E VOLUTION OF THE E - HEALTH INDUSTRY

This chapter guides through the evolution of the e-health industry by looking at the first movers, survivors and new comers, and also depicts the structure of the industry and its main stakeholders.

5.1.1 The early stage of the e-health industry

The term e-health first came into existence in the late 1990s and it was barely used before 1999. The term was apparently first used by industry leaders and marketing people rather than academics. They created and used it in line with other "words" such as commerce, business etc., in an attempt to convey the promises, principles, excitement around e-commerce to the health arena, and to give an account of the new possibilities the Internet is opening up to the area of healthcare (Eysenbach, 2001). Because the Internet created new opportunities and challenges to the traditional health care information technology industry, the use of a new term to address these issues seemed appropriate. It is quite clear that e-health encompasses more than just a technological development. During this time the Internet-based health service providers shot up like mushrooms, gaining enormous market capitalisation in the health industry in their heyday in the lasts months of 1999, with the aggregated all-time highs of the eight largest companies accounting for a market capitalisation of 56 billion U.S.

Dollar. Most of these first generation companies demised as quickly as they emerged with the burst of the Internet bubble. Their demise can be easily revealed by their market value decline of 93,9% just three years later (Yahoo! Finance, 2002).

E-health companies emerged everywhere. Some of the businesses provided physicians and health providers with clinical information, billing, and office management services, whereas others focused directly on patients, giving them new access to information about their specific problems and concerns. All these companies used the new Internet medium to deliver products and services that they hoped would revolutionize healthcare. At that time famous companies like DrKoop.com, Drugstore.com, and PlanetRx.com rode the wave of investor optimism to Wall Street success but collapsed soon after the Dot-com bubble burst. The biggest mistake during the early Internet stage for many new ventures was the tendency to see the Internet as a unique business model, with its own set of rules. As concluded in the Chapter 4, it is merely an additional channel for communicating with customers and all the old rules that still apply. Product and service are still the primary vehicles to generate profits. The biggest challenge is to expand the old business model to accommodate this new channel of

communications, not to disregard a proven model. History books will remember this as a time of rapid excitement and innovation followed by equally rapid collapse (Itagaki et al, 2002).

5.1.2 E-health survivors and newcomers

Overall, the post-bubble e-health sector has been characterised by the formation of consumer-generated niche Websites, propelled by media advertising incentives (Swartz, 2008). As of January 2008, there were 2,070 health-information sites, reaching 0.5% of all Internet traffic.

That compares with 1,047 sites, reaching 0.3% of all Internet traffic, in 2005 (Swartz, 2008).

These survivors have been defined as “footnotes from the halcyon days of the pre-burst years”. However, some of these are survivors of the worst stage of the Internet era, suggesting considerable merits in their business model (Swartz, 2008).

WebMD, as well as health-related Websites BabyCenter and About.com, all have carved important niches in a specialized market and are thriving in today's Web 2.0 era. They are among the last vestiges of an earlier boom that appears to be re-emerging. Next to the old

“survivors”, the big “players” are entering e-health industry. Microsoft has begun offering consumers a specialized health care search engine, as well as an online service for them to store their health records securely. As recent as in May 2008, Google introduced a Google Health, a Website that allows consumers to track information online and to manage its health documents online. Further, it facilitates the contact between patients and their medical institutions. It is also in the process of adding unspecified health products and services.

Today, Internet based ventures and marketplaces operating in providing information services supporting the medical and health sector are changing established ways of providing customer value in this area. These and similar Internet ventures introduce to varying degrees changes in the business logic and new value propositions to their customers.

5.1.3 E-health industry’s main stakeholders

The healthcare industry and relationships among healthcare players, providers and consumers are very complicated. Each of the stakeholder groups has their particular characteristics and requirements towards different healthcare processes and derived e-health services. The Internet and the market for online services are relatively new and still evolving, and the target market for e-health companies tends to fall into two broad categories, i.e. consumers

Figure 7: E-health industry’s main stakeholders

Figure 7 depicts the e-health industry’s stakeholder structure. Often, the physicians and medical institutions will assist or even determine the customers’ (patients’) healthcare decisions and, therefore, they play a very important role in e-health sector. The next layer of stakeholders includes online and traditional health information providers, pharmacies, as well as manufacturers. Today the latter is getting closer to the customer through online pharmacies and due to the changes in the supply chain. Despite being placed in the outer layer, insurance companies and government play crucial role in the e-health industry by either stimulating or restricting health business online opportunities. Online medical record providers are still a distance away from the customers and the core of the e-health stakeholders as they are still at their early stage of evolution. Post and logistics companies are also part of the stakeholder group as their business can experience big changes with the further development of e-health industry.

Post, logistics

companies Insurance companies

Online medical record providers Source: Own creation

Other related industries Online health

information providers

Traditional healthcare information providers

Traditional pharmacies

Manufacturers Online pharmacies

Customer Medical institutions

Physicians

Government