Editor's note: This blog was originally published on July 30, 2019

Tech startups have set their sights on health care's $3 trillion market, and investors have been all too willing to throw funding their way. These new market entrants are young, nimble, and stocked with IT talent. Startups often develop a concept for a product or service that sounds revolutionary, and venture-capital firms, seeking to profit off of the company's growth potential, can value these companies in the millions—even if an actual product doesn't exist yet. Digital health funding in particular has been rising exponentially for years now, giving birth to a number of "unicorns," or startups that have a valuation of over $1 billion.

But it's not just the startups that are looking to shake up the industry. Employers, insurers, and large tech companies (e.g., Amazon, Google) are also going big on digital health innovation. Unfortunately, many of these efforts have failed to deliver breakthroughs that match the hype.

Why digital transformation often fails to launch

In his book Mistreated, Dr. Robert Pearl outlines a number of reasons why "sleek and shiny new gadgets" end up hitting a dead end.

12 ways to assess your digital health system maturity model

1. Solutions looking for a problem: Pearl argues that tech entrepreneurs take a backward approach to innovation; they focus first on discovering the technology, and only then try to figure out the business case for the product (and eventually, how to monetize it).
2. Tech companies don't want the liability: There are technologies that could be incredibly useful for patient care, but manufacturers are hesitant to sell them. A device that could tell patients when they're at risk and when not to worry could expose companies to legal action if patients experience a major complication down the road. Device makers instead prefer to pass their data on to health care providers to "own" the process.
3. No clear buyer: Creating a new tool or mobile app is difficult, but so is monetizing it. Unfortunately, even in the case where these new IT solutions prove useful, health care stakeholders (e.g., patients, physicians, payers) often do not want to cover the cost of deploying or maintaining them. Until our payment models shift away from fee-for-service, stakeholders will continue to pass the cost onto other parties.
4. Many physicians still see technology as impersonal: Some physicians see technology as a barrier to the personal aspects of health care. Clinicians may be resistant to technology for any number of reasons, such as doubting a tool's utility, not wanting to deal with implementation headaches, or a fear of losing influence over patient care decisions.

Don't be complacent: 3 ways to move forward

However, despite these speed bumps, digital disruption and innovation are happening, and health care providers cannot afford to be complacent. The intersection of changing market forces, technical advancement, and growing consumer expectations around digital enablement are pushing providers to fundamentally rethink their care delivery processes.

Follow the path to Artificial Intelligence

With so many changes underway, the designated digital transformer (e.g., CIO, Chief Digital Officer, Chief Innovation Officer) must lead, educate, and balance practicality with "rethinking impossibilities." IT leaders also play a key role in building the foundational competencies required for the digital health system of the future. As your organization prepares for digital transformation, keep these lessons in mind:

1. Don't purchase technology without a business strategy in place. Many health systems either start to invest in new emerging technologies out of fear of losing ground to early adopters, or because they're excited by the "shiny" new objects being released. However, digital transformation should be guided by strategy and measurable goals, not tools.
2. Before looking at external solutions, consider the talent you may already have. Given the rise of disruptive startups and the health care efforts of big tech, it's natural for many hospitals and health systems to adopt an "outside-in" approach to digital transformation. However, organizations should not overlook current staff—internal teams have a better understanding of the real problems to be solved and the potential cultural, workflow, and incentive barriers to success.
3. Adopt an agile mindset to build a culture of calculated tolerance for failure. Implementing the newest digital health technology often requires extensive experimentation and customization. If each IT initiative has to follow a strict methodology, or jump through multiple layers of management approval to move forward, innovation will be reduced to a crawl. Agile methodology is common in startups and aligns well with the fast-paced digital transformation environment. Encourage daily huddles, cross-team decision making, and rapid prototyping to spark new ways of thinking.