The Sky Is Falling in the Lab Industry?
In the lab industry, there is much concern that commoditization and downward reimbursement pressures (from PAMA to laboratory benefit managers or LBMs) are killing our profitability and innovation, and could eventually reduce customer service.
Digital Genomics
But more evidence of "digital genomics" is everywhere. For example, in one day I saw that the Boston academic spin-out lab Claritas Genomics emphasizes its alliance with digital genomics firm WuXiNextCode, itself a spinout from the famous legacy firm DeCode. And the former CEO of Claritas Patrice Milos is now CEO of a digital genomics firm Medley Genomics, with several co-founders from the computer science departments of Princeton and Brown. And in just the last couple weeks, more news from Genepeeks which uses genetics combined with software called "Virtual Progeny" - a heavy bioinformatics play in the preconception space (see patent). Veritas Genetics acquires artificial intelligence firm Curoverse. Genome analytics firm Genoox raises $6M. The list goes on.
But in addition to just improving a service (like more sophisticated interpretation of sequence data or better integration with EHRs),. Digitization is also allowing firms to change the nature of their offerings and their scope-and-scale in creative ways. I'll discuss this with reference to two works, the classic Nobel prize winning work of Coase in the 1930s, and a new 2017 book on "complementary innovation" by Robertson.
But in addition to just improving a service (like more sophisticated interpretation of sequence data or better integration with EHRs),. Digitization is also allowing firms to change the nature of their offerings and their scope-and-scale in creative ways. I'll discuss this with reference to two works, the classic Nobel prize winning work of Coase in the 1930s, and a new 2017 book on "complementary innovation" by Robertson.
Is "The Nature of the Firm Lab" Changing?
This sounds esoteric relative to the nitty gritty business of getting in blood and tissue samples in the door and issuing a report back to the physician. But the business school perspective helps in understanding, categorizing and predicting real-world changes in the genomics industry. [more after the break.]
Another perspective that helps is captured in a new book "The Power of Little Ideas: Low-Risk, High-Reward Approach to Innovation," by Wharton professor David Robertson. The title can be misleading (risk/reward is only one aspect), but here is the main idea. I'd name it "complementary innovation" rather than "little ideas," but let's go with it. Some companies succeed by creating a family of complementary innovations around a service, an approach that is neither "incremental innovation" of the starting product nor is it a standalone "radical innovation." We are seeing more and more creative efforts at "complementary innovation" in the genomics industry.
What Do GoPro and Navican Have In Common?
David Robert's Book "Power of Little Ideas"
Robertson argues that new teams, goals, and skills are needed to "innovate around a product" rather than innovate the product, the thing itself. (Robertson adds that even when Sony saw it was losing badly, it continued to innovate the camera product alone - the camera's memory, focus - rather than realizing GoPro was winning because of its customer ecosystem.)
I'd argue that spinout labs like Navican (originating from Intermountain Health System) are innovating all around the product - providing virtual tumor boards, genetic counselors through telemedicine [**], guiding patients proactively to clinical trials, and even assisting with drug reimbursement (branded as TheraMap, here).
They're emphatically not just a "spinout lab," or even "Lab 2.0" (one that is more proactively integrated with clinical care, like via EHRs and test recommendations). It's Lab 3.0, which is really a lot more than a lab, it becomes a new digital health/telemedicine oncology multi-modal services package built around a core product of genomic testing.
I'd argue that spinout labs like Navican (originating from Intermountain Health System) are innovating all around the product - providing virtual tumor boards, genetic counselors through telemedicine [**], guiding patients proactively to clinical trials, and even assisting with drug reimbursement (branded as TheraMap, here).
They're emphatically not just a "spinout lab," or even "Lab 2.0" (one that is more proactively integrated with clinical care, like via EHRs and test recommendations). It's Lab 3.0, which is really a lot more than a lab, it becomes a new digital health/telemedicine oncology multi-modal services package built around a core product of genomic testing.
Directly Comparing Robertson's View of Sony/GoPro to Lab 3.0
Arguably, labs are forced to migrate in this direction to differentiate away from genetic sequencing alone as the that becomes more widely available and commoditized. (Click to enlarge).
The points is, as you migrate from "traditional reference lab" version 1.0 to what Navican - or others - are trying to do, you are shifting "the nature of the firm" and "the boundaries of the firm" in a way that business school professors who study GoPro will recognize. Generally, the changes are heavily dependent on new industry realities that are rapidly being enabled by digital health and telemedicine and typically, a few players will be on the cutting edge (or bleeding edge) of new approaches to innovation and integration.
In an equally important and interesting trend, molecular labs are moving laterally. In some cases, this is by direct acquisition. This month, Invitae (which has focused on germline genetics in adults) acquired a major playing in the genomic chip space, CombiMatrix, and one of the largest preconception testing laboratories, Good Start Genetics (here; here).
But other combinational approaches are possible. A particularly interesting example is the alliance between Color Genomics and GenomeDx and between Color and Cynvenio (subscription article at Genomeweb, here). Color Genomics provides hereditary cancer tests in the gene panel format, while Cynvenio is in the cancer somatic mutation liquid biopsy space and GenomeDx has a leading test in the prostate cancer prognostic space, Decipher.[***] The alliances will allow efficiencies in reaching physicians and other advantages.
Labs are also moving into broader offerings without acquisitions or alliances. For example, Color Genomics moves from breast cancer testing into hypercholesterolemia (here) and Natera moves from NIPT toward ctDNA (liquid biopsy oncology; here).
Arguably, labs are forced to migrate in this direction to differentiate away from genetic sequencing alone as the that becomes more widely available and commoditized. (Click to enlarge).
The points is, as you migrate from "traditional reference lab" version 1.0 to what Navican - or others - are trying to do, you are shifting "the nature of the firm" and "the boundaries of the firm" in a way that business school professors who study GoPro will recognize. Generally, the changes are heavily dependent on new industry realities that are rapidly being enabled by digital health and telemedicine and typically, a few players will be on the cutting edge (or bleeding edge) of new approaches to innovation and integration.
Labs are Also Moving Laterally This Month! Invitae; Color Genomics
In an equally important and interesting trend, molecular labs are moving laterally. In some cases, this is by direct acquisition. This month, Invitae (which has focused on germline genetics in adults) acquired a major playing in the genomic chip space, CombiMatrix, and one of the largest preconception testing laboratories, Good Start Genetics (here; here).
But other combinational approaches are possible. A particularly interesting example is the alliance between Color Genomics and GenomeDx and between Color and Cynvenio (subscription article at Genomeweb, here). Color Genomics provides hereditary cancer tests in the gene panel format, while Cynvenio is in the cancer somatic mutation liquid biopsy space and GenomeDx has a leading test in the prostate cancer prognostic space, Decipher.[***] The alliances will allow efficiencies in reaching physicians and other advantages.
Labs are also moving into broader offerings without acquisitions or alliances. For example, Color Genomics moves from breast cancer testing into hypercholesterolemia (here) and Natera moves from NIPT toward ctDNA (liquid biopsy oncology; here).
And Back to Coase and Robertson
The creative circle of different and diverse allied services is exactly what Robertson discusses with model companies like GoPro.
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[*] This article emphasizes that the "lab spinouts" so called offer much more than just labs, e.g. virtual tumor boards or genetic counseling. If they're labs, it's "Lab 3.0" or something like that. Another spinout, M2Gen from Moffitt Cancer Center, raised $75M and does not even have a lab but is a "healthcare informatics business" such as for genetic information and clinical trials. Here.
[**] In genetic counseling, see also spinout Genome Medical from Invitae recently raised Series A and startups Genematters and Clear Genetics have had $1-2M startup investments.
[***] GenomeDx also has a very interesting innovation in the digital genomics space in its DecipherGrid research program.
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The 2017 book by Lewis & McKone, "Edge Strategy," is complementary to the book on complementary innovation by Robertson discussed here.
