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Say you are an entrepreneur looking to make a big splash in the medical technology industry. Your new rapid test for bacterial infections will make emergency rooms more efficient and reduce how long it takes to train hospital staff. You are confident that big firms will want to acquire the technology—probably outbidding each other for the prototype.
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As tempting as this sounds—and as sure as you may be that it will pan out—there are benefits to a more patient, self-sustaining approach.
Katie Arnold, the founder of SPRIG Consulting and an adjunct lecturer of innovation and entrepreneurship at the Kellogg School, advises startups to design a marketing plan to take them from conception to commercialization—without relying on a heavyweight swooping in to buy.
In research-heavy industries such as medtech, pharmaceuticals, automotive engineering and military technology, a thorough marketing plan is critical for guiding products through development processes that can take up to a decade.
It also serves a second purpose. “Having a comprehensive marketing plan earlier in the development process makes discussions with potential acquirers go more smoothly because they can envision how the opportunity may come to fruition within their commercial infrastructure,” Arnold says.
Arnold shares three pieces of marketing advice for startups in sectors that have long R&D timelines.
Determine Where Your Company’s Product Fits Relative to the Big Players’ Priorities
The big fish in any R&D-heavy industry—for instance, Abbott, Baxter, and Medtronic in medtech—tend to prioritize external growth opportunities that can then be marketed via their existing channels for distribution and sales. These giants count on startups and smaller firms to feed them viable products in growing areas—and, if the product aligns with their priorities, they pay handsomely for those innovations.
So does your product make the cut?
Often for R&D-heavy industries, the marketability of revolutionary products is unproven, as these products will either create new markets or displace existing markets. The key for a startup is to thoroughly assess the market by determining its size, growth potential, and how open it is to new products.
“Find big markets with significant unmet needs, and then go build products to meet those needs based on diligence and information you are receiving from the market.”
“When you’re in it for the long haul, you want to be in a market that’s attractive,” Arnold says. “Look at the large and growing markets that established companies might think of as the next area of innovation. You don’t want to be in a declining market that has commodity-like pricing, or else you’ve put in a lot of time, money, and effort that may not result in an exit.”
Establish Coordinated Product-Development and Marketing Approaches Early
Even if your company’s ultimate goal is to be acquired by a larger entity, it still needs to be prepared to bring its product fully to the market. After all, the build-to-be-bought strategy does not always go according to plan. Larger companies may wait to acquire a product until it has strong market traction. In these cases, early-stage marketing can sustain a company and set it up for a stronger buy offer.
“You can’t just go and build towards the next development milestone with an R&D-only focused mentality,” Arnold says. Instead, startups should consider marketability.
“The best approach is to find big markets with significant unmet needs, and then go build products to meet those needs based on diligence and information you are receiving from the market,” she says.
This market-driven approach requires constant communication between product development and marketing teams. While engineers are busy creating prototypes, the marketing team needs to be kept up to speed on the device design and how it will function. Assessing regulatory and reimbursement aspects of the product, as well as concerns like whether a medial device is likely to be covered by insurance, can have profound impact on how quickly the device gets to market.
“In the past, we used to develop the device, get it approved, and then figure out how to get it paid for,” Arnold says. “This is no longer the case. Because of changing healthcare economics, you have to know early on if your device fits into an established reimbursement code, or if it will require a new reimbursement code. Given that a new code can take several years to establish, the marketing plan and related regulatory and reimbursement aspects of the strategy should be established early, at the same time that product development starts.”
Invest in Primary Market Research
Arnold has found that first-time entrepreneurs can be tempted to skimp early-stage, primary market research, which can be labor and budget intensive at a time when most companies are dedicating everything they have to product development.
“Those who haven’t gone through the product life cycle find it harder to justify spending $30,000 for three to six months of market research,” she says. But those who opt to begin market research later in the process run the risk of hurting the bottom line. “The earlier you test your concepts, the more you know you’re creating something meaningful to the market.”
Arnold finds herself integrating market research earlier and earlier into a product’s conception. In the world of medical startups, marketing teams seek out clinicians and key opinion leaders to discern their opinions on evolving new products. This research is used to determine how the product differs from current market offerings—and most importantly, whether people are likely to use it in the future. The results can then be used to shape engineering and prototype development.
“We see critical insights—such as clinical studies that may need to be performed—and can bring them into the development of the device,” she says. “As soon as we can get out and talk with customers—in this case clinicians and administrators—the better.”
Primary research may, for example, lead a startup that is developing a device with multiple features to rethink its design. By discussing the design with clinicians, the company can identify which of these elements is a must-have, and which is a nice-to-have, but not critical, product feature. Knowing this information can save a company a lot of time and capital on the way to market.
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