How to commercialize your healthcare IT and media products

The National Institutes of Health Commercialization Program (NIH-CAP), designed to assist promising life science companies bring their technologies to market, is a nation wide program funded by NIH. NIH invited me to talk to this year’s class of SBIR/STTR grantees about how to commercialize their Healthcare IT, Media, and Training products at the 12th Annual NIH SBIR/STTR Conference held in Raleigh, NC last week. I’ve done this event for about 4 years now and it’s very well put together and heavily attended by companies looking to launch healthcare products. Here’s what I told them.

Align the Payers, Beneficiaries, and Users (PBU) of your product

There are three distinct groups you’re “selling” your products to:

• The payer or the person/entity that writes the check for your product.
• The person or group that benefits most from the use of the product.
• The person or group that actually uses the product.

I call this the “PBU alignment” problem. In a complex environment like healthcare, the three groups are often not the same — if you can find a market in which the payers, the beneficiaries, and the users are all the same then your sales job is easy. However, that’s commonly not the case. Let’s take a look at the typical example of a complex product like an electronic medical records (EMR) software package in the era of ARRA, HITECH, and meaningful use (MU). The “payer” may ultimately be government reimbursements through  Medicare, the “beneficiaries” are the healthcare insurance firms and the government agencies that need the MU data, and the “users” are the doctors and staff at physicians offices and hospitals. Why has it taken decades for EMRs to be sold to just a tiny fraction of the total industry? Because the PBU alignment hasn’t been reached — until the users, beneficiaries, and payers of the products all understand the value and are willing to work together to achieve a goal it will be tough.

What’s the lesson and advice for your product? Figure out the PBU alignment problem and see how you’ll sell to each of the groups and make the right arguments — you do it right and you’ll make money. You forget the complexities of the PBU and you’ll be languishing, too.

Marketing, Advertising, PR, and  Branding

Everyone tells small companies that they need to “do marketing” but that’s really hard to do so I started with a quick visual to explain what it means. It comes from Marty Neumeier on pages 24 and 25 of ZAG by way of the Brand Autopsy Blog (which I highly recommend reading) and illustrates the differences between Marketing, Advertising, PR, and Branding. It’s a wonderful visual and clearly shows that small companies should focus on marketing and free PR, shoot for branding and probably eschew advertising until they have enough money.

Healthcare Industry Fallacies

I continued with a brief discussion about how selling to the healthcare community is very hard but not for the reasons they might think. I mentioned that:

• Healthcare folks are neither technically challenged nor simple techno-phobes. Because they are in the business of saving lives and improving health, they care about technologies that help them achieve their mission.
• Most product decisions are no longer made by clinical folks alone, CIOs are fully involved. Don’t try to sell just to the clinical folks — make sure the IT side is engaged and on your side.
• Complex, full-featured, products are not easier to sell than simple, stand alone tools that have the capability of interoperating with other solutions are much easier to sell. Software as a service is a good approach.
• Hospitals will not buy unless one proves value. This seems obvious but most startups think that because they think something is important, their customers will just agree.
• Selling into doctors offices is not easy. There were a few startups looking to sell to individual physicians’ offices. I told them selling to to your first dozen physicians is pretty easy since we all know doctors. Just be careful, though, since selling to the next dozen and beyond is where companies fall.

Conducting Market Research

Lots of startups don’t do basic market research so I suggested the following approach:

• Find the right search terms for your industry or product. Don’t be esoteric. Because startups will only be found through word of mouth or on the Internet, don’t choose terms to describe yourself that no one else understands. Selling to hospitals is not about creativity, it’s about value. If the customer doesn’t understand what you’re selling give up now.
• Use competitive intelligence to locate your competitors and existing firms. The easiest way is to use Internet search. Once you know your competitors, call them up and ask them about client references Call up their clients and talk to them about their products and services and what can be improved.

What types of Business Models to Consider

• Software as a Service (SaaS) and subscription model  — best model for startups with something they can maintain in their own data centers
• Consulting and Solutions model — when you can provide packaged help
• Licensed model — when privacy or complexity requires solutions to be installed in house
• Freemium model (and open source)

Some Success Criteria

• Make sure your company and its value is easy to explain
• Make sure your value is defendable and differentiated (but without being esoteric)
• Make sure that you have ability to attract partners and can either create or be part of an ecosystem
• Ensure that you have word of mouth opportunity
• Have scaleable staff and systems
• Have a scaleable product — build once, sell many times
• Have an uncomplicated pricing and deployment model
• Be very focused — you can’t “solve healthcare” but you can solve very specific problems
• Try to own the relationship with and information about customers — don’t rely on partners that won’t give you access to customers

I wanted to thank the hundreds of audience members for their great questions in Raleigh. If you have further queries that you think can help your fellow entrepreneurs, post them here and I’ll answers them as best as I can.