One of the most strategically important topics for a startup is commercialization – the point when a company transitions from research focus to generating revenue, scaling the organization, and potentially driving toward an exit. As part of its educational series, the Fogarty Institute recently hosted an impressive panel who offered their thoughts on managing this important phase of a company’s lifecycle.
The workshop included a trio of speakers who were able to explore the topic from a variety of perspectives. Seasoned veterans Susan Stimson, chief strategy officer of Intersect ENT, and Marga Ortigas-Wedekind, executive vice president of marketing of iRhythm, shared their experiences at two of the most high-profile and successful medical device companies in recent times. Both companies managed the complex journey from traditional startup to commercial ramp-up and successful IPO. Then Fogarty Institute and Stanford Biodesign graduate Jon Coe, co-founder and CEO of Prescient Surgical, offered perspectives from his company, which is in the early stages of its commercial journey.
Susan Stimson: Internal mindset and external reputation are both key
As part of the founding team of Intersect ENT, a company dedicated to transforming care for patients with ear, nose and throat conditions, Susan played an instrumental role in its evolution from R&D stage to a high-growth commercial entity. Among the strategies she shared:
- Establish a company-wide mindset: One mistake that startup companies with truly novel technology often make is to assume that customers will rush to buy their product because it now represents the best treatment option available to patients. This is rarely, if ever, the case. Instead companies must “earn the right” to have customers adopt their product or service. At Intersect ENT, the management team instilled a mindset that the company must deliver the products, clinical evidence, service and support necessary to “earn the business.” This mindset was also applicable to other stakeholders such as investors: Here the team emphasized the need to “earn the right” to ask for investor’s capital by delivering on the project plans, revenue and earnings they promised. This “earn it” mindset proved to be a powerful tool in establishing a company culture that emphasized hard work, integrity, accountability and results.
- Develop the right metrics: Carefully constructed metrics allow the team to track commercialization progress while also incentivizing appropriate behavior. For example, Intersect ENT emphasized measuring “traction” (i.e. the number of sites reordering product) rather than just “trial” (i.e. the number of new sites willing to try the product). Tying compensation and bonuses to such metrics further focused the team’s efforts on activities most likely to drive a sustainable long-term business rather than just a transient spike in sales.
- Build a brand: A key step in developing a truly successful commercialization strategy is to understand what factors weigh most heavily in a customer’s product purchase decision, and in their choice of a preferred vendor. The Intersect ENT team spent considerable time and effort to understand these variables then used them to develop their positioning, messaging and overall branding strategies. By doing so, they not only differentiated their product, but the company as a whole. They successfully established themselves as more than just a vendor out to sell product, but rather as a partner in patient care and a group that customers respected and wanted to do business with.
Marga Ortigas-Wedekind: Never stop pivoting
Marga joined iRhythm, a leading digital healthcare solutions company focused on advancing cardiac care. She joined the company in 2015 and played an integral role in refining the company’s strategy and helping it drive toward a successful IPO. Three of her top suggestions were:
- Keep reinventing yourself: The road from early-stage startup to IPO is rarely straight, so companies need to constantly anticipate changes and adapt. Sometimes the pivots necessary for success can be significant such as redesigning the product, modifying the reimbursement strategy, or even revising the basic business model. Throughout this journey, it is important to remain flexible by continually evaluating your progress, listening to customer feedback and adapting accordingly.
- Know what drives your business: The iRhythm platform consists of a wearable device that captures cardiac-related data about the patient. The device is very novel and represented a major simplification in the equipment needed to capture this data. Because of this, it would have been easy to consider the “device” the major focus of the company’s business. However, as the company gained experience with the system, they quickly realized that optimizing the “service” side of the business, which involved gathering, transmitting, analyzing and presenting the data to clinicians, was going to be critical in driving adoption. This required developing the unique skill sets, organizational resources and processes to operate as a service provider and not just a product provider.
- Craft your messaging: Many technology-driven startups fall into the trap of communicating about their product and company from a perspective that is company-centric. This often means emphasizing the novel technical aspects of their system and the unique company culture that allowed such innovation to occur. However, to the customer and ultimate user of such medical devices, these factors are often of much lower importance. Instead, they want to understand the benefit of the system in terms that resonate with them and their patients. At iRhythm, the group was very purposeful in researching and understanding customer perceptions about their product and company and what factors were most important. They then tailored the product, service and messaging to these specific customer areas of interest. Taking a “customer-centric” rather than “company-centric” view has been a key contributor to their successful commercialization.
Jon Coe: Build a strong foundation
Jon Coe launched Prescient Surgical, a startup focused on reducing surgical site infection, at Stanford Biodesign. He has recently closed Series B funding and begun initial commercialization. Jon shared the following advice for companies just beginning their commercial efforts:
- Focus on market segmentation and targeting: Novel technologies will often have many potential applications. However small companies do not have the resources to pursue all of them simultaneously. Doing so risks diluting the company’s efforts and potentially running out of money before gaining commercial traction in any one area. Instead, it is essential to invest time and effort in identifying which applications and user groups are the most likely to be initial adopters of the technology.
- Invest in an experienced team: Given a startup’s limited resources, early commercial efforts need to yield results quickly. To maximize the probability of this happening, it is critical to hire a quality field team. Such individuals need to be experienced at early-market development, know the market they are entering and ideally have existing relationships with a large number of potential customers. Often times, in an effort to minimize burn rate, startups will hire junior or part-time sales reps. While this can be successful in select instances, more often than not, this strategy limits the company’s ability to optimize their early commercial efforts. Instead, it is typically better to invest in more senior individuals early on, with the added benefit that such individuals can then more easily transition into sales management roles as the team expands.
- Build the long-term value of the company: Small companies often focus too much on short-term revenue. Instead, they must realize that investors and acquirers are most often seeking longer-term viable businesses that can deliver sustainable growth. As such, it is important during early commercial efforts to focus not just on revenue, but also on making investments in things like clinical studies that prove the clinical benefit of the company’s products and help drive long-term adoption. Companies that focus on building a business and not just chasing revenue are more likely to be successful.