In my last post, we discussed how the best leaders respond to what the situation demands. They are not wedded to “this is how we’ve done this in the past.” And when the environment shifts, these leaders re-evaluate their approach.
So why is this idea important for go-to-market planning in 2022? Has anything changed over the past few decades that demands a different way of operating? You better believe it has!
The good old days
Back in the day, the name of the game was to develop a clinically valuable product and get to market. The big milestones were to establish a quality system, a supply chain, and obtain regulatory clearance. For products on the FDA 510k path, clinical data was not necessarily required – especially if the company had KOLs in their corner who believed in the product.
Additionally, commercial traction was easier to attain. Traditionally, companies hired a sales leader who had sold in that market previously and “had a Rolodex.” The sales team went out, learned about the market by trial and error, wore out their shoe leather, and found early adopters who were willing to try the product. And companies were generally able to get their products in hospitals without much delay to perform procedures and obtain payment.
Finally, the criteria for an exit were less stringent as well. Companies were sometimes acquired even before they had regulatory clearance. And for those that launched commercially, a strong early sales ramp was frequently all that was needed.
The bottom line is that CEOs could generally manage the complexity of going to market without the need to bring in much outside help.
“The 90s ain’t what they used to be.”
Flash forward to 2022, and the world has changed. Many more stakeholders are involved in access, purchase and utilization decisions. These include insurance companies, value analysis committees and in some cases even patients. And for each of these key stakeholders, value must be demonstrated to create market traction.
Consequently, in addition to a product and regulatory plan, CEOs need to evaluate provider economics and ensure that reimbursement is at least adequate. And even for 510K products, clinical evidence may be needed to drive reimbursement initiatives and/or market acceptance.
Additionally, strategics have become more discriminating. Today, acquisitions generally must be accretive, and public offerings need to inspire high confidence for long-term success. Sales metrics for ramps, run rates and “same store sales” must achieve pre-defined targets. And with the exception of companies who are fortunate enough to enter very large and developed markets, most start-ups need to identify and initiate a long-term market development plan.
The new normal
So what does this mean for CEOs and investors of venture-backed companies with disruptive products? The bottom line is that go-to-market planning and preparation has become much more complex, time-consuming, and costly. And that means more funds need to be raised and more resources and expertise brought to bear pre-commercially to develop and execute plans – particularly those related to reimbursement and launch preparation.
My observation is that Boards ensure that the hard and fast requirements for commercial launch (e.g., product development, regulatory, supply chain, and quality) are prioritized. Additionally, companies recognize that reimbursement barriers to acceptable provider economics must be addressed. That is why reimbursement consultants and/or employees are now routinely engaged prior to commercial launch.
In contrast, I see many companies persist in delaying significant commercial prep until they hire a Sales / Commercial leader six months pre-launch. Since proper commercial preparation is more ambiguous to define than achieving other launch pre-requisites, it tends to get short shrift. Even CEOs with a commercial background are challenged to find the time and commit the resources necessary to start this process early enough and provide enough oversight.
The challenge for a newly hired Sales or Commercial leader leading launch preparation in this environment is that they don’t yet understand the business’ value proposition well enough to build a compelling selling story. And since that groundwork usually has not been completed, the sales story and approach is developed almost exclusively through trial-by-fire. Frequently, the first conversations with community providers occur as part of the first sales calls. And that means a price is paid in terms of the first impressions created and the rate of success in these early calls.
It is not uncommon for the Sales team to spend 6-12 months after regulatory approval/clearance developing their selling story and working with Marketing to build the necessary supporting materials and training. And once the first sale has been made, the clock begins to tick on the sales ramp. So in an environment in which the sales ramp is critical to valuation and acquisition, does this approach make the most sense?
“What’s a CEO – and Board – to do?”
An alternative approach is to bring in the resources and expertise when they are needed to ensure that the Sales organization is able to hit the ground running once regulatory clearance has been obtained.
In my experience, the ideal time to begin launch preparation is 9 to 12 months beforehand. This gives adequate time to understand the market, develop value propositions and positioning, build a selling story, and develop the necessary resources and training.
Some Boards are unwilling to commit the resources to hire full-time Sales or Marketing executives 9 to 12 months ahead of the projected launch date. In these cases, an alternative is to bring in a commercial consultant to begin the preparation. This approach is analogous to engaging product, clinical or reimbursement consultants. In each case, a contracted resource is brought in when needed, not when the organization can afford a full-time hire.
Netting it all out
Plainly stated, the cost, risk and time of bringing medical devices to market – as well as expectations for early commercial results – has grown over the last several decades. And CEOs are stretched more than ever before. Boards have made adaptations in some respects – for example, with their willingness to bring on reimbursement consultants. But with regard to accelerating and deepening commercial launch preparation, many are still operating under the “hire a Commercial / Sales leader 6 months before launch” paradigm.
In contrast, more sophisticated Boards are beginning to recognize that CEOs – even those with a commercial background – simply do not have the bandwidth to adequately develop go-to-market plans on their own. And the value of having a data-driven, robust commercial launch plan can have material impact on early success, valuations, and exits.
In my next post, we’ll introduce an updated, data-driven approach to prepare for commercial success in 2022.