So, you want to be a health care entrepreneur
Editor’s Note: Cambia Grove is proud to partner with the innovation community to amplify their perspectives on topics applicable to the larger health care ecosystem. This guest post from Brian Glaister, Conflux Innovations, asks innovators to reflect on three core questions early on to avoid barriers on the road to adoption.
The views expressed in this article are solely those of the author and do not necessarily reflect the opinions or positions of Cambia, Cambia Grove, or any other entity or organization.
A decade ago when I started my first company, I fell in love with an amazing technology that solved a huge clinical problem and assumed everything else would fall into place. Boy was I ever wrong. It took years of painful pivots and hard work to finally get things going in the right direction. Now when I meet with early stage entrepreneurs, the last thing I want to hear about is their technology. I am much more interested in their answers to the following questions:
How many customers have you talked to?
Poor grammar aside, I ask this question at the beginning of every meeting and usually get one of two answers: a blank stare or “I have worked in this space for years and really understand what is needed.” Neither is satisfactory and when I finally convince the entrepreneurs to go out and conduct dozens or (preferably) hundreds of customer discovery interviews, they invariably come back afterwards wanting to attack a different problem with a different solution than they originally envisioned. It is critical that you spend significant time conducting customer discovery research before spending a dime on product development. That way you can be sure you are addressing a problem that actually needs solving.
Do you understand the flow of money for your solution?
Most of us get into health care innovation for altruistic reasons, but getting your innovation adopted is sadly less about improving care and more about making or saving someone money. You have to understand how the money flows for your solution and which of the 5 Points of Health Care™ touch the money along the way. Perverse incentives abound in the health care system and just because you financially benefit one stakeholder group doesn’t mean others won’t fiercely work to kill your innovation. Building a stakeholder map that follows the flow of money will help you understand who will benefit from your innovation and who it might harm. Innovations that reduce costs for payers can often harm profitability for providers. Similarly, improving revenue for providers may cause riots among payers. Can you build a stakeholder map that will be a win-win for everyone involved? If not, you will likely be better off building a different product.
How are you going to survive the gap between Minimal Viable Product and Product/Market Fit?
Sales cycles in health care are painfully slow. Most often the person who receives the value from your innovation is not the person who makes the purchase decision which reduces the urgency to purchase. In many health care organizations, you can go through months of positive meetings only to realize that the organization itself isn’t sure who can make the purchase decision. And when you are fortunate to actually identify who can make the purchase decision, by the time the next budget cycle rolls around that person will have invariably moved on to a different job and is no longer available to champion your product. And with so many so-called “early stage” investors refusing to get involved before you have significant monthly recurring revenue, how can you demonstrate traction to stay alive until you can raise your next round of funding?
Yes, you are going to have to bang your head against the wall until you break through the inertia and achieve revenue, but you will likely have to get creative to demonstrate non-revenue traction in order to attract additional investment or risk running out of cash before you get to the other end of the sales cycle. Can you get an enterprise client to sign a letter of intent to pilot? And better yet, can that be a paid pilot leading into a contract that quickly scales throughout the enterprise? Is there a free version of your product you can launch to demonstrate user traction? Is there a marquee distribution partner you can sign on? What about launching in an overseas market that moves faster than the US? Get scrappy and build a story that will attract investment while you work through the sales cycle. Too many innovations have died on the vine because the entrepreneurs did not anticipate the amount of time it takes to demonstrate product/market fit in health care and plan accordingly from the beginning.
Not every health care innovation has the potential for adoption and there are certainly many other factors that contribute to commercial success, but by finding strong answers to these three questions early in the process you can significantly de-risk your venture for investors and yourself. I find the reason entrepreneurs avoid these questions is often out of fear of receiving negative criticism about their ideas. But it takes months or even years of hard work to develop products in health care and startup after startup comes to the end of the product development process only to painfully find the doors to commercialization closed to their innovations. By asking the hard, uncomfortable questions before starting to develop the product, you give yourself the opportunity to adjust course before walking miles in the wrong direction.
About Brian Glaister
Brian Glaister is the Managing Director of Conflux Innovations, a boutique consultancy that operates at the intersection between product development, sales & marketing, and operations to grow innovative companies to the next level.
Visit other Entrepreneurial Engagement posts:
- Breaking Down Barriers and Building Your Own Front Door (Hamed Ahmadi, Medsien)
- Lessons form Shanghai: One Innovator's Path to Adoption (Brian Glaister, Conflux Innovations)
- Purchasers + Entrepreneurs = Outcomes (Stephanie Fiano, Forum Solutions LLC)
- Will ONC New Rules Open Up the Walled Garden? (Ed Butler, Agate Point)