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Bob MetcalfeStartup entrepreneurs entering the healthcare marketplace in the United States face huge challenges. The market is mature; it’s dominated by large, established companies; and it’s under severe stress. But those dynamics also create opportunity for entrepreneurs, according to Bob Metcalfe, Internet pioneer, longtime venture capitalist, and, now, professor of innovation at the University of Texas.  “It’s harder for startups when the incumbents are well entrenched, but there’s an opportunity for disruption when an industry is broken, like healthcare is, and when the incumbents are broken, like some in healthcare are,” Metcalfe says.

Metcalfe is one of five judges at IBM SmartCamp Austin, May 17 and 18. The event is the second this year of the series of annual IBM SmartCamp entrepreneur competitions, which are aimed at helping startups that are focusing on Smarter Planet-related products and services. Of the five finalists in Austin, three are in the healthcare field and another is health related, so I when spoke to Metcalfe on the phone last week I asked him to tailor his advice to their circumstances.

Of course, some of the most important advice that entrepreneurs can receive is more general, and Metcalfe dispenses that as well.  One key piece: Don’t be afraid of going up against entrenched incumbents. Metcalfe did just that in his own career as an entrepreneur. After co-inventing the Ethernet networking technology in 1973 at Xerox Palo Alto Research Center, he co-founded 3Com to sell networking equipment based on the technology. The major incumbent in that case was none other than IBM, with its Token Ring technology. Long story short, Metcalfe and Ethernet won.

As a general partner at the venture capital firm Polaris Venture Partners for 10 years, and, now, as a professor of innovation, Metcalfe uses what he calls a “three-by-three” thinking tool to evaluate the opportunities for startups. These days, he focuses on three industries, which he says “deserve disruption:” health care, energy and education. He analyzes each of the three based on the potential for using the Internet to reinvent them. Within health care, he says, three forms of Internet technology can create major shifts:

Mobile: Cell phones and their descendants (tablets, etc) will enable the personalization of medicine via remote monitoring and network communications.

Video: Broadband networks and telepresence technologies will enable rich interactions between physicians and their patients when they can’t meet face to face.

Embedded: Sensors located in homes and on individuals’  bodies connected via wireless and wired networks will make it possible to monitor and manage health status and drug delivery much more effectively.

Metcalfe is a big  believer in what journalists call “the power of three.” That’s the idea that complicated concepts are best explained when they’re broken into three parts. When I asked him to describe the biggest challenges startups face today, he said there are three. First, entrepreneurs have to understand the competition they face–the strengths and weaknesses of the particular companies they’re going up against. Second, they have to understand the ecology of their markets–the entire environment in which they operate, including all of the interrelationships. Third, they must develop a long term strategy . Often, they have to come up with an initial approach to the market and then change things up as the market develops. He calls this a staged path to market.

His most important advice for entrepreneurs is they have to be persistent: “It’s a long road, but it’s a worthwhile road. This is how progress is achieved, either through startups or through the reaction they provoke.”

To watch a livestream of today’s event in Austin, click here. To learn more about the 5 finalists and to vote to select which receives the People’s Vote Award, click here.

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May 19, 2011
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