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. http://www.sagentia.com/our-services.aspx

1. The First Million Bucks
By Dan Edwards
Published in February 2011

2. The First Million Bucks
The 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 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.
Understanding the innovation mandate
At Sagentia, we recently conducted research
amongst 20 big-name medical device companies to
identify areas of best practice in front end innovation.
Our intent is to share that insight and help
companies get the most out of their investment. First,
we should clarify our definition of front end: it is the
set of activities that deliver a bulletproof investment
case around a product concept that will release the
multimillion euro budgets required for downstream
product development (system design, detail design,
prototyping, clinical trials, transfer to manufacture
and so forth).
Although everybody agrees that innovation is a major
contributor to competitive edge, it doesn’t follow that
everybody does it well. Some organisations are
innovation sophisticates, whilst others struggle to make sense of how to nurture
opportunities 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 million
euros? 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 innovation
mandate 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 their
corporate strategy, not all can articulate their mandate well. So whilst all front end
executives are usually able to directly relate their role to an overall financial growth
agenda, only some are able to point to a link between their company’s competitive
position 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 are
undertaking this kind of research.”
Businesses that have a competitive strategy that requires them to be number one or
two in a given medical market must deliver product and service differentiation to that
market. In this situation, the group or individual operating at the front end needs to be a
front end sophisticate and should both understand the challenge and feel confident and
justified in seeking funds for projects that don’t have a guaranteed outcome. The best
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3. The First Million Bucks
front end innovators in these types of businesses will operate in that zeitgeist—they live
it, breathe it and feel entirely comfortable with it.
Recognising radical
A sophisticated approach is an absolute prerequisite for any front end innovation that
hopes to deliver a new market benefit or technology. The data upon which these
breakthrough products are based, and upon which decisions are made, are usually
very thin. This is the nature of disruption—if a precedent existed, the innovation
wouldn’t be radical.
If usual screening rules were applied in these situations, budget requests to support
these 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 the
outset that the project being evaluated will need to be handled differently. We believe
that three elements are necessary to ensure this happens: people, tools and
processes.
First, it is essential that the leaders of front end work are people with experience and
an understanding of the high-risk profile and decision-making required. Moreover, we
need these individuals to sympathise with both marketing and R&D. Such individuals
are rare. Second, a correct set of tools must be used, and we have a toolbox to share
later in this article. And last, processes must be designed both to nurture and
adequately vet a high-risk project portfolio.
People: marketing vs R&D
Most executives come with either an R&D sensibility or are rooted in marketing. Few
R&D innovators cross the floor into marketing; those that do are a rare breed and are
to be treasured. Even fewer marketers move into R&D. This lack of common ground
has been a problem for years and it remains so today.
The shortfalls apparent in both marketing-led and R&D-led innovation are all too
obvious. Marketing-led innovation falls short in generating solutions and, in some
cases, relies too much on “two-day creativity workshops” to respond to months of
careful market research. There are better tools available, as outlined in Table I. The
corollary is also true: R&D-heavy teams leading innovation efforts are often blind to the
range 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 programme
Are organisations systematic or serendipitous about how they initiate a programme?
Anecdotal evidence tells us that the use of systematic analysis is very much on the
increase in the medical device industry. The stereotypical image remains of a CEO
popping his head around the door to R&D, scratching his chin and proclaiming, “We
need 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. The
CEO instruction was, in reality, filling a void. Now that the analytical tools exist, they are
being used at the expense of top-down instruction.
Developing this point further, a better approach is to follow a simple but clearly defined
four-step programme.
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1. 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 opportunities
Our research indicates a shift in the medical device industry (and other sectors such as
consumer products) towards a bullpen, where projects are gathered together and
viewed as a whole. The bullpen portfolio approach—as opposed to a traditional
process that considers individual projects in isolation and on their own merit—has been
shown, on aggregate, to improve success rates. Here’s why:
Competition (not between teams, per se, but between market opportunities) should be
encouraged in order to get the best results out of projects.
A discipline is established that kills foundering projects and swiftly reassigns budgets
into awaiting projects. It will help ensure that R&D budgets are fully spent. A common
misconception among middle managers is that underspending R&D budget is a good
thing. We disagree with this position, arguing that an underinvestment in R&D is an
underinvestment in growth.
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5. The First Million Bucks
Tools
Organisations seem to focus on those areas of front end innovation, where they have
internal resources and proven strengths. For example, depending on who is running
the show—i.e., marketing or R&D—the focus will be weighted accordingly. This
approach is limiting and forces sponsors to make decisions with incomplete evidence.
Companies should consider their areas of weakness and explore the full range of tools
available to address them.
Table 1 shows an aggregation of tools that may be used by front end innovation
executives 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 testing
It is encouraging to note the sheer diversity of tools that are now available, coupled with the fact
that 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 medical
procedures in light of the move towards preventative rather than curative interventions. On the
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R&D side, technology landscaping is a means to explore technology solutions from adjacent
industries for application in a medical setting.
In some instances, these tools are deployed and managed directly by the medical device
company. For some of the more specialist tools, or where adequate in-house expertise and
resources do not exist, outside consulting services are being retained. Indeed, the ratio of
internal spend (salary and benefits) to external spend (consultancy) averages 1:3. In other
words, of that 1 million euros described earlier, 750,000 is being incurred as a direct expense.
Beyond VoC research
All companies point to needs as the single most important innovation driver. Over the past 20
years, Voice of the Customer (VoC) has become the established industry mantra. Questioning
its 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, there
are 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 than
observe) a clinician?
Practitioners are often blind to disruption. Clinicians’ intellectual investment in the current
standard of care (a given procedure) will often render them blind to, or simply unaware of, the
potential for disruption at a procedural level.
Key opinion leaders—a particular segment of the clinical population that is commonly sought
out—are sometimes the wrong voices to listen to. Less skilled clinicians and users are an
overlooked constituency and a larger market segment.
The overarching point is that the tool and its applicability need to be fully understood. Before
initiating any research, a prudent innovator should have a hypothesis as to where insight will
come from and choose a research method (or methods) accordingly.
Take laparoscopic gall stone removal for example. If ethnographic research is undertaken in
isolation, insights will be gained into the limitations of current technologies. This will lead to
ideas 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 for
surgery entirely by preventing a stone from forming in the first place. If you have a surgical tools
franchise that serves this market, you may miss a billion-euro disruption to your annual revenue.
Conclusion
With typical medical device budgets for front end work around the 1 million euro mark, it is clear
that industry recognises the crucial position this early activity occupies within the innovation
function. The key, however, is to make this investment valuable.
Perhaps the single largest determinant of the practices one ought to adopt is competitive
stance. Put bluntly, a company aspiring to lead in its sector will need to be more sophisticated in
its 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 of
the practices and tools described here. The tools can be broken into groups: those that will take
you 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 to
consider sophisticated solution research and creation tools. It is not enough to simply hand off a
marketing brief to the company’s line extension technology team—it’s likely that they will dilute
the opportunity with business-as-usual solutions. There is more to solution building than
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brainstorming workshops. Similarly, R&D-led functions should challenge their own level of
market interrogation wisdom to see how aware they really are of the unmet needs of their
customers. There is more to market research than clinician interviews.
To front end sponsors perhaps reading this, we would counsel to let your front end innovation
function 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 those
discussed here. A strong message from our research is that we ought not allow organisational
structure legacy and tradition impede performance.
To the front end doer, we would recommend looking at the toolbox you are drawing from and
the bias that your background brings to the challenge. There are several tools listed in this
report that might warrant a trial run.
Dan Edwards is Vice President at Sagentia
Harston Mill, Harston, Cambridge CB22 7GG, UK
Tel. +44 1223 875 200
Email: dan.edwards@sagentia.com
www.sagentia.com
If you are interested in receiving the complete Sagentia research report, please contact Dan
Edwards by e-mail, dan.edwards@sagentia.com
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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.com
Sagentia Ltd Sagentia Inc
Harston Mill One Broadway
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Harston 14 Floor
Cambridge Cambridge, MA 02142
CB22 7GG USA
UK
T. +44 1223 875200 T. +1 617 401 3170