“I have an idea. A great idea. I mean, it’s an “I can’t believe no one has thought of this before” idea. The market for this product is going to be enormous.”
In conversations with innovators spanning devices, biologics, diagnostic tools, and many areas in between, I have heard this common refrain more times than I can count. These conversations have even included the phrase “it is a billion-dollar market opportunity.”
While they intend to convey the belief that they have huge market potential and feel very strongly about the direction that they are going, they are, in fact, unintentionally signaling that they haven’t done the real work needed to understand the real opportunity.
Enthusiasm, excitement, and drive are all essential characteristics for an entrepreneur; however, my role is to temper this eagerness with a good dose of real market intel. All the academic preparation and focused development efforts will only go so far. It is necessary to step out of your comfort zone to answer some critical questions about product potential before knowing if that great idea is also a commercially viable one.
To know the real market opportunity, and therefore revenue potential for a novel healthcare product, a key factor is to know if anyone will pay for it. Understanding the reimbursement landscape, economic environment, and purchasing dynamics will get you on your way to understanding the real commercial opportunity.
- Reimbursement Landscape: What are insurance companies and government agencies paying for similar products? What are the direct and indirect competitors that could influence the reimbursement structure? Will your product cause an increase or decrease in overall costs? What are the hard costs (devices, drugs, clinic/bed space etc.) and soft costs (nursing time, improved workflow, good will, etc.) associated with using your product? Pulling together these costs will give you a better picture of your pricing windows and room for margins and profitability.
- Economic Environment: What is the environment within which you would introduce the product? Look to know the space as well as you can. For example, is the product used in a particularly difficult type of tumor where doctors are desperate for options and insurance companies are more lenient, or would you be increasing the cost of a screening colonoscopy where margins are already razor thin? How does this environment behave when new products are introduced? Do they require a high degree of clinical data and peer-reviewed publications or are they willing to try something new with safety data and a few case studies? The answer to these questions will help you understand the potential challenges to introduce your product in the space.
- Purchasing Dynamics: What are the conditions for hospital/clinic purchasing agents for this type of product? Are they under any extra pressure in your area of specialization due to bundled care, close scrutiny, competitive contracts, or other reasons? How difficult is it to get another product in your category in front of the right professionals? What are the purchasing cycles where your product is used? Knowing how your product fits into the purchasing dynamics will help you know more about potential adoption.
Do the research to address these factors and help you better understand the market opportunity and real potential for your new product.
Ilsa Webeck founded MedTech Strategies, a boutique, strategic research consulting firm, with the knowledge that all companies, regardless of their size, need to develop a product/service value proposition and understand the business of healthcare in order to be successful. She works with companies on new technology initiatives focused on identifying value and actionable outcomes for growth. Her past roles include corporate planning, product management and early product strategy at Johnson & Johnson, Biogen and Health Advances. Ilsa holds a BA in Biology from Dartmouth College and an MBA from the Tuck School of Business. She is an invited lecturer at the Boston Biomedical Innovation Center (B-BIC) and is a member of the board for the Medical Development Group (MDG).