Business Model Innovation in Digital Health: Bob Allison, Co-Founder of PEAR Health Labs (Part 3)

Sramana Mitra: How did you do the Bluetooth piece?

Bob Allison: When Bluetooth came out, we started the piece that was Bluetooth. Originally, there wasn’t any Bluetooth; it was a direct connection only. You would take your dongle from your computer, plug it into our little radio, and you would import your music file.

Sramana Mitra: You were selling a device?

Bob Allison: Right.

Sramana Mitra: How long did that mode of go-to-market continue?

Bob Allison: We did that through 2014. In 2014, we started to make a pivot towards the phone. We had an eye-opening moment in that we went to Europe to meet with most of the folks that were in the heart rate manufacturing business like Garmin and spent some time understanding heart rate variability and the patents around that.

We decided that we had to pivot to a software company. We started moving our technology to run off of other people’s hardware and take advantage of the iPhone. Bluetooth was moving along at the speed of light in terms of capacity and power. We felt that there was a good opportunity to do that.

We pivoted to being a software company in 2014. Then we made one other pivot in 2017. We decided to move from an app environment to an enterprise environment. Today, the product is mostly oriented around population health and not around athletes.

Sramana Mitra: Let me probe a bit. From 2011 to 2014 when you operated as a device company, what kind of revenue level did you reach?

Bob Allison: We peaked at $3 million.

Sramana Mitra: What is the price point of the device?

Bob Allison: $400. All the capital that we used came from Innovate and friends who had been with us in other investments. Both Jabra and Ultimate Ears were successful outcomes. They were hoping that we could do the same with the early onset of PEAR. It wasn’t really what it is today. We were selling a piece of hardware. We probably had about 10,000 people using the product across the country.

Sramana Mitra: Come 2014 when you are pivoting towards becoming a software company, that’s not easy. Your DNA is not of a software company; your DNA is a device DNA. Was the team also a hardware team?

Bob Allison: Yes. It was a big change for us. We were doing some software development. It was more firmware. We had some good DNA there. We had one talented engineer that was a pretty good software engineer. We were based in Lake Solano. There were some good resources in California. There was Qualcomm there. We were able to attract folks in that area to start out a real software DNA. We didn’t get it right off the bat. We had some struggles.

Sramana Mitra: Software skills available in the Qualcomm ecosystem is not consumer software skills. If you’re looking for app development and user interface, that’s not available in that ecosystem.

Bob Allison: At that time, there weren’t many people that great at it either. This was all pretty early on.

Sramana Mitra: In 2014, the iPhone has already been in the market for seven years. That market developed so fast. It exploded. The skill development on the Apple ecosystem was one of the fastest I’ve ever seen. Did you continue to sell the hardware at this point?

Bob Allison: No, we left the hardware business and said we’re going to make this pivot to software.

Sramana Mitra: How long did it take you to launch? Was it an app that you were trying to launch?

Bob Allison: Yes, basically. The product would use the app as the repository for the coaching and information that was live on the phone. We would interact with the device. You’d use our earphones to listen to it. We still had a little bit of hardware. We had earphones that you could use. It was hybrid.

We decided that we would build the products for brands rather than trying to build the brand on our own. We were a B2B trying to take advantage of the fact that we had this capability and we didn’t have a lot of money to put into marketing. We weren’t sure that the app business was necessarily going to be a profitable business as direct to consumer, given our scale.

This segment is part 3 in the series : Business Model Innovation in Digital Health: Bob Allison, Co-Founder of PEAR Health Labs
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