With Naomi Allen, Co-Founder and CEO at Brightline
Setting the scene
As investors, the type of companies that we invest in are redefining the rules of an entire industry, and defining a problem that’s never been solved before. Ultimately the world’s greatest technology companies, define and are synonymous with a category which they solve uniquely well. We’re fascinated by this concept, and we’ve been exploring it for three or four years with some of the world’s leading thinkers like Dave Peterson from Play Bigger and practitioners from across our portfolio.
Naomi Allen is the co-founder and CEO of Brightline, which is the world's first technology-enabled behavioural health home for children and families. She's an entrepreneur with 20 years of hands-on experience, developing high growth, health tech companies, as well as a former advisor to our friends at Play Bigger. She's also the mother of three children and ascribes to the philosophy of “radical flexibility”.
Category Design - what is it and why is it important?
Twelve years ago, I was a founder at a company called Castlight Health in 2008, and as we were preparing to take Castlight public in 2013, we quickly discovered that people didn't know what we were about. We had built this extremely novel product, we were one of the very first health tech companies that were innovative in the United States. But we struggled for people to understand us as a business i.e. what was the major problem that we were solving in the US healthcare system, and what was the special sauce of how we were solving it. As a leadership team, we brought in the group from Play Bigger - Dave, Al & Chris - and we spent several months together, talking about what was the business at our core DNA. What I learnt was, in many ways, it's not the product that wins the day for growing companies, it's not even the company, it's about defining a category which shows the world:
There are so many examples of this that I find fascinating. If you think about where Microsoft was many years ago, none of the products that they ultimately put together into the Microsoft Office Suite was in and of themselves, the best products. What was fascinating about Microsoft was they painted a story about enabling professional workers with a whole suite of tools, and they helped ignite the idea that it is valuable to have an email tool integrated with a spreadsheet tool integrated with a presentation tool. They painted a new category. For many years, Microsoft just introduced category after category in a powerful way, even though in many cases that was not with the best products, or even necessarily the best company structure. Category design is, to me, just a fundamental way for companies to win massive new markets.
Laying the foundations for a new category
Laying the foundations for a new category is very difficult to do in the first six months of starting a new company, but it's never too early to start thinking about a category. Early on, founders should be spending a lot of time talking about the problem they're solving and understanding how they are uniquely positioned to solve that problem. Speaking personally, I'm a mom of three kids and one of my kids has had his journey in the behavioural health experience. In the US, it is incredibly hard for families to access high-quality health care for behavioural health. So, we spent a lot of time the first months of Brightline just talking to families about what's the hassle map, what are all the challenges you face etc. We spent a lot of time sitting in that problem space. I think so often entrepreneurs are so eager to go tell the story and then envision that we leap forward to what we think the answer is before we've spent enough time in the problem space. Ultimately, category design is around deeply understanding a problem you're solving and having, a unique perspective on what it takes to solve that problem, and then figuring out a way to invite others on the journey with you to create an ecosystem around a new category.
Before founding Brightline, I was the Chief Growth Officer for Livongo. I joined Livongo pre-IPO at the time where Livongo was moving from being a diabetes management company to managing care for a bunch of chronic conditions. They had a diabetes solution, they just launched hypertension, we had acquired a diabetes prevention company, we were in the midst of acquiring a behavioural health company. So, the challenge Livongo was facing was that they were rolling up care around a bunch of chronic conditions, but so was everybody else. If you looked at the competitive landscape, what was happening in the chronic condition management space was that everyone looked the same, everyone had started with one condition and was expanding out the condition platform.
When I joined Livongo, I spent a lot of time with Glen, Lee, Jenny Schneider, and Hemant and the board and Chris Bischoff, just a wonderful group of people, and they were all saying, “gosh, we are solving a unique problem, but nobody understands what we're doing that's so special and so unique.” Throughout many months as a leadership team at Livongo, what we extracted out of the business was that there's a bunch of noise in the market. If you have a chronic condition, you're getting conflicting advice from different clinicians. So the question we asked ourselves was “How do we use information, data and coaching to separate the signal from the noise?” What we developed was a point of view that health signals and applying them to shape behaviour change are the antidote to noisy healthcare. Without clear guidance, healthcare can be overwhelmingly confusing, complex and costly. As a result, we launched the category of “Applied Health Signals” - that was using devices, coaches and our machine learning engine to separate the noise and the signals, to use those signals to help guide and coach individuals on how to live their best life regardless of their chronic conditions.
Category design in a complex and heavily regulated industry
It took us a long time to figure out how we were uniquely different from competitors that also had chronic condition platforms. That journey is an incredibly foundational one, that very often, entrepreneurs either don't take the time to establish early on, or worse just write it off as a marketing journey, which it's definitely not. I could talk at length about how category design fundamentally changes a company's DNA, but in short its transformational.
If you're in a highly complex, multi stakeholder industry, like Healthcare, the ecosystem play can be tricky. Category Kings, which is the Play Bigger term for the person that owns a category, can't live in a vacuum. The thought process that I think companies need to experience early on is - how do you create an entire industry around this category? Apple is a great example of this. It wasn't enough for Apple to innovate around the idea of having a smartphone with apps. In order for a smartphone to be smart, it needed an entire ecosystem of people to create and launch apps on the smartphone. Apple didn't get there on day one, when they launched, they had one or two apps in the App Store. I was at Stanford Business School and Steve Jobs came and spoke to us about the App Store and how that was going to play out - we all thought he was crazy. Apple built an entire ecosystem around the idea of having a smartphone and what makes that a vibrant community. That's one of the things that's tricky in healthcare is that there are such complex, multi stakeholder, entrenched perspectives on how healthcare should work.
For instance, with Brightline, one of the big gaps that we heard from families was affordability of high quality behavioural health for kids. In the US, the vast majority of behavioural healthcare is out of network, which means that individuals are paying cash for all their services, which ultimately means that most families can't afford any type of behavioural health treatment for their kids. What you see is, only about 20% of kids ever get any behavioural health care in the US. When we started to talk with health plans we wondered, “why aren't there better reimbursement rates?” We then found out that health plan leaders would be willing to pay more reimbursements for behavioural health providers, if only they would measure more clinical outcomes, access operation and more. From the health plans point of view, they don't know which clinicians are providing great care with great results, so they don't know which ones to reimburse at a greater rate versus not. From the clinicians point of view, health plans don't pay them to do that type of measurement and documentation. We'd reached this kind of stalemate crisis level around paediatric behavioural health in the US. When we started to ask the questions, we found that this problem that we're solving is a systemic stalemate that's evolved between the clinical community for behavioural health and the payers for behavioural health. That’s where Brightline comes in, it's a technical platform that relies heavily on evidence based protocols and we use technology to develop and run systems of measurement. So pre, during, and post treatment, we're measuring how a child's progressing, we're using clinical protocols and we're using technology to evaluate our clinicians following the protocols with high fidelity. We just get this opportunity to go enter into a complex multi stakeholder entity with an entirely new offering, and an entirely new category of care. We wouldn't have gotten there if we hadn't spent a lot of time talking to those entities and understanding the complexity of the current context.
The evolution to becoming a category king
The best founding teams spend time thinking about the problem they're solving, and then map out what I would call the "from tos". Following along with Dave and Al's work around category design, a "from to" is about painting a picture of where you want to take the category. So from x to y.
For Brightline it would have been from “very difficult, complex, hard to access, fragmented care” to “multidisciplinary, in network, affordable and accessible care”. That’s our big from-to.
If we think forward five years from now, and we've solved the pain points of the category, there are some important questions to answer:
That "from to" exercise is important, because from there, it allows you to talk about how you define that future state and future vision. What are the words that you want to use to describe that future vision? Very often that leads to a group of leaders writing what I call a one page manifesto. What's fun here is that you can get three or four people to go off and think about this future state and write down what that future state looks like. If you wake up five years from now, and you've succeeded in building a category that you're trying to build, how does the world look and feel different, and what do you describe that new world as? That is such an interesting journey, and you'll often get back divergent answers from different leaders. This exercise typically leads to a journey of saying - "what we want is for the category to be sticky". In order for the category to be sticky, it can't just be a category name and some words on a page.
That's the journey that I think true category design leads to.
You also have to think about what is the way to introduce a category to an outside audience that you're targeting who you want to inform about the category. That's referred to as a lightning strike. You want to think about a very targeted set of individuals who you want to think differently about the world. You're creating an opportunity - a culmination of introducing the category to that set of individuals or that set of market leaders as a way to shape and inform their thinking. The category creation process, the first visible manifestation of that is often a lightning strike, which can be an event, or introducing a category through a digital blitz, or even an industry opportunity, where you invite potential ecosystem partners to launch products around the categories. There are lots of different ways to think about a lightning strike. That's the first year journey of category creation - it goes from talking about the problem you're solving through to a lightning strike.
Category design is much more than marketing
When we started Castlight in 2008, the key market insight that we had was that there was a lot of inefficiency in the US healthcare system, because consumers often didn't know what high quality care was and what it cost. That's because price is a highly variable factor in US healthcare; prices are not transparent and neither is quality. At Castlight, we were on a mission to deliver price and quality transparency to the hands of consumers. This was to optimise the market dynamics in the US healthcare market and make care higher quality and more affordable. If you think about cost and quality on a matrix, you want to push people to the top right quadrant of high quality, low cost. That was the first few years of Castlight's journey - establishing transparency first in the medical domain, and then for pharmacy pricing, dental and then behavioural health too. But what happened when we were getting ready to take the company public was we realised that we were missing a more fundamental insight, which was that US healthcare was crippling US business growth, because medical claims expense is one of the largest and growing expenditures for any large corporation. What became very apparent for us was we were talking about the wrong problem.
We were talking about transparency for individual consumers, but what we needed to do was level up and think about the implications for the enterprise, the US economy and for businesses to continue to be globally healthy by creating new ways to reduce overall healthcare costs for that major plan's expenditure for healthcare benefits for their employees.
The implication was, our category was no longer transparent for consumers. Our category was “enterprise healthcare cloud,” and creating a system of tools and mechanisms for enterprises to understand their overall healthcare expenditures. As head of product at the time, the implication was, I had to build a whole bunch of analytics products to help an executive and help a CFO understand which levers to pull within their healthcare benefits. As well as help a head of benefits, understand which programmes were performing and underperforming. Which segments of the provider network were delivering high quality, low cost care. There was a profoundly transformative experience for Castlight, as the implication was an entirely different set of products. We had to re-architect our product team and radically uplevel our data sciences capabilities. We rebuilt all of our marketing and changed the way we measured performance for our team to become an enterprise healthcare business. All of that was in the context of also having to educate the market around why the way that the US business community handled healthcare claims was essentially fundamentally crippling growth for many companies. There was a massive overhaul of the business strategy.
Newly created categories don’t always have visible pioneers
Consider Hallmark, the greeting card company. I loved that Hallmark had a unique insight in a problem that they were solving in the 1920s, which was that historically the way of communicating news through mail was you either wrote a letter, or you sent a postcard - those were the two options prior to the notion of greeting cards. They found that in the 1920s, post World War I, a lot of families wanted to convey personal news, especially during the stock market crash. But, they wanted to do it in a way that carried with it an elegance or a sense of support. This idea of having a card that conveyed a positive message, but was still privately enclosed in an envelope was the problem that Hallmark was solving.
Hallmark created the greeting card industry, and very interestingly had to create an ecosystem, which was two things - predominantly one was a new amount for more expensive stamps that could carry the weight of a greeting card, and the second were the racks that displayed greeting cards in stores. It wasn't enough for them to create greeting cards, they had to innovate an ecosystem around that. If you look at Hallmark today, which is an enduring consumer business still, there's no one person that you think about that is like the category creator that defines Hallmark, and I think that's very common for categories.
At Play Bigger we often talk about the company Five Hour Energy. The idea of an energy shot, which is a very innovative consumer category, doesn't have a visible champion. In many cases of us, we've evolved this idea of the iconic category king or queen. There are a lot of categories for which there's been a group of folks that have led the category to the forefront without it being a single individual.
It helps if a category has a vocal, visionary leader and advocate.
Livongo in the US recently was seen as a very well executed and successful IPO and those that followed the journey knew that category was a big part of that. Many people have asked, how did you help that category come to life? My response is that part of the magic is that Glen, Jenny, Lee and Hemant - the senior leaders - believed that a category could be a big differentiator for the growth of the business. They invest a lot of energy in it and we spent a lot of time working on the language of how to talk about the category because part of launching a category is embedding a language that's consistent. For instance, you don't talk about the iPhone being cool or interesting, you talk about it as smart technology. There's a language that you have to be very deliberate about when you introduce a new category. Having dedicated consistent advocacy and leadership that's outspoken, that helps to land that language, that helps to talk about the "from tos", that helps to talk about why the ecosystem is an exciting thing to join, is certainly an incredible thing for a category to have. My only point was there's lots of categories that don't have it like that.
If you look at an entire category, and you map from the time the category king went public, to the entire market size of all of the players in that category, and you can see that there's a clear economic benefit to being the category king. It benefits companies to establish and set the parameters for the categories, so that anyone else that's coming is in a followership. In becoming the category king and thinking very proactively about how to shape the category, it allows you to own the conversation in a way that I think is important for founders to think about early on.