Medical device product development is justifiably hard. Innovative devices push technical and clinical boundaries. Before being used for patient care, new devices must undergo rigorous analysis and testing. It takes months or years to bring new medical devices from concept to reality. So it’s a big milestone when the last signatures finally authorize product release, and the first units ship to the first customers. Time to celebrate? Not so fast.
Your first customers decide if you should celebrate. Initial shipments are just steps towards the ultimate objective – satisfying unmet customer needs and building a great business. How well have you really done? A couple of weeks ago I wrote about the need for metrics to be customer-facing. Here are a few suggestions for quick-and-dirty customer-facing metrics to help you assess your product launch.
Medical device markets have features that enable rapid product-launch assessments, including hard data on disease/condition/procedure rates and hard data on the number of physicians and providers. This data is often unavailable for other market sectors. For example, as I write this, no one can accurately predict the total potential market for tablet computers such as the iPad. However, the total potential market for prostate cancer treatment devices is pretty well defined. Intuitive Surgical states in their 2010-Q4 investor presentation that there are approximately 200,000 annual prostate cancer treatments in the US, and 700,000 worldwide. According to the American Hospital Association there are about 5,000 community hospitals in the US. Even better, medical device companies can often ascertain the relevant annual procedure volumes for each of their customers. For example, Medicare makes procedure data available each year.
Post-launch, medical device companies can use this data to create customer-facing metrics that assess product acceptance, product reliability and product profitability.
Metric one: median share-of-site versus plan. Measure your device’s monthly usage at each of your initial customer sites, and divide by the monthly total potential cases. Before you launch, define a new-site start-up time, to allow the site to come up the training and patient-recruitment curves. After launch, wait the start-up time for your first cohort of customers, then measure share-of-site for each. Now look at the median share-of-site versus your plan. If you aren’t at least close to plan, you aren’t meeting your customer’s needs.
A hypothetical example: Suppose you expect a hospital to take 3 months to come up to speed on your new prostate cancer surgery device. For each of your first cohort of hospitals, wait those 3 months, and then measure the actual usage of your device. Suppose St. Joseph hospital typically performs 50 prostate cancer surgeries each month, and they use your device 5 times in the month after the start-up period. Then your share-of-site is 10%. Perhaps your business plan says that the addressable market for your new prostate cancer device is 25% of all prostate cancer surgeries. Your 10% share-of-site is significantly below your 25% plan. Keep your champagne on ice.
Metric two: out-of-the-box failure rate. As consumers, none of us expect to buy a product and have it fail out-of-the-box. We expect products to just work. Medical device customers feel the same way. So keep track of your out-of-the-box failure rate. Set a goal during development, based on benchmarking other successful new products in your space. If your product isn’t meeting goal, you’ve got more work to do.
Metric three: unit-gross-margin at scale. At launch, it’s expensive to make your product because your overhead spending is spread over small unit volumes. Your unit cost-of-goods-sold (COGS) will shrink as your volumes increase. You may also see a benefit in component pricing as volumes increase. Your finance team should be able to project your unit COGS for the larger volumes, and calculate the resulting gross margin. If your unit-gross-margin at scale is not meeting your business plan model, it’s time for a cost-reduction project.
What about customer satisfaction surveys? I’m a big fan of customer surveys. They should absolutely be part of your execution plan at launch. However, even rock-simple surveys like the net promoter score or survey.io can be difficult to implement and interpret. The real benefit of surveys usually comes after seeing trends in data over quarters and years. So while it’s important to get started right away, surveys won’t necessarily give you immediate results.
These three metrics are a good start, and experienced development teams will add to the list. In the comments, let me know how you you assess your product launch.
- Marketing Metrics 4 Pirates (July 2010) (slideshare.net)
- SXSW Recap: Startup Metrics for Pirates 2.0 (centernetworks.com)