As hospital systems consolidate, and as more physicians become hospital employees, the business side of the hospital has taken control over the acquisition of new procedures and technologies. For medical device companies, the days of driving sales via physician champions is over.
For providers, acquiring an innovative new medical device means offering a new service to patients. For a provider, the decision to acquire a new medical device is a business decision to grow the hospital’s service share. The more novel the service, the more business risk faced by the hospital, and the more complicated the purchasing decision. Philip Kotler’s book “Strategic Marketing For Health Care Organizations” gives an example of the new reality:
A hospital is considering adding a sports medicine program to its portfolio of services. Before deciding whether to launch such a program, it plans to do market research to gauge the size of the community need, discover which competitors already offer such a program, consider how it will organize and deliver the program, understand how to price its various services, and determine how profitable the program is likely to be.
Medical device sales and marketing needs to adapt. Intuitive Surgical shows us how.
In a 2006 presentation, Intuitive touted data that by implementing the da Vinci marketing programs, large hospitals could triple their prostatectomy volume from pre-robotic surgery levels, and small hospitals could grow their volumes by a factor of 10.
A great procedure and a consumer brand are necessary but not sufficient to drive adoption. Referring physicians can still be a bottleneck, preventing patients from even getting to your proceduralist. Many patients are like my mom, who routinely asks her doctor about new medications and procedures for her various medical conditions. If her physician doesn’t know about the procedure, or doesn’t feel comfortable with it, she won’t recommend it.
No one does the vision thing better than Elon Musk. But he is even a visionary about vision. His grand visions inspire consumers and employees. But he also knows that visions need grounding in credibility. Overly grand ambitions generate skepticism and backlash. So Tesla has smartly scaled its vision over time, as its accomplishments have grown.
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.
I’ve had a series of Tesla posts on my mind for a while, but finding the time to write them has been elusive until now. I’ll post them over the next few weeks.
Tesla is today’s “It Car” – the cool, sexy, electric performance vehicle of choice. Who wouldn’t want to take a Model S for a spin? While there is a lot to admire about Tesla’s vehicles, Tesla Motors has also been masterfully executing its business strategy. For those paying attention, Tesla’s business activities can teach important lessons about bringing innovative products to market. Medical device companies could learn a thing or two. Today I’d like to talk about segmentation strategy and building a brand.
Ask most medical device marketers about market segmentation, and you’ll get an earful about physician specialty (and subspecialty), hospital/facility size or type (academic, ASC, for profit, large system, etc), or adopter type (early adopters, followers, and skeptics). Unfortunately, these approaches rarely help companies identify customer groups that are differentially addressable – i.e. best served by different products or services, different price points, and/or different marketing channels and sales techniques.
Medical device firms can do much, much more to understand and better serve their markets. Even back in the 1980’s much more could be done. Let me explain how I approached market segmentation twenty-something years ago.
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.
To pivot is to change one element of your business model to improve product/market fit. Iterating the business model via a series of pivots is easy to imagine in a software startup, where code is relatively mutable, but aren’t hardware timelines just different? Is the idea of a Lean Startup really applicable to medical device companies?
Having trouble getting your medical device startup funded? Most likely, you have picked the wrong problem to solve. Think about it this way: When you launch a new medical device, you are asking physicians, hospitals, nurses and patients to change medical practice. That’s a big deal. A really big deal. So get it through your head that medical practice will only change if your new device solves an important problem. That’s why the lean medical device startup defines its problem hypotheses first. That’s also why the lean medical medical device startup tests its problem hypotheses early and often. You need to make sure you are solving the right problem.
What does ‘testing your problem hypothesis’ mean? How do you go about testing your problem hypothesis?