How To Build A
Compelling Product Value Proposition
Harris Kaplan.
Managing Partner. Red Team Associates
Meeting Overview
8:00 – 8:10
Introduction
8:10 – 9:00
Panel Discussion
Blair Allen, CCO Acist Medical
Thomas Gunderson, Managing Director and Senior Research Analyst Piper Jaffray
Phil Nalbone, SVP Business Development, Vascular Solutions
Kathy Tune, Partner, Thomas McNerney
9:00 – 9:15
Break
9:15 – 10:00
How to Build a Compelling Value Proposition
Harris Kaplan, Managing Partner
10:00 – 11:00
Case Study
© Red Team Associates / 2
Situations Where Red Team Can Add Significant Value
Client Situation
Red Team Activities
No commercial team




Indication prioritization
Commercial opportunity assessment
Product Positioning, build commercial story for pitch deck
Initial forecast
Don’t want to divert
the commercial team
 Due diligence
 Business development
 Development of go-to-market strategy
Want a second point
of view
 Re-affirm forecast and opportunity
 Develop alternative go-to-market strategy
 Targeting, positioning, messaging and pricing
Knowledge/expertise
gap (new category)
Underperforming
brand




Opportunity assessment
Forecast
Valuation
Go-to market strategy development
 360º assessment of situation
 Value driver analysis
 Refine or rework existing tactical execution plan
© Red Team Associates / 3
Minnesota Is One of the Premiere Medical Device Clusters in
the U.S.
Minnesota
Massachusetts
New Jersey
Northern
California
Pennsylvania
Southern
California
Indiana
© Red Team Associates / 4
Able to Consistently Generate Numerous Innovative Medical
Products
Minnesota Accounts for ~30% of All PMAs Approved Annually
Approved PMAs by State
997
926
845
772
681
144
493
433
112
171
210
248
118
203
236
232
239
MN
251
CA
209
280
248
Others
199
199
458
207
244
281
131
198
254
273
207
164
226
288
729
648
237
525
747
895
242
296
302
298
391
324
371
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
SOURCE: FDA PMA Approval; Red Team Associates analysis
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PPACA Turns 5 This Year …
Selection of PPACA Implementation Affecting Hospitals
2010
2011
2012
2013
2014
2015 & beyond
Hospital Market Basket Reductions
Medical Device Tax
Medical DSH Payment Reduction
Baseline measure
Baseline
measure
Readmission Measure
Hospital Value Based Purchasing
Baseline
measure
Hospital Acquired
Conditions
Pre-existing Conditions For Children, No Annual Or Lifetime Limits, Children On Parents Insurance Until 26
Medicaid Expansion
Insurance reforms
Disclosure of payments to MDs/teaching hospitals
SOURCE: Red Team Associates analysis
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… And It Has Provided a Mix of Clouds And Sunshine to
Medical Device Manufacturers
Economic Buyers
and Market Access
Authorities are
Physicians
Key Decision
Employment
Makers
& Alignment
with Hospitals
Payment
reform—flat
fee vs fee for
service
Hospital
consolidation
and GPO’s
Increased
Regulatory
Requirements
Declining
Innovation
Productivity
Centralized
Decision
Making
 More people are insured
 More uninsured potentially
being treated
 Strong demand for better
products
 Even greater willingness to pay
for products that clearly
demonstrate value
SOURCE: Red Team Associates analysis
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All Change Has Consequences…
KOL’s are less predictive of future success
Longer selling cycles to gain product adoption and new training
requirements
More pressure on pricing and margins
Scale and size become more important as buyers strive to reduce
the number of suppliers and paperwork
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As A Result, Medtech Is Being Turned on Its Head by Policy
Changes And the Growth of Big Medicine
 In the past, reps had relationships with physicians
and could convince them and close the sale
 Now you apply to present to a product value
committee of which procurement is a member
 How would the product save the hospital money?
Why should we violate a large sole source
contract to get this product?
 After waiting 3 months, you get 15 minutes in front
of a 10 person committee and you may not get a
commitment beyond “we’re willing to try it”
SOURCE: Anderson E. (2012) “Death of a MedTech Salesman”
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Demonstrating a Compelling Value Proposition in These
Turbulent Times Is Critical for Attracting Funding or Licensors
…and VCs are attracted to
higher value investments
MedTech companies are
searching for larger deals …
Deal
Value
($b)
Number
of Deals
45
43
40
4.4
3.9
3.9
2012
2013
2014
387
406
345
2012
2013
2014
20
2011
2012
2013
252
235
208
176
2013
2014
2011
2012
2014
2011
485
2011
8.2% p.a.
Average
Deal
Value
($m)
3.7
179
7.5% p.a.
227
183
11.3
9.1
9.6
9.6
2011
2012
2013
96
2011
2012
2013
SOURCE: EvaluateMedTech; Red Team Associates analysis
2014
2014
© Red Team Associates / 10
Harris Kaplan, Managing Partner
[email protected]
Red Team Associates
100 Witmer Road, Suite 260
Horsham, PA 19044
Mobile: 1 410 215 9595
www.redteamassociates.com
© Red Team Associates / 11
Meeting Overview
8:00 – 8:10
Introduction
8:10 – 9:00
Panel Discussion
Blair Allen, CCO Acist Medical
Thomas Gunderson, Managing Director and Senior Research Analyst Piper Jaffray
Phil Nalbone, VP Corporate Development, Vascular Solutions
Kathy Tune, Partner, Thomas McNerney
9:00 – 9:15
Break
9:15 – 10:00
How to Build a Compelling Value Proposition
Harris Kaplan, Managing Partner
10:00 – 11:00
Case Study
© Red Team Associates / 12
Panel Discussion
© Red Team Associates / 13
Meeting Overview
8:00 – 8:10
Introduction
8:10 – 9:00
Panel Discussion
Blair Allen, CCO Acist Medical
Thomas Gunderson, Managing Director and Senior Research Analyst Piper Jaffray
Phil Nalbone, SVP Business Development, Vascular Solutions
Kathy Tune, Partner, Thomas McNerney
9:00 – 9:15
Break
9:15 – 10:00
How to Build a Compelling Value Proposition
Harris Kaplan, Managing Partner
10:00 – 11:00
Case Study
© Red Team Associates / 14
What is A Value Proposition?
A value proposition is a short statement that clearly
communicates the benefits your potential customer(s) gets by
using your product, service or idea
A value proposition is usually developed for each stakeholder
based on perceptions of the benefits and costs (including both
economic and social risk) associated with the product.
Comprehensive
Credible
Clear
Customer-centric
Creative
Convincing
© Red Team Associates / 15
A Compelling Value Proposition Beings and Ends with the
Customers
 What are customers trying to get done?
 What are the challenges customers face
in achieving their goals?
 How significant are these challenges?
Your Device
 How does your product help the
customer overcome those challenges
and achieve their goal – better, faster,
cheaper, more predictably…
 How valuable would that be?
 What’s the downside of making the
change?
Source: Red Team Associates
© Red Team Associates / 16
The System, Not Just the Physician, Plays an Increasingly
Important Role in Outcomes
Who Really Controls Outcomes?
Hospitals/ Payers/ Government Procurement Authorities
Physicians
Family/caregivers
Patients
Source: Red Team Associates
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Procurement Practice Differs Across European Countries;
Mix of Tenders and Contracts Is Required To Succeed
Level of Centralization for Medical Device Procurement
Centralized
Fragmented
Public
Public
Procurement by
national
healthcare
authorities
Procurement by regional
and sub-regional
healthcare authorities
Public/Private
Public hospitals are
self-governed;
Growing number of
GPOs/chains in the
region
SOURCE: Public Governance Institute (Belgium); Red Team Associates EU Engagements
Private
70 GPOs and
chains (generate
80% of sales)
Private
~340 GPOs
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While Physicians Still Champion Medical Devices, Hospital
Admins Have Growing Purchasing Power in Certain Specialties
Distribution of Purchasing Power in U.S. Hospitals
Percent of Total Votes
Medical
Device Avg.
Physicians
50%
Hospital
Admin
Nurses
Other
72%
35%
13%
0%
Cardio/
Neuro
Orthopedic
Devices
54%
27%
15%
3%
SOURCE: Alexander Group; Red Team Associates analysis
Equipment
55%
28%
0%
2%
Surgical
Devices
33%
13%
0%
43%
General
Supplies
21%
28%
18%
13%
51%
21%
6%
© Red Team Associates / 19
Hospital Product Evaluations Take Place at Different Levels
Key
Concern
Governance
Financial
Health System
Hospital
Department
Patient
care
Policy
Example Stakeholders
 Contracting
 Guidelines
 Protocols
 CEO,CFO,CMO
 Procurement
 Contracting
 Guidelines
 Protocols
 CFO, CMO
 Procurement
 Dept Heads
 Guidelines
 Protocols




 Protocols
 Attending physician
 Nurse practitioners
 Admitting Physician
Patient Point of Entry
SOURCE: Past engagement experience; Red Team Associates analysis
Hospitalists
Attending Physicians
Procurement
Dept Heads
© Red Team Associates / 20
Questions That Your Product May Need to Address …
Hospital admins worry about …
Physicians worry about …

Maintain/increase profitability
Financial Concerns

Differentiate themselves from other
hospital choices (their competition), and
trying to grow market share

Per member per month reimbursement

Lower cost per patient /admission

Being paid for what they do while
hospitals are paid for outcomes

Keep board and shareholders happy

Minimize risk and litigation

Compliance

Manage internal communications

Improve employee morale and
motivation

Compete to hire and retain talents from
a limited pool and with limited resources
SOURCE: Red Team Associates analysis
Practice Concerns

Preserve their standard of care

Preserve their standard of living

Feel good about what they’re doing
© Red Team Associates / 21
Your Compelling Value Proposition Needs to Be at The Center
of Your Product Development And Marketing
Diagnose
Design
CVP
Deliver
Demonstrate
SOURCE: Red Team Associates analysis
© Red Team Associates / 22
The Relative Financial Expectations And Speed of Adoption
Will Differ According to the Advantages Your Product Offers
Vs the Behavior Change Required
Adoption Driver Index
High
Disrupt
Differentiate
Don’t
Discount
Product
Advantages
Low
Low
High
Degree of Behavior Change Required
SOURCE: Red Team Associates
© Red Team Associates / 23
Early Commercial Inputs Can Maximize Value And Reduce
Commercial Risks
ILLUSTRATIVE
Cumulative
Costs
Budget constraints
Need to evaluate
and test potential
feature options
with all
stakeholders
during design
phase can
maximize product
value when
launched
Required features
Feature 1 & 2
Feature 3 & 4
Incremental Value
© Red Team Associates / 24
Adoption Driver Index: A Simple Template for Assessing
Whether Your Product Will Be Adopted And How Quickly
Internal
Relative
Advantages
Relative
Communicability
SCORE
Relative
Cost
SCORE
SCORE WEIGHTED SCORE
SCORE
SCORE
Relative
Ease of
use
4
Physicians
1
2
Patients
2
2
Hospital
admins
3
SCORE
Relative
Compatibility
Relative
“Try-ability”
8
Weights: Important
Customer
6
Not Important
© Red Team Associates / 25
Value Proposition Worksheet
Customers
For …
Target customer
…who…
State of need or opportunity
..this product is …
Product/service category
…that
Statement of benefit
Positioning
Unlike…
Primary competitive alternative
…this device
State of primary differentiator
…because of
Proof that benefits can be delivered
© Red Team Associates / 26
The Value Proposition Will Differ for Different Stakeholders
Examples
Value
Proposition
for a
Product
Patient
Can be done as
outpatient vs inpatient
Reimbursable by my
insurance carrier
Physician
Procedure is easier to
perform
Takes less time to perform
Can be done in my office
Hospital
Administration
Reduced cost
No hospital stay
required
Fewer re-admissions
Compelling
Value
Proposition
© Red Team Associates / 27
Case Example: It Always Begins with the Value proposition at
Coloplast
SenSura® Mio
First ever ostomy
bag in woven textile
SOURCE: Coloplast Capital Market Day 2014
© Red Team Associates / 28
Value Proposition: Thinking Beyond the Product
New business model
with the Cath lab
program
Provide bundled offerings after M&A
Finance
Offering
Product
Providing on-demand,
remote customer
support through
mobile devices and
live video
New business model
Superior workflow,
scalable design
Process
The company focuses
on online and direct-to
consumer marketing
for its hearing device
Delivery
Offer Lowest Cost Products: Leverage its production
advantage and pass cost-savings onto customers
SOURCE: Press releases; Red Team Associates analysis
Owning the disease –
dialysis product
manufacturer and care
manager and solution
provider
New way to engage
customers – Zoho
Campaign
© Red Team Associates / 29
Harris Kaplan, Managing Partner
[email protected]
Red Team Associates
100 Witmer Road, Suite 260
Horsham, PA 19044
Mobile: 1 410 215 9595
www.redteamassociates.com
© Red Team Associates / 30