Phase zero is the place to work out product functionality, business strategy and customer value. Here are the evaluation tools to get it right.
Scott Thielman, Product Creation Studio
New products can change the outlook for companies, and the right product can create a new market segment. However, history is littered with solutions that missed the mark, and R&D budgets are inevitably limited. So how do medical device leaders select the winning opportunities to pursue when faced with myriad concepts and potential pitfalls?
Often, the problem is not a lack of ideas. Humans naturally invent given an unmet need and development resources. A leading cause for the demise of most products is the over-pursuit of a singular aspect of an idea that ultimately fails to gain traction – a failure that might have been recognized or avoided by disciplined evaluation of other key domains early in the process.
New product development leaders can benefit from a variety of tools to help them organize their evaluation more holistically. This need is amplified for medical devices where key factors such as industry regulation, clinical testing, and complex sales channels up the ante for each product bet.
In early opportunity investments, it is important to recognize that it’s too early for a “product development process” and that you actually need to start in “phase zero” (aka R&D). Phase zero is a place where product functionality, business strategy and customer value must be established to move forward. It is helpful to imagine three domains that require distinct early-stage attention but all overlap in support of the business plan. They are vision and value development, function development, and strategy development
These domains comprise key activities and deliverables. This is not intended to be an all-inclusive list. Rather, it highlights areas that typically represent the highest value for medical device development.
Vision and value development
OBSERVE – IDEATE – EVALUATE
The purpose of vision and value development is to acquire a deep understanding of new product users and generate a validated product story.
Key activities during the vision and value development phase may include:
User research/usability studies
A critical component to Phase Zero is gaining a deep understanding of the user and user needs. Find out what it will take to drive adoption by your target market (both the medical community and the payors). FDA is focused on the customer early in the product development process; knowledge gained in Phase Zero can help facilitate these studies and inform ideation around product concept.
- Formulate customer needs and problems and validate them. Don’t spend too much time on in-depth studies at this point. Save this for later when the project gets the green light. Focus instead on talking to key thought leaders and trusted doctors.
- Literature reviews and input from customers on similar products can help create an image of the customer, as well as a market-driven product definition.
Evaluation of possible market resistance
Innovative solutions alone won’t make the product a success. If a product is truly revolutionary, it is safe to assume there may be resistance by key customers and thought leaders, making market acceptance a significant risk. It is critical to determine a strategy early on for gaining acceptance based on the risk you discover in the vision and value development activities. Overcome this risk by determining how to get support from key personnel and involving them as early in the process as possible.
INVESTIGATE – PROVE – OPTIMIZE
The purpose of function development is to create and demonstrate new technical capabilities and features of the product or technology.
Key activities during function development may include:
Technology evaluation and assessment
A critical part of Phase Zero is assessing the maturity of the technology. Where will the technology come into play during the product development process? Has technological feasibility been proven? If not, determine whether feasibility will be best realized with analysis, concepts, or prototype testing.
Product function feasibility
How will the technology function in a product? Spend time in Phase Zero to move the technology from early research to applied research with a proof-of-concept prototype. This enables performance demonstration of the technology in a commercial configuration of the product; a key to assessing product viability. These early prototypes can build confidence in more challenging solutions while reducing financial and investment risk along the way.
REVIEW – ADVISE – PLAN
The purpose of strategy development is to establish an approach to product commercialization and create a business plan. In Phase Zero it is critical to have at least a skeleton business plan prior to significant investment in the other domains.
Key activities during strategy development may include:
Business model and growth strategy
An outline of your growth strategy is essential, but it isn’t complete without numbers to back it up. Revenue, sales and distribution models are the key drivers of a business model. To build a solid business case, you need to include numbers for the following: return on investment; profit-and-loss expectations; estimated revenue; and acceptable profit margin.
If the adequate information does not exist, determine what information is missing and what forecasts can be made to provide rough estimates. Financial forecasting is not an exact science, the key is to provide a starting point and highlight areas that need further attention.
Understand the product owner’s portfolio
To present a compelling business case, it is important to consider how your product will strategically fit into the existing landscape.
Does this product compete with another already in the product owner’s portfolio? If so, determine a strategy for overcoming market cannibalization. Is the product in a completely new category? Be sure to consider the resources necessary to create this new product and how to successfully bring it to market.
IP ownership and patent landscape
It is important to explore intellectual property as soon as possible. Too many projects have entered into product development only to be abandoned because of IP issues, legal delays, and a misunderstanding of the patent landscape. Save precious time and money by determining whether the solution is free to operate (FTO) in your area of technology.
A freedom to operate analysis includes thorough research of issued and pending patents worldwide, as well as obtaining a legal opinion on whether the new product would infringe on existing patents owned by others. This can be completed by internal or external attorneys (some situations may call for the use of both).
Until the IP ownership is established, the financial risk may be too high to continue product development any further.
Reimbursement and regulatory strategy
A common mistake in medical device development is delaying a reimbursement and regulatory strategy. Too many projects have been discontinued well into product development from a late discovery of a lengthy and costly reimbursement and regulatory policies.
A regulatory strategy should include the required clinical data and the burden of proof information. Consider starting a conversation with FDA in this phase to gain a better understanding of the policies. A reimbursement strategy should include a health economics analysis for healthcare resources in any appropriate markets (U.S., EU, etc.).
This information will inform the ROI estimation included in your business model and growth strategy.
Establish a decision-making process
Key to any successful project – especially early on – is to establish a decision-making process for moving the project forward. Who will determine which opportunities to pursue and the criteria used to make that decision? Identify project stakeholders early and involve them in building the business case.
Don’t forget to allow time to build in early feedback on product concepts and the business plan.
Phase zero: Prepare for development success
The phase zero paradigm organizes opportunity risks into key domains to help development leaders maximize their investment of early-stage resources. With so much ground to cover, it is important to focus on tasks that determine which innovations have real potential and justify their user value, technical and strategic feasibility.
Phase zero efforts may be repeated iteratively to refine and validate the product concept in preparation for moving into product development. When that happens, it is possible for real innovations to be brought to market quickly and strategically, increasing the likelihood of viability and success in the marketplace.