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From Self-Driving Cars to Healthcare AI: How a Six Sigma Analysis Revealed a $100B Opportunity

James Bates had just sold Freescale to NXP when his two-year non-compete agreement forced him to look outside his comfort zone of self-driving vehicle technologies. What started as simple due diligence on medical practices for sale would uncover one of the most counterintuitive truths in American healthcare – and lead to the founding of AdviNOW Medical.

In a recent episode of Category Visionaries, James shared how his engineering background led him to approach healthcare differently than most entrepreneurs. Instead of accepting conventional wisdom about medical practices, he applied Six Sigma cost analysis to understand why these businesses struggled despite operating in one of America’s largest industries.

“I was shocked to see that they don’t really make money. I mean, most people think, oh, doctors, everything associated with medicine, a third of our economy, that must be everyone’s rich. But the medical practice businesses, they don’t make money. We’re talking low, single digit EBITDA,” James explained.

This discovery led him to dig deeper. Working closely with an urgent care chain operator, James began analyzing every movement and process in medical clinics. The results were startling: “Two thirds of a physician’s time was spent doing activities that there was no regulatory reason for them to do. They just happened to be the one with the knowledge, so they were doing it.”

But perhaps more surprising was what James discovered about the incentive structures in healthcare. “Nobody actually wants to reduce the cost of healthcare,” he revealed. He explained how insurance companies, bound by law to maintain profits under 20%, are actually incentivized to increase revenue rather than efficiency: “Rather than making an efficient insurance company, they bloat it as much as possible so that they can grow on the revenue side.”

This insight shaped James’ go-to-market strategy. Rather than trying to cut costs, which would face resistance from multiple stakeholders, he focused on creating value for all parties involved. “AdviNOW saves you and it saves the patient. Nobody loses. And so all the constituencies can win when AdviNOW is adopted.”

The funding strategy similarly broke from Silicon Valley conventions. Instead of chasing traditional VC money, James invested nearly $10 million of his own capital and sought out strategic investors who brought more than money to the table. “My lead investor for the last couple of rounds is a venture capital company called Accelerant Ventures,” he shared. “I also have companies like Global Med, which is a strategic investor. They sell medical equipment, and bundling AdviNOW software with their medical equipment is a strategy that they were considering.”

This approach to building strategic value extends to their customer acquisition strategy. Starting with urgent care and primary care clinics, which “suffer the most with the overhead burden and the low profitability,” allowed AdviNOW to prove their model where the pain points were most acute. These early successes then opened doors to larger health systems.

James’ experience offers several valuable lessons for founders targeting regulated industries. First, deep system analysis can reveal opportunities that surface-level market research might miss. Second, understanding and aligning stakeholder incentives is crucial for driving adoption. Finally, strategic partnerships can provide more value than pure financial investments when navigating complex industries.

Looking ahead, James sees AI fundamentally transforming healthcare delivery: “Physicians won’t be spending their time on the simple stuff that will all go away… I’m looking forward to a world where healthcare is not a mystery. Healthcare is solved.”

For B2B founders, James’ journey demonstrates how combining rigorous analysis with strategic stakeholder alignment can unlock massive opportunities – even in industries that seem resistant to change.