Whitepaper:The first million bucks


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Medical device companies spend about 1 million euros at the front end of every device development project to get to a product concept that they believe in (at least on paper). Some spend it better than others.

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Whitepaper:The first million bucks

  1. 1. The First Million BucksBy Dan EdwardsPublished in February 2011
  2. 2. The First Million BucksThe First Million Bucks[ NB This article was published in European Medical Device Technology in February 2011:http://www.emdt.co.uk/article/first-million-bucks ]Medical device companies spend around 1 million euros at the front end ofevery device development project to get to a product concept that they believein (at least on paper). Some spend it better than others.Understanding the innovation mandateAt Sagentia, we recently conducted researchamongst 20 big-name medical device companies toidentify areas of best practice in front end innovation.Our intent is to share that insight and helpcompanies get the most out of their investment. First,we should clarify our definition of front end: it is theset of activities that deliver a bulletproof investmentcase around a product concept that will release themultimillion euro budgets required for downstreamproduct development (system design, detail design,prototyping, clinical trials, transfer to manufactureand so forth).Although everybody agrees that innovation is a majorcontributor to competitive edge, it doesn’t follow thateverybody does it well. Some organisations areinnovation sophisticates, whilst others struggle to make sense of how to nurtureopportunities into strong product concepts that warrant further investment.Sophistication is required of both market and technology research methods.Importantly, being good at one is no indicator of being good at the other.So, how can a medical device company achieve the best value from its first millioneuros? In this article, we discuss a series of best practices to answer that question.Executives who operate at the front end need to recognise what type of innovationmandate they have so that they can put in place an appropriate structure to support it.Although all companies have an underlying innovation mandate that is part of theircorporate strategy, not all can articulate their mandate well. So whilst all front endexecutives are usually able to directly relate their role to an overall financial growthagenda, only some are able to point to a link between their company’s competitiveposition and their particular innovation programme. An example of such a link would be“we aim to be number one in Chinese laparoscopic surgery, and hence we areundertaking this kind of research.”Businesses that have a competitive strategy that requires them to be number one ortwo in a given medical market must deliver product and service differentiation to thatmarket. In this situation, the group or individual operating at the front end needs to be afront end sophisticate and should both understand the challenge and feel confident andjustified in seeking funds for projects that don’t have a guaranteed outcome. The best 1 © Sagentia 2011
  3. 3. The First Million Bucksfront end innovators in these types of businesses will operate in that zeitgeist—they liveit, breathe it and feel entirely comfortable with it.Recognising radicalA sophisticated approach is an absolute prerequisite for any front end innovation thathopes to deliver a new market benefit or technology. The data upon which thesebreakthrough products are based, and upon which decisions are made, are usuallyvery thin. This is the nature of disruption—if a precedent existed, the innovationwouldn’t be radical.If usual screening rules were applied in these situations, budget requests to supportthese endeavours would be rejected out of hand. Consequently, governance of high-risk activities calls for an alternative approach, and it needs to be recognised from theoutset that the project being evaluated will need to be handled differently. We believethat three elements are necessary to ensure this happens: people, tools andprocesses.First, it is essential that the leaders of front end work are people with experience andan understanding of the high-risk profile and decision-making required. Moreover, weneed these individuals to sympathise with both marketing and R&D. Such individualsare rare. Second, a correct set of tools must be used, and we have a toolbox to sharelater in this article. And last, processes must be designed both to nurture andadequately vet a high-risk project portfolio.People: marketing vs R&DMost executives come with either an R&D sensibility or are rooted in marketing. FewR&D innovators cross the floor into marketing; those that do are a rare breed and areto be treasured. Even fewer marketers move into R&D. This lack of common groundhas been a problem for years and it remains so today.The shortfalls apparent in both marketing-led and R&D-led innovation are all tooobvious. Marketing-led innovation falls short in generating solutions and, in somecases, relies too much on “two-day creativity workshops” to respond to months ofcareful market research. There are better tools available, as outlined in Table I. Thecorollary is also true: R&D-heavy teams leading innovation efforts are often blind to therange of market research tools available at either the opportunity-scanning or topic-specific market research steps. Awareness and acceptance of these gaps is critical,and efforts to share tools and bridge gaps will significantly improve outcomes.Process 1: a four-step programmeAre organisations systematic or serendipitous about how they initiate a programme?Anecdotal evidence tells us that the use of systematic analysis is very much on theincrease in the medical device industry. The stereotypical image remains of a CEOpopping his head around the door to R&D, scratching his chin and proclaiming, “Weneed to be bigger in imaging” (in a small number of instances, this is still the case).However, it is encouraging that this haphazard approach is diminishing rapidly. TheCEO instruction was, in reality, filling a void. Now that the analytical tools exist, they arebeing used at the expense of top-down instruction.Developing this point further, a better approach is to follow a simple but clearly definedfour-step programme. 2 © Sagentia 2011
  4. 4. The First Million Bucks1. Opportunity scanning. Information is sampled across a range of topics (clinical procedure, clinician group, market trend or even technology opportunity) with the goal of identifying a theme to exploit. This is the stage which, until recently, was fulfilled by the “visionary CEO.”2. Topic-specific market research. Having settled on a topic, data is sought to qualify the opportunity hypothesis. This data takes two forms: quantitative data on the size and growth of the topic and qualitative data on the target user’s subtle needs relating to it.3. Solution generation. In solution generation and filtering, we explore both technology and design.4. Concept profiling. This is the final stage, when the concept is bullet-proofed prior to governance scrutiny, ensuring that all stage exit criteria are addressed.Process 2: a bullpen of opportunitiesOur research indicates a shift in the medical device industry (and other sectors such asconsumer products) towards a bullpen, where projects are gathered together andviewed as a whole. The bullpen portfolio approach—as opposed to a traditionalprocess that considers individual projects in isolation and on their own merit—has beenshown, on aggregate, to improve success rates. Here’s why:Competition (not between teams, per se, but between market opportunities) should beencouraged in order to get the best results out of projects.A discipline is established that kills foundering projects and swiftly reassigns budgetsinto awaiting projects. It will help ensure that R&D budgets are fully spent. A commonmisconception among middle managers is that underspending R&D budget is a goodthing. We disagree with this position, arguing that an underinvestment in R&D is anunderinvestment in growth. 3 © Sagentia 2011
  5. 5. The First Million BucksToolsOrganisations seem to focus on those areas of front end innovation, where they haveinternal resources and proven strengths. For example, depending on who is runningthe show—i.e., marketing or R&D—the focus will be weighted accordingly. Thisapproach is limiting and forces sponsors to make decisions with incomplete evidence.Companies should consider their areas of weakness and explore the full range of toolsavailable to address them.Table 1 shows an aggregation of tools that may be used by front end innovationexecutives in large, sophisticated medical device organisations. Table I: Toolbox by category 2. Topic-specific 1. Opportunity 3. Solution 4. Concept market scanning generation profiling research Buy and peruse KOL interviews Ideation sessions IP check industry reports Ethnographies University alliance Regulatory check Ad hoc clinician chats University alliance Technology Reimbursement landscaping check Scan call centre CarePath mapping logs Human factors IP white spaces “Business case” analysis Scan competitor Technology Paper prototypes – recalls Advisory panels selection (storyboard) test with VoC Drinking fountain Cross-functional Concept innovation topics internal team embodiment using Proof-of-concept assessments morphological prototyping Scan FDA logs mapping Market size Preclinical with Scan blogs/chat assessment (using Preliminary animal models rooms secondary data) concept vision (graphics) Prepare evidence Medical advisory Market size collection request panels assessment (build For high-risk bottom technology—proof Concept lock-write Scan clinical up with primary of principle spec outcome data by data) demonstrator (not disease and full Go to market therapy Validate customer- prototypes) strategy need assumptions with VoC Pilot (get customer to pay) Materials testingIt is encouraging to note the sheer diversity of tools that are now available, coupled with the factthat many of these tools are new to the medical device industry. On the market research side,for example, CarePath mapping is a tool to determine triggers for replacing entire medicalprocedures in light of the move towards preventative rather than curative interventions. On the 4 © Sagentia 2011
  6. 6. The First Million BucksR&D side, technology landscaping is a means to explore technology solutions from adjacentindustries for application in a medical setting.In some instances, these tools are deployed and managed directly by the medical devicecompany. For some of the more specialist tools, or where adequate in-house expertise andresources do not exist, outside consulting services are being retained. Indeed, the ratio ofinternal spend (salary and benefits) to external spend (consultancy) averages 1:3. In otherwords, of that 1 million euros described earlier, 750,000 is being incurred as a direct expense.Beyond VoC researchAll companies point to needs as the single most important innovation driver. Over the past 20years, Voice of the Customer (VoC) has become the established industry mantra. Questioningits validity was seen as verging on the heretical. Change, however, is on the horizon.While there is still appropriate reverence for the opinions and insights voiced by clinicians, thereare definite shortcomings associated with listening only to customers:Clinicians are sometimes poor at self-reporting. Recognising that most thought is unconscious,what amount of false reporting or noise do we introduce when we interview (rather thanobserve) a clinician?Practitioners are often blind to disruption. Clinicians’ intellectual investment in the currentstandard of care (a given procedure) will often render them blind to, or simply unaware of, thepotential for disruption at a procedural level.Key opinion leaders—a particular segment of the clinical population that is commonly soughtout—are sometimes the wrong voices to listen to. Less skilled clinicians and users are anoverlooked constituency and a larger market segment.The overarching point is that the tool and its applicability need to be fully understood. Beforeinitiating any research, a prudent innovator should have a hypothesis as to where insight willcome from and choose a research method (or methods) accordingly.Take laparoscopic gall stone removal for example. If ethnographic research is undertaken inisolation, insights will be gained into the limitations of current technologies. This will lead toideas for new gall stone removal technologies. But there may well be an entire procedure-disruption angle. There may be a yet-to-be-discovered drug that will obviate the need forsurgery entirely by preventing a stone from forming in the first place. If you have a surgical toolsfranchise that serves this market, you may miss a billion-euro disruption to your annual revenue.ConclusionWith typical medical device budgets for front end work around the 1 million euro mark, it is clearthat industry recognises the crucial position this early activity occupies within the innovationfunction. The key, however, is to make this investment valuable.Perhaps the single largest determinant of the practices one ought to adopt is competitivestance. Put bluntly, a company aspiring to lead in its sector will need to be more sophisticated inits front end execution than a company adopting a fast-follower competitive strategy.If a business unit expects to be the disruptor in its market niche, it will need to consider many ofthe practices and tools described here. The tools can be broken into groups: those that will takeyou to new needs and procedures (markets) and those that will take you to new solutions(technologies).If an innovation function is being led by a marketing executive, it would behove said executive toconsider sophisticated solution research and creation tools. It is not enough to simply hand off amarketing brief to the company’s line extension technology team—it’s likely that they will dilutethe opportunity with business-as-usual solutions. There is more to solution building than 5 © Sagentia 2011
  7. 7. The First Million Bucksbrainstorming workshops. Similarly, R&D-led functions should challenge their own level ofmarket interrogation wisdom to see how aware they really are of the unmet needs of theircustomers. There is more to market research than clinician interviews.To front end sponsors perhaps reading this, we would counsel to let your front end innovationfunction mature into the delivery engine it needs to be to address your competitive agenda.Perhaps there are some governance and operational practices that can be adopted from thosediscussed here. A strong message from our research is that we ought not allow organisationalstructure legacy and tradition impede performance.To the front end doer, we would recommend looking at the toolbox you are drawing from andthe bias that your background brings to the challenge. There are several tools listed in thisreport that might warrant a trial run.Dan Edwards is Vice President at SagentiaHarston Mill, Harston, Cambridge CB22 7GG, UKTel. +44 1223 875 200Email: dan.edwards@sagentia.comwww.sagentia.comIf you are interested in receiving the complete Sagentia research report, please contact DanEdwards by e-mail, dan.edwards@sagentia.com 6 © Sagentia 2011
  8. 8. Sagentia Sagentia is a global innovation, technology and product development company. We provide outsourced R&D consultancy services to start ups through to global market leaders in the medical, industrial and consumer sectors. With global headquarters in Cambridge, UK, and US headquarters in Cambridge, Massachusetts, Sagentia works with clients from front end market needs analysis through to transfer to manufacture. We deliver innovation around new technologies and new generation products and services that provide commercial value and market advantage. The company also assists business leaders to create strategies for technology, innovation and growth. www.sagentia.com info@sagentia.comSagentia Ltd Sagentia IncHarston Mill One Broadway thHarston 14 FloorCambridge Cambridge, MA 02142CB22 7GG USAUKT. +44 1223 875200 T. +1 617 401 3170