When it Comes to Innovation in Medtech, Customer Value is King

A medical device start-up identified an attractive market involving the treatment of sinusitis with a minimally invasive approach. The goal was to not only offer the clinical advantage of a faster recovery time, but to create a procedure that was optimized to be performed in a physician’s office. 

To distinguish itself from a competitive company – which accessed sinuses through the nose – the start-up developed a novel approach. The procedure required the ENT surgeon to go under the upper lip, above the upper teeth and through the gum tissue and bone to enter the sinus. This procedure offered the benefit of direct visualization of the treatment site.

In clinical trials, the procedural success rates were high and most adverse events were transient. Additionally, the company developed a best-in-class delivery system for office procedures. Despite these relatively positive results, the market rejected this approach. Both physicians and patients expressed concerns about a more invasive procedure – particularly on an awake patient.

To its credit, the leadership in the start-up realized that a shift was needed. They were able to adapt a through-the-nostril approach that they had developed for another product to treat multiple sinuses. Coupled with the ease-of-use of the overall system, this proved to be a highly successful approach that ultimately commanded superior market share in the office.

This start-up eventually enjoyed a lucrative IPO and subsequent acquisition. However, the initial product misstep caused them to go through a rough period in which they had to raise more funds. 

So the question is could the market reaction to the original product have been anticipated and avoided? More broadly, how can companies more frequently “do it right the first time?”

“It Ain’t What You Don’t Know That Gets You Into Trouble. It’s What You Know for Sure That Just Ain’t So.” – Mark Twain

The aforementioned quote is one of my favorites. Early stage companies typically do not yet have the right staff in place to do opportunity assessment. So what can happen is that the leadership decides that they “know” what will sell. Or they decide to get the informal opinion of a few KOLs who may have no idea how the private practice mainstream market will react. Proceeding with unfounded confidence without a good understanding of the players in the market is how many start-ups fail before they ever really get started.

As we saw in my previous article, understanding the needs of the key stakeholders and the size of the opportunity is the first step in developing a product plan. But to go to the next level, we need a means to identify attractive product concepts. Specifically, we need a way to answer these questions: 

• How can you identify high-potential product concepts?
• How can you assess how compelling these would be to customers?
• How can you narrow down to a select few for further exploration?

Let’s take a look at each of these questions in kind.

The Chicken or the Egg in Product Development

There are two main potential avenues to follow to find the “next big thing.”

·      Start with an organically-developed technology with multiple potential applications, and identify an attractive market to target.

·      Identify a market opportunity, and develop or acquire a technology to address unmet needs.

In either case, we are back to the question regarding how do we assess which high-potential product concepts are compelling to customers?

A Winning (Value) Proposition

In my experience, "value proposition" is one of those phrases that is widely used but not consistently understood. I was fortunate earlier in my career to participate in a project with Dr. Lynn Phillips. Dr. Phillips is a former Stanford faculty member who was an early thought leader during the heyday of the development of customer-value concepts. My organization worked with him and the company that he founded called Reinventures to better understand and improve the value that we delivered to customers.

Per Dr. Phillips’ framework, your value proposition conveys the net benefit your customer will derive by adopting your product/service compared to their alternative. The strength of the value proposition depends not only on the net benefit, but also on its perceived relevance, importance, urgency and credibility.

When constructing value propositions in medtech, I find it helpful to leverage the categories of customer value described by my former colleagues Jim Surek and Charlie Johnson. Jim and Charlie have collaborated on sales strategies at multiple successful start-ups. The types of customer value that they have identified are clinical, strategic, operational and financial (Figure 1). By consciously considering each of these categories, you can ensure that you are thinking comprehensively when developing a value proposition.

Figure 1 Types of Customer Value

In summary, the attractiveness of product concepts can be assessed by creating customer value propositions. And value propositions must be developed for each stakeholder that can influence a utilization and/or buying decision.

So in practice, how do we develop a short list of product opportunities for consideration in the product roadmap?

“Left Brain, Meet the Right Brain”

One of the hallmarks of great strategic marketers is the ability to combine the skills of analysis, intuition, and creative problem solving. In the context of product development, the process includes gathering and organizing the information regarding the market opportunity, pulling together potential product concepts, developing value propositions for the key stakeholders, and qualitatively inferring how attractive these offerings will be to the market. In other words, figure out “What will sell?”

For internally developed products, this is an iterative and collaborative process between Marketing and Engineering. There are many product success stories which begin with “the product manager and engineer(s) were joined at the hip.” This means that both team members observed customers, understood their pain points, discussed what they saw, imagined a better way, developed prototypes, obtained customer feedback, and refined to the commercialized product. 

While the general approach to product development is consistent, implementation can vary significantly from one situation to the next. For example, consider a large company with complex products that have two-year development timelines and require multi-million dollar investments. The cost of getting the product wrong here is devastating – there is no “fast-fail” way to recover from building the wrong robotic system. In this instance, the pre-development market research needs to be more formal and extensive to be highly confident that the product will address a significant market need.

In contrast, consider a start-up that is developing a relatively simple disposable to address a clinical need of COVID-19 patients. The opportunity cost for being late to market for an urgent opportunity like this is such that less formal feedback and intuition may need to suffice. Bottom line: When it comes to how confident you need to be to address product development decisions, the answer is “it depends.”

Regardless of the path to get there, at the end of this step, the team should be able to qualitatively narrow down the original list of product concepts to a select few that they recommend for further evaluation to senior management.

Putting it all together

In summary, once attractive market opportunities have been identified based on addressable market size and unmet needs, the next steps are:

• Marketing and Engineering identify organic or externally sourced product concepts.
• Marketing leads the development of value propositions for each stakeholder.
• Business leadership can eliminate some product candidates based on qualitative assessment of the strength of the value propositions.

For the product concepts that continue to look viable, a quantitative assessment is required to prioritize them. This will be the subject of my next article.

Figure 2  Building a Market-Driven Medtech Organization