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Health Innovation Frontiers II| 21 AUG 2014For more information: Keith Epstein [email protected]

AARP ConfidentialNOT FOR DISTRIBUTION

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Health Innovation Frontiers II:The $30 Billion Social Impact Market in the Shadows

Health Innovation Frontiers II:The $30 Billion Social Impact Market in the Shadows

Guideposts for innovation and investmentin the accelerating Longevity Economy

Harry Wang, Director, Health & Mobile Research, Parks AssociatesKeith Epstein, Senior Strategic Advisor, AARP

202.434.6169. [email protected]

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21 August 2014 | AARP Confidential | NOT FOR DISTRIBUTION

Health Innovation Frontiers 2014



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Project Background

AARP Thought Leadership soughtto:

• Identify the latest and significant technology,regulatory, market trends to 2019 in nineopportunities areas analyzed in the initialInnovation Frontier report (published January2013)

• Profile and segment these nine innovationfrontier opportunities areas by marketsolutions and highlight significant players fromstartups to incumbent companies

• Update/extend market opportunities forecaststo 2019 and highlight/explain market forcesthat shift the market opportunity potentials inthese nine areas

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Nine Areas of Opportunity

Analysis of 32 health needs ledto 9 opportunity areas forbreakthrough technologies,innovative products anddisruptive services to generatesubstantial revenue.

1. Medication Management

2. Aging with Vitality

3. Vital Sign Monitoring

4. Care Navigation

5. Emergency Detection & Response

6. Physical Fitness

7. Social Engagement

8. Diet & Nutrition

9. Behavioral & Emotional Health



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Leading Nine Opportunities Areas Relate to Consumer Needs

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Prevent In-Home AccidentsPrevent In-Home Accidents

Send Alert When LostSend Alert When Lost

Detect FallsDetect Falls

Manage MedicationsManage Medications

Improve/Aid HearingImprove/Aid Hearing

Improve or Aid Memory/CognitionImprove or Aid Memory/Cognition

Improve/Aid VisionImprove/Aid Vision

Maintain Muscle StrengthMaintain Muscle Strength

Keep MobilizedKeep Mobilized

Stay Connected SociallyStay Connected Socially

Manage Healthcare CostsManage Healthcare Costs

Plan for End of Life CarePlan for End of Life Care

Navigate Healthcare SystemsNavigate Healthcare Systems

Evaluate Quality of CareEvaluate Quality of Care

Receive Divorce/Grief SupportReceive Divorce/Grief Support

Manage Life Phase TransitionsManage Life Phase Transitions

Reduce StressReduce Stress

Control Sodium IntakeControl Sodium Intake

Boost Daytime EnergyBoost Daytime Energy

Improve Sleep QualityImprove Sleep Quality

Prevent DehydrationPrevent Dehydration

Eat HealthyEat Healthy

Manage ArthritisManage Arthritis

Reduce Bad CholesterolReduce Bad Cholesterol

Keep Glucose in RangeKeep Glucose in Range

Relieve Back PainRelieve Back Pain

Maintain Good Dental HygieneMaintain Good Dental Hygiene

Detect Skin ProblemsDetect Skin Problems

Maintain Healthy WeightMaintain Healthy Weight

Address Calcium DeficienciesAddress Calcium Deficiencies

Engage in Age-Appropriate ExerciseEngage in Age-Appropriate Exercise

Keep Blood Pressure in RangeKeep Blood Pressure in Range

NavigateHealthcare System

Social Engagement

Behavioral &Emotional Health

Physical Fitness

Aging with Vitality

Diet & Nutrition

MedicationManagement

Vital SignMonitoring

EmergencyDetection &

Response



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Definitions

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Nine Areas of Opportunities

These 9 opportunity areas consist of the following market solution segments:

1. Medication Management: medication information, reminder, tracking tools, and compliance services(not included: infusion therapy/PBM services)

2. Aging with Vitality: hearing & vision health, preventive aging care, cognitive & brain health, andeveryday life support tools/services (not included: cosmetics and plastic surgery)

3. Vital Sign Monitoring: health sensors, diagnostic devices, vital sign monitoring enabling technologies,monitoring solutions (not included: implanted medical devices such as ICD)

4. Care Navigation: care records/expense management, provider directory & marketplace, care reviewand comparison, care planning tools, care coordination solutions

5. Emergency Detection & Response: home sensors, PERS/fall detection, location tracking, activitymonitoring (not included: home security solutions--monitored/DIY)

6. Physical Fitness: fitness devices, apps, programs, enabling solutions (not included: fitness clubs)

7. Social Engagement: mobility assistance, “digital inclusion” solutions, online patient community andpeer-to-peer support

8. Diet & Nutrition: nutrition content and education, diet and nutrition tracking tools, managementprograms, meal plan/delivery/cooking solutions (not included: diet pills/supplements, face-to-faceconsultation)

9. Behavioral & Emotional Health: companionship solutions, support group/community, behavioralmodification/self-help solutions, stress/emotion management/therapies (not included: office-basedface-to-face mental health evaluation)



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Executive SummaryExecutive Summary



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Health Innovation Frontiers:The $30 Billion Social Impact Market in the Shadows

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The Longevity Economy• 106 million people – and counting• $7.1 trillion in annual economic activity• $1.6 trillion in health spending

The Untapped Health Solutions Market• Existing Solutions: $68 billion by 2019 – in decline• New revenue opportunities: $30 billion – and soaring• Greatest adoption and revenue: Fitness, keeping vital and navigating care

Double Bottom Line• Accelerating revenues for investors, entrepreneurs and incumbents• Enabling millions to enjoy healthier, higher-quality lives

Making it Happen: Thinking Like a Disruptor• VALUE FIRST• SOLUTIONS driven by consumer priorities• Agile and holistic PLATFORMS• EMPOWERMENT

Untapped opportunities abound to make a difference in the lives of millionswhile reaping rewards from the world’s third largest economic force: The 50+

Among research supplementing this report: “The Disruption Economy,” reports I and II, AARP Strategic Intelligence (2013, 2014 and ongoing); “The Longevity Economy,”Oxford Economics for AARP (2013); Health Innovation Frontiers, Parks Associates for AARP (2013 and this report)



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Opportunities at the Frontier: Guiding Principles

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Ongoing marketplace analysis by AARP Strategic Intelligence finds that four guidingprinciples undergird efforts of the most successful organizations in the “disruptioneconomy.” The principles could be used by entrepreneurs, investors and incumbentsalike as part of the criteria to assess the viability of any undertaking.

VALUE FIRSTShow inherent, recurring value before asking people to pay for that value.Recurring benefit to the health consumer from convergence

SOLUTIONSDriven by the priorities of individuals, not necessarily the organization.Evaluate circumstances in users’ lives – not just what to sell them.Instead of targeting “average” customer – build on need or want of solution.

PLATFORMSHolistic, agile and personalized – not silos, apps, or devices.

EMPOWERMENTMaximize intrinsic value with tools and information to guide decisions.Sense of ownership and control over tailored health goals, decision-making,medical records, and secure identity.

To succeedin thedisruptioneconomy,think like adisruptor



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Market Insights

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▪ Affordability and business scalability can trump aversionof mature consumers to innovation and tech.

▪ Seize innovation opportunities by reducing friction andtargeting crossover markets.

-Opportunities abound in the diminishing divide betweenconsumer health and medical care

-Focus on crossover markets in under-served areas of priority tothe individual

▪ When addressing consumer pain points, solve for stigmaassociated with health-related solutions.

- Design and sell for positive pitch: enrich an experience, not justsolve a problem; enhance a lifestyle, not improve a condition.

Principle #1:Create Intrinsic, Recurring VALUE FIRST for Consumers

VALUE FIRST!



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Market Insights

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▪ “A Small Token of Inner Strengths”

-Affordable: $99

-Aesthetically appealing: fashion meetsfunctions

-Crossover opportunities: fitness + posturemanagement

-Overlooked needs: track posture and alertslouch

Principle #1 - IllustrationCreate Intrinsic, Recurring VALUE FIRST for Consumers



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Market Insights

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Principle #2SOLUTIONS Driven by Priorities of Individuals

▪ Enhance the experience of consumers and theirperception of value by building holistic solutions. Purehardware innovations are not enough. Also one-offs.

-Consumer wants an experience, not just another app or device

-Offer a range of “jobs to be done”*

Data is not an asset—until it’s turned into knowledge.

-The player can create a more individualized, value-first solutionby leveraging data purposefully.

USERS, NOTSILOS!

* Customers want to "hire" a product to do a job, or, as legendary Harvard Business School marketing professor Theodore Levitt put it, "Peopledon't want to buy a quarter-inch drill. They want a quarter-inch hole!“ See “Marketing Malpractice: The Cause and the Cure,” December 2005,Harvard Business Review. http://hbr.org/product/marketing-malpractice-the-cause-and-the-cure/an/R0512D-PDF-ENG



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▪ One-tracker solution for almostall “jobs to be done.”

- Email, blood pressure, supermarketfoods…, personal priorities easily setand managed

- “Everything in one place”

- Data translated into insights forpersonal discovery

Principle #2 - IllustrationSOLUTIONS Driven by Priorities of Individuals

Market Insights



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▪ Platforms create the convenience of accessing value-based solutions.This builds loyalty, user experience and relationship throughpersonalization and agile utility.

-Platforms also bridge market silos and respond faster to rapidlychanging consumer demand

▪ Existing platform players’ entry into healthcare offers entrepreneurs aspringboard and a model for success.

-They accelerate time-to-market and can foster collaborations betweenstartups and incumbents

▪ An open and agile platform supports unconventional revenue modelsand strengthens business viability.

-An open and agile platform disrupts the “walled garden” approach andencourages innovations via partnerships and new business models

Principle #3:Deliver via Agile PLATFORMS to Meet Individual’sPriorities

PLATFORMS, NOTJUST APPS ORHARDWARE!

Market Insights



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▪ A Swiss-Army Knife for Fitness

-OPEN platform: APIs connect over 100partner solutions

-LARGE scale: Used by 30 million people

-STICKY experience: Personalize-ableHealthGraph feature improves user loyalty

-AGILE business model: Flexible forpremium services, subscription, dataanalytics, partner sell-through, PaaS…

Market Insights

Principle #3 - IllustrationDeliver via Agile PLATFORMS to Meet Individual’s Priorities



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Principle #4:EMPOWERMENT

▪ Empower consumers with knowledge and tools to takemore active roles in their health, tipping the market infavor of “prosumers.”

▪ Raise awareness and encourage proactive discovery ofhealth-related solutions among mature consumers.

-Product aesthetics and ease of use matter, and so doesconsumer education/outreach

▪ Focus innovations on high-cost, inconvenient, andbloated markets by directly addressing inefficiencies.

-Empower consumers by eliminating the clutter in the valuechain

INDIVIDUALS, NOTORGANIZATIONS!

Market Insights



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An Illustration of Principle #4

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▪ Empower Consumers to Select the BestProvider

-Address inefficiencies: Marketplaceeliminates the middleman (agencies)

-Reduce cost: Saving from direct hiring

-Empower with tools and actionableinformation: Caregiver reviews, payrollmanagement, tax filing

Principle #4 - IllustrationEMPOWERMENT



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Update on Market Opportunities: Key Findings

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• Innovations Are Accelerating: Moredisruptive business models andinnovative products & services

• A Bigger Revenue Potential: Cumulativerevenue opportunities up 50%

• Deepening Cuts into Growth of ExistingMarket Solutions: as innovationaccelerates, $9 billion will be squeezedout of existing market solutions

From $20 billion to $30billion(slide 70)

Five-Year CAGR risesfrom 14% to 35%(slide 71)

From 5% CAGR to -0.3% CAGR; From $77billion to $68 billion(slides 70-71)

Such underlying principles are key components to marketplacedisruptions that overall are happening at an astounding pace. SinceJanuary 2013 alone, this AARP/Parks Associates analysis finds:



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• Opportunities for Innovation are inMotion:

-Physical Fitness, Aging with Vitality, and Care

Navigation have the greatest revenue/growthpotential

-Medication Management and Vital SignMonitoring still have tremendous innovationpotential, despite that other growth opportunityareas have a greater investment appeal.

Update on Market Opportunities: Key Findings

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Business model challengesand pricing pressurereduces revenue potential

New products and servicesand disruptive businessmodels invigorate growth

Maximum Revenue Opportunities (2014-2019)-Physical Fitness: $8.5B-Care Navigation: $4.1B-Aging with Vitality: $3.3B

Maximum Revenue Opportunities (2014-2019)-Medication Management: $1.4 B-Vital Sign Monitoring: $3.8 B



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Market Opportunity Attractiveness

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Projected Users (2019)Fewer

Inve

stm

en

tR

isk

Hig

he

r

Vital signMonitoring


Aging withVitality

PhysicalFitnessEmergency

Detection/Response

CareNavigation


More

Low

er

SocialEngagement

Diet &Nutrition

This chart visualizes the rapid movement of estimates in the nine opportunity areas over the last 18 months;

The size of bubble represents maximum revenue potential in each area.

A more detailed version of the chart with explanations and definitions can be found on slide 69

= $1 billion

Directionof Shift

The Zoneof GreatestInvestment

Appeal

Chart Legend



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Conclusions and Potential Next Steps

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• VCs, entrepreneurs, and incumbents can’t afford not to act.While risk of being left behind has always existed, the paceof change is accelerating.

- The velocity, breadth, and disruptiveness of health innovations arephenomenal

-In less than two years’ time, market investment potential increases 50%,

growth rate more than doubles

• A diverse range of investment opportunities are opening upfor VCs and entrepreneurs-In the Care Navigation market alone, five categories of market solutions

consisting of more than 100 startups have emerged

• Physical Fitness, Aging with Vitality, Care Navigationrepresent the three best investment opportunities (see slide

17 for details)

• The market can grow even faster if policies and regulationsbecome more market friendly to entrepreneurs- Changes in reimbursement for tech-enabled solutions, regulation reformsand payment model alignments can significantly speed up innovations

“The environment ischanging so fast that itrequires improvisationin terms of strategy,products, and evenday-to-day operations.Just when you thinkyou understand thetechnology landscape,you see a majordisruption.”

-Eric E. Schmidt - Executive

Chairman for Google, co-author The New DigitalAge: Reshaping the Futureof People, Nations andBusiness.



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Market Trends and Updates on NineOpportunity AreasMarket Trends and Updates on NineOpportunity Areas



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Market Snapshot

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• Market is characterized by fragmented solutions and low monetization rates.

• Low-cost analog solutions—such as weekly and monthly pill organizers—arecommon, but have limited ability to track and encourage medicationcompliance.

• Digital solutions range from simple reminder apps, to monitored pill dispensingsolutions, to high-tech digestible pills; but current offerings are either poorlydesigned or too expensive.

• Revenues are largely driven by consumer out-of-pocket spending; insurers haveyet to find the means to fund medication compliance initiatives even thoughthe economic costs of non- or under-compliance is substantial.

• More than 100 medication reminder apps are available, most of which are freeto use, whereas monitored pill bottles or similar solutions are rare.

Fast Facts Quick Stats

• Among people 65+, 60% are taking atleast three medications.1

• By 2019, 94 million 50+ will take atleast two pills.2

• An estimated 54 million people 50+will need to track and monitor theirmedications by 2019.2

• Medication lapses and druginteractions cost the nation as much as$289 billion a year.3

Needs & Pain Points

• High cost for intelligent medication monitoring solutions

– GlowCap, one of the most affordable solutions on the market today, costs $79 plus amonthly fee for mobile broadband service from AT&T

• Bulky and cumbersome to use

– Philips MD2 is as large as a Keurig coffee machine, and users can only use it at home

• Business models remain a challenge

– Insurers are unwilling to subsidize products/solutions with mass market potential;they prefer covering only those solutions serving niche patient populations

Value Proposition

• Health benefits and safety

– Avoid taking the wrong drugs,inappropriate dosage, or experiencinglife-threatening drug interactions

• Improved medication refill rate

– Avoid medication lapses due torunning out of supply

1. Parks Associates Consumer Survey2. Parks Associates Estimates3. 3 Viswanathan M, et al, Interventions to Improve Adherence to Self-administered Medications for Chronic Diseases in the United States: A Systematic Review. Ann Intern Med. 2012; 157(11):785-795.



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MedicationInformation

Providers

MedicationReminderSolutions

MedicationTracking Devices

Market Solution Segments

DoseCast

MedicationCompliance

Services

Applications & servicesto encourage andreward medicationcompliance/adherence

Smart pill boxes withreminder and pill-tracking functions

Apps or solutions thatremind/alert users ofmedication times anddosages

Apps or portals whereconsumers can look upRx information andreceive medicationeducation




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Technology & Market Trends

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Technology Trends Market Trends• Digital medication reminder apps are abundant

– More than 100 different apps in both the iOS and Androidapp stores offer medication reminder functionality, includingstandalone reminder apps as well as reminder featuresintegrated inside family PHR apps and caregiver taskmanagement apps.

• Sensors are miniaturized and become less costly toimplement on medication tracking/monitoringsolutions

– Technology can remotely lock or unlock a pill bottle cap or apill compartment to ensure better compliance.

– Bluetooth technology is being incorporated into medicationmonitoring solutions as well, paving the way for new designsthat rely on smartphones as a data gateway and/or acompliance information center.

• Application to Person (A2P) messaging solutions arewidely used to enable notification and alert featuresfor a monitored medication solutions

– Push notification through text messages, email, in-app IM, isbecoming highly intelligent and personalizable, making itpossible to engage care providers and family caregivers aspart of a team effort for medication compliance

• There is growing interest in integrating medicationreminder/management functions into PERS or seniorindependent living solutions

– GreatCall’s MedCoach app comes free with its cellular plan,along with its 5Star PERS and nurse help line services.

• Caregiver solution providers and family PHR vendorshave integrated medication reminder andmanagement features as natural extensions of theircore offerings

– The Unfrazzle app includes medication list and reminderfunctions that alert caregivers about their loved ones’medication plans and compliance.

• Innovators are paying attention to the human factorsfor medication compliance

– Although the tracking and notification functions can beeasily done via technology, vendors understand that non-compliance is first and foremost a behavioral problem.

– As a result, innovators like Mango Health have started toincorporate behavioral change elements, such as rewards,social interaction, and gamification, into their respectivesolutions.




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Innovation Trends

• Medication Management services enhance basic reminder appsand pill trackers by involving care providers/caregivers

› While technology enables the functions of a medication managementplatform to work, solution providers now recognize the human factorsbehind medication non-compliance; as a result, medication managementis increasingly part of a program in which care providers/pharmacists areinvolved to engage, educate, and track patients

• Medication reminder apps are plentiful—new reminder appsdifferentiate by offering incentives or rewards

› Social network integration and gamification drive usage and consumerengagement level

• Smart pillbox gets an aesthetic upgrade

› New designs are more aesthetically appealing and discrete

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Caregivers can sendaudio/video/text reminders andcheck status

Care provider support throughintegration with Blue ButtonPHR

Offers personalized m-Coupons, rewards, and otherincentives to encourageadherence via game mechanics

Uses gamification mechanisms(earn points towards rewardsand discounts) and peercomparison to drive positivebehavior changes




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Implications for VC & Entrepreneur Community

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• Innovative business/revenue models are key to unlocking market potential

–While traditional product sales or monitoring service models can still help move the market forward, themarket needs new business models that can do the following:• Target mass-market medication management needs while producing a good revenue stream,

• Convince health insurers or care providers that medication management is a preventive care/patient engagement solution

• Leverage medication data and user behaviors for new revenue opportunities.

• Medication management can become part of a broader patient engagement solution insteadof a standalone solution

–PHR and caregiver task management tools have begun to integrate medication reminder and trackingfunctions into their solutions, as have vital sign monitoring vendors.

– Parks Associates expects patient portal providers—mostly incumbent EMR vendors and a new breed ofstartups—to incorporate medication management features in their respective solutions as well.

–Health insurers and care providers may be more willing to invest in or partner with medication managementservice providers if medication compliance features can be leveraged as value-added components of anintegrated service.

• The medication monitoring hardware market needs low-cost options to drive mass-marketdemand

–Low-cost devices are an important component in the overall strategy to rally mass-market demand and offercompliance data to health insurers/care providers

–A low-cost device may leverage PAN technologies to connect with a smartphone, rather than usingembedded mobile connectivity


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Market Snapshot

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Aging with Vitality

• This market features a broad range of products and services that cater to olderconsumers’ need to mitigate the physical and cognitive declines caused byaging.

• Most common solutions include hearing aids and vision correction products, aswell as cognitive training services.

• Digital solutions range from new-generation digital hearing aids, to new meansto conduct eyes exams and new vision aid products, to online brain healthservices that combine education, cognitive training, and gamification elements.

• Innovations are taking place across many under-served areas, from smartwalkers, to smart mirrors, to intelligent products and apps helping peopleunderstand and manage aging-related needs, such as arthritis pain,dehydration, and skin health.

• Consumer out-of-pocket spending is the dominate revenue source.


• More than 100 million U.S. consumersare ages 50+ and this population willbecome 115 million strong by 2019.

• 10% to 20% of people older than 65suffer from Mild Cognitive Impairment(MCI).1

• According to Health U.S. 2012, 13.6% ofpeople 65+ have vision problem.

• About 18% of people 45-64 years old,30% of those 65-74 years old, and 47%of those age 75 and older experiencesome hearing loss. 2

Needs & Pain Points

• Ease of use is particularly important to 50+ consumers

– Design improvement has led to more software-enabled solutions that require users tohave a good understanding of new user interface and key control features

• Marketing of Aging with Vitality products and services needs to be smart

– Marketing should emphasize vitality rather than fighting aging

• Product and service affordability is still a challenge to achieving mass market potential

– While digital innovations tend to disrupt incumbents’ business models, they are notnecessarily more affordable. For instance, digital hearing aids with smartphone appcontrol capabilities are more expensive than their analog competitors.

Value Proposition

• Make the impact of aging less disruptiveto everyday life

– Need the right info about aging andappropriate tools to reduce life hasslescaused by aging

• Use tools and services to mitigateaging’s impact on cognitive capability

– Improve memory and brain cognitivefunction through science-based means

1. Jane E. Brody, “When Passes are Not Just Signs of Aging,” The New York Times, September 5, 20012. National Institute on Deafness and Other Communication Disorders, “Quick Statistics.”



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Everyday LifeSupport

Tools/Services

PreventiveAging Care

Hearing andVision Health

Cognitive &Brain Health


Applications & servicesthat help improve brainand cognitive functionsand mitigate memory loss

Products and services thatimprove hearing andvision

Products and servicesthat detect earlysigns/symptoms ofaging or prevent aging

Products and servicesthat alleviate the dailyinconveniences causedby aging

Aging with Vitality



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Technology Trends Market Trends• Smartphone apps are driving a new round of

innovation

– Apps for brain health services, digital hearing aids, vision selfcheck-ups, daily life support, and preventive care for agingare abundant

• New product designs using breakthrough industrymaterials and PAN technologies make productsaesthetically appealing and functionally smart

– From Whill’s new wheelchair design to Oral-B’s connectedtoothbrush, new designs help drive consumers’ pent-updemand.

– New hearing aids are more discrete to wear than olderdesigns, and are robust in personalization features, thanks toconnectivity protocols and smart software integration.

• The emerging wearables category impacts productdesigns and function choices

– Advances in wearable sensors make aging with vitalityproducts more personalizable.

– Wearables leverage voice recognition, gesture recognition,and text-to-speech technologies to further enhance the easeof use for these products

• Both startups and established brands/designers areinnovating in this space, taking advantage of thelarge addressable market and broad range ofproducts and services in this sector

– From Oral-B and Starkey to Buzzy and Netatmo, from a nicheproduct like hearing aids to a more mainstream solutionsuch as UV protection, innovations span a broad range ofAging with Vitality needs

• Success stories such as Lumosity have invited morecompetition

– As this market is almost entirely driven by consumer out-of-pocket spending, successes and failures are easier todistinguish.

– Startups can “pivot” rapidly to take advantage of market-proven business models and product/service concepts andcompete for new market opportunities opened up by marketleaders/innovators.

Aging with Vitality



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Innovation Trends

• Neuroscience and brain-sensing technology-basedbrain exercise programs come to the market: wearabletechnology-enabled, research data-validated programs thatmeasure brain activities and foster brain functions

• “Quantified Everything” leads to new connecteddevices that help manage aging and revive vitality: fromconnected toothbrushes to smart mirrors, technology isembedded in everyday tasks to track elements affecting aging

• Better designs and digital features make aging-relatedproducts more personalize-able: smart hearing aidscontrolled by software in a discrete yet elegant design, is oneexample

• New care support services offer convenience and valueand help 50+ live hassle-free: from grocery shopping tohome chores to new life aid tools such as a smart walker, newhome service providers leverage technology to deliver serviceswithout overhead costs associated with traditional businessmodels, and new product innovations reduce inconveniencescaused by aging.

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Brain traininggames based onMIT brain healthresearch

A wearable braceletwith accompanyingapp for trackingsunlight exposureand skin health

Grocery shoppingservice throughwhich customersplace groceryorders via theirsmartphones and agrocery shopperbuys and deliversgroceries tocustomers’ homes

New-generationhearing aid withdiscrete design,controllable from asmartphone app

Aging with Vitality



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• Although proven business and revenue models are important criteria for evaluatinginvestment opportunities, innovations that address a broad need category and featureintuitive user interface/experience can become long-term winning investments.

–New innovations that improve the user experience can awake latent demand or expand the target market.For example, digital hearing aids and life support tools/services have the potential to be much bigger marketover the long term.

• As more incumbents enter this market, competition can intensify; but it also means VCs maybenefit from new exit strategies such as selling stakes in startups to incumbent players.

–Due to the B2C nature of this market, solutions that cater to aging with vitality needs may have synergy witha broad range of incumbent products and services. For instance, brain health solutions are synergistic withother wellness programs; UV monitoring products and services can be attractive investments for companiesin the skincare industry.

• The Aging with Vitality category features a broad range of solutions at different stages ofdevelopment; VCs will benefit from a diversified portfolio strategy by investing in companiesoperating in distinctive market segments and featuring different risk profiles and investmenthorizons.

1

2

3

Aging with Vitality



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Market Snapshot

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• A well-defined market with consistent demand but lackluster historical growthdue to a difficult reimbursement environment.

• Solutions mainly target chronic care management needs but marketopportunities have also expanded to the wellness and preventive care areas.

• Health reform efforts and digitization of medical records have laid thegroundwork for future adoption of vital sign monitoring solutions.

• Innovations are taking place on many fronts, including device design, gatewayfunction integration, back-end data analytics, and digital coaching services.

• Although revenues today mainly come from direct investment in vital signmonitoring devices and solutions from non-physician healthcare providers,future revenues may come from more diversified sources, including adoptionby physician practices and direct-to-consumer channels for self-care.


• Total target market for vital signmonitoring solutions among 50+ maybe as high as 52 million by 2019.1

• The CDC reports that 49% of men and53% of women ages 65-74 have highcholesterol, and 27% of people 65 andolder have diabetes.

• Also according to the CDC, 64% of menand 69% of women ages 55-64 yearsold suffer from high blood pressure.2

• More than 5 million people 50+ sufferfrom COPD.2

Needs & Pain Points

• Despite recent price declines on vital sign monitoring solutions, costs remainhigh for consumers who want to self-monitor

– New connected devices usually cost more than traditional products, andintegration of multiple devices for data aggregation is a cost driver.

• Consumer awareness of connected vital sign monitoring solutions is low

• User comfort and ability to provide timely feedback affect monitoringcompliance and care effectiveness

– Human feedback is more effective but more costly; digital coaching relying onsoftware algorithms is still at an early stage of implementation—effectiveness isunproven at this stage.

Value Proposition

• Improve chronic care managementeffectiveness

– Timely monitoring and alerts, plusconstant feedback, reduces healthrisks and prevents adverse events

• Cost reduction

– Vital sign monitoring is a more costeffective way to reduce use of costlyhealth services, such as ER care

1, 2, Parks Associates research



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SensorInnovations

DiagnosticDevices


Enablers

Vital SignMonitoringSolutions

Self Monitoring Remote Health Monitoring

Applications & servicessupport vital signmonitoring as a service:integration, dataaggregation, analytics

Solutions & servicesconsist of bothhardware and softwarefor monitoring vitalsigns

Hardware-focusedcompanies withproducts for vital signmeasurement anddiagnosis

Providers of sensorsthat can be embeddedin a product




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Technology Trends Market Trends• Sensor technology and new IC designs have led to

new device form factors and will likely revolutionizevital sign collection in the long term.

– Overall, vital sign monitoring devices benefit from the latestdesign trends and lowered component cost; at the sametime, sensor patches from companies such as Vital Connectand Vancive are currently commercially viable in limited usecases, but have great potential in the long run

• Cloud technology has made virtual data gatewaysboth technically feasible and more cost effective.

– Virtual gateway solutions, though still in the early stage ofdevelopment, promise to lower the cost of vital signmonitoring solutions, facilitate clinical data exchanges, andenable better care coordination efforts.

• Health big data efforts, from existing EMR vendors,enterprise software providers, and new entrantssuch as Apple and Google, will improve another keyfunction of vital sign monitoring solutions.

– Large companies’ entry into this market will help the vitalsign monitoring industry standardize and harmonizedifferent data sets and improve compliance by offeringmore accurate assessments and more timely alerts.

• Several entities show interest in integrating vitalsign monitoring as part of a broader businesssolution or a component of service portfolio.

– Care management companies, PERS service providers,and broadband service providers, among others, all areinterested in building a broadly-based monitoringplatform to collect vital signs along with otherconsumer health behavioral data.

• Vital sign monitoring device makers are buildingout integrated solutions or offering device-basedservices in order to avoid commoditization oftheir hardware business.

– From incumbent players such as Omron to startupssuch as iHealth Labs, device sales are not their ultimatebusiness models.

• Competition in the vital sign data gatewaysolution market will pick up steam.

– Market consolidation in the forms of mergers andacquisitions will accelerate after 2015; before then,there will be a surge of new entrants into this market.




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Innovation Trends

• Vital sign sensors can be built into everyday life objects,making them more discrete and easy to use: Shoe insolesand clothing are target objects for smart vital sign monitoring assoft sensor technologies become mature and more economical

• Vital signs that can be monitored have expanded fromtraditional medical signs to skin, gait, and user behaviors

• Although new vital sign monitoring devices continue toemerge, integrated solutions and vital data aggregationservices are catching on:

› Turnkey solutions and health data APIs/gateways play animportant role in serving healthcare provider clients, improvingend user experience, and engaging family caregivers in fightingchronic conditions.

› Large consumer brands have also joined the race: Apple/Samsung

• Vital sign data analytics—software that turns disparatedata into meaningful information for caregivers and careprofessionals—are in high demand

• The market still lacks low-cost self-monitoring solutions

34

Tracks motionand locationto determinehealth status

Soft sensorsbuilt intofabric for vitalsign datacollection

Sensors thatcollect andtransmit bloodchemistry dataand use APIs tomonetize datastreams

Health dataanalytics servicebased on self-reported dataand passivesensor data




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35

• Although device designs and functions are important evaluation criteria, companies in the vitalsign monitoring space must find the right channel partners and business partners for success.

–Near-term opportunities will likely come from care providers who recognize the value of vital signmonitoring solutions, whereas long-term opportunities will more likely come from the self-monitoringmarket with premium coaching service.

• Over the long-term, digital patch technology-based sensor designs will transform the vital signmonitoring industry

–Ease of use and richer data through continuous monitoring will be the key drivers for digital patch’s success.

• Although many device OEMs and app developers want to build a platform instead of simplyproducts and apps, many of them are unlikely to succeed

–Although the cost of entry is low, technology complexity and platform scalability will be key hurdles for mostto overcome.

–VCs will have to examine companies’ technology, partnerships, and business models closely in order to fullyunderstand these platforms’ capabilities.

1

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3




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Market Snapshot

36

Care Navigation

• A growing, yet fragmented, market spurred by recent regulatory changes andconsumer demand.

• Market solutions have expanded to include more direct-to-consumer offeringsthat disrupt incumbent players.

• These solutions cater to a diverse population and a heterogeneous set ofneeds: from care planning to expense management, and from finding specificcare providers to coordinating care among multiple care providers.

• Market solutions employ a broad range of revenue models from broker fees toadvertising, from subscriptions to licensing fees.

• Most solutions and services tap consumer out-of-pocket spending as theprimary revenue source, with a few exceptions, such as care coordination toolsand services.


• A 2011 Deloitte survey showed that76% of healthcare consumers do nothave a strong understanding of howthe health care system works. 1

• According to Aetna’s EmpoweredHealth Index survey in July 2012, 88%of consumers said that healthinsurance choices are tough becauseinformation is confusing andcomplicated. 43% of adults do not tracktheir out-of-pocket health costs and81% have difficulty in makinghealthcare decisions. 2

Needs & Pain Points

• Complex rules and regulations lead to significant confusion among consumersabout care choices and expenses

– The market lacks transparency due to multiple layers of business relationshipsbetween insurers, health systems, and physician groups.

– Quick changes in the healthcare business, such as the health insurance exchangerollouts, further confounded consumers’ efforts to make wise care choices

• More data are needed to improve care navigation solutions

– For business reasons or for fear of misuse of its data, the private sector has beenslow to make their data available.

Value Proposition

• Better information leads to better carechoices

– Care navigation market solutions giveconsumers the information andguidance they need to make wiser carechoices

• Cost savings

– Competitive pricing and displacementof traditional information brokers fromthe value chain result in cost savings

1 Deloitte Center for Health Solutions, 2011 Survey of Health Care Consumers in the United States: Key Findings, Strategic Implications, 2011



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Care Records &Expense

Management

Care/PlanReview &

Comparison

Care ProviderDirectories &Marketplaces

CareCoordination

Solutions


Care PlanningTools

Solutions & servicesthat help patients andcaregivers coordinatedifferent careactivities

Solutions & servicesthat prepare patientsand caregivers forfuture care & estateplanning needs

Services offeringreviews & comparisonsof care providers,facilities, drug costs,and insurance plans

Services that list andrefer care providers orhelp patient/caregiversfind providers on amarketplace

Services that helppatients and caregiversmanage health records,manage medical claimsand billing, trackspending

Care Navigation



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Technology Trends Market Trends• Mobile apps increasingly become the preferred

access point for care navigation solutions.

– Rising penetration of smartphones and the convenience ofusing mobile apps for information access have convincedmany care navigation startups of a mobile-first strategy.

• API technology enables faster integration ofhealthcare information from various sources andfosters partnerships across different industry sectors

– Web APIs and native APIs are widely used to create mash-up features that can better serve end users

• A large number of incumbent players are tryingto adapt their respective business to the digitalage.

– Disruptive business models such as the marketplacemodel from care.com have changed the competitivelandscape

– The fact that successful consumer service brands suchas Angie’s List and Yelp have entered this market hasfurther disrupted incumbents’ business

• Opportunities are abundant in both the B2C andB2B markets.

– B2C success, such as care.com, and B2B success, suchas Castlight Health, have inspired numerous startups topursue opportunities in this market

– Consolidation will be inevitable in the long run as themarket needs scalable solutions, not fragmentation.

• By releasing more data to the public, the federalgovernment encourages the public and privatesectors to collaborate on healthcaretransparency efforts.

– The long-term health of this market will be impacted bywhether private sector players pursue transparencyefforts and how they will respond to increasingconsumer demand for transparent health data.

Care Navigation



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Innovation Trends

• The marketplace model has disrupted the providerdirectory business:

› Although provider directories and review sites are still populardestinations, new care provider marketplace models combineinformation portals with a transactional platform for consumers tonot only find, but also hire a care provider or book an appointment

› The marketplace model disrupts the business of traditional carebrokers (agencies and advisors) by connecting patients directlywith care providers, creating savings for both patients and careproviders

• Disruptive care planning solutions: digital and mobiletechnologies enable new assistive services for consumers’ careplanning needs, such as eligibility verification, care cost comparison,expense management, legal assistance, and death care-relatedservices

• Direct-to-consumer services that help consumers managemedical claims and billing, track health spending, andsimplify health records management are growing

39

A home care worker marketplaceserving as a low-cost solution tomatch care workers with carerecipients

Detailed care worker profiles anduser reviews

Online time tracking, invoicingand payroll processing

Helps consumers prepare medicaladvance directive through adigital form that replaces theneed for individual legal directiveforms

A service that reviews andanalyzes consumer-uploadedmedical claims and expenses toidentify errors or savings

Care Navigation



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40

• The care navigation market represents a significant near-term investment opportunity

–Near-term consumer needs have attracted many startup companies targeting various subcategoryopportunities, each of which is large and ready for disruptive products or services.

• The strength of a care navigation solution is rooted in its data quality and user interface

–Entrepreneurs should not rely solely on government-provided data but also explore new data sources fromthe private sector that can help their solutions stand out.

– Intuitive user interfaces and personalized guidance are key ingredients of a winning formula.

• Business models built on the premise of matching buyers directly with sellers on an openmarketplace are promising.

–The value of this approach to both the buyers and sellers is straightforward.

–Cost savings from the elimination of the middleman in the value chain are a significant competitiveadvantage over incumbent players.

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Care Navigation



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Market Snapshot

41


Response

• An industry with good long-term growth potential due to an agingpopulation with a strong desire to live in their own homes

• Emergency Response Solution: A fragmented market with about 100-150providers; the top ten providers collectively manage about two-thirds ofsubscribers, the rest are local providers serving a few thousand on average

• Activity Tracking: An emerging industry with about 10-20 solution providers;most are startups

• Location Tracking: market growth is negatively affected by high hardwarecosts; the market consists mainly of location-based service (LBS) providersadding senior location-tracking services


• Emergency Response Solutions

– Two million subscribers in 2013, 85%of whom are ages 75 and older.1

• Activity Tracking: about 50,000 usersin 2013.2

• Location Tracking: 150,000 userssubscribe to a monitored location-tracking service or use a GPS-enabledwatch/phone with geo-fencingcapabilities.3

Needs & Pain Points

• Cost

– Recurring monthly expenses pinch seniors’ budgets

• False Positive

– Technology is unreliable, resulting in either false detection or faultyinterpretation of daily routine patterns, causing unnecessary disruptions

• Low mobility of older generation PERS products

– Consumers are unable to use older PERS products outside the home, on a trip,or in places without landline or network connectivity

Value Proposition

1, 2, 3, Parks Associates research data

• Safety and Peace of Mind

– Timely detection and alerts to avoidsevere and costly consequences

– Safety assurance for adult childrenand independent-minded seniors

• Less costly than a long-term carefacility

– A relatively affordable option toremain independent



With 42

Home Sensor/Hardware

LocationTracking

Home SensorActivity Tracking


PERS/FallDetection

Solutions & services thatuse a sensor network totrack at-home activitypatterns and send alertsfor abnormalities

Products, applications &services that track users’location

Solutions & servicesthat enable seniors tocall for help or auto-detect emergenciesand alert for help

Products or sensorsdeployed in anemergency detectionand responsesolution/service


Response



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43

Technology Trends Market Trends


Response

• Sensor/networking technology is improving

– Improvements in software algorithms and sensortechnologies have improved motion detection reliabilityand accuracy

– Although it is too early to draw a conclusion about whichPAN (personal area network) technologies will dominatethis market, all of them have made progress onperformance (battery life, peak power rate, data rate, etc.)in their respective ecosystems

• M2M and Internet of Things (IoT) drives innovationand cost reduction

– Overall M2M/IoT market growth is driving componentcosts down and making solutions more affordable

– IoT also drives design innovations to make sensors moreportable, attachable, and wearable

• Software design is trending toward a simple andclean user interface for emergency responsesolutions

– Dashboard views of seniors’ status and push notificationsde-clutter the user interface and make the status checkfaster and easier for caregivers who monitor loved onesfrom a mobile phone or a Web portal

– Smart Home players are also investing heavily in softwareand cloud services to prepare their end-to-end solutionsfor consumers

• Marketing efforts have focused on lifestyle freedomand lower costs compared with institutional long-term care options, however some solution providershave shifted focus to value-added features toconvince wary seniors

– These solutions try to add features that address non-emergency needs—family connection, personal legacy,wellness, medication management, etc.

– PERS is no longer just a service, but will become a platformto serve a variety of senior needs.

• New entrants have deep interest in turning PERS intoa service module on their smart home platforms

– Broadband service providers, cablecos, and home securitymonitoring companies have a growing interest in PERS

– Their software partners are working on an integratedsoftware deck to support modular service deployment

• In addition to the consumer market, businesscustomers such as nursing homes, retirementcommunities, and hospitals are also sales targets

– Emergency response solutions can be a service differentiator

– Hospitals use PERS in transitional care to minimize re-admission penalties



With

Innovation Trends

• Low-cost solutions enter the market: they challenge incumbent

players with more intuitive designs and/or lower service costs

• Wearables are slowly but steadily transforming locationtracking and emergency response solutions

› This segment will benefit from overall consumer interest in smartwatches and smart bands, and will enjoy lowered production costsdue to economies of scale

• Smartphone apps and software will challenge standalonedevices for location tracking and emergency assistance

› A software-driven approach leverages the popularity of smartphonesand tablets to drive consumer adoption

• Traditional PERS providers are showing interest in integratingvital sign monitoring functions into their PERS platforms

• Telcos and Cable MSOs have shown an interest in theindependent living market.

› Verizon and AT&T have launched PERS services, while cable companiesare building a home monitoring platform that will likely feature PERSand home sensor technologies

44

Low-cost homeactivity trackingsolution usingdiscrete sensordesigns

New watch-likelocation-trackingdevice with betterdesign andusability

Free smartphone appusing geo-fencing todesignate zones andalert caregivers ofabnormal activities

Build integratedPERS/telehealthplatform for seniors


Response



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45

• This sector is undergoing a major product upgrade cycle

–Modernized solutions featuring mobile broadband and smart sensors will expand solutions’ appeal to abroader audience.

• Technology integration efforts can result in a powerful independent living solution

– If the price of such an integrated independent living solution is affordable, a bigger market opportunity canemerge.

• B2B market can be another investment opportunity

–Hospitals and long-term care facilities have shown interest in the PERS market.

1

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Response



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Market Snapshot

46

Physical Fitness

• Sizable industry, with consumer discretional spending on fitnessequipment, fitness clubs, and personal trainer services comprisingits main revenue sources

• Large established players in respective industry segments but nodominant players

• Recent innovations take place mainly in fitness devices andpersonal fitness training services

• Revenue models are unlikely to change dramatically, even takinginto consideration recent innovations and disruptions


• 45% of people age 55-64 exerciseindoors or outdoors at least oncea week, a rate which increases to54% of people 65 and older. 1

• There are about 30,000 fitnessclubs serving more than 50million members. 2

• Total out-of-pocket spending onfitness club membership dues bypeople 50+ is estimated around$4 billion in 2013. 3

Needs & Pain Points

• Age-appropriate exercises and feedback

– People ages 50+ have unique needs for exercise and fitness, but currenthardware and services are more “one-size-fits-all.”

• A broad selection of fitness tracking devices and apps

– People ages 50+ may become overwhelmed by the choices on the market

– Confusion can be caused by a lack of differentiation among competing fitnessdevices and apps

Value Proposition

1,3, Parks Associates research data2. IRHSA data

• Health benefits of exercise

– Improve overall health and mitigateaging impact

• Social benefits of exercise

– Group exercise classes can be a greatform of social engagement



With 47

Fitness Devices

FitnessPrograms

Fitness SolutionEnablers


Fitness Apps

Solutions &platforms thatsupport fitness dataintegration andanalytics

Apps and solutionsthat teach fitness ortrack fitness progress,including B2C &B2B2C services

Apps that trackfitness progress andtarget consumersdirectly

Products that recordfitness data and trackfitness progress

Physical Fitness



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48

Technology Trends Market Trends• Design breakthroughs make fitness tracking devices

more comfortable to wear

– Fitness bands on the wrist and clipable trackers that caneasily attach to clothes and shoes offer conveniencewithout compromising performance

• MEMS (micro-electromechanical systems) sensorsare becoming more integrated, less costly, andhigher performance

– 3-axis accelerometers and gyroscopes provide robustmotion and cadence tracking functions

• System software designs become more powerefficient yet still robust in supporting importantfeatures

– Use of real-time OS gains traction

– Google offers a wearable-optimized OS, as does Tizen

• Fitness/exercise has become a social activity

– Social network integration has become a key feature toappeal to younger users—social features appeal to 50+consumers in that they make fitness tracking more engaging

• Although direct-to-consumer offerings dominate,fitness app developers and device makers also targetemployers and insurers for new businessopportunities and weight loss program providers forpartnerships

– Employers and insurers value fitness solutions as part oflarger wellness solutions for their employees/members

– Weight loss program providers hope to retain users byproviding the latest technology that integrates well withtheir programs

• DIY fitness solutions cut into the business of fee-based fitness services

– Fitness clubs examine new ways to attract members tocounter competition from DIY solutions that users can run athome

– Personal trainer services are also affected by free apps thatteach people how to exercise through photo illustrations andstreaming video classes

Physical Fitness



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Innovation Trends

• Smart watches support fitness functions and compete withfitness bands: Most smart watches on the market support somefitness tracking functions or integrate with existing fitness apps

• Digital fitness trainer solutions offer personalized/interactive fitness classes through streaming videos andsoftware-based expert feedback services with socialnetworking elements

• Fitness as a game: turning fitness activities into a fun-filledexperience with interactive gaming features

• Software platforms that support fitness data tracking andaggregation emerge from well-established consumerbrands: Apple, Samsung and Google have launched digital healthplatforms. These data platforms can unleash new innovation powerfrom their developers/partners.

49

A smart watchto display andtrack fitnessactivities

Video-basedfitness trainingprogram thatcould displacepersonaltrainer model

Augments thefitness experiencethroughinteractive,immersivefeatures

Secure and opendata platformwith open APIs fordevelopers tobuild newapplications

Physical Fitness



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50

• Invest in companies targeting age-appropriate fitness training/tracking solutions

• Companies with the capability to keep users engaged and the ability to turn user interactiondata into new features can be good investments

–Look for companies that differentiate on their ability to continuously innovate the user experience

• Be cautious about investing in pure hardware companies

–Competition will be intense; margin is likely to decline soon

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Physical Fitness



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Market Snapshot

51

Social Engagement

• An emerging market with great potential to impact the social livesof 50+ consumers, due to digital technology and social networks

• People 50+ are much more comfortable about connecting withpeople on Facebook or similar social networks than they were fiveyears ago when social networking was still a novelty.

• Innovations are concentrated in solutions and services that help 50+consumers remove mental and physical barriers to socializing.

• Innovators are experimenting with multiple business/revenuemodels that include advertising, freemium, software as a service,broker fee/commission, and subscription, all requiring a high levelof operational scale to be successful.


• A UC San Francisco trackingsurvey found that 30% of peopleages 60+ reported feeling lonelysometimes, and 13% felt lonelyvery often. 1

• More than 70 million people 50+showed a strong interest instaying socially connected withtheir friends and familymembers. 2

Needs & Pain Points

• Traditional means for social engagement are inconvenient toschedule and manage

– People ages 50+ traditionally relied on community gatherings and groupactivities to stay connected, but scheduling difficulty and transportationinconvenience stand in the way

• 50+ consumers are not familiar with the latest tools for socialengagement, such as photo sharing and timeline updates

Value Proposition

1. Judith Graham, “The High Price of Loneliness,” The New York Times, June 18, 20122. Parks Associates research data

• An active social life benefitshealth

– On the flip side, chronic lonelinessincreases health risks

• Convenience

– Solutions and services that helppeople 50+ stay connected or offermobility solutions to encourage face-to-face interaction become moreconvenient to use



With 52

MobilityAssistance

“DigitalInclusion”Solutions


Online PatientCommunity and

P2P Support

Digital communitiesfor people withsimilar healthconditions to shareexperience and findsupport/counseling

Products or servicesthat keep healthconsumers engagedand in-touch with theircommunity or withfamily caregivers/friends

Apps or services thathelp consumers easilyfind transportationoptions for socialengagement needs

Social Engagement



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53

Technology Trends Market Trends• Mobile technology has fundamentally changed

social networking

– Social elements mix with location information along withother smartphone features (e.g., camera) to enable a muchricher social networking experience

• Growing competition in the online social networkingmarket has led to more specialized communities

– Patient communities, neighborhood communities, andcaregiver communities meet specific social engagementneeds of people 50+

• Services that support consumers’ transportationneeds are enhanced by smartphone apps thatconnect riders directly with drivers; this businessmodel has disrupted traditional transportationservices such as taxi service

– Successes such as Uber and Lyft have attracted large venturefunding into this new solution market but also invitecompetition and incumbents’ defensive moves.

• Business models have become more market proven,yet many startups are still struggling with scale

– Specialized communities usually grow slower than generalpurpose communities, and a smaller user base makes itdifficult to generate revenues from the traditionaladvertising model

Social Engagement



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Innovation Trends

• New types of social network target specificpopulations and communities

› New social networks may include both peer-to-peerlearning & support and patient to care providercommunications to maximize online community’s benefit

› Social networks for broader consumer needs may targetpeople in the same community for social engagement orpatient’ caregivers

• Digital solutions that help consumers (esp. seniors)overcome social loneliness and bring them back totheir community and family circles have gainedtraction

• New transportation scheduling and pickup options:offers convenience to 50+ and their family caregivers whoneed ad hoc transportation services

54

Peer-to-peer mentoring that leveragespersonal experience to help patientsovercome health issues, stay engagedwith each other with daily life

A new transportation assistancesmartphone app in which a customercan ask taxi drivers to bid on his/hertrip based on price, wait time, anddriving distance

A tablet-based life organization solutionto help less technology savvy seniors toenjoy a personalized digital onlineexperience—photo sharing, video chat,get reminders, check scores, etc.

Social Engagement



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• Sustainability of revenue models is an important evaluation criteria

–Companies with a diversified revenue model and over time can find a stable source of revenues in thismarket segment will be the winners.

• Although the transportation support service market is hot, there are already two majorleaders---Uber and Lyft

–This sub market segment has become crowded and ROI on this segment will be low.

• “Digital Inclusion” Market is under penetrated

–Though the definition of this market is less clear, it appeal to more than 20 million families that look afterfamily members and look for means to bring loved ones connected to one another

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Social Engagement



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Market Snapshot

56

Diet and Nutrition

• A fragmented market with multiple types of solution vendors butno clear market leaders in each market sub-segment.

• Diet and nutrition needs have a broad appeal among 50+, but thetraditional weight loss industry has been stagnant, and newsolution vendors are still searching for effective monetizationstrategies

• Innovations have led to new solutions and services such as diettracking, diet coaching, and grocery shopping services. Nutritionaldata services have also emerged.

• Diet & nutrition solutions are usually integrated with fitnesstracking and personal training services to achieve weight loss goals.


• In 2010, 43% of men and 45% ofwomen ages 65-74 were obese;27% of men and 30% of women75 and older were obese. 1

• Data from the CDC’ nationalHealth and NutritionExamination Survey show only17% of adults 60 or olderconsume a good quality diet,30% skip at least one meal perday, and 16% consume fewerthan 1,000 calories per day.. 2

Needs & Pain Points

• Many food and nutrition labels lack specific info on nutritional valueand calorie data

– The industry needs more in-depth data about food and its ingredients as well asmore accurate calorie count data to help 50+’ weight loss needs

• Meal plans or grocery delivery services may not be available incertain geographical areas

• Cost of a diet/nutrition management service is still relatively high.

Value Proposition

1. Federal Interagency Forum on Aging-Related Statistics, Older Americans 2012: Key Indicators of Well-Being,2. Parks Associates research data

• Healthy eating has positive impacton many health metrics

• Convenience

– From diet tracking to groceryshopping, data are readily availableonline or on smartphone andconvenient for consumers to learnand track.



With 57

Content &Education

Diet/NutritionManagement

Meal Plan/Delivery/ Cooking

Solutions


Diet & NutritionTracking Tool

Services & solutionsthat either deliverprepared meals orhelp grocery shoppingand cooking withrecipes

Services that adviseconsumers about dietand nutrition; eitherwith a digital coach orvia a personal coach

Apps and solutionsthat help consumerstrack and manage dietand nutrition, usuallya self-guided tool

Diet & nutritioncontent andeducational info forconsumers or forbusiness partners

Diet and Nutrition



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58

Technology Trends Market Trends• Mobile apps make diet tracking and diet

information access much more convenient

– Mashup with fitness tracking functions makes it even moreappealing

– Bar-code scanning technology turns the smartphone as afood label reader

• Software algorithms have become moresophisticated to analyze diet habits, make personalrecommendations, and send alerts

• New diet and nutrition solutions threatenincumbents’ business

– WeightWatchers and Jenny Craig are under significantpressure to revitalize their business challenged by newweight loss solutions combing fitness tracking and diettracking

– Online grocery delivery companies face growingcompetition from startup companies specializing in mobile-based solutions

• There is a growing interest in aggregating allnutritional and food info from all sources (grocerystores, restaurants, etc.) to better serve consumerdiet tracking needs

– Companies are filling the data gap by working with partnersand securing access to private sector food databases.

• Traditional dietitian coaching model is threatened byDIY services

– Although most insurers will pay for medically necessarydietitian coaching sessions, more people will turn to moreadvanced diet tracking apps and may sign up for a premiumcoaching service tier to receive experts feedback becausethe latter is more convenient and affordable.

Diet and Nutrition



With

Innovation Trends

• Grocery shopping guidance services or applicationsbecome more robust and comprehensive

› Provides recommended food options or builds customizedmeal plans based on shopper’s dietary needs or biometricdata

› Adds home food/grocery delivery as premium features

• Nutritional information gets more granular and foodchoices more specialized:

› not only major ingredients are analyzed, even minoringredients including additives are analyzed for totalhealthiness assessment

› Specialized food/nutritional apps help people buy andprepare food that are organic, seasonal, and without GMO

59

Diet and food recommendation(MealRX) based on proprietary dietassessment and optional biometricdata analysis

A nutritional app that informs groceryshoppers 12 fruits and vegetableswith the most pesticide residue, 15with the least residue.

Diet and Nutrition



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60

• Data quality is a business differentiator

–Depth and breadth of food information is the first business strength that can help the company stand out inan increasingly crowded market

• Long-term, diet and nutrition information alone will not be sufficient to sustain businessgrowth

–Entrepreneurs will benefit from integrating diet and nutrition data and tracking tools with other wellnesssolutions such as fitness, vital sign monitoring, etc.

• Grocery shopping assistance service may face strong competition from established players

–Grocery store chains are likely to expand into this business aggressively along with companies such asAmazon.com and Schwan’s,

– Investment in the backend logistic/data system that support new ways of grocery shopping can be a lessrisky investment as the ability to aggregate grocery info and price information and coordinate customerorders with delivery schedule can be a challenge for large chain stores even though they might try it on theirown first.

1

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Diet and Nutrition



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Market Snapshot

61

Behavioral &Emotional

Health

• A market traditionally dominated by psychologist visits/therapies asa reimbursable services and certain wellness management servicesto correct/modify behaviors

• These services must meet specific criteria to be eligible forreimbursement, whereas the broader 50+ population has the needto manage their mental and behavioral health without suchreimbursement restrictions.

• Stress is a significant source of behavioral and emotional healthproblems. Life changing event, such as divorce or family memberdeath, could also trigger emotional stress. As a result, marketsolutions are concentrated on addressing specific triggers.


• The American PsychologicalAssociation reported thatBoomers (Ages 47-65) andMature adults (66 years andolder) report less stress thanyounger generations, but stillexperience stress levels higherthan recommended.

Needs & Pain Points

• Behavioral and emotional health problems may relapse aftertreatment

– Effective monitoring of behavioral traits and detecting triggers can be achallenge

• Many “me-to” solutions are on the market today, especially formeditation and stress management.

– Lack of differentiation makes it difficult for consumers to select

Value Proposition

• Mental and behavioral problemsin many cases are health riskscontributing to other healthproblems

• Lower cost

– Self-help tools are free and can meetgeneral consumer needs.



With 62

Companionship

Stress/EmotionManagement/

Therapy

BehavioralModification-

Self Help


Support Group/Community

Services that adviseconsumers on stressmanagement andpsychological therapy,usually from a professional

Services that adviseconsumers on stressmanagement andpsychological therapy,usually from a professional

Online communities thathelp consumers seeksupport from peoplewith a similar experienceor condition

Product and services thathelp people overcomefear of seclusion andoffer emotional support


Health



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63

Technology Trends Market Trends• Remote consultations and self tests are being

employed thanks for technologies such as videocamera and skin sensors

– Standardized video codecs for Web and mobileapplications enable remote consultation to take place onany devices.

• Software algorithms can build personalized self-testand support tools for DIY use

• Care management firms increasingly recognize theneed to address behavioral and emotional healthproblems as part of a comprehensive chronic caremanagement program.

– They are looking at multiple solutions including communitysupport, self-help tools, and digital companion solutions tocomplement their stress management and therapysolutions.

• Patient support groups use peer-to-peer consultationand communications to provide emotional support

– Social engagement is an effective approach to mitigate thedownside of stress and consequent emotional healthproblems.


Health



With

Innovation Trends

• Online service models that connect consumers withmental health professionals or offer digital therapybecome more prevalent: this direct-to-consumer modelcompetes with traditional mental therapy services based onreferrals and/or as part of a disease management programadministered by an insurance company

• Robotics and digital companion solutions enter themental health market targeting people withloneliness

• Behavioral & emotional health programs integratedinto overall healthy living solutions: the industryrecognizes that behavioral/mental health must be meshedinto population health management

64

Online therapy through a live videoconsultation that promisesconvenience, effectiveness, privacy,savings, and more choice ofprofessionals

A conversational companionship and pettherapy that uses a virtual, talking pet ontablet to engage seniors with talks aboutfamily photos, positive memories, news, etc.

A population health managementsolution that incorporates a patient’spsychosocial and behavioral traits into itsprogram


Health



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65

• Care management companies are likely to invest in behavioral and emotional health solutions

–They may develop such solutions in-house but more likely either partner with an existing provider or make astrategic acquisition.

• Digital delivery of mental health services through remote consultation is a growth area

–Such consultation is eligible to be reimbursed, which encourages healthcare professionals’ use of thisservices.

• DIY tools for stress management will struggle with revenue model challenges

– Independent DIY solutions will find it difficult to sell the service/app directly to a consumer

1

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Health



With

Update on Market OpportunitiesPotentialUpdate on Market OpportunitiesPotential



With

Market Opportunities: Key Findings

67

• Innovations Are Accelerating: Moredisruptive business models andinnovative products & services

• A Bigger Revenue Potential:Cumulative revenue opportunities up50%

• Deepening Cuts into Growth ofExisting Market Solutions: asinnovation accelerates, $9 billion willbe squeezed out of existing marketsolutions

From $20 billion to $30billion

Five-Year CAGR risesfrom 14% to 35%

From 5% CAGR to -0.3% CAGR; From $77billion to $68 billion

Market place disruptions are happening at an astounding pace;since January 2013 alone, this report finds :



With

• Innovation Opportunities Will Shift:

-Physical Fitness, Aging with Vitality, and

Care Navigation have the greatestrevenue/growth potential

-Medication Management and Vital SignMonitoring still have tremendous innovationpotential, despite that other growthopportunity areas have a greater investmentappeal.

Market Opportunities: Key Findings

68

Business model challengesand pricing pressurereduces revenue potential

New products and servicesand disruptive businessmodels invigorate growth

Maximum Revenue Opportunities (2014-2019)-Physical Fitness: $8.5B-Care Navigation: $4.1B-Aging with Vitality: $3.3B

Maximum Revenue Opportunities (2014-2019)-Medication Management: $1.4 B-Vital Sign Monitoring: $3.8 B



With

Fewer Users/Lower Risk

Market Opportunity Attractiveness

69

Projected Users (2019)Fewer

Inve

stm

en

tR

isk

(Rev

en

ue

Op

po

rtu

nit

yV

aria

nce

)

Hig

he

r

Vital signMonitoring:

26 MMedication

Management:8.1 M

Aging withVitality:

42 M

PhysicalFitness:

34 MEmergencyDetection/Response:

4.8 M

CareNavigation:

61 M

Behavioral &Emotional Health:

25 M

More

Low

er

$8.5 B

$2.6 B

$3.8 B

$1.4 B

$3.3 B

$3.1 B

$1.7 B

$4.1 B

Mapping of ninemarket areasbased on:

Maximumcumulativerevenue projectedfor 2014-2019(larger circle =higher revenue)

Maximumnumber of usersprojected in 2019

Investment risk,measured byrevenueopportunityvariance. Moreattractiveopportunitieshave lower levelsof risk.

Fewer Users/Higher Risk

More Users/Higher Risk

More Users/Lower Risk

SocialEngagement:

57M

Diet & Nutrition:35 M$1.9B

The Zone ofGreatest

Investment Appeal



With 70

Impact of Health Innovations: Drive Higher Revenue andCut Deeper into Existing Market Revenues

$77$68

$20$30

$0

$20

$40

$60

$80

$100

2013 Report, Six-year (2013-2018)Cumulative Revenues

2014 Revised Update, Six-year(2014-2019) CumulativeRevneues

$B

illio

n

Summary: Revised Updates Show Health Innovations-enabled Revenues Will Grow Bigger and Faster, Cut Deeper

into Existing Market Solutions' Revenues in the Next SixYears

TraditionalMarketRevenues

HealthInnovation-enabledRevenueOpportunities



With 71

Impact of Health Innovations: Faster Growth

14%

35%

5.0%

-0.3%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2013 Report, Six-year (2013-2018) 2014 Revised Update, Six-year (2014-2019)

Cumulative Annual Revenue Growth:2013 Estimates vs. 2014 Projections

CAGR for Innovation-enabledRevenue Opportunities

CAGR for Exisiting Market SolutionRevenues



With

Comparison: Health Innovation-enabled New Revenue Opportunitiesas a % of Total Market will Grow Faster than Initially Projected

72

15%

20%

26%

32%

39%

44%

18% 19% 19% 20%

23%25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2013 2014 2015 2016 2017 2018 2019

Health Innovations-enabled New Revenue Opportunitiesas a % of Total Market Revenues:

2013 Estimates vs. 2014 Projections

Health Innovation-enabled Revenue Opportunities as % of TotalMarket Revenue Opportunities (2014 Revised Update, 2014-2019)

Health Innovation-enabled Revenue Opportunities as % of TotalMarket Revenue Opportunities (2013 Report, 2013-2018)



With

Forecast Update: Annual Revenue Potentials Broken out byExisting Market Solutions and Health Innovations Solutions

73

$11,438 $11,390 $11,558 $11,218 $11,315 $11,261

$2,005 $2,860$4,015 $5,383

$7,182$8,892

$0

$5,000

$10,000

$15,000

$20,000

2014 2015 2016 2017 2018 2019

$m

illio

ns

Health Innovations to Add $30 Billion New RevenueOpportunities from 2014-2019 to the Existing Health Solution

Market for 50+

New Revenue Opportunities enabled by Innovations for 50+

Out-of-Pocket Spending on Existing Health Solutions by 50+

CAGR: 35%

CAGR:-0.3%



With

Analysis of Changes

74

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

$1.4 B $3.3 B

2013 Report (2013-2018)

CurrentEstimates(2014-2019)

▪ Medication Management: Cumulative revenuepotential lowered from $3.3 billion in the 2013report to $1.4 billion in this update. This downwardrevision reflects the following assumption changes:

1) The difficulty market players have hadmonetizing medication management as a paidservice or a retail product to consumers, eventhough the addressable market is huge andmedication compliance is a significantproblem;

2) Analyst belief that the most monetizableopportunities come from a smaller populationthat has a more severe medication adherenceproblem and therefore more likely to betargeted by care providers and insurers forcompliance efforts;

3) Free or low-cost medication managementsolutions can appeal to a larger population,but revenue opportunities are likely smaller.


Summary of Changes(compared with 2013 report):

1. Lowered estimates of revenuepotential

2. Smaller size of marketadopters

3. Similar investment risk profile



With

Analysis of Changes

75

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report (2013-2018)


Aging with Vitality

$1.9 B

$3.3 B ▪ Aging with Vitality: Cumulative revenueopportunities raised from $1.9 billion in the 2013report to $3.3 billion. This upward revision is basedon the following reasons:

1) A faster pace of innovation in products andservices targeting this opportunity area, inparticular smart products/services that detectearly aging signs and mitigate aging impact;

2) An expanded list of product categoriesaddressing aging needs such as dehydration,UV protection, posture correction, etc.;

3) A shift from services to product sales modelthat cater to the aging Baby Boomers’ needsand the resulting higher revenues fromproduct sales than service subscription.


1. Higher estimates of revenuepotential

2. Similar size of marketadopters

3. Lowered investment riskprofile



With

Analysis of Changes

76

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report (2013-2018)

Current Estimates(2014-2019)


$4.8 B

$3.8 B ▪ Vital Sign Monitoring: Downward revenuerevisions of this category were made for thefollowing reasons:

1) This category’s revenue models are relativelystable compared with other opportunitiesareas, but revenue potential from user growthwill be more than offset by a shifting mix froma 3rd-party-dominated service model to aprimary care provider-dominated model withthe latter carrying a lower PMPM pricing thanthe former model


1. Lowered estimates of revenuepotential





With

Analysis of Changes

77

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report(2013-2018)

Current Estimates(2014-2019)

Physical Fitness

▪ Physical Fitness: Cumulative revenue potentialraised from $1.9 billion in the 2013 report to $8.5billion in this update. This significant upwardrevision reflects the following assumption changes:

1)There is a significant increase in demand forfitness products that track users fitness progressand for new product categories, such as the smartwatch, that have built-in fitness features thatdrive fitness product sales; these new devicecategories, which carry a much higher priceassumption than traditional fitness trackingdevices, were not factored into the previousreport

2)Large consumer electronic device OEMs’ entryinto this market—in particular, Apple, Samsung,and Google’s major hardware partners—willincrease consumer appetite for high-end fitnessor CE products with built-in fitness trackingfeatures

$1.9 B $8.5 B



2. Increased size of marketadopters




With

Analysis of Changes

78

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report(2013-2018)


Social Engagement

▪ Social Engagement: Cumulative revenueopportunity raised from $1 billion in the 2013report to $3.1 billion. This upward revision is basedon the following reasons:

1) A faster adoption of social engagement effortsby those ages 50+ (driven by new patientengagement efforts from care providers),along with the convenience and low cost ofnew social engagement approaches will leadto higher user engagement levels and higherad impressions;

2) Better monetization of social media userbases, as reflected in the recent metrics frommarket leaders such as Facebook andLinkedIn, convinced the analyst to reviseupwards the ad rates that advertisers arewilling to pay for ads served on socialplatforms.

$3.1 B

$1.0 B




3. Increased investment riskprofile



With

Analysis of Changes

79

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report(2013-2018)


EmergencyResponse

▪ Emergency Detection and Response: There are nosignificant upward or downward revisions of thiscategory for the following reasons:

1) The category’s revenue models are relativelystable compared with other opportunitiesareas;

2) While user growth is expected, pricingpressures from digital innovations will keeprevenue potential in the similar growth

patterns as in the 2013 forecasts.

$2.6 B

$2.4 B







With

Analysis of Changes

80

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report(2013-2018)


Diet & Nutrition

▪ Diet & Nutrition: Cumulative revenue potentialraised from $1.6 billion in the 2013 report to $1.9billion in this update. This upward revision reflectsthe following assumption changes:

1) The Accountable Care Act will drive adoptionof preventive care engagement efforts, anddiet and nutrition is becoming a key area ofinvestment by care providers and insurers,resulting in revised assumptions of adoptionof diet/nutrition solutions and services

$1.6 B $1.9 B







With

Analysis of Changes

81

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report(2013-2018)


Care Navigation

▪ Care Navigation: Cumulative revenueopportunities raised from $3.3 billion in the 2013report to $4.1 billion. This upward revision is basedon the following reasons:

1) The need for assistance to navigate the post-ACA healthcare system has increasedsignificantly as more consumers use thehealth exchanges to buy health insurance

2) The adoption rate of this consumer-centricmodel is much higher than analystassumptions in 2013;

2) Better monetization of care navigationservices, including referrals, marketplace, andadvertising, will spur the growth of the carenavigation market.

$4.1 B

$3.3 B







With

Analysis of Changes

82

Users

Inve

stm

ent

Ris

k(R

even

ue

Op

po

rtu

nit

yV

aria

nce

)Lo

wer

Hig

her

Fewer More

2013 Report(2013-2018)



▪ Behavioral and Emotional Health: Cumulativerevenue potential raised from $428 million in the2013 report to $1.7 billion in this update. Thissignificant upward revision reflects the followingassumption changes:

1) A more significant adoption of digital tools formental health/behavioral health assessmentand therapy than previous assumptionssuggested; this more convenient andaffordable fee-based approach will replace anad-driven business model;

2) An expanded user base for behavioral andemotional health management as a result ofmore extensive preventive care outreach bycare providers and insurers.

$0.4 B

$1.7 B





Thank You.Thank You.

Harry Wang, Director, Health &Mobile Research, Parks Associates

Jennifer Kent, Senior Analyst,Parks Associates

15950 N. Dallas Parkway, Suite 575

Dallas, Texas 75248

Office: 972.490.1113

Fax: 972.490.1133

[email protected]

Keith Epstein, Senior StrategicAdvisor, AARP

AARP National Headquarters

601 E Street NW

Washington DC 20049

Office: 202.434.6169

[email protected]

with

health innovation frontiers ii - aarp · health innovation frontiers ii| 21 aug 2014 for more...

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