large companies beholden to a board of directors are sometimes reluctant to take that chance.
  • Vendors opt for scalability over service. As vendors grow, they have no choice but to trade high-touch service for scalability and a more templated approach.  There’s no way you can provide white-glove service to thousands of clients and remain scalable.  The business model, by definition, must go one of two ways:  high-touch or highly scalable.  Neither direction is “right” – it’s simply a decision by the business to be large and scalable or smaller and service-focused.  Because of the consolidation we’ve pointed to a number of times here, most vendors have little choice but to opt for scalability.
  • Customization becomes not-so-customized. This too comes down to the scalability that’s becoming more important as consolidation continues and vendors take on more clients.  Starting with a turnkey program and offering a few options for “customization” isn’t true customization – yet that’s what many vendors are forced to do as they grow too large to truly tailor a program and promotional plan to fit each client’s unique goals and needs.
  • Shift to “wellbeing.” Okay, we’re cheating a little here, because this has already begun to happen.  When we started in 2007, everyone knew this industry as “wellness,” even though many vendors already focused on things beyond the clinical stuff (screenings, assessments, and coaching), and basic physical activity and nutrition (physical health).  For instance, even our earliest Challenges-of-the-Day dealt with sleep, resilience, finances, and emotional wellbeing.  But still, we – everyone, for the most part – called it “wellness.”  In the last year (ish), we’ve seen a shift toward referring to it as what it really is – “wellbeing.”  The difference boils down to a distinction between physical health (wellness) and a more holistic focus (wellbeing).  Surely 2018 will solidify that delineation, and nearly everyone will climb on board, referring to their programs as wellbeing programs rather than wellness programs.
  • Everyone can’t get $1. Each year has brought us new “pillars” to wellbeing.  Most vendors started with physical activity and nutrition, and have since added a focus on sleep, stress, resilience, diabetes-management, and so on.  ”Point” solutions, such as SmartDollar for financial wellbeing, have popped up like mushrooms, all fighting for rays of sunshine and all asking for roughly $1 PEPM.  And we don’t think the majority of clients will pay it, especially since there are often multiple “extra” vendors to consider.  With full-blown wellbeing platforms going for $3-$4 PEPM (or less as we get into the Jumbo market), there just isn’t enough room for everybody to get an extra dollar PEPM.  We predict that the best-of-breed will quickly hitch wagons to lead horses (…more consolidation, anyone?), while the others will struggle and ultimately vanish.
  • More consolidation (duh), but at a slower pace. We’ve been seeing consolidation in the wellness/wellbeing industry now for a few years, so it’s not surprising that the mergers and acquisitions are likely to continue into 2018.  There are a couple of reasons we’re seeing this consolidation:
    1. Time’s up…investors want to cash out.  Most of the vendors in this industry have accepted funding in the form of venture capital, private equity, or growth equity.  This is helpful when companies are starting out or want to grow quickly, because it provides them the cash infusion to build sales teams and infrastructure.  But investors don’t just say, “Here’s our money – keep it forever.”  They typically want their money back (with a handsome return, of course) within 2-5 years.  If the recipient of this type of funding doesn’t have the cash to pay back investors when the clock runs out, they have limited options – and a common one is to raise cash by being acquired.  This conundrum was beautifully articulated in a “post-mortem” written in November 2013 by Healthrageous founder Rick Lee, who said in part, “As soon as you take institutional money, the clock starts ticking.”  Healthrageous got the ball rolling, and massive consolidation has continued in this industry at a frenzied pace ever since.
    2. Synergy of services.  Many vendors are being acquired by strategic partners or even competitors who find their services to be complementary, creating what both sides agree is a “win-win.” This acquisition is an example of win-win, synergistic acquisitions. When Castlight Health bought Jiff earlier this year, it was a similar strategic arrangement.  While both are digital platforms, Castlight is a “transparency” program and offers consumers a platform for personalized health and benefits “shopping.”  Jiff is a digital solution that serves as a “hub” for wellbeing and benefits programs.  And even as I’m sitting here writing out these predictions, Vivarae has acquired SimplyWell.
  • While we think the consolidation will continue, the rate of consolidation will slow considerably.  The biggest reason for this is that there just aren’t that many companies left out there that are in a position to be acquired.  Most have already been acquired, or have too much debt to be attractive to potential acquirers.  With a few notable exceptions, the only companies left for acquisition are the smaller “guppies” that have been popping up in the last five years or so.

If you have any thoughts you’d like to share with us about your visions for the future of corporate wellness, please drop us an email or give us a call.

[All this talk about consolidation probably has you wondering where Sonic Boom stands heading into 2018 – will we be the next key wellness vendor to sell or merge? Or will we remain the only self-funded and Co-Founder-managed player in the wellness big leagues? We’ll have that answer (and more) in an upcoming post – stay tuned!]