Lessons From Tesla – Brand Identity for Consumers, Clinical Value for Healthcare

In my last post, I mentioned Tesla’s brand identity – technology, performance, design.  Tesla consumers pay up for the brand and its design. In brand strategy, I (and others) see a lot of parallels between Tesla and Apple. Both are status brands, and both use their brand identity to maintain premium pricing. Tesla has clearly been paying attention.

Take a look at Apple’s brand – design, performance, and reliability. People pay significantly more for Apple products than for similarly performing products from other companies. When the iPhone first appeared, its performance blew away other then-existing smartphones. Over time, it’s hard to say that Android phone performance hasn’t caught up with the iPhone. All the same apps. Great processing, camera and screen technologies. Sharp-looking industrial design. Most reviewers rate Google Now as better than Siri. Yet Apple is the smartphone company making the profits.

Apple leveraged their early technology lead to build their brand, and now the brand delivers the economic rents. Apple Music is a late entrant to the streaming music market, but its brand enabled it to quickly become a top player.

Now let’s look at Tesla and its electric vehicles. Nothing else on the road performs like Tesla’s current lineup, and Tesla can charge a premium for their products. Like Apple, Tesla’s product design, manufacturing quality and subsequent product reliability are outstanding. Tesla is using its early technology lead to build its brand identity for technology, performance, design and reliability. If/when competitor technologies eventually catch up to Tesla, Tesla will still be able to earn economic rents on their brand.

So what’s this got to do with medical devices?

Tesla (and Apple) show us that long term business success requires more than just development of products and patents. It demands the development of a unique, hard-to-duplicate intellectual asset that provides ongoing value to the customer. For consumer products, that intellectual asset is the brand.

It’s rare that brand identity carries similar weight in medical devices, medical device customers are businesses, not consumers. Intuitive Surgical is likely the best example of successful branding in devices. Even if other approaches are just as safe/effective as Intuitive’s robot, customers still pay up for Intuitive. Intuitive is also unique in that its brand is valued by patients / consumers.

But I’d like to propose that the closest equivalent of brand identity in most healthcare is clinical value evidence. (I’m using Porter’s definition of clinical value: “value is defined as the health outcomes achieved that matter to patients relative to the cost of achieving those outcomes”). Brand identity is the intellectual asset valued by consumers (it increases the perceived value of the product and provides a competitive barrier), while clinical value evidence is the intellectual asset valued by payers and providers. Value-based pricing can only be achieved for innovative medical devices by generating the clinical value evidence needed to convince payers and providers to invest. Once the clinical value is demonstrated, product changes and expansions into adjacent market segments become easier. A great example: Barrx ran a fantastic clinical program, and would-be competitors face a massive challenge trying to enter the esophageal ablation market.  The recently introduced scope-attached RFA product gets a halo effect from the clinical value evidence of the original balloon-based system.

So what’s the lesson for medical device companies? In the expanding value-based healthcare world, clinical value evidence is becoming the intellectual asset that underpins the ability to achieve longer term value-based pricing, even in the presence of competitors with similar technologies. The generation of clinical value evidence, via clinical studies and economic analyses, required device companies to invest over time, in the same way that consumer companies make investments in building their brand. Innovative medical device companies that fail to make these investments risk their products becoming commoditized.

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