Maximizing Value in Medical Device Launches

It takes more than a great device and a sound marketing strategy to ensure the success of a product debut.

Matt Singer, Andrea Schulzand 1 more

April 1, 2009

18 Min Read
Maximizing Value in Medical Device Launches




The importance of successful product launches in the medical device industry cannot be overestimated.

On the surface, launch delays appear to make a difference only during a product's first few years, when sales are relatively small. But closer inspection reveals the impact can be significant. A year's delay always costs a year of peak sales—which can mean millions of dollars in lost revenues—making a successful, on-time launch absolutely critical.
Pricing pressure and competition in medical device and diagnostic companies' existing business make successful new products even more critical to achieve short- and long-term growth goals.
Despite their importance, it is surprising just how often launches go wrong. That's because it takes more than just a great product, a sound marketing strategy, or even a standardized process to ensure success.
Based on our experience working with medical device and diagnostic firms, this article presents a framework of 11 guiding principles for launch excellence. Applied as a whole, these principles can help ensure a company maximizes its product debut, whether it's for a breakthrough technology or a product line extension.
We have found several consistent challenges facing medical products firms in how they approach launching new products. These include poor interaction between global and local units, inadequate allocation of resources, and limited institutional launch experience. In some instances, these problems can have a cascading effect, as unresolved issues in one aspect of the launch can cause problems in another. As a result, many medical products simply do not realize the sales expectations that were set. Even worse, companies do not always properly assess the product opportunity to begin with and often do not even know that the launch could have gone much better.
This article examines why medical products companies struggle with product launches and lays out a step-by-step plan to maximize these launch opportunities.
Why Medical Products Firms Struggle
We have observed six main reasons why medical device companies experience launch failures; some reasons are obvious, others less so. Because one unresolved issue can lead to another, each is worth examining in detail:
Poor Global-Local Interaction: It is often unclear who “owns” key activities such as developing the value proposition for a new product in a specific market or determining when different entities should be engaged in the process. This leads to overlap in some activities or others being completely overlooked.
For example, both global and local marketing teams might create separate—and potentially conflicting—value propositions for the same new product. Or, global marketing might believe country marketing is responsible for developing the value proposition and vice versa. As a result, this crucial element of the plan is completed only at the last moment or not at all.
Likewise, sometimes R&D will develop a product with little or no marketing insight from local organizations beforehand. This results in products not meeting local needs and the “not-invented-here” syndrome, where local affiliates do not fully support and drive the new product launch because they do not believe it meets their customers' needs.

Figure 1: Impact of launch delay on cumulative sales.(click images to enlarge)

Lack of Cross-Functional Coordination: A successful product launch requires close departmental coordination, but too many companies suffer from a silo mentality across their various departments, resulting in inadequate communication and poor coordination.
For example, consider a scenario in which manufacturing needs forecasts from finance to support capacity planning, while finance must have input from marketing to develop the forecasts. Frequently, finance does not get the forecasts submitted on time, because marketing fails to deliver the necessary inputs like monthly demand estimates for capacity planning to finance. This kind of failure is often the result of companies operating in traditional functional silos. In this example, marketing is not communicating with finance, and finance is not talking to manufacturing. Structural or long-standing cultural impediments are usually at the root of these failures of cross-functional coordination.
Inadequate Resource Planning and Allocation: Product launches are inherently uncertain, as issues such as actual product readiness and unforeseen regulatory delays often pop up. Therefore, companies want to postpone investing in overhead—for sales force resources in particular—as long as possible, just in case the launch does not materialize or is delayed “another six months.” Insufficient resources for various launch functions after a certain point jeopardize the success of the product introduction.
Resource delays create additional and unnecessary stress, as existing personnel are forced to work on the launch in addition to their “day job” managing the current product portfolio. Typically, incentives are usually designed for the existing business, making the launch a lower priority, which compounds the problem.
Uncertain and Evolving Business Climate: Product development and launches span long time frames, and the environment that existed when the initiative was begun may be much different from the environment at launch. Competition has come and gone, the approved reimbursement levels may be lower than expected, and regulatory approvals are routinely delayed. By not considering in advance what might change, many companies engage in inevitable “fire drills” in reaction to unanticipated events.
One example: A competitor receives faster approval for a new product than anticipated and launches it earlier than anticipated. If the marketing team does not anticipate the possibility that a competitor's product might launch early, it will not be prepared and will be significantly behind from the start—perhaps irreversibly.
Limited Institutional Experience: While a company may have launched products in the past, the team assigned to introduce a particular product may have little launch experience. Or the company may be launching a product in a new market or to a new customer segment, making the company's institutional experience much less relevant. Even with a well-defined process, an inexperienced team may not be fully capable to make critical judgments, such as how to respond to unexpected events or unrealistic time lines. The team may also simply forget to complete critical activities, because they have never done them before.
Other issues may arise from never handling a major new product. It is not uncommon for a team to have handled small launches such as line extensions but to be unprepared to roll out a potential blockbuster. The scale of such a launch can overwhelm inexperienced team members, who may forget to complete fundamental tasks or underestimate the size of the opportunity and allocate insufficient resources.
Short Launch Cycle: Unlike product debuts in the pharmaceutical world, medical product companies' launch cycles are often quite short—sometimes a matter of months. Short launch cycles limit companies' ability to fully prepare for the launch. Or they often can result in disjointed planning efforts as the company is running against the clock from the beginning. Often, the release of funds for critical launch activities is tied to regulatory approval milestones. This short launch time frame makes effective launch preparation even more critical, as there is very little margin for error.
A Framework for Success
The 11 guiding principles can help ensure that a company has the appropriate capabilities and infrastructure for a successful launch.
Few companies consistently implement these principles well, given the competing demands on focus and resources as well as the prevalence of functional organization structures like marketing, operations, and sales.
Each principle is placed into these four categories: Build a High-Impact Launch Organization, Create an Upbeat Mentality and Focus, Develop Effective Launch Planning Guides and Tools, and Support Integrated Communication and Learning.
Build a High-Impact Launch Organization
1. Organize and empower: Identify appropriate decision-makers, clearly define roles and responsibilities, and ensure accountability and ownership.
A global marketing manager who is assigned ownership of a launch needs to be given the right level of authority to ensure that others involved in the project understand the decision-making process and are compelled to follow the launch plan. Appropriate titles and pay grades can help define and empower these roles, of course, as can executive communication reinforced by action. Such formal structures can clearly communicate a global or local marketing manager's authority.
2. Allocate appropriate resources: Staff a core launch team with the appropriate level and type of resources.
Since any product launch is, by nature, cross-functional, the launch needs a team that represents the appropriate company functions. The team usually should initially consist of a full-time leader with part-time support from global product development, marketing, and regulatory staff. Other team members, such as pricing, manufacturing, and managed markets personnel, need to be added as a launch date draws near. Beyond this core team, other key stakeholders—legal and finance, for example—must provide a sufficient level of support.
Large, complex launches are likely to require greater resource commitments earlier in the process than more modest ones. For instance, a product that requires a new reimbursement model could mean years of negotiations with local payers and government entities. As a result, careful launch planning also requires careful internal communication planning, in order to convey expectations to cross-functional counterparts.
3. Align incentives: Build incentive systems to deliver commitment from regional and local divisions.
Local personnel are critical to launch success. Country managers who allocate local budgets, country marketing leaders who support local tactical execution, and country sales managers who target customers—all need financial incentives related to the launch. But measuring launch progress with only a simple metric of total sales is usually insufficient, as a new product is likely to require a large amount of time and energy before reaching significant sales volume. By focusing only on a sales metric, the manager is more likely to extract such additional sales more easily from in-market products, which boosts total sales in the near-term but may hurt the long-term potential for the new product.
Incentives beyond sales results that are based on other launch preparation metrics, such as the number of customers reached, are also critical to ensure success. Incentives are applicable to non-commercial support staff as well. If, for instance, there is no incentive for the manufacturing staff for actively supporting a launch, staff members are less likely to help. In essence, they need “skin in the game.”
Create an Upbeat Mentality and Focus
4. Prioritize and focus: Drive the strategic priority of new product launches from the top of the organization and create alignment in the company.
How do marketing managers handle launches when they barely have time to do their regular duties?
As mentioned earlier, individuals working on a launch often have to juggle it with their “day jobs.” To ensure they allocate their time effectively, senior level executives must communicate priorities and reinforce them through action. Communications can take the form of company/division e-mail or newsletters about strategic priorities. During a new product launch, top executives need to reinforce priorities through their own behavior.
For example, a team that requires more resources for an important launch needs management to make a public commitment to deliver those resources, and then to follow through on it. Nothing communicates priorities more strongly than action.
5. Mobilize: Create a sense of urgency about the launch from the top, and mobilize the company toward this goal.
In today's market, the window of opportunity for a new product is shrinking, as competitors enter the market quickly, or the market itself undergoes rapid change. And as discussed earlier, launch delays have a more significant financial impact than it might appear. Therefore, it is critical for management to perpetuate the mentality of a finite “window of opportunity” in order to really maximize the revenue potential offered by the new product. Frequently, the launch date is a moving target, making it difficult to drive the best outcome and the appropriate accountability. By holding the organization to a targeted launch date (with allowances for external events such as delayed regulatory approval), management can communicate the necessary sense of urgency to the organization. Rewards for an effective, on-time launch reinforce the importance of the launch.
All this said, it is important to not sacrifice quality for speed. If a launch team runs into difficult internal hurdles such as inadequate product development staff required to finish the product design, it is critical for upper management to work with the team in order to find ways to overcome the hurdles by adding staff, for example.
6. Think big: Quantify the total sales potential, then develop an aggressive, but realistic, sales goal for the launch product.
Companies often think of opportunities in terms of their organization's constraints. “We are launching this product in Canada with 10 sales representatives in place now, so how much sales can 10 reps drive?” is one example of this type of thinking.
A better approach to quantifying the market is to assess the opportunity and the required investment without regard to existing capacity restraints. Only then should management apply internal constraints and develop an aggressive, but realistic, goal for the product by considering the product's market potential and the cost and workload required to reach it. Through targeted market research, the organization can gather key metrics to support this analysis. When assessing opportunities that are at least a couple years away from launch, high-level data such as epidemiology, incidence, and procedure counts are sufficient to develop a general market picture. It is more important to ascertain whether the opportunity is $100 million versus $50 million, as opposed to knowing whether it is worth $100 million versus $94 million.
These market assessments should be integrated into the overall business planning process that helps senior management compare various product and country opportunities with each other. This is even more important today, as resources are scarce. Only by understanding various opportunities using consistent methodologies can senior management prioritize how to allocate resources across both launches and opportunities in the existing business.
Develop Effective Launch Planning Guides and Tools
7. Provide a launch guidebook: Compile a comprehensive, easy-to-use set of resources to guide support teams.
These materials should include organizational best practices but should have enough flexibility for easy customization. Every product and market is different, and this fact should be reflected in the plan. Many companies use a standardized launch plan that lists typical roles and responsibilities for team members, reflects best-practice activities, and shows interdependencies among functions. The plan also identifies who is accountable for and consulted on various launch responsibilities.
Such materials give launch teams a good starting point for local customization of the plan, depending upon a new product's particular requirements. These materials and plans can then be adapted, for example, if a new product needs a different reimbursement authorization or requires a different value proposition related to, for example, economic or clinical benefits, or both.
8. Develop a compelling value proposition: Build a value proposition that reflects the needs of those influencing purchasing decisions for a new product.
Given the complexities of today's market and the growing role of economic decision-makers such as materials managers and hospital administrators, assessing the needs of these various decision-makers is essential for any new product. A deep understanding of customer needs—which includes alternative solutions that satisfy those needs—is critical to crafting a compelling product positioning.
It is critical that the medical device firm articulates to the customer how the total value of the new product offering exceeds its price—in other words, shows that the device is a good deal. Convincing customers of the new product's value must be done in a manner that gives customers no reason to seek alternative solutions such as choosing a competing product or not buying anything, for example.
Medical products firms often struggle in delivering a compelling value proposition, as it requires skills beyond offering customers a good business relationship and competitive prices. Rather than deliver additional services that do not offer meaningful value to the customer, device manufacturers should instead focus on articulating the value of what they already offer. Paying attention to how value is articulated in a way that meets real customer needs, in terms the customer understands, and comparing that value with the alternatives, can often offer better results than just adding more services. This approach also can potentially lower manufacturing costs.
9. Protect the business: Eliminate copycats and other competitive threats before the new product launches.
Patent protection is perhaps the most well-known means of protecting a new product, but a new product can also be protected through winning the endorsement of academic medical centers and other key opinion leaders early in the launch process. Another approach is to build a high-value offering around the product or to develop strong sales force relationships that make the cost of switching suppliers unattractive for customers. This can happen both in the first few months after a launch by aggressively going after key customers, or even before a launch in certain circumstances. For example, if a company is launching a product that will change the treatment paradigm, the company can engage in valuable market development activities before the launch, educating customers on just the treatment paradigm shift.
Support Integrated Communication and Learning
10. Communicate effectively: Plan communications well, initiate them early in the process, and communicate regularly.
If a company hires representatives to increase selling capacity in anticipation of a product launch, a suitable communications plan is needed to enable the current sales force to understand the change and how it affects them. Communication is a critical part of any successful launch; too little communication causes confusion, while too much communication dilutes the overall message.
In the example above, if the company's CEO, marketing department, and sales executives deliver messages that give different rationales for changes, the sales force may misunderstand and resent the thinking behind the changes.
Careful attention to how key departments communicate with one another is also critical for an effective launch. The sales and marketing departments and local country teams should be involved early and often in product development and general planning, but in a way that is not over-burdensome. Their ideas should be incorporated into product development, which helps build buy-in for the eventual outcome. Involving sales and marketing early in product development helps ensure that the product is created with the customer in mind. Similarly, engaging branches or subsidiaries and other local constituencies as the product is being developed increases the likelihood that the product will meet local needs and will build buy-in with these key stakeholders.
11. Institutionalize best practices: Develop processes that effectively disseminate best practices from launch to launch and country to country.
Best practices reflect what past teams have learned. They are an acknowledgement of what does and doesn't work. Embedding them in the wider corporate culture goes beyond the individual team to ensure that future teams can learn from others' experiences.
Companies need to develop a “pull” mechanism that captures the lessons from a launch. This mechanism could take several forms, including online communities, “wiki” intranet sites, or even a more simple document repository that future launch teams can access.
In addition, it is important to build a formal review into the launch plan at the end of the process to ensure that team members discuss and analyze the launch. For example, every launch plan could require the team to reflect on the experience and focus on what team members learned. Payment of final launch incentives could be made contingent on completion of this important last step.
Following the development of the pull mechanism, a “push” equivalent can ensure future launch teams benefit from past experiences. If the company already has a knowledge-sharing platform familiar to everyone in the company, it can serve as an excellent forum to disseminate ideas and experiences.
Regardless of how the information is staged, it is critical that future launch teams are aware that this knowledge exists and that they know where to find it. Many knowledge management initiatives fall short because nobody knows the location of the information captured during the launch process.
Knowledge management systems and other technology can help facilitate this process, but they are insufficient if relied on exclusively. A knowledge-sharing mentality needs to be institutionalized throughout the organization: It needs to be made a part of what people do. This requires behavioral modeling from the top and reinforcement through recognition and rewards.
With the pressure to ensure successful product launches greater than ever, it is critical that medical device companies be prepared to face challenges effectively. Proper preparation is more than a matter of avoiding failure. Improving product launch capabilities represents a tremendous opportunity to improve the business not just for today, but for the future.
Matthew Singer is a manager in ZS Associates' Evanston, IL, office and is the global leader of the firm's new product launch effectiveness practice. Over the last several years, Singer has assisted several medical products and services, pharmaceutical, and biotech companies with numerous commercialization issues. He can be reached at 847/492-3588 or [email protected].
Marshall Solem is a managing principal for ZS Associates and is responsible for the company's Midwest region, consisting of over 225 consulting professionals. Solem focuses on helping clients address issues of new product launch effectiveness, market segmentation, go-to-market strategy, sales and marketing organization design, territory alignment, incentive compensation, and sales force effectiveness. Solem can be reached at 847/492-3645 or [email protected].
Andrea Schulz is a consultant in ZS Associates' Evanston office. She has worked with medical device and diagnostics companies on a range of sales and marketing issues such as new product launch strategy, sales force strategy and effectiveness, opportunity assessment, channel design, and value proposition development. Schulz has experience working with clients in the United States and Europe. Schulz can be reached at 847/492-3124 or [email protected].

© 2009 Canon Communications LLC

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