capturing VALUE for early-stage entrepreneurs
it all starts with UNLOCKING BARRIERS for the decision makers and influencers in healthcare
SEPTEMBER 2022
by Sanchita Pasi
Articulating an effective value proposition and go-to-market strategy needs to include a thorough stakeholder barrier analysis, especially around who is going to pay and break those barriers.
We mentioned in our earlier post how important it is for early-stage entrepreneurs to timely design a patient-centered value proposition by demonstrating how their solution improves outcomes that matter and/or lowers the costs needed to achieve these outcomes.
Value-based care’s idea is that everyone wins: the payer, the provider, and the patient, but it cuts right to the heart of the revenue models of the healthcare system. The successful startups have shown the ability to not just create great value for patients (by bringing a needs-driven innovation to light in the right space at the right time) but also capture value for all stakeholders influencing market access and adoption. The path from creating value to capturing value is not straightforward for healthcare entrepreneurs. It requires a deep understanding of stakeholders’ pain points and incentives to tailor a value proposition that satisfies their needs (and makes them open their pockets).
BUILDING A SUCCESSFUL VALUE PROPOSITION
The purpose of developing a value proposition is to identify and satisfy an unmet need that your target market possesses.
STEP 1: Identify the unmet need: The concept of healthcare need usually carries the implication that the larger the need, the greater the claim on healthcare resources (ceteris paribus). The European Medical Agency (EMA) defines Unmet Medical Need about conditional marketing authorization as follows: “Unmet medical needs means a condition for which there exists no satisfactory method of diagnosis, prevention or treatment in the Union or, even if such a method exists, in relation to which the medicinal product concerned will be of a major therapeutic advantage to those affected”.
With an estimated 75% of US-based early-stage medtech companies never see success for failing at the market access stage. According to CBI Insights, the #1 reason why startups fail is due to misreading market demand (in 42% of cases). Understanding and addressing the needs (and demand) of multiple stakeholders within healthcare sounds like an arduous task.
In the framework of driving value-based care startups face a healthcare market that now demands economically viable solutions, this approach of defining the company’s strategy to address a well-identified and quantified unmet need can minimize approval and adoption risks. From a patient’s perspective, the EUROSTAT provided recent statistics in the European Union on the overview of unmet needs for specific healthcare-related services. Cost and affordability, distance, and timeliness were listed as the main reasons why the needs for healthcare services are not met.
STEP 2: Identify the target market: it should be clarified that within healthcare the task of defining the target “market” should be accomplished in two steps: first, identify the target patient population affected by a specific condition and the gaps in care provided, and second the target stakeholder for whom the solution is designed. As the EIT Implementation framework shows that Value-Based healthcare (VBHC) initiatives can be implemented at a population or individual level, including episodic and chronic diseases. Once the target patient condition has been identified (and quantified), the second step is to identify (and quantify) the major stakeholders’ impact on the adoption of the technology (more on this below).
CREATING AND CAPTURING VALUE FOR MULTIPLE STAKEHOLDERS
“Don’t try to make everyone happy, you’re not tequila”.
So where do you start?
In healthcare, the main stakeholders are Patients, Providers, Physicians, Payers, Pharma (medtech) and Policymakers (the 6Ps) and the cost of not timely identifying the key actor that most influences the adoption of a product/service can be detrimental to a startup. On the other hand, achieving equal multi-stakeholder engagement and alignment in healthcare is the most essential element of driving value-based care and improving outcomes for patients across the entire care continuum.
Identifying and satisfying the needs of multiple stakeholders starts with understanding the drivers and their barriers to the adoption of YOUR specific technology solution. A common approach to mapping stakeholders’ buyer journey is through the following steps well described in any marketing book: Awareness, Consideration, Purchase, Retention, and Advocacy. A potential buyer does not become a “customer” until the very last stage: when they become your advocate! The real success of a business is not by getting customers to purchase the solution, but by getting the customers to return to you.
Firstly, it is critical to delineate the power or weight a stakeholder holds in the decision-making process of paying your technology vs using your technology. Healthcare holds an extra complexity of having to deal with an audience where the user is not the customer and the customer is not the ultimate beneficiary.
Once you have understood the weight that a stakeholder holds on the usage or purchase of a technology, mapping their barriers to determine how to craft a meaningful value proposition and drive initiatives can be done through the stakeholder barrier curve below. The goal of this curve is to determine the impact a stakeholder can have on technology adoption based on their role (clinical or economical) and tailoring the business model to the unmet needs of the most influential stakeholder(s). Clinical stakeholders are usually the physicians, or other healthcare professionals (HCPs), economical stakeholders can include the roles that have financial restrictions for technology adoption (department head in hospitals, provider administration, payers). The example below is taken from the perspective of a technology startup owner.
Example of customer barrier journey for economic and clinical stakeholders for a technology.
Barrier #1 Lack of Awareness.
Awareness step starts when the customer becomes aware of your product or service. But what if the customer is not aware of the problem?
Why fix something that is not broken?
Lack of awareness of the existing gaps in current diagnostic and treatment pathways is technology is often a major contributor to accepting a proposed solution. Many times startups need to spend valuable time preparing the market for a need that the potential customers are yet to recognize and prepare for a wave of transformation.
An Accenture research shows that despite most companies (80%) relying on healthcare professionals (HCPs) as the primary way to communicate information about their services to patients, just 40% of respondents reported being ‘very aware’ of health companies’ patient services, with more than half (55%) saying they were only ‘somewhat aware’ and five percent saying they were ‘not aware.’
JOB TO BE DONE → Fill the communication gap to educate the market.
A good point to start is education. Educating the market requires 4 key things: sharing the right message, through the right channel, at the right time, to the right audience.
Suboptimal communication and coordination between primary care providers and specialists, and between payers and patients top the challenges to early and accurate diagnosis. Can you solve this problem by bridging the massive communication gap in healthcare?
Telemedicine is a great example of an industry that was pioneered by visionaries and who prepared the market ahead of its time and captured all of its value as soon as COVID triggered mass adoption. They showed that being at the right time in the right place drove engagement and adoption.
“Telemedicine has proven to significantly improve the quality of healthcare by increasing accessibility and efficiency through reducing the need to travel, providing clinical support and improving patient outcomes. Understanding and addressing patients’ needs before they travel to a hospital or to a medical emergency facility is the best way to optimize medical care and avoid unnecessary costs. Companies trying to bring to market new Telehealth services or products will need to be very thoughtful in building together the right data intelligence platform that shows to potential customers how their products add value, improve quality of healthcare and patient satisfaction” ~ Marc Subirats, Partner at Nina Capital, founder of Advance Medical, a pioneering international telemedicine company that was born in 1999 and was acquired by Teladoc in 2018.
Barrier #2 Lack of Need.
Taking the example above: a scenario in which the clinician realizes there might be a problem, but doesn’t recognize that your solution can solve their problem:
What if you have managed to convince the customer, let’s say a physician, that there is a problem in the pathway for a certain condition that you (startup) have designed a solution for: let’s say the current invasive diagnostic pathway for Coronary Artery Disease is not as time efficient as an AI-driven non-invasive diagnostic tool that can help them save time and be more accurate?
What happens next?
Well, the answer usually lies in the fact that you might have failed to create the “wow” effect in your customer. A WOW moment is by definition, the moment where you achieve to go beyond the customer’s expectations and requirements. It is the first time that new customers realize just how valuable your product is going to be to them personally.
JOB TO BE DONE → build the WOW moment by demonstrating superior outcomes.
Once you realize your customers’ biggest pain point it is usually easier to find how your solution can make their lives easier? Failing to properly articulate your value proposition is the top reason why startups fail.
For example for Coronary Artery Disease and Peripheral Artery Disease, Abbott surveyed about 1400 stakeholders in healthcare worldwide and found that:
- Scarcity of time available to spend with each patient (not allowing a more consultative approach to care): selected by 55% of physicians and 44% of administrators globally;
- Scarce resources for patients to make lifestyle changes that could improve outcomes: named by 44% of physicians and 33% of administrators globally
- Lack of appropriate tools to aid with medication adherence and lifestyle changes: mentioned by 43% of physicians and 47% of administrators globally;
- Lack of insight into aftercare and patient adherence with treatment: selected by 42% of physicians and 45% of administrators globally;
- Lack of appropriate post-care facilities for recovery, such as cardiac rehab centers: named by 41% of physicians and 31% of administrators globally.
Barrier #3 Perceived Budget Constraints.
is when the customer buys the solution. The main barrier at this step is “not enough money” and represents an excellent opportunity for startups to address this challenge early on. Mostly, “not enough money” is a synonym for perceived budget constraints compared to actual budget constraints. Developing a health-economic value proposition for your solution can help you clarify the financial allocation required for the provider/pharma/payer to deploy the solution and the economics of direct and indirect cost savings they would incur in. A great example is HeartFlow FFRCT recommendation update by the National Institutes for Health and Care Excellence (NICE) in 2021: Heartflow FFRCT was first approved by NICE in 2017 as a cost-effective solution that would lead to reduction in unnecessary invasive and repeated cardiac testing, increased cathlab efficiency AND cost savings of £ 9.1 million by 2022 for NHS by avoiding invasive investigation and treatment. In 2021 the recommendation was updated as new evidence suggested HeartFlow to be cost effective to a greater magnitude than their original cost savings (from £ 214 per patient to £ 391).
JOB TO BE DONE → Cost-benefit analysis.
The first step here is to understand WHO will be paying for the product and to know how much of the price will be covered (reimbursed) by the payers. Misunderstanding this complicated relationship of the economics of payment can be deadly.
The next step is to understand the economic drivers for whoever will be paying for the product: the payer that will “reimburse” the provider, the provider that will allocate the budget for the department or the department head that will make efficient use of the funds he/she is allocated.
We shared in our earlier post the key differences between cost-effectiveness analysis, used by government agencies to drive reimbursement that looks at the society’s perspective, and value-based models, which put the patients’ perspective at the center. In order to tackle the “perceived budget constraints” argument, you would need to take a step-by-step approach depending on the key decision makers that drive the adoption of your technology. The goal here is to show that even though your product “financially” costs the customer a certain amount of $, the “economics” of your product will end up saving them valuable money, time and resources in the long run.
In addition, having a good economic value proposition for your technology means considering all aspects of “economics” for your target customer. Josh Kaufman, author of the Personal MBA, explains that there are nine economic values that people consider when evaluating a potential purchase:
- Efficiency: how well does it work?
- Speed: how quickly does it work?
- Reliability: can I depend on it to do what I want?
- Ease of use: how much effort does it require?
- Flexibility: how many things does it do?
- Status: how does this affect the way others perceive me?
- Aesthetic appeal: how attractive or otherwise aesthetically pleasing is it?
- Emotion: how does it make me feel?
- Cost: how much do I have to give up to get this?
Barrier #4 Difficult to Use.
is when a customer believes your solution to be difficult to integrate in their daily routine. With the healthcare industry transitioning towards value-based care models, it is crucial for a med tech startup to demonstrate how their technology integrates within the healthcare workflows. Effective healthcare requires robust systems and processes that work to ensure efficiency. Medical societies work a great deal to build consensus around effective and efficient clinical patient pathways to ensure higher quality care to patients. Providers and physicians need to subsequently integrate the clinical guidelines (in terms of diagnostic and treatment steps) into effective clinical organizational workflows. Clinical workflows focus on how processes are performed both administratively and operationally and have the ultimate goal to streamline inefficiencies to guarantee the best health experience to patients. Any new innovation that disrupts an existing workflow is neither desirable nor likely to be adopted.
JOB TO BE DONE → Design products that seamlessly integrate within the clinical workflows.
Failure to consider existing workflow while designing products has been stated as one of the top-ten reasons for medical device startups failing. You may think your product/service will be automatically adopted because of how you are sure if it will improve patient outcomes or lower overall costs, but if it adds steps or changes a procedure in a massive way, you’re interrupting people — and they don’t like that. A surgeon might like your technology, but if a nurse/technician requires spending an extra 30 minutes, you might face an extra hurdle for mass adoption.
Barrier #5 Lack of Standardization.
when the customer becomes your advocate and refers the product/solution to their peers. Until this step is achieved, a buyer cannot be considered a customer.
Within the healthcare industry, systematic use of a product depends largely on supporting guidelines from medical associations. Within the pharma industry, as the most standardized, the adoption of a drug is highly dependent on it being part of a granular clinical guidelines which see slow updates as market access is the longest journey that proves safety and efficiency. Medtech being the least standardized segment has a faster market access journey but the longest mass adoption journey, and this is due to the high level of evidence that is required for the medical community to accept a product as superior in clinical efficiency.
JOB TO BE DONE → Build consensus.
Rogers’ adoption model identified five stages to technology adoption and the five segments of people that fall into each stage. When launching a product, potential customers are usually classified as follows: innovators 2,5%, early adopters 13,5%, early majority 34%, late majority 34% and the laggards 16%.
It is quite easy to get the innovators and early adopters to “try” your product, as they are inherently driven to be “open” to innovation. The challenging step is to get the buy-in of the early majority. This should be your sweet spot to define yourself “commercially successful”.
The early majority is the largest and most promising customer segment within your product lifecycle and they like to take their time. The only way to warm into this segment is by building consensus around them. They seek out referrals and trust the key opinion leaders to guide them to “safe” choices for their patients.
Our call to action…
Designing a need-driven product and finding the market product fit is closely tied to a meaningful value proposition for the relevant stakeholders. We have invested in companies that have successfully articulated a value-based proposition while aligning the needs of the most critical decision makers and decision influencers.
So where do you start?
Have a look at our recent investments:
Promptly Health has identified a need for healthcare participants — providers, payers, life sciences corporations, and patients — to aggregate clinical and claim data, and complement it with real-world evidence of outcomes, to enable the transition to value-based payment contracts. To solve this need Promptly has developed a framework for enhanced management of health data coupled with next-generation technologies and analytics, all with a patient-centric vision. It is a modular cross-disease platform for health outcomes analytics that positions the startup to become a big data player in the field, with potential opportunities for additional growth derived by their plans for geographical expansion and the potential to serve the growing market of virtual clinical trials.
MoveUP has identified a need to enhance the efficiency of perioperative orthopedics care delivery in patients who receive hip and knee replacement surgery. The three-year-old company promises to reduce the incidence of chronic pain in patients after surgery, and in doing so, the variability of both clinical and financial outcomes for providers and insurers. It achieves this objective with the balanced coupling of affordable, scalable technology with actual therapists and physicians, which drives provider adoption and patient engagement.
If you are a founder with a technology that can drive patient-centric value-based care further while aligning the needs of critical healthcare decision-makers, please reach out to us at Nina Capital.
We are looking forward to meeting you!
Sanchita Pasi
