Published on May 09, 2024
“Resilience and persistence with your core principles is the bedrock of building anything from zero to one,” stated Prashant Tandon, CEO and Co-founder of Tata 1mg, providing an invaluable lesson for incubating any new business over the course of a Leadership Series EDGE Webinar on May 8, 2024, titled ‘Tata 1mg’s Transformation Journey and Way Forward’.
This, along with the power of compounding excellence and nurturing a diverse talent pool have seen Tata 1mg emerge as the largest online integrated healthcare platform in the country today.
Patient-centric
Tracing the genesis of Tata 1mg, Prashant recalled how his experience of the US healthcare system while working with McKinsey and the failure of his first start-up in India, which provided a software solution for doctors in 2009, led to the realisation that globally, most healthcare systems are designed either for the payer (such as an insurance company) or healthcare provider (hospital).
“Nobody designed a healthcare system with the patient at the centre. We felt this was a fundamental gap in how healthcare is delivered,” he recounted.
So, Tata 1mg was founded with the objective to “make healthcare understandable, accessible and affordable for all patients”. The founders built this endeavour on three pillars: Customer centricity, technology, and operationally efficient model of healthcare delivery.
The growth pyramid
Tata 1mg began as a content platform to draw people online. “For the first few years, we only invested in content,” said Prashant. With 35 million unique users a month, 5 billion page views annually, and 1.5 million YouTube subscribers, content still forms the base of its growth pyramid today.
“We are the Wikipedia of medical information. Globally, we are the eighth-largest content platform, and number one in India,” stated Prashant.
The company then built the e-hospital or transaction layer, which includes medicines, lab tests and consultations, on top of this. The data that gets generated from this forms the next layer of the pyramid. “That data is the context on which we will build the new model of healthcare, which is personalised, predictive and preventative,” he said. Finally, at the top of the pyramid is its goal: “Can Tata 1mg be the patient’s trusted partner – everything that you need before you know that you need it?”
Integrated healthcare system
The growth pyramid reflects the second core principle that has defined Tata 1mg’s construct: “We believe healthcare must be integrated. This second core principle has been key in our inflection journey,” stated Prashant.
Historically, pharmacies, doctor’s clinics and diagnostic labs have all run as independent shops, he pointed out. “To make it healthcare, you need the context of what’s going on with the patient. That comes by adding the data layer.”
Undoubtedly, the founders encountered many naysayers in their start-up journey. “The entire ecosystem told us healthcare can never be customer-centric and that, outpatient healthcare is not integrated. They said if you try to do too many things and not focus on one, you will not be able to build a company.” However, the founders remained resilient.
“Our view was we are building only one thing – a delivery mechanism to make a person well. For that, if a person needs products, services or content, we will provide that. The strength of your belief is very important, and then how you actually deliver all of that,” he said.
Today, Tata 1mg’s offerings include e-pharmacies with a 31% market share, its recently launched retail stores, and hospital pharmacies. On the institution side, it offers corporate healthcare and wellness services to companies, and has partnerships with insurance and pharmaceutical companies.
Power of compounding
“All of this was not built overnight. All the work of the last five-eight years is showing results now because the power of compounding is kicking in,” said Prashant.
Indeed, Tata 1mg has pursued excellence by constantly refining its partnerships, technology platform and supply chain. “It was a fast-paced effort to get better every day and then letting the compounding of excellence to take place,” said Prashant.
Take the company’s supply chain and technology, which are at the heart of its business. In FY2024, it had ~14,000 tech releases. “Every release is something getting a little better.”
And since trust is core to the healthcare business, the company buys medicines directly from pharmaceutical companies today, has 12 certified labs country-wide, and its entire supply chain is temperature-controlled.
Crucially, its customer net performance scores, which were in the 20s five years ago, have jumped to industry-high levels of 66 for the ePharmacy, 77 for the eDiagnostics, and 85 for the Speciality businesses today. In contrast, most healthcare businesses globally have negative or single-digit NPS, pointed out Prashant. “We are incredibly proud of our customer experience metrics.”
Nurturing talent
Undoubtedly, people are key for the success of any business. However, as Prashant pointed out, new businesses don’t have readymade talent pools. “You have to nurture and cultivate different types of talent.” One of the biggest reasons for Tata 1mg’s success is that it has brought together talent from various domains ranging from best-in-class data scientists and technologists to outstanding phlebotomists, warehousing experts and delivery staff.
“Building a company like Tata 1mg required an equal seat at the table for all these professionals, and for everyone to appreciate each other’s skill sets. This talent model is going to be more and more critical for companies in future,” he stated.
This also calls for leaders to let their teams take the meandering instead of linear path to success. “Meandering and making mistakes is a feature not a bug of any early-stage journey. Disruption is messy and new models will take iterative turns,” he stated.
Prashant’s advice was: “Let failures happen, push for excellence, and stick to a few core things. Create fundamental values so that at the point that the power of compounding comes to the fore, magic starts happening. That’s what we are seeing at Tata 1mg today.”
For instance, the company turned around its diagnostics business from minus 30% EBITDA to plus 11% EBITDA last year. “That happened because of everything that was built in the last seven years,” he said.
Going forward
Looking ahead, Tata 1mg’s imperatives are to become a fully integrated omnichannel healthcare company by 2030, and to leverage technology. “We are early in the integrated omnichannel phase,” said Prashant. Around 70% of its business is still digital but he expects it to change to 50:50, going forward.
“The healthcare world is getting changed with AI and data sciences to become increasingly hyper-personalised, lifecycle-oriented and predictive,” he added. Tata 1mg’s data scientists are already working on some state-of-the-art models here.
“We are still early in our journey. While we have covered some ground, there is lots more to build and we have an exciting phase ahead of us,” said Prashant.