One of the most frequent questions I am asked by startups and new product development teams is “what’s the best way to sell my X product into a hospital?” It’s a terrific question so I reached out to a friend of mine, Steve Carbonara, who heads Sales Force Effectiveness at Bard Medical and runs his own consulting practice helping companies with their sales process. After 8 years of corporate sales experience in the health care IT industry with Misys Healthcare and Allscripts, Steve moved into a private practice, starting a consulting firm. Over the past 4 years he has worked with several start ups and medium sized businesses; his roles range from providing sales leadership, to defining product strategy, product development, raising equity and implementing sales processes. I invited Steve to share his advice on how to sell health IT products into hospitals. Here’s what he had to say, in the first of several articles in this series, on the subject of understanding how hospitals buy medical technology:
Whether you’re in medical devices, medical supplies or healthcare information technology – I’m sure that you spend much of your time around the question of how hospitals buy technology. Hospitals buy most products in the same manner, through committee meetings, materials managers and cost savings analysis. As budgets have shrunk and physician influence has dissipated, the old days of working with a physician who could easily pull your product or service into his/her practice or hospital are pretty much at an end. So, what is the process these hospitals use?
Strategic planning – Assessment of Technology – Research of Vendors – Acquisition – Utilization.
There is a process now at most hospitals and a rigorous one at that; hospitals want to make sure that the products or services brought in house fit a specific need (planning stage) and that in the case of the technologies purchased, all options and all emerging technologies were reviewed prior to purchase (assessment stage) to ensure that they put the hospital money into the right solution not just ‘a solution’. These two stages seem easy, but the devil is in the details and that’s what these two stages are all about – pulling teams together and performing hospital and departmental analysis to decide if a product evaluation should even take place. Questions being asked and answered in these two stages – what are the needs of the hospital, what are all the options available to the hospital today and in the near future, what will be the affect on the operational workflow if the product is purchased, and what will be the financial affect of purchasing this product. Here’s the devilish reality; each of these questions may have hundreds of questions under them to fully gauge need and affect before moving onto the next step.
Moving onto the next phase where at least the need has been identified, your product is no longer the focus, now it is you and your firm (research vendors). This is where the hospital will pit your financial and operational performance against the biggest companies in the industry and ask you to defend your business strategy and processes to see which vendor is the best fit as their partner. This is typically done through an RFI (request for information), where much of the information gathered in the first few stages is utilized in putting a process in place to systematically compare all products and firms that are being reviewed. The RFI will also outline the acquisition and utilization stages, the next two steps in the process. In this manner, many times the RFI will become part of the final agreement between the hospital and the vendor as proof that the vendor has agreed that its product can perform up to the specified needs of the hospital and within financial parameters that were agreed to upfront.
So, this is the hospital process – is this what you really need to know? I like to ask the other question, which is where I believe more value is derived – How do I work within the hospital buying process? This is all about alignment and time management. I always discuss this with vendors in the following manner – if I understand how a hospital is going to purchase product I can optimize the process for not only myself but for the hospital, which will potentially make me the best fit option or help me identify that I’m not the best fit very early on in the process, so I can get out of the process and thus focus on other opportunities where my product fits better.
This is where I believe most small companies and sales people fail; because they don’t perform this step they are always chasing that elusive deal – ‘the next big win’ for them, the company and the investors. How do we align the sales process with the buying process and what is the result when we do?
We agree that the buying process is elaborate and time consuming. The sales process is actually the exact opposite – you can identify a prospect, present your product and have the contract signed all by 11am if it were up to you as a small business owner or sales person – this is not alignment.
Alignment means understanding the buying process is elaborate and time consuming and providing the information to the buyer within the defined scope that their process outlines. If you do this you must then become the consultant, not the sales person, as your actions and input could actually shorten the stages of the buying process. When the hospital administration talks with you about your product and asks who your competition is today do you answer with ‘we really don’t have competition, no vendor truly provides the combination of product and service that we offer’; if so, you are not the consultant. Every product and service has a competitor, so being upfront with the buyer will shorten their process in evaluating competition and doing research on vendors. What if you knew more about your competition than you did yourself – welcome to being the consultant!
I ask the same thing to every business owner, how much do you know about the top 10-15-20 vendors in your market? If the answer is you know the top 3, then you don’t know enough; the buyer is going to look at a large pool of data to determine which vendors should receive the RFP; why not influence that research upfront and thus shorten the process and set up the process in your favor?
While you can shorten the process by knowing about your competition you can also know more about yourself – well actually, you can be more transparent when it comes to your firm. How many of us have worked within a company where we didn’t tell buyers about ourselves because we were scared of what they may really think of us – the firm is too small, too young, had recent failures, etc. Transparency with the buyer will help you not hurt you, but its all about presentation.
When the buyer researches the vendors in the industry don’t make the research on your firm be a hurdle – provide up front all of the information that will be found out by the buyer and present it with your story. If you don’t then you are opening the door for the buyer to find out this information from your competition with their spin – which will probably paint a worse picture and thus view of you and your firm by the buyer.
We do this as a consultant in the research stage by providing case studies and white papers – building the validation of why our product and firm are the right choice for this hospital. We build spreadsheets of analysis to compare products and companies for our buyers – many times building the return on investment analysis and financial impact analysis that will be reviewed during the assessment stage. We identify failures in the recent past and discuss the why’s and how’s as an educational discussion for the buyer as to what to avoid when they purchase – surprising how helpful it is to a buyer to hear the good and bad of what can happen with the purchase so that they can plan the utilization stage of their process.
Something to consider as a business owner selling to hospitals is if you know their buying cycle why not mimic it with your internal processes? I have seen many small businesses put road blocks up by having contract terms that fly in the face of how hospitals buy products. An analysis of your business practices and your sales processes compared to the known buying practices of your target market is the first step to making your firm more successful. Once you do this you can recruit higher level sales talent, the consultants of the industry, and take your sales and your firm to the next level. Remember, it’s not only about understanding the buying process, it’s about using the knowledge of the buying process to set up your processes – optimize your time and your client’s time and you’ll be the winner more often than not.