Wellness trends in 2018: A glimpse into the future
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:
- 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.
- 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.
- 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.”
- 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.
- 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.
- 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.
- 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.
[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!]