We are sometimes approached by businesses that are looking to enter healthcare.
They may have an established business in another industry, access to capital and a strong entrepreneurial ambition. They see the size and growth potential of healthcare and want to build a new business in the sector.
But there is a fundamental question that needs to be answered before deciding what to invest in:
Where should we play?
Healthcare is not one market. It includes pharmaceuticals, consumer healthcare, medical devices, diagnostics and several other segments, each with very different business models, economics, competitive dynamics and capabilities required to succeed.
So, the answer cannot simply be, “Healthcare is a large and growing market. Let's enter pharma.”
The more important task is to systematically move from understanding the broad opportunity to identifying a specific business opportunity that makes sense for the organisation.
At Aovantage, we typically approach this through a series of stages.
In practice, this process is rarely linear. As organisations learn more about particular sectors and opportunities, assumptions are refined, priorities change and new opportunities emerge.
The value of the framework is not that it creates a perfectly sequential process, but that it provides a structured way to progressively reduce uncertainty and focus attention on the opportunities with the greatest potential.
1. Understand the Healthcare Landscape
The starting point is to understand the broader healthcare opportunity.
What are the major segments? How large are they? How fast are they growing? What are the key trends shaping them? Where are the opportunities likely to emerge over the next five to ten years?
At this stage, the objective is not to select a business.
It is to build a sufficiently broad understanding of the landscape to know where to look more closely.
For example, pharmaceuticals, consumer healthcare, devices and diagnostics may all offer attractive opportunities — but in very different ways.
2. Identify Attractive Sectors
Once the broad landscape is understood, the next question is:
Which sectors are particularly attractive for us?
Market size and growth are important, but they are only part of the picture.
We would also look at factors such as:
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Market growth and future potential
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Profitability and business economics
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Competitive intensity
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Customer and stakeholder complexity
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Market structure
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Entry barriers
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Regulatory environment
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Capital requirements
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Emerging trends
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Potential for building a meaningful business
This starts narrowing the universe.
3. Identify Attractive Categories
The next level of the exercise is to go deeper.
A sector such as, say, pharmaceuticals is itself too broad to make an investment decision.
Which therapy areas? Which categories? Which parts of the value chain? Where is growth coming from? Where are there structural opportunities rather than simply short-term market growth?
For example, an initial assessment might lead us to explore areas such as vaccines, chronic therapies or other specific categories in greater detail.
The objective is to progressively move from sector → category → opportunity.
Up to this point, the focus has largely been on understanding market attractiveness. The next stage is to determine whether those opportunities are attractive for this specific organisation.
4. Assess Strategic Fit
An attractive market does not automatically make it an attractive opportunity for every company.
This is where the organisation itself becomes an important part of the assessment.
What capabilities does the company already have?
What relationships, distribution capabilities, manufacturing expertise, technology, capital, brand-building experience or other assets could potentially be leveraged?
What does the promoter want to build?
What is the investment appetite?
What is the desired scale and time horizon?
And perhaps most importantly:
Where can this organisation have a genuine right to win?
This is often where the shortlist becomes much sharper.
5. Shortlist Specific Opportunities
The next step is to move from attractive categories to specific opportunities.
This could mean identifying particular business models, product categories, partnerships, companies or acquisition opportunities.
At this stage, the discussion becomes much more concrete.
Instead of asking:
“Is pharma attractive?”
we are asking:
“Which part of pharma could make sense for us, and why?”
That is a much more useful question.
6. Build the Business Case
Once a few opportunities have been identified, they need to stand up to commercial scrutiny.
What could the business realistically become?
What investment would be required?
What revenues and margins could potentially be achieved?
How long might it take to build scale?
What capabilities would need to be developed?
What are the major risks?
What would the competitive landscape look like?
And what would need to be true for the opportunity to succeed?
This is where an interesting market opportunity starts becoming an actual business proposition.
7. Determine the Right Route to Market
There may be several ways to enter.
Build from scratch. Acquire an existing business. Partner with an established player. License products or technology. Create a joint venture.
The right answer depends on the opportunity, the organisation's capabilities, capital availability, desired speed and willingness to build capabilities internally.
A good opportunity can still become a poor investment if the route to market is wrong.
At this stage, the organisation will often have narrowed the field to a small number of attractive opportunities and potential routes to market. However, before making a final investment decision, there is an important question that still needs to be answered:
Can we realistically build and scale this business?
8. Assess Execution Requirements
Before committing capital, it is useful to develop an initial view of what execution might require for each opportunity.
What capabilities need to be built?
Who needs to be hired?
What partnerships need to be developed?
What investments may be required beyond the initial entry?
What could the first 12-24 months of execution look like?
And what milestones would indicate that the business is progressing as expected?
The objective at this stage is not to create a detailed implementation plan. Rather, it is to understand whether the opportunity can realistically be executed and what it may take to build a successful business.
In practice, organisations will often assess these requirements across two or three shortlisted opportunities before making a final choice. This helps avoid becoming overly committed to a single option too early and provides alternatives should practical challenges emerge during due diligence, negotiations or implementation planning.
9. Make the Investment and Build the Business
At this point, the organisation should have sufficient confidence to make an informed investment decision.
The healthcare landscape has been assessed, attractive sectors and categories identified, strategic fit evaluated, opportunities shortlisted, business cases developed, routes to market considered and execution requirements assessed.
The question is no longer:
"Where should we play?"
It is:
"Which opportunity should we commit to?"
Once the decision has been made, the focus shifts from evaluating opportunities to building the business.
Depending on the route chosen, this may involve completing an acquisition, establishing partnerships, launching products, recruiting key talent, building capabilities or integrating a newly acquired business.
This is where strategy becomes execution and where the success of the investment is ultimately determined.
By the end of this process, an organisation may have narrowed hundreds of possible healthcare opportunities to a small number of well-defined options. For example, rather than entering "pharmaceuticals", the conclusion might be to pursue a branded generics business in selected chronic therapy areas through acquisition, or to enter diagnostics through a partnership-led model.
Conclusion
Entering healthcare requires careful evaluation of the opportunities available and what it would take to build a successful business.
A structured approach helps organisations look beyond market size and growth, assess strategic fit and business potential, and make informed choices about where to invest.
Ultimately, it is about finding the right opportunity for the organisation and building a business that can grow over the long term.
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At Aovantage, we help businesses evaluate healthcare opportunities, develop growth strategies and build a clear roadmap for entering and growing in the sector.