2018 saw Amazon and Apple both announce plans to open health clinics for their employees. These two companies are giants of the technology industry, but they each have very different approaches to doing business. It is, therefore, worth considering each company’s motivations and how this might affect the medical industry going forward.
One key benefit to both companies will be that they will no longer be reliant on third party healthcare providers to provide clinics for their employees, but this doesn’t give the full picture. For that we should consider the strategies of these two companies and what this suggests about the different directions Amazon and Apple might take their new health clinics.
Amazon’s trajectory so far points towards a future in which the company is involved to some degree in most areas of economic activity: the company that started as an online bookshop is now involved in all facets of online retail, is expanding into logistics, provides cloud services to both private and commercial customers, and recently acquired Whole Foods as a means for entering the grocery sector.
A common thread among many of Amazon’s new markets has been that they have all initially served the interests of Amazon’s established businesses. To take the examples above, the logistics service will serve the online retail business, the cloud services started out as a series of tools available to Amazon’s own engineers, while the Whole Foods acquisition provides a new distribution channel for Amazon’s online grocery service.
Viewed with the above pattern in mind, can we expect Amazon’s health clinics to one day be expanded out to serve consumers? That Amazon have partnered with JP Morgan, who can provide the capital to expand such a service, and Berkshire Hathaway, who are established reinsurers, indicates that this may indeed be the endgame of a service that has initially been set up to service Amazon itself.
In contrast, Apple do not appear to have made any moves to expand their AC Wellness centres beyond servicing their employees. However, these clinics are nevertheless well placed to complement their business of selling high margin devices and services, namely by providing a means for Apple to test out health and wellbeing related products and services.
Apple have clearly indicated an interest to expand into the health and wellbeing market, for example with the electrocardiogram functionality built into the new Apple Watch. They have also begun offering patients access to their health records on the iPhone, and recently announced that this feature is being rolled out to all US military veterans.
In recent years, with declining growth in the iPhone market, Apple’s strategy has been to drive more value from its existing customers rather than to pursue new customers. This is most clearly evident in the sharp rise in the cost of the flagship iPhones, but is also evident in Apple’s approach to its Watch and HomePod products. Rather than selling the Watch as a purely standalone product, its features are closely integrated with the iPhone, and indeed Apple requires that users own an iPhone in order to set up their Watch. Similarly, the HomePod has been sold as a high-end speaker with close integration with Apple Music, a service pre-installed on all new iPhones.
Perhaps the best way to consider Apple’s move into healthcare is as a way to leverage more value from its existing customers. That isn’t to say that Apple won’t be expanding its wellness centres beyond its employee base, but rather that the most immediate value will be as a testbed for new products and services that can be marketed to their existing customers.
The effect on the medical industry going forward
What we have here then is two very different approaches to advancing into the medical sector from two of the largest companies in the world.
Amazon’s approach suggests that they are viewing their health clinics in the same way they have viewed the other aspects of their business, and are at least giving themselves the option of expanding these clinics to consumers.
Apple haven’t yet taken any steps towards expanding their AC Wellness centres. This suggests that these centres will, at least initially, serve as a means to gather insight on how to advance their products and services rather than as end in themselves.
What is common to both approaches is they are part of the current trend of large tech companies seeking to move into new markets in order to supplement slowing growth. Since the medical sector is the latest area of interest to these companies, they will most likely look to acquire smaller companies that are already well positioned in this sector.
Medical technology companies should therefore be considering how best to position themselves to capitalise on this movement. By developing a robust intellectual property portfolio, established companies can protect their position in the market from future changes and smaller companies can make themselves a more attractive prospect for acquisition.