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One of the very first questions I had to answer in my doctoral journey was, “What business problem do I want to spend the next five-to-six years on?” As I thought about it, there were two contradicting phenomena that piqued my interest.
On one hand, there was an explosion of innovation happening in healthcare. On the other hand, I came across this alarming statistic:
It’s head-spinning to think about how many technologies and advancements health innovators dream up that end up in a zombie graveyard. From telehealth to connected medical devices, digital therapeutics, remote monitoring tools, on-demand primary care — you name it — there are many things that must go right to transform these innovations into profitable businesses.
While some researchers argue that commercialization is the most critical aspect of innovation, it’s often the most poorly-managed.2 There are multiple pitfalls to jump over or maneuver through.
Even the most savvy innovators and the most brilliant ideas won’t succeed unless innovators have a strategic and well-planned commercialization strategy to reach customer adoption, diffusion, and ROI from your solution.
In this guide, we’ll go over 10 steps to ensure that your innovation is on the path to profit (and not the path to the zombie graveyard where great ideas go to die):
1. Focus on your fit
2. Validate market need
3. Finance your innovation
4. Segment your target market
5. Define your new product concept
6. Build and test your business model
7. Validate clinical and financial outcomes
8. Establish partnerships and alliances
9. Determine launch timing
10. Communicate your unique brand story
Keep in mind that these steps aren’t necessarily linear or chronological. The commercialization process is iterative and continuous. And, it will look different for every innovation depending on your unique situation.
1. Focus on Your Fit
The path to profit for every business can be measured by how successful a company is in achieving three milestones or different stages of “Fit.” You want to validate that your business idea works on paper, in the market, and in the bank.
Every innovator can use these three milestones as goalposts to manage the strategy process and measure progress as they navigate how to commercialize a product, service, or experience.
Problem-solution fit takes place when you:
- Have evidence that customers care about certain jobs, pains, and gains.
- Designed a value proposition that addresses those jobs, pains, and gains.
IN THE MARKET
Product-market fit takes place when you:
- Have evidence that your products and services, pain relievers, and gain creators are actually creating customer value and getting traction in the market.
IN THE BANK
Business Model Fit
Business model fit takes place when you:
- Have evidence that your proposition can be embedded into a profitable and scalable business model.
Source: Testing Business Ideas3
To achieve each of the Three Fits, you’ll need to validate what are commonly called the “Three Lenses of Innovation.” Those are:
When these three lenses converge, you’re well on the way to adoption, diffusion, and market success.
The Most Reliable Indicator of Success:
Each of the Three Fits are critical milestones of the commercialization process. However, achieving product-market fit is the #1 reason why an innovation succeeds.4 It’s a side effect of doing things right, and it’s the most reliable indicator that you’re on the path to scalability.
The Process Towards Product Market Fit
2. Validate Market Need
The #1 reason why an innovation fails is because there's no need for the solution. This is also known as a lack of product-solution fit, as we discussed in Step 1.
It’s a hard pill to swallow, but sometimes, what we love isn’t always what people want to buy. It’s easy to get blindsided by our passion, experience, and intuition.
Ever had an idea that you were 1,000% sure customers needed and wanted to buy? You were so sure you were onto something, believing that cash will come flowing in once you launch... only to watch your idea become an epic failure.
Validating market need is a critical step in creating products and services customers want — and will actually pay for. Test your business ideas early and often to prevent wasting time, energy and big bucks on building and promoting stuff that nobody wants to buy.
Before you go full throttle, here are two strategies you can deploy to eliminate biases and blindspots, and ground yourself and your team in validated data.
Market Research Techniques
You can reduce risk and uncertainty through discovery research and validation experiments.
Discover if your general direction is right. Test basic assumptions. Get first insights to course-correct rapidly.
Validate the direction you’ve taken. Confirm with strong evidence that your business idea is very likely to work.
The benefits of these techniques can extend far past validation, helping you: 5
- Learn how your customers define success
- Uncover unspoken needs and breakthrough opportunities
- Understand where your offerings fit into your customers’ world
- Discover what customers like and don’t like about your offerings
- Clarify exactly how and when customers will use your product and service
- Deliver the right new features and make better strategy decisions
- Increase empathy for the customer’s experience within your organization
- Improve the effectiveness of your sales and marketing
- Identify your most effective marketing messages and sellable features
Jobs: What Causes Someone to Buy
It’s a common mistake for health innovators to focus on demographics, behavior patterns, motivations, and goals. While these characteristics and attributes are important when finding your target customers, they only uncover correlations between buyers and their buying decisions, not causality.
The jobs or jobs-to-be-done approach is the theoretical framework that helps uncover what causes a customer to buy.
A “job” is a problem a person is trying to solve. Customers don’t really buy products or services — they “hire” them to get a job done.6 And, “jobs” aren’t adjectives or adverbs. A job to be done typically starts with the words, “Help me...” “Help me avoid...” or “I need to…”
While products and services come and go, the underlying job-to- be-done doesn’t go away, and people need products and services to complete these jobs. This approach brings predictability and stability beyond the basic approach to customer profile development.
The jobs-to-be-done framework has four categories:
- Identifying the job to be done.
- Defining the experiences that the customer needs to nail the job perfectly.
- Integrating the organization to deliver the job to be done.
- Creating a “purpose brand.”
Once you validate your customer's jobs, you’ll want to uncover and validate your customer gains and pains to complete the customer profile. Customer gains describe the outcomes customers want to achieve or the concrete benefits they are seeking. Customer pains describe the bad outcomes, risks, and obstacles related to customer jobs.
3. Finance Your Innovation
On your path to innovation commercialization, you can finance your solution in a number of ways, like:
- Bootstrapping (if you can afford it)
- “Angel investors”
- Venture capitalists (VCs)
- Federal and private grants and loans
- Local and university small business development centers
- Third party innovation contests
- Crowdfunding on popular websites like MedStartr and Indiegogo
- “Slicing pie,” or splitting equity instead of paying for help, equipment, supplies, rent and even credit
Healthcare business leaders might also choose a pilot customer or early adopter to fund development. This strategy ties into partnerships and alliances (Step 8), and can also help to develop other steps in the commercialization process.
Rallying Leadership and Finance to Support Corporate Innovation
It can be tough to challenge the status quo and fund new business ventures within the constraints of a large organization.
As a rule of thumb, it should take no more than three months from when an idea is conceived to when it’s funded.7 Start with a very focused set of initiatives defined in a product roadmap and demonstrate tangible results. Create small wins and then ask for additional investment.
Successful corporate innovation requires unity of command, accountability, and transparency — and it starts with the CEO.
There is a natural tendency to revert to how we were trained or our own comfort levels. The CEO must be very visible and vocal about the success of short-term wins and how the company is going to forge its vision for growth and innovation.
4. Segment Your Target Market
Market segmentation is the process of defining the group or groups of customers who share similar needs and buying behaviors, and are more likely than others to adopt your solution.8
Research shows that to be successful with the mainstream market, you have to be successful with early adopters first.9
This includes segmenting the early adopters for your solution and understanding their needs, characteristics, and buying intentions — which are often significantly different than mainstream customers.
This means that your targeting, positioning, and messaging strategies (and often your product strategies) will be significantly different in the early stages of commercializing innovation.
Early Adopters and the First 16% of Your Market
According to the Diffusion of Innovation (DoI) theory, early adopters comprise the first 16% of the market. After this point, you’ll need to “cross the chasm” into the mainstream market.
The main problem for innovators is that early adopters are a completely different market than mainstream customers. For example, they’re often more savvy and analytical in how they approach and evaluate things, and less risk-averse and more willing to change their habits, processes, and “status quo” to try out something new and promising.
Here are some questions to ask when figuring out who your early adopters are:
- What customers are high risk-takers?
- What customers are willing to try something new to leapfrog the competition?
- What customers are embracing or leading change in their market?
- Who has the financial resources to pay for your innovation?
- Where does my company have relationships that can be leveraged?
5. Define Your New Product Concept
As we discussed in Step 2, the #1 reason an innovation fails is because there’s no market need for it. The unfortunate thing about this is that so many innovators are convinced there’s a need for their solution when there really isn’t.
The only way to ensure that there’s a true market need, and that you’re on the path to product-market fit, is to co-create your solution with your target market. Earlier than you think. For longer than you think.
Let’s look at the what and how of product co-creation.
What Is Co-Creation?
It’s the evolution and transformation of the customer’s role. Co-creation stretches beyond just the design phase. It’s true customer collaboration that weaves throughout the entire product development and launch process, starting with your initial idea and ending when you close the company.
It’s how you can ensure that you’re meeting a real market need — not just building on your team’s assumptions and biases.
What Is Co-Creation?
Ideally, you’re co-creating through five stages, or what I like to call the “Five Co’s of Product Co-Creation” framework:
Have participants imagine as many ideas as possible while suspending any judgment. This phase ensures that you’re meeting a real market need — not just building on your team’s assumptions and biases.
Reduce the number of ideas to a prioritized shortlist of potential solutions. Which of your product ideas will have the greatest impact, are most viable, or are more difficult for competitors to copy?
Determine the minimum viable product (MVP) configuration and create a crude prototype or version 1. Hone in on the most important features so you can build, test, and iterate incrementally.
Test the prototype or version 1 with your target audience. Be sure to figure out which specific features you’ll collect feedback on and how you’ll collect it.
Launch your solution in collaboration with users, buyers, and influencers. Not just end-users and buyers, but also key influencers who can help spread the word and build positive word-of-mouth among your market’s tech-savvy, innovative early adopters.
6. Build and Test Your Business Model
A business model isn’t just about how a company makes money. It’s about finding a systematic way to unlock long-term value for an organization while delivering valuable products and services.
Business modeling is also about the kind of value a business can create for its customers, the distribution networks it’s able to tap into, and the key partnerships it can leverage.
Fortunately, there’s a systematic tool to help understand, define, and design a business that creates, delivers, and captures value. It’s called the Business Model Canvas.
Healthcare business leaders might also choose a pilot customer or early adopter to fund development. This strategy ties into partnerships and alliances (Step 8), and can also help to develop other steps in the commercialization process.10
The Business Model Canvas
You might already be familiar with the nine building blocks of Alexander Osterwalder and Yves Pigneur’s Business Model Canvas. Here’s an overview of each building block, a description of each, and the questions to ask yourself and your team as you’re mapping out different business model prototypes.
Here’s an overview of each building block, a description of each, and the questions to ask yourself and your team as you’re mapping out different business model prototypes.
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Want to take all this juicy info with you? No problem. Download the PDF version here — it even has bonus content that’s not included in the web version.
7. Validate Clinical and Financial Outcomes
Is your innovation safe? Will it generate an ROI for your customers?
Developing evidence to validate the safety and efficacy or ROI of your healthcare innovation can make or break your commercial success.
Should you consider a pilot study with a potential customer, a peer-reviewed study with a researcher, FDA validation, or a clinical trial? Where do you start? How do you build the right clinical evidence plan and what do you evaluate?
Three Strategies for Gathering Evidence
Here are three common strategies: product co-creation, proof of concept, and a pilot program.
Product Co-Creation: Bringing stakeholders into the product development and launch process. The co-testing phase will help you gather real world evidence (RWE).
Proof of Concept (POC): Also called a proof of principle, it’s the process of evaluating the effect of a small, maybe incomplete, iteration of your innovation to demonstrate its feasibility or desirability in the real world.
Pilot Program: An initial roll-out of a solution into production, targeting a limited scope of the intended final solution. The purpose of a pilot is to test in the real world. Here’s an overview of each building block, a description of each, and the questions to ask yourself and your team as you’re mapping out different business model prototypes.
Beware of “Death by Pilot”
While pilots are common, the costly and prolonged nature of a pilot — and the innately cautious and risk-averse traits of the healthcare industry — can turn your pilot program into a death trap. Especially for a radical innovation.
“Death by pilot” and “pilot purgatory” can be a tragedy for health innovators, and for patients and the healthcare system as a whole, who never get the chance to benefit from your solution in the first place.
In many cases, health innovators are trapped in a pilot vortex without a payoff, or bankrolling the pilot(s) or investing hefty amounts of money into product changes based on a single partner’s needs.
This doesn’t have to be the case. With some strategic partnerships and advanced planning, it’s possible to find the right environment and circumstances to flourish in a seemingly resistant landscape.
8. Establish Partnerships and Alliances
Research shows that successful innovators rarely commercialize on their own. The right partnerships and alliances can bring legitimacy and credibility, help create and shape markets, help with commercialization tasks, and supplement resources along the way.
But it’s important to ensure that you explore clear tradeoffs and benefits. If you don’t, there's a serious risk of complicating the process for yourself and your partners.
Identify Your Resources and Capabilities
Your resources and capabilities are your sources of competitive advantage — and the primary source of profitability for any firm. So ask yourself: What resources does your business need to be able to compete?
Resources are things that can be hired and fired, bought and sold, depreciated, or built. Most resources are visible, measurable, flexible, and transferable.
Resources can be divided into three categories:
Tangible: Physical and financial assets, like technology, equipment, products, facilities, and cash
Intangible: Skills, reputation and brand names, like Google and Disney
Human Resources: Skilled employees
Identifying your core competencies or capabilities can be useful in identifying what contributes more to customer value and which market segments to target.
The idea here is that you’re never outsourcing your own competitive advantage or core competencies. You want to identify them so you can harness them to maximum capacity, and then use partnerships and alliances to fill your gaps and weaknesses.
Building Relationships Across All Innovation Stages
You can create and nurture partnerships and alliances through all stages of innovation. For example, in the earliest stages, you’ll likely need a partner to finance the development of the solution and build the company. Maybe a development team or commercialization expert?! Down the road, you’ll join forces with pilot partners and beta testers.
When you’re ready to launch, you might enter partnerships with companies that have compatible solutions that are already on the market. These opportunities can be a boon for adoption and diffusion, as you might be able to gain better access to potentially saturated markets.
9. Determine Launch Timing
Surprise: being first-to-market doesn’t automatically equal a competitive advantage or sure profits. Instead of jumping into the market the moment your MVP is ready, take a step back and analyze how timing can influence your chances of success.
There are three primary market entry timing strategies: first-mover, follower, and late entrant.11 Each has its own unique advantages and disadvantages.
To determine the right time to go to market, you’ll need to take several factors into account, including your:
- Strategic intent
- Risk exposure
- Resource capabilities
- Partner relationships
- Market conditions
- Industry Evolution
Entry Timing Strategies
Here’s a quick description of the three entry timing strategies:
First-mover: Being first-to-market in your industry niche and innovation category, effectively creating a new market or a major subfield within an existing market.
Fast-follower: Going to market shortly after a competing product, meaning your market is already known.
Late entrant: Going to market later in the game, when your market is already established and there are already multiple competing solutions.
Being a first-mover is the often-coveted position of being the first in your niche to meet a particular market need. But it can also be a hazard if your product isn’t viable yet. In these cases, it’s often better to be second to market or even a late entrant.
It’s also important to consider that being a first-mover may be a double-edged sword that comes with unique challenges, especially for radical innovations.
Innovators face a heightened need to distinguish the product’s characteristics and capabilities, find the right market and audience segmentation, and create or enforce behavior and consumption patterns to make sure that the innovation is fully adopted by the mainstream market.
10. Communicate Your Unique Brand Story
Your brand’s story is your DNA – the legacy you leave behind.
While it’s important to lay strong scientific groundwork to establish credibility, it’s also important to appeal to the customer’s human side.
Storytelling unites intellect and inspiration, building powerful product and service stories that connect brands with customers and stakeholders. When you effectively communicate your story, you establish your foothold in the market and show why you’re vital.
Simplicity Is Key
Keeping messaging simple and direct is one of the most effective advertising angles when it’s time to achieve mainstream adoption. If you inundate your audience with a string of features, you risk confusion and abandonment.
Instead, hone in on a few key offerings with strong technological or practical applications. Many innovators find success with a mix of marketing messages that highlight the more technical and sophisticated traits of the innovation, while at the same time communicating the solution on a backdrop of more commonly-known products.
Brand Story Pitfalls and Best Practices
As you craft your brand story, here are some pitfalls to watch out for and best practices to consider.
- Positioning and messaging are especially difficult for radical innovations. Consumers aren’t aware that the innovation exists, so advertising channels, like Google Adwords, aren’t effective solutions.
- A negative post-purchase attitude by early adopters is one of the main reasons for market failure.
- Beware of messaging misalignment among early and mainstream markets.
- Stress technical and sophisticated features versus brand names or product lines.
- Beware of brand confusion if you have multiple brands in the portfolio.
- People don't care about you, your product features and functionality, how awesome your company is, your experience in the industry, etc. All they care about is how you solve their problem and help them move from their current state to their desired state.
- Don’t assume your initial messaging will resonate with the early market. Crafting a nerve-striking, hair-raising, “payment now” kind of offer takes optimization and improvements over time. Test and iterate until the story evokes emotions and motivates people to buy.
Are you on the path to profit?
Introducing a healthcare innovation is more than just developing revolutionary tech and pushing it out to the mainstream. To succeed in the market and generate ROI, you need a strategic, calculated, and data-fueled commercialization plan.
There’s no single right way to commercialize innovation, and every solution’s plan will be different. But, the one thing they all have in common is the 10 steps needed to go from an idea to “the next big thing.”
Too many healthcare business leaders launch their innovation without a customized strategy in place to reach adoption, diffusion, and market success. Are you taking the right steps to be part of the 5% of innovators who succeed?