How to get a business idea out of a problem

 In late 1995, Jim Clark was diagnosed with a rare blood disease, hemochromatosis.  In his regular visits to the hospital, the founder and former CEO of Netscape was deluged with insurance forms and increasingly frustrated with the hospital's bureaucracy.  The experience got him thinking.  His idea took the form of Healtheon Corporation, a business designed around eliminating waste--and especially the paperwork--in the $1.5 trillion healthcare industry.

Jim's plan was to revolutionise healthcare by connecting the quagmire of incompatible systems used by insurers, hospitals, doctors, and patients through Healtheon's Internet portal.  In doing so, he projected that his company could trim $250 billion a year in waste, while earning $125 billion a year in the process, making Healtheon the most valuable company in America.

Michael Lewis, in his book The New New Thing, details how Jim Clark recruited a squad of elite programmers who created breakthrough applications for companies such as Hill Physicians Medical Group, California's largest network of independent physicians.  By automating Hill's insurance claims processing, for example, Healtheon reduced the time required for submitting a claim from an average of seven days to around 30 minutes.

In February 1999, Healtheon went public and saw its stock jump from $8 to $31 per share on the first day of trading.  Three months later, Healtheon announced a merger with WebMD, a healthcare technology company, which would create the largest online health care firm in America, valued at $9.8 billion.  On the announcement, Healtheon's stock rocketed to $105 per share, valuing the company at $16 billion.

Jim's share of the three-year-old enterprise was $1.3 billion.

In little more than a year, however, the economic bubble around Internet stocks burst, and the value of Healtheon/WebMD's stock plummeted.  By January 2001, two years after its spectacular initial public offering, the company, now named WebMD Corp., was once again trading at $8 per share.