Richard Burke, who built UnitedHealthcare (UNH), started with $40,000, which he borrowed against his house (from Bootstrap to Billions). On the other hand, Haven, a joint venture, with backing from Jeff Bezos, Warren Buffett, Jamie Dimon, and their organizations, was trying to develop a solution to the high cost of medical care and it failed. Its failure is considered to be a “a sign of how difficult it is to radically improve American health care.”
Why did UNH succeed in dominating American healthcare when it was led by a lone entrepreneur with limited resources, while Haven did not, though it was led by one of the mightiest business armies assembled to solve this issue
I interviewed Burke for my book (Bootstrap to Billions). Burke dropped out of a doctorate program in finance because he found a real-life opportunity to analyze American health care and develop a solution. This led to his founding of UNH. Here are 4 reasons why UNH succeeded.
Burke jumped on an emerging trend. When Burke founded UNH, legislation making health maintenance organizations (HMOs) a mandatory option for corporate employees had been passed by Congress. Burke played a role in helping to pass the legislation. This started a trend allowing employees to pick HMOs. UNH jumped on the trend and rode it to become a unicorn.
Burke was committed. When Burke started UNH, he went into it full-time, including mortgaging his house to borrow funds to start the company. When the company was slow to take off, he pivoted to take on temporary business in healthcare data management to keep his company afloat. This commitment was key – Burke could not afford to quit. He tried alternative solutions until he found the one that worked. When initial strategies were slow to take off, he pivoted.
Burke worked with physician groups. A medical system needs physicians. Burke built UNH by helping physician groups form HMOs that he managed. Then he took his management company public and acquired the HMOs.
Burke made it attractive for patients to switch to his HMO. By offering corporate employees the choice to keep their physicians with a financial incentive, Burke made it attractive for patients to pick his HMO.
Could the three titans of American business have done better? Maybe they could have learned from unicorn entrepreneurs like Burke, and from Silicon Valley.
· Start with an emerging trend. More than 95% of the unicorn entrepreneurs I financed, interviewed, or analyzed started with an emerging trend, which helped the new venture beat entrenched titans. With three of the most accomplished people in American business and with the support of their three major corporations, Haven seemed to be trying to create a trend, which is tougher.
· Encourage entrepreneurs to enter the emerging trend – with their eyes on the unicorn prize. This is what unicorn entrepreneurs, including Burke, did. He was one of multiple entrepreneurs who entered the HMO trend. Silicon Valley excels at this practice – there are usually many entrepreneurs trying to build unicorns in many emerging trends. VCs enter after they see evidence of potential.
· Focus on business innovation to find the winning strategy. Burke focused on business strategy innovation like many unicorn-entrepreneurs. He formed joint ventures with physicians so he could offer corporate employees the prized option to keep seeing the physician they liked. Then he offered this benefit to corporations to keep their employees happy and productive. UNH succeeded by offering employees their choice of physicians and offering employers a choice of services at an affordable price.
MY TAKE: The contrast between UNH and Haven shows the importance of smart and committed entrepreneurs. Entrepreneurs need smart venture-skills, take-off-strategies, and the ability to execute to succeed. Commitment is key – it is easy to leave (or end) a startup at the first hint of problems especially when the leader has attractive options.