12 Steps to Product-Market Fit in Medtech

Many medtech innovators come from backgrounds in engineering, science, and medicine. Within these domains, we are taught to solve problems - often starting at first principles and developing technical solutions to achieve functional objectives. We brainstorm, sketch, develop breadboards and prototypes, arriving at creative solutions that we believe are appropriate for the market. Yet, we often do not sufficiently understand the parameters that ultimately define market success. This is particularly true in medtech, where so many extraneous factors outside our core technical backgrounds can influence the prosperity or ultimate demise of a new venture.

Begin at the End - Work Backwards

Most new ventures start at the solution stage - and this makes sense. An idea is created to solve a problem, and early funding is obtained to take the idea to the next level. However, this early funding often creates a reinforcing feedback loop toward a solution-first approach. Innovators obtaining a first grant or angel investment experience a confirmation of process. They have gained a reward for their solution, and future steps continue pushing the solution to new levels of functionality. Innovators aim to keep the momentum going and view solution building as their primary value-creation activity. After all, that's what created the initial fundraising event.

However, most innovators that take this route end up stalling out. The solution-first approach hits a wall when the hidden monsters of medtech surface. They can be in the form of payers, providers, patients, regulators, clinicians, and savvy investors. Medtech innovators often find that their solutions, while ingenious from technical perspectives, meet opposition from the market. The cost-benefit may not be clear to payers and providers. The regulatory pathway may be too arduous to pursue. The changes to workflow and hospital infrastructure may be too significant to justify. The list goes on and on.

The solution-first approach hits a wall when the hidden monsters of medtech surface.

While it may seem counterintuitive for early stage medtech teams to focus on late-stage market factors, this essential paradigm shift can save a team from developing a product that is misaligned with market needs. Teams should begin at the end, and work backwards. Understand the depths of patient needs, customer constraints and motivators, sales and distribution channels and mechanisms, and the evidence that will be needed to compel adoption. Gain these perspectives, and hone the solution to fit. Apply these insights to the design early. The further downstream a team realizes a product-market disconnect, the more painful and irreconcilable a course correction may be.

Introducing the Medtech Vision Organizer™ (MVO)

The Medtech Vision Organizer™ (MVO) is a framework that aims to evaluate and refine product-market fit (or more precisely 'market-product fit,' since we are starting with the market.) The MVO consists of a 1-page canvas with 12 cells divided by Regulatory Approval through the center of the page. A sequence is proposed on how to work through the MVO, which focuses on patient and customer first, working backwards toward the solution. The MVO aims to focus innovators' efforts on identifying and addressing the market needs early, clearly defining a value proposition that resonates, and designing an evidence strategy that will ease market adoption.

Developing a medtech business is a non-linear process. In some ways, a templated or a prescribed planning document suggests that there can be a one-size-fits all approach. Most certainly, this is not the case, especially for the medtech industry. Every venture has nuances that must be carefully considered, every step pondered, questioned, tested, and revisited multiple times. However, despite this non-linearity, a framework can help to gain clarity on the issues that matter. It can serve as a checklist to identify latent issues, and it can establish a priority through which teams address them. But most importantly, a well-constructed, concise framework can help teams share a vision and a plan.

The MVO aims to focus innovators' efforts on identifying and addressing the market needs early, clearly defining a value proposition that resonates, and designing an evidence strategy that will ease market adoption.

Much like other traceable documentation in medtech, the MVO is intended to be living and iterative. As knowledge is gained and pathways are recalculated, the MVO should be revisited.

The brief video (3:57) below describes the overall structure of the MVO. Understanding how the MVO has been designed and the linkages between each of the sections and subsections may help viewers understand how the various components of the medtech puzzle fit together.

12-Steps to Product-Market Fit using the MVO

If you are ready to pilot the MVO, the steps below provide a synopsis of each section. Of course, full textbooks have been written on each of these topics, so these brief descriptions barely scratch the surface. These synopses are intended to trigger questions and inspire further research - it's up to the medtech innovator to dive deeper and understand these steps related to the specifics of the venture.

Step 1 - Patient & Problem

Who specifically is the patient population you are aiming to help? It is common for early-stage innovators to aim for the $1B market, defining an overly-broad patient population, to later find that their solution is pertinent to a small sub-population of this group. Research the disease state fundamentals to understand the epidemiology, anatomy and physiology, pathophysiology and clinical presentation. Gain perspective into patients' quality of life - develop understanding and empathy. Define the problem clearly and simply in a way that is independent of any particular solution. This is the foundation - don't skip it!

Step 2 - Customer

Who is responsible for purchasing and deploying the end product? Is it a patient, an independent care provider, a hospital, an insurer? Understand how the customer perceives the problem that you are aiming to solve. Do they see it the same way? Every transaction consists of costs and benefits - understand how these stack-up for the customer. The costs are not exclusively financial ones - they may relate to process changes, infrastructure changes, training, maintenance, time - often these factors inhibit adoption much more than the cost of the product itself. Change is hard and expensive - how can you make this change as painless as possible? Understand the influencers of a transaction. Are there physicians, nurses, IT managers, family members, or others that will be counseled before a transaction is made? Get in their heads - understand their motivators, constraints, skepticisms, and ideas.

Step 3 - Standard of Care

What is the current treatment model? Understand the primary endpoints that are used to evaluate patient health and procedure outcomes - are these patient vitals, steps paced, lengths of stay? Also, understand the secondary endpoints, such as repeat procedures, readmission rates, post-discharge mortalities. These secondary endpoints are often much more clinically and economically significant, but they also are generally much more challenging to monitor and quantify. What are the healthcare economics presented by the current standard of care? Quantify the economic burden carried per patient, per procedure per hospital. Extrapolate these economic burdens to characterize the magnitude of cost to the healthcare system domestically and globally. Evaluate reimbursement codes and coverage for the current standard of care. Do procedure outcomes fluctuate between various types of care providers, and do these fluctuations result in quality-adjusted reimbursement levels?

Step 4 - Value Proposition

This is why your business exists. The product you are developing is simply a vehicle to deliver your value proposition. The value proposition is the improvement over the current standard of care. This is the outcome that makes it all worth it. What clinical and economic benefits need to be realized to justify the risks of change? You can and should make this assessment completely independent of your product. This is a numerical comparison to the standard of care. Is it a 30% improvement in morbidity, 20% reduction in mortality, 1.0 Quality-Adjusted-Life-Years (QALY)? After defining the clinical value proposition, understand how these outcomes affect the healthcare economics.

Step 5 - Comparative Evidence

How will you prove that your value proposition has been fulfilled? Typically, a comparative study is necessary to quantify the improvement over the standard of care. What is the degree of clinical effectiveness ("effectiveness" relates to real world data, outside of a controlled environment) that satisfies your value prop? What endpoints are tracked and what outcomes over the current comparative procedure are needed? Track how the clinical effectiveness translates into an economic benefit for payers, providers, patients. This may require interpolation of data, but it can be important to satisfy public and private payor evaluations of "reasonableness and effectiveness" in determining new reimbursement coding and coverage. What is the magnitude of this comparative evidence study? How long will it take? How much will it cost?

Step 6 - Delivery

Given the clinical data requirements needed to compel a purchasing decision and the number of stakeholders involved in assessing cost-benefit, how does this drive sales, marketing, and distribution decisions? Will a highly-skilled and trained salesforce be needed to influence and train clinicians? Will specialty marketing be required to publish data and regulated claims in the appropriate medical media channels? Will alignment with an existing distributor that already addresses a market segment accelerate the adoption of a new offering?

Additionally, how will the product be priced, and how will a company get paid? Will there be consumable streams or maintenance contracts? Is there an opportunity (or expectation) for risk-sharing that may ease adoption while providing greater economic upside if the medical problem is adequately solved? There are many factors in the delivery model, but it is helpful to understand the precedent that is accepted within the targeted customer base in addition to any drivers that may influence change.

Step 7 - Solution

Let the brainstorming begin! Now that we have (re)defined the key components of the market, they should be applied to the solution. How does the original concept need to adapt to address the market factors? Are there design changes that could improve clinical workflow? Are there ways to integrate data collection means to ease future comparative studies? Are there training tools or product features that could help a salesforce convey the product use and benefits? Understanding all of the market stakeholders and redefining the product to motivate adoption and reduce inhibitions is critical. Now's the time to do it.

Additionally, there are likely intellectual property (IP) concerns that need to be uncovered and addressed. Learn the basics of patent searching to identify the prior art that may be of concern. It is beneficial to understand the basic mechanics of patent claims, but it is also beneficial to engage competent IP counsel to review the narrowed set of patents that may be of concern. Also, who are the competitors, and what are the substitute products and procedures that could be used to address the problem you have specified? What are the usability, workflow, and data integration issues that you need to address? What are your targeted unit costs, and how much capital may be needed for tooling or automation to achieve your target unit costs?

Step 8 - Regulatory

There is an abundance of information on fda.gov that can help medtech innovators understand their device classification and regulatory pathways. Become educated on this subject matter, but engage a qualified regulatory consultant to advise on these critical topics. Understand the standards, predicates, clinical endpoints and outcomes that should be addressed to achieve regulatory approval. Also, understand the pre-clinical data that may be required for an Investigational Device Exemption (IDE) clinical evaluation in advance of regulatory approval. Confirm early assumptions through pre-submission meetings with FDA.

Step 9 - Clinical Evidence

Based on the regulatory plan, what clinical data is expected to achieve market approval? Is the device Significant Risk (SR) or Non-Significant Risk (NSR)? This will determine the regulatory pathway for pre-market clinical evaluations. Understand the clinical endpoints and efficacy requirements that will need to be satisfied to meet regulatory approval. What is the timeline and approximated cost of this clinical study? Will you engage a Clinical Research Organization (CRO) or manage the clinical studies through internal resources?

Step 10 - Pre-Clinical Evidence

How can a team evaluate efficacy outside a clinical study? Can surgical simulators or cadavers be used? Should animal studies be pursued? If so, what is the most appropriate animal model? What are the endpoints that need to be tracked, and what are the outcomes that will need to be satisfied to achieve IDE approval? What rationale and justifications must be made to connect the pre-clinical data with anticipated clinical data? How long will these pre-clinical studies take, and what is the approximate cost?

Step 11 - Development

Now it's time to roll all of these pre-market details into a comprehensive development plan. The development plan pulls the pre-clinical, clinical, regulatory, human factors, engineering, IP, and other pieces into a holistic plan inclusive of timelines and budgets. Regarding design and engineering, will you be building an in-house team or leveraging a contract development firm? Consider the fixed versus variable costs in this key decision. An hourly comparison is far from accurate. Employees may cost less per hour, but you carry them indefinitely. And they come with a lot of hidden costs like recruitment, training, benefits, computers, office space, IT support, vacations, management, and replacement. How will you be addressing other development activities, such as human factors and industrial design? When will you be creating a Quality Management System (QMS), and who will be your management representative with notified bodies and regulatory agencies? What is your manufacturing strategy? Will you build product in-house or work with a Contract Manufacturing Organization (CMO)? How long do you estimate it will take to develop and manufacture your product? How much will this process cost?

Step 12 - Investment

Is the juice worth the squeeze? If you have filled-out the MVO, you understand that there is a massive amount of work that needs to be completed for your medtech business to reach success. Next, you need to build a financial model that accounts for the various processes and costs described, and you also need to account for employees and the standard costs of doing business. After conservatively assembling these costs over your projected time horizon, what type of capital outlay will be needed to breakeven? After that answer is apparent and pressure-tested with experienced medtechers, what financial returns are your investors going to be seeking? Define as Return on Investment (ROI), which is independent of time, and Internal Rate of Return (IRR), which accounts for time. How does this translate into a total financial exit transaction? Is this exit on par with other industry comps? If so, you may have an investable opportunity. What are the value inflection milestones that would unlock future rounds of funding? Understanding these milestones can help define the corresponding fundraising stages, capital amounts, and investor targets.

Summary

Before committing to a solution, medtech innovators should take a time-out and focus on the market factors that will influence their ultimate success or failure. By beginning at the end - evaluating patients, customers, standard of care, sales channels, and market evidence requirements - innovators will gain the insights needed to steer their product toward the market needs. The Medtech Vision Organizer™ (MVO) is a tool that can be used to step through this process to ensure that the right issues are being identified, addressed, and considered through the development process.

A Request for You

This MVO framework is in its early stages, and I would value any feedback (positive or negative) on the content. Please post your comments, and if you find the article useful, I would greatly appreciate "likes" and "shares." My goal is to make the MVO framework as effective as it can be for medtech innovators, and your input will help in achieving this goal. Thanks! -Eric

About the Author

Eric Sugalski is the CEO and founder of Archimedic. He has over 20 years experience developing new medical technologies ranging from capital equipment to drug delivery devices, home health products, surgical instrumentation, and orthopaedic devices. At Archimedic, Eric works with the business development and program management teams to create comprehensive development plans for clients to achieve commercial, clinical, regulatory, and technical milestones. Outside of Archimedic, Eric holds a Lecturer position in the School of Bioengineering at the University of Pennsylvania. Eric lives in the Philadelphia suburbs with his wife and three children.