The Need for Alliances in Uncertain Times

Mike Peña, Stanford University May 4, 2017

Businesses and entire industries are coping with major uncertainty due to President Donald Trump: from carmakers that fear his next tweet, to health insurers who can’t set coverage rates because of the ongoing fight to repeal the Affordable Care Act.

Rohan Bhobe is the CEO and co-founder of a technology startup that earned its chops by fixing key parts of the website after its clunky launch in the fall of 2013. So you’d think he and his fellow co-founders at Nava – a public benefit corporation – would be downright nauseated from following every twist and turn of the healthcare debate.

How could any business move forward if its biggest customer decided it should dismantle the program that gave the business its start in the first place?

Well, the young entrepreneurs at Nava aren’t asking that question, and in fact, are more certain than ever about their work, which is building modern web platforms for government agencies that deliver services to the public. For, Nava moved critical systems to the cloud, dramatically streamlined the online-application process, and “hot swapped” the original identity-management system that had caused most of the initial site outages – saving “tens of millions of dollars” in taxpayer costs, according to Bhobe.

In the process, this agile group of go-getters from Silicon Valley gradually found their stride in the stodgy District of Columbia. “We got better at shipping modern product in the context of a government environment,” Bhobe explained, “and as government also became more familiar with our techniques, we were able to work together faster.”

He and his team developed a cadence of learning and a growing confidence that their skills might be better applied in Washington than the West Coast. And the prospect of improving how government serves people aligned strongly with the entrepreneurs’ personal values.

Now, with Trump in office and Republican majorities in both houses of Congress, the effort to dismantle the Affordable Care Act drags on as the party in power struggles to come to a consensus on provisions for a replacement plan.

So again, why aren’t Nava’s founders freaking out?

Simply put, their confidence stems from a complete faith in their team’s unique skills and strengths in engineering the delivery of government services, as well as a clear understanding of who their customers really are: the American people. Neither of those facts bend for a new Commander in Chief or anyone else.

It’s an important lesson for every entrepreneur: Your special talents, and a high-fidelity image of the people you’re serving, should be the steel guardrails for your venture.

“We work with government as our partners to serve, ultimately, the American people,” Bhobe said. “It was great to see our commitment extend beyond any particular authority figure in government; and it sharpened our focus onto people and their needs, and working on their behalf.”

Not that Nava’s founders didn’t voice how they personally felt. In a blog post published a month after the election, Nava’s founders strongly rejected many of Trump’s actions and statements during the 2016 presidential campaign. As a public benefit corporation, Nava wears its values on its sleeve.

“We believe that when our democracy commits to a public service, it should deliver in a way that is equitable and effective,” Nava Co-Founder Sha Hwang stated on Medium. “Our work is a tireless pursuit towards this goal. We believe that the software powering these services can be radically reimagined to improve the quality of people’s lives.”

But now that those in power are trying to figure out how to get out of that commitment, Bhobe says Nava is responding to the uncertainty by increasingly turning to other types of organizations to get a clearer picture and work together toward the outcome they’d like to see. These include healthcare foundations, political institutions, and experts in everything from data ethics to design.

“We’re all in a wait-and-see mode about what the priorities are going to be,” Bhobe said. “The uncertainty is not a positive thing.”

Indeed, recent entrepreneurship research has shown that one way startups respond to market uncertainty is by forming strategic alliances. Specifically in the healthcare space, studies at Stanford University have found that medical-device startups formed ties with different types of stakeholders to hedge unpredictability in both product development and the commercialization process.

In a 2015 study by Stanford entrepreneurship professors Riitta Katila and Kathleen Eisenhardt, along with lead author Emily Cox Pahnke at the University of Washington, they found that network ties with certain partners were especially beneficial when medical-device development was highly ambiguous.

“These startups got different benefits from different partners,” said Katila, a professor in Stanford’s Department of Management Science & Engineering. “Government gave them credibility. Ties to private investors, strategic and managerial advice. Ties to corporations, manufacturing and marketing resources.”

In a subsequent paper by Katila, who studies technology strategy and innovation, she and her co-authors found that med-tech startups handle uncertainties in the environment by forming relationships with doctors and bringing them in as collaborators. “Uncertainty” in this context was around possible changes in FDA standards and whether a drug or device would be approved.

Katila recalled an interview with an orthopedic surgeon, where he explained why a medical-device startup had reached out to him. According to Katila, the doctor described how vagueness in the regulatory landscape meant a trial designed according to standards in place at the time might yield irrelevant results and waste much money, time and effort.

“Even if you do a design like that right now that the FDA approves, when you go back to [the] panel in three to five years, the reviewers are likely to have changed their minds to reflect more current standards of care,” the doctor told the paper’s authors. “If the company had gone without clinical input, they would have been up a creek.”

At Nava, reaching out to other stakeholders predated Trump’s election, according to Bhobe. The company’s goal was never to be the sole builder of all technology for the government, he said. But at a time of great uncertainty, strategic alliances seem to be more important than ever – whatever form they may take.

“We’ve come to realize that success in this environment, independent of any kind of political party, is going to be a messy ecosystem of groups, pushing long term in fits and starts,” Bhobe explained. “It’s not as clean, but I think that’s OK.”