This Doctor Runs a $2.3 Billion Health Startup. He Says This Is Why Walmart and IBM Couldn’t Crack Healthcare.

Walmart and IBM thought they could fix healthcare. Zocdoc’s founder and CEO, Oliver Kharraz, says they missed the point.

In a new commentary piece for Fortune, Kharraz explained that healthcare is harder to disrupt than giants like Walmart and IBM expected. Kharraz is the CEO of Zocdoc, the $2.3 billion healthcare marketplace that helps patients find and book appointments with doctors online. He comes from a 300-year family tradition of doctors.

“Don’t mistake me. Healthcare desperately needs fixing and people who are willing to take ambitious swings at improving it,” Kharraz wrote. “But nowhere is it more true that ideas are easy and execution is hard than in healthcare.”

Many companies have tried to reinvent healthcare

Companies like Walmart and IBM entered healthcare with big ambitions. Both ultimately pulled back, Kharraz wrote.

Walmart opened low-cost clinics in 2019, promising transparent prices for primary and dental care. But by April 2024, it said it would close all 51 locations in five states and end its virtual-care business after rising costs and difficult insurance reimbursement made the model unprofitable.

Meanwhile, IBM’s Watson Health followed a similar arc: launched in 2015 to use AI in areas including cancer care, it never lived up to the hype. In 2022, IBM sold much of the division to Francisco Partners in a deal reportedly valued at about $1 billion, after investing roughly $4 billion.

Why disruption playbooks don’t work

Kharraz explained that disruption playbooks, or revolutionary plans, don’t work in healthcare because healthcare is not a technology issue. It is instead a “complex systems and incentives problem” that involves trillions of dollars invested in a network of hospitals, pharmacies and more. The system is deeply interconnected: Doctors, hospitals, insurers, regulations and financial incentives all influence one another, and have for decades.

Healthcare is not a market where you can change one piece of the puzzle and expect everything else to fall into place, Kharraz wrote. He likened it to building the fastest train in the world. It may be impressive, but if it cannot run on the tracks that already exist, it is not going to get very far.

Healthcare innovations have to work with the existing system

That is why healthcare is so difficult to transform at scale, Kharraz asserted. It is not an open field where a new company can start from scratch; it is a system layered with legacy infrastructure and institutions that cannot simply be bypassed. The companies that make a lasting difference have to find ways to work within that reality, not pretend it does not exist.

Some startups try to build around the system, Kharraz said. They create useful niche products and sometimes-solid businesses, but they often remain on the margins because they are not connected to healthcare’s core infrastructure. Without that connection, it is hard to reach the scale required to address the industry’s biggest problems.

Other companies make the opposite mistake, he pointed out. They assume that the system will eventually reshape itself around a superior idea. But in healthcare, the tracks rarely rebuild themselves just because someone has designed a better train, according to Kharraz.