Great Technology Isn't Enough: Make Adoption Easy | James Bates

Bill Canady: Welcome everyone to the 1000-Day CEO. I'm Bill Canady. Every CEO faces the same challenge. How do you turn a good idea into a business that creates lasting value? And what do you do when the original plan stops working? Today I'm joined by James Bates, founder and CEO of AdviNOW Medical. James brings together technologies operators' perspective to healthcare with a focus on how AI can change the work people do. We're going to talk about why he started AdviNOW. The decisions he faced when COVID disrupted the original route to market, and how a CEO knows when a company is ready to scale. James, welcome to the 1000-Day CEO.

James: Thank you, Bill, for having me. Yeah, yeah, I mean.

Bill Canady: Yes, exciting to have you here. So listen, why don't we go ahead and jump in? James, when you first looked inside of a medical practice as an engineer, what work did you see people doing that you thought a system should be doing for them,

James: Yeah, so I I think for that question, it might be appropriate just to kind of walk through the founding story of the company, because that kind of tells that story. So I I mean, I'm an engineer. I've been in the high technology field for 30 years. most recently before AdviNOW, I had the opportunity to run a billion-dollar business that made self-driving vehicle technologies mainly. We created the technologies that enables cars to auto-brake on auto-steer. And about 80% of the cars that do that. use some of our components. So we're we were great. We sold the company. And as an officer of the company, it was a good time for me to retire. I retired and started to look what else I was going to do. I had a very strong non-compete, which meant, you know, I could play golf for a few years or I could do something completely different. Well, healthcare is completely different. So kind of checked that box. And my initial thought was I would just buy some medical practices and kind of learn the business of healthcare by running them. And I was got with a banker and I started looking at medical practices that were on the market for sale. And to my astonishment, they were all very challenged businesses. I looked at about 30 different practice groups and all of them were not high-quality businesses, which meant low gross margin, low net margin. Ultimately They were charities that paid physicians. And when I started looking at that, it just didn't make any sense to buy them and roll them up. So I decided to take more of an industrial engineering look at the businesses. And I did what's called a Six Sigma lean analysis. I literally walked into the practice with a stopwatch and measured exactly how long every single step in that workflow took. And Whether it's the front desk, whether it's the nurse, whether it's the doctor, the back office, every single person, what are they doing in their job, and how does that correlate to the outcomes that the medical practice is trying to achieve? Well, a medical practice has three outcomes that they're trying to achieve. Number one, positive outcomes for the patient. And that's the most important thing. You want those positive outcomes for the patient, of course. That's why you go to medical school, that's why you go to the doctor. But number two, The practice needs to be paid at the appropriate level for every single patient that they see. And number three, they don't want to be sued for doing it. So ultimately, you have to meet all of the regulate regulatory requirements. You need to meet the liability checklist, make sure you don't run into any malpractice issues. And that varies for every state and every patient that you see. So the unfortunate reality. Is that the medical practices, the doctor, they were spending 70% of their time trying to get paid and not get sued, and only 30% of their time actually practicing medicine, giving positive outcomes to the patient. Well, that seemed backwards. And I I just thought, man, that is crazy. That is the fundamental problem with medical practices. And artificial intelligence can be used to free the physician. From spending 70% of their time trying to get paid and not get sued, and allow them to spend the high majority of their time trying to get positive outcomes for the patient. So that is what AdviNOW Medical does. We were founded to do that. We use artificial intelligence. And essentially, to achieve that goal, we needed to automate the complete medical practice. We automate everything. The front desk does, everything the nurse does that's not a physical touch related, everything the doctor does that's not actually decision-making or physical exam related, and everything the back office does. So AI engages with the patient before the visit. We will actually predict every single question that the doctor will ask, and we will ask it to the patient ahead of time. The AI will then predict. Whether the insurance company will pay for the diagnosis and treatment, and it will mitigate any of the payment risks by asking questions to the patient and clarifying their condition. We will then give a physician a report of what the diagnosis most likely is, what the treatment options are, whether they'll be paid for by the insurance company, and whether there's any liability risk associated with this patient. So the physician doesn't need to collect and document all that data because it's already been collected and documented. And they can just have a conversation with a patient about their condition and about what they need to do to have positive outcomes. Medical practices,

Bill Canady: That is so amazing.

James: that is the goal of our solution is to revolutionize healthcare. Medical practices that adopt our solution, they see a tremendous increase in profitability. It's not even close. It's a thousand percent increase in profit. It revolutionizes the practice. That is what AI can do for the business of medicine.

Bill Canady: Interesting. Now does does the patient take this at home before they come in? is it d does the AI basically interview them?

James: It it can. It can do it at home. It can do it in the waiting room. It can do it in a triage room. The goal is that it's done as early as possible. So if labs are needed or or i images are needed that they can be ordered and done before the patient sees the doctor. But

Bill Canady: Interesting.

James: yeah, ideally it would be done at home before they before they even go to the doctor's office.

Bill Canady: Yeah, they give a link and just it's kinda like today we all get the link and you fill out the paperwork before. This is just asking a little bit more, maybe pointed questions.

James: 100%. So every single patient today uses what's called a digital front door. They click on the link and then they're asked a bunch of questions. The problem with the things they engage with today is that the questions are irrelevant. Does your grandma

Bill Canady: Mm-hmm.

James: have diabetes? Right? How many times have we all been asked stupid questions that, quite frankly, nobody in the medical practice even looks at?

Bill Canady: Mm-hmm.

James: Now The reason why those questions are being asked is because if you're potentially a new patient and you don't collect that information, the insurance company won't pay. They're not smart. They don't read what's in the patient's chart. So they ask everything over and over and over and over and over again, just in case it might be needed. And who bears the burden of that? The patient.

Bill Canady: Patient does. It's very frustrating. You know, when

James: Yeah.

Bill Canady: you were first looking at this, you you'd exited a field, you were very familiar with, you were coming to this. What did you measure before deciding there was a business here? What what gave you hope that you thought you could put this together? Medical with HIPAA and everything else, you know, there's the privacy issues, and it seems like you've really come up with something here.

James: Yeah. So I mean, obviously the measure of any business is the balance sheet and PL. Right. Every single business you run into, a a measure of the quality of the business is the profitability of the business. You know, what is the

Bill Canady: Mm-hmm.

James: cash flow? How much money do you make? How what does it take to make that money? And so that was my first look. And quite frankly, I was depressed when I looked at the business through that lens because

Bill Canady: Yeah, that's what you said earlier.

James: it was terrible. Yeah. So, so I was really, really shocked when I did that. and it almost gave it up. It was when I actually measured that the physician, who is the most expensive part of that practice, and quite frankly, they are the limiting function. How many patients you can see is directly correlated to what your profit is and what your revenue is. And so the doctor was so inefficient. They're wasting 70% of their time doing things that have that can be automated with and improve the quality of life for all of the workers in the clinic and the patient if it's done. So that's what gave me hope. And I'm like, okay, now we can solve this fundamental problem of healthcare.

Bill Canady: Interesting. What did you decide to not automate?

James: Well, you can't automate the decision itself, right? So today that needs to sit with a physician from licensing and liability purposes. you can't automate away the human element of healthcare. I mean, if you have a sick patient, they want the compassion, they want somebody who understands what they're feeling, and they want to trust that the person they're talking to actually is giving them something that's gonna help their issue. And so That's something we we don't take away. I mean, that's that's what we want left. What we want out of healthcare is all the bull crap that goes back and forth with the insurance company. We

Bill Canady: Mm-hmm.

James: want to remove from healthcare all of the ambiguity about whether what's best for you and what's not best for you.

Bill Canady: Mm-hmm.

James: We wanna leave the doctor and the patient relationship. And I believe that's what we've been able to do.

Bill Canady: So when you decided to commit to AdviNOW, what was the first evidence you saw that doctors would actually pay you to do it?

James: Well, I mean, w you can go to any medical practice and basically ask them, Do you want a thousand percent increase in profit? Right? Nobody says no. Right. So

Bill Canady: Yeah. Did you know that going in though, did you know it would be that successful?

James: you didn't after you take the measurements that seventy percent of the doctor's time is wasted, i if you're recovering that time, it translates into profitability pretty easily from a s you know, a simulation standpoint. So yeah, we had a pretty good idea.

Bill Canady: Where'd you find your first real buyers at?

James: I mean, they were local clinics here in Arizona. I mean, the very first buyer was incredibly easy to find, right? I can throw a stick and sign up any any medical practice. so from that standpoint it's it w we've never had a problem of finding new clients.

Bill Canady: impressive. When you had your first hypothesis, the kind of the thesis you were going on, what'd you get wrong? What'd you think that they would be excited about that didn't maybe didn't work?

James: Yeah, well, as an engineer going into a field, I assumed that there was a perfect way to practice medicine that everyone would agree upon, right?

Bill Canady: Mm-hmm.

James: And so I figured we would design certain workflows, they would follow peer-reviewed literature, and all doctors would want to use it. Well, that's not exactly the case. Medicine is still a little bit mysterious and Doctors that go to Stanford Medical School thinks that theirs is the best and the guys at Columbia don't know what they're talking about, you know, and and every doctor is the smartest person in the room. And and and so I was surprised to find out that there's a lot of different ways to practice medicine and doctors believe that their way is the best way. They don't

Bill Canady: Mm-hmm.

James: there is no objective best way yet. And because of that, we had to really focus on The current challenge that we are just now solving is how can you make sure that AI maintains that specific doctor's uniqueness in the way the medicine is practiced at the same time we're compliant with insurance rules and regulations, you know, and liability management. And so that's really the trick that is allowing us to grow really quickly.

Bill Canady: Are you customizing the program by doctor, or is it pretty much a standard process? Because the insurance has to be customized.

James: It has to be customized all the way by doctorate. It cannot be standardized. And that's that was that's what I was shocked over, actually. It's what I got wrong

Bill Canady: Yeah.

James: in it.

Bill Canady: Interesting insurance companies will still pay even though it's pretty customized.

James: Well, insurance companies will pay as long as it meets their guidelines, right?

Bill Canady: Their guy.

James: The insurance company guidelines, which are different for every single insurance company, as long as they're met, they will pay, regardless of what else the doctor does.

Bill Canady: Take us back to the moment COVID disrupted your retail clinic channel. What happened and what did you decide to do in the first 48 hours?

James: Yeah, well, I mean forty-eight hours probably isn't it's it it it

Bill Canady: Sounds like a good question when I say it that way. So I

James: did I didn't really understand what was going on in the first 48 hours of COVID, quite frankly.

Bill Canady: N none of us did.

James: I so AdviNOW in our very first mark go-to-market approach was very narrowly addressing what's called retail medicine. And so that's a CVS Minute Clinics, that's Safeway. Walgreens and think of pharmacies, think of grocery stores where they have a clinic that can't handle anything really serious. That's why it's called their convenience or retail clinics. But you know, they could prescribe a strep throat antibiotic, or maybe they could, you know, look at a a a small little wound you have in your arm and in or something like that. But anything more serious, they're gonna send you somewhere else. That was our initial go-to-market. CVS was very aggressive, Walgreens, Walmart. All of the major players had a thesis around healthcare that they were going down. And quite frankly, we were being very successful in the space. We were engaged with all of the big boys. They all loved what we were doing. We were lowered their costs. They were highly efficient in the retail space. They lived on slim margins. And and so selling the product was super easy to do. That was easy. The problem was that when COVID hit, I had, you know, we were supposed to ramp to about $5 million of revenue in 2020. We'd done about 300,000 by February of 2020. We were ramping up, things were looking good. we were supposed to get up to over 100 locations by the end of the year. I mean, we had 28 opened by the end of February. Things were looking good. And COVID hit the first thing. A retail outlet did was shut down the clinics. They're like, we don't need sick people in our stores. If you have a whiff of

Bill Canady: I remember this.

James: COVID, don't come close. Because they would have to shut down the whole store and completely sanitize it and do the whole deal. Well, at first, I I thought, okay, we'll wait this puppy out. You know. And it took me Probably until the second or third surge of COVID back in October, November of that year, to come to the realization that COVID's not ending anytime soon. And so we had to pivot away from retail medicine and we pivoted into initially very large hospital systems because they had extreme shortages of healthcare professionals at the time.

Bill Canady: Mm-hmm.

James: And it and again, everyone was interested in using us. It was great. I mean, AI automation solves a lot of problems that happened with COVID. The problem with it is that large hospital systems are like government entities. They cannot make decisions to save their lives. And because AdviNOW touches all aspects of the patient encounter, it's very, very difficult for them to adopt. So we did have to pivot again to smaller clinics that can make decisions and allow us to customize down to the physician level without a lot of red tape that we have to go through. And so that's kind of where we're living today, although we're used in large hospital systems as well. That's not our major go-to-market focus. Our major go-to-market focus is more of the ambulatory outpatient clinics.

Bill Canady: Did the retail piece ever recover?

James: No, re retail's dead, unfortunately. Yeah. No no one

Bill Canady: I think so too. I don't see the I don't see the clinics anymore.

James: Yeah. I mean i i it's not like it was. Yeah.

Bill Canady: Yeah, really just a such a crazy time that we all went through and see how you pivoted through it's very impressive, you know. What decision do you think you made at that time that most improved the company's chance of survival?

James: Well it's really just getting out of retail medicine. I mean

Bill Canady: That change. It's hard to do. A lot of people ride it right to the bitter end. Sometimes they can't recover from.

James: No, I I I waited six months before I would have made that decision. So I wish I would have made it earlier, quite frankly. but but yeah, it was it was not expected. It was brutal.

Bill Canady: Yeah. In an earlier interview you had described going from more than a hundred employees to about fifteen during twenty twenty during that that terrible time. is how did you decide, you know, with that type of cutback, that type of timing, what type of c capabilities you you you had to keep if you were gonna make it?

James: Well, we we only I mean ultimately we were scaling up to handle a a deployment, you know, of over a thousand clinics within the next eighteen months was was the forecast for us. And that's those were the contracts that we were we were negotiating and had signed. So so that's what we were staffing up for. So initially I got rid of the customer success people that were supposed to support that run, right? I kept the engineers, but then I had to basically give up on the augmented reality people that w they they they were mainly for that type of convenience care setup. And

Bill Canady: Mm-hmm.

James: then I lower level engineers were the next one and kept the architects, right? That that's that's how we played that whole game.

Bill Canady: Yeah. Let's talk a little bit about your best fit customers today. You talked there kind of the smaller hospital systems. So what is a clinic or or health center that you're working with today, what do they need to to see from you before trusting a a smaller technology company like yourself?

James: Well, they just need to see results, right? I mean I mean ultimately if the AI is asking the right questions and prepping the report for the physician, i it's it they see it, it's very easy to sell. And then they wanna see it inside their own system. And when they do, i it it's again, it sells itself.

Bill Canady: Mm-hmm. Yeah. I d is that the biggest obstacle between signing an agreement versus getting people to actually use the product today, them seeing it in their own system?

James: Well, it has to. I mean, they can't use it. If they don't see it in their own system, they can't use it. I mean, they it i it it has to match their way of practicing medicine for it to be usable. I mean, signing contracts are easy.

Bill Canady: Can you give us an ex go ahead.

James: Getting them up and signing contracts again is very easy to do. it's it's getting it live in a in basically set up to practice medicine the way they do. That's the challenging part of what we do today.

Bill Canady: Can you maybe walk us through what a typical, maybe even give us an example of a typical once they make the decision they want to try it, what does it look like on the onboarding? How long does it take? what's the expectation for them?

James: Yeah, so what we're releasing at the end of this year is what we call one click onboarding. And so at that point, if they're using an electronic medical record vendor like athenahealth, this they are a, you know, they're a rather large database, the medical database company, and that's what we integrate

Bill Canady: Mm-hmm.

James: with, then all they have to do is sign the agreement with us, sign the agreement with athenahealth, give us access to the data. And within a week they can try a trial our system and be up and running. So that's what we'll be have done by the end of the year.

Bill Canady: One click integration. Holy cow. Have you been able to go sell that product yet or you haven't have you launched it yet?

James: It's the same it's so we're selling it's the same product that's just onboarding our current product. Either it's more manual

Bill Canady: Just onboarding the current product.

James: in nature where it takes a lot longer than a week, or you know, or it's the one click that all they have to do is sign, give us access to their data, and our system does a hundred percent of the configuration in an automated way.

Bill Canady: Interesting. Yeah, maybe talk maybe we'll move to talking a little bit about the difference kind of AI differentiation versus human judgment. so what's materially different about your approach to AI and whether another and what should another a CEO learn from it, even outside of healthcare?

James: Yeah. AI is one of the most abused words out there, right? I mean, ev everyone, everyone says they're AI. You can't sell a product that's not AI enabled. But what are you, what is the AI actually doing? Right. And and so in healthcare, a a very big problem with AI is what's called hallucinations. That's where the AI thinks it's giving you the right answer, but it's not. And so what AdviNow did is AdviNow built a very massive knowledge graph with hundreds of millions of connections that mimics a physician's brain. And an insurance company's brain, and a lawyer's brain, right? So all of these things are kind of mashed together. And that's what gives the correlations between the symptoms and illnesses, illnesses and treatments, treatments and outcomes, insurance companies' payers, liability risk, regulatory constraints, all of that is built into what's called a knowledge graph. And so that's the way our system is built. We're not just, hey, let's ask ChatGPT or Claude what the answer is and then we'll spit that back out. So when you're looking at AI companies, what you're looking for is a company that automates the workflows in a very decisive way. When you're in a regulated environment like medicine, you cannot hallucinate. And i i if you're just gonna, you know, get some automation tool that's going to click a button for you and you will end up with very severe problems. So it has to be repeatable, has to be auditable, and that's what we deliver to the marketplace.

Bill Canady: When you look at a traditional hospital that you're working with or medical clinic, what needs to be redesigned in their systems as it stands today before they can really bring in the AI?

James: Well, the beautiful thing is if they're using athenahealth, nothing. They don't need to do anything.

Bill Canady: No kidding. If they're not using athenahealth, they're using a different provider or a different system. How do they handle it then?

James: And then well, then we just have to be able to integrate into the system in a way and actually get a look at their data to know how to configure it. So that's the big challenge.

Bill Canady: Hmm, nice. So maybe a little bit back in history, what did your earlier semiconductor leadership prepare you for? And how did healthcare force you to unlearn that?

James: Well, I mean, i in in the semiconductor space and the system space, which is where I was, the best widget wins, right? And if you have the best widget, pretty much in a competitive world, you win, right? Cheaper,

Bill Canady: Mm-hmm.

James: higher performance, differentiating advantage. Everyone just adopts it. In healthcare, that's not the case. It comes down to risk profile. It comes down to training new staff. It comes down to how they position it, what the decision matrix is in a hospital system is an example. And and so it's it's a different animal, right? You can save them hundreds of millions of dollars, but if you don't make it for them easy for them to onboard, they can't use you because they don't have the capability to do that type of change management.

Bill Canady: Liability is extraordinary and money comes secondary in a lot of cases and they very makes them very inefficient. What which of your

James: It it makes them very inefficient, but they i it's also that they don't have any profitability. They don't have any margin. Like a hospital system lives on two to three percent net margin. So if they adopt a new system and it costs them two to three percent, they're firing people. They they can't make payroll. So they have zero capability to experiment because any experiment means that they can't they can't keep the doors open. Because their margins are so slim. So I understand why it is the way it is. I just think it's extremely unfortunate. And AdviNOW's out there to solve that problem, get them up to thirty percent net margin, then they can do experiments and and not have to shut their doors. Yeah.

Bill Canady: I'm doing lot. Thirty percent net margin covers a lot of sins. You can you can start making some mistakes. Which of your

James: That's exactly right. Yeah, absolutely.

Bill Canady: operating principles carried over the best?

James: Really, it's just that that analysis, that industrial analysis, that Six Sigma analysis, you want to measure everything. You you improve what you measure, right? That's a standard saying. And

Bill Canady: Mm-hmm.

James: if you go into it saying, I have this great idea, but you're not measuring it, your idea is not gonna translate. And so being able to measure, track, create the fundamental technology. You know, that's that's a learned experience that I've had throughout my career, and it's it's it's been really advantageous for us.

Bill Canady: You spoke in the past about choosing difficult challenges. Well, when is the harder path created an un unnecessary complexity?

James: Well, I mean, if I look at what about AdviNOW, you know, when I found at AdviNOW, I looked at it and I'm like, I'm gonna develop this AI. And we were AI before AI was cool, right? Before the pandemic, there was no ChatGPT to go to. I mean, that that that whole concept of a large language model just didn't really exist. And and so we had we had to invent it. And so we invented the really, really hard stuff first. And it took us years to get a product out because of that. Where if I was gonna go do this all over again, I probably would have done a digital front door out of the box first because I could have sold it, turned that into big revenue just with that, even though it's kind of stupid and doesn't really solve the problem that I wanted to solve. It

Bill Canady: Yeah.

James: it would have generated some revenue and made us a going concern a lot earlier. And it would have taken a lot of risk out of the business that I was doing. Now it everything worked out. But it was it was a hard path, that's for sure.

Bill Canady: I have no doubt, g given pandemics, you know, new market, new everything. If you had a thousand

James: Yeah.

Bill Canady: days to make AdviNOW durable without depending on you personally, what three things would you want to be true or need to be true by the thousand days?

James: Well, get just get the one click onboarding running. That's the last piece that I'm deeply involved in and and once we get that going and this can turn into onboarding AdviNOW with the click of a button, you know, they could fire me and hire anyone else to run it and I think it'll be just fine.

Bill Canady: So when you get that up and going, what do you got? You think you're gonna step back at that point or let someone else come in or or maybe set the set it free?

James: No I I'd love to take this, make it a few hundred million dollar business and sell it, you know, and at that point make a decision on what I do.

Bill Canady: That's what guys like you and I do. We come out, we you know, you've done something, I mean you've taken it from zero to one and now you're gonna take it beyond that. i if you you know, your timing is extraordinary. Now you just gotta get your one click button going.

James: That's exactly right. That's what that's the last missing piece of the puzzle here.

Bill Canady: Well, I mean, look, there's what, like sixty days between now and the end of the year. So it so it sounds like you y y you will have great certainty that this is gonna happen for you.

James: We should we should be there. We think we can get there.

Bill Canady: If people are interested in learning more about your product, maybe even having you come out and work with them, how would they contact you, James?

James: INFO, so info@advinow.com will get somebody at my company. james.bates@advinow.com goes directly to me. www.advinow.com gets you to our website. So absolutely reach out if you have any questions. You want us you want your profit to increase a thousand percent and you run a medical practice, just reach out and we can help you make that.

Bill Canady: So you've got something very special here in an industry that terribly needs it. I've been involved with several hospitals and sat on a couple of boards and they are and I say this with love. My my my daughter's a a dentist in the in the medical profession and they have no idea about business. So they do they they

James: It's rough.

Bill Canady: it's really rough for them. They spend their whole lives becoming experts at keeping care of us, and it's challenged to keep care of themselves and their practices. So

James: A hundred percent.

Bill Canady: Well, listen, I can't thank you enough for being here today, for sharing the decisions behind your journey and the journey that you've got going forward with it. I, as I said, I think you built something very special. For everyone listening, take one question back to your business. If you stepped out of the room today, what would keep it working and what would stop? If this conversation was useful, follow or subscribe to 1000-Day CEO and share it with a leader who is working through their next stage of growth. You can find more about the 1000-Day CEO. and Tools for Building More Profitable Businesses at the8020institute.com. We'll have all of James' information in the show notes. You'll be able to find his links that he talked about. And I hope you reach out to him. I think he'll do a great job for you. James, thank you so much for joining us today. Have a great day, everybody.

James: Thanks, Bill. I appreciate it.