Startup companies in particular have the critical task of ensuring their product launches are successful, because the alternative can mean that the company itself ultimately fails. The problem is that while many startups believe their new products will change the world, they fail to deliver. A successful launch hinges on creating a foundation for success with certain key steps, as the IOI Partners team has experienced in our client engagements.
In this article, I will share what I have learned to be best practices for preparing for commercialization. These views are based on actual experiences and what has been proven to deliver results. While the spirit of the article reflects these experiences, the actual names, events and dialogue have been modified for dramatic effect and to protect privacy and confidentiality.
Several weeks ago, I met with Dr. Ben Frank Lynn, CEO of the startup company Static Charge, to review their new product that they believed was going to revolutionize the healthcare industry. I vividly recall his excitement. Dr. Lynn told me all about the innovative features, including the nanowire fabrication, flexible design, and rapid healing rates. His company was started a few years ago, having successfully raised $15 million from friends, family and angel investors. Clinical studies were complete, and the results were excellent. Dr. Lynn is an accomplished engineer with more than 50 patents. His team comprised other scientists and medical professionals.
Dr. Lynn told me he was ready for commercial launch in 90 days, once FDA clearance was obtained. I then asked Dr. Lynn how he was going to commercialize the product? What customers was he targeting? What customer need was he solving? How would he beat his competition? He said that there wasn’t any competition; his product was unique, and there was no other product like it in the world. He said, “There is no need for all that up-front commercialization ‘stuff’; there is no time for that. Once customers see my product, they will buy it.” Uh oh, I thought.
How was I going to tell him it was highly unlikely that his product launch would succeed if he didn’t take certain key steps?
Does this story seem familiar? Why do so many startup companies believe their new and shiny object will change the world, but then fall woefully short on delivering the expected results? How many companies can you name that experienced product launch failures in the first year? Who remembers the Apple Newton? Google Glass? Sony Betamax? All of these failures were from major corporations. Can you name any product launch failures from startup companies? Probably not—because a launch failure from a startup company means the company fails, the investors lose their money, and the employees look for employment somewhere else.
Joan Schneider and Julie Hall sum up this false sense of security: “The biggest problem we’ve encountered is lack of preparation: Companies are so focused on designing and manufacturing new products that they postpone the hard work of getting ready to market them until too late in the game.” [1]
With this in mind, my conversations with Dr. Lynn offer six best practices for any startup that strives for a successful commercial launch.
I. Set aside enough cash to support the commercial launch.
Dr. Lynn is an accomplished inventor and assembled a brilliant team of engineers and scientists. However, I noticed a lack of sales and marketing experience. Dr. Lynn, are you ready to launch your product? Do you have enough cash on hand to staff this function and support all of the commercial activities? A successful company must invest in the development of sales and marketing collateral such as product brochures and pricing models. Your sales people also need tools such as positioning versus the competition and how to handle customer opposition.
Dr. Lynn responded to my concerns by telling me not to worry and that he followed the advice I gave him when he started the company, which echoes IOI Partners advice given in recent articles on the topics of Voice of the Customer (VOC) and value proposition. Static Charge interviewed 50 healthcare professionals in a VOC study and tested their proposed value proposition. Ben, that’s great; I am glad you did that. But remember, you did that work three years ago. The market has changed and it’s a good idea to make sure your product’s value proposition and positioning still resonate. Ben then said, “Oh! That’s a good idea. As a scientist, I know I need to validate my hypotheses. I guess I’ll need to reprioritize the budget, so we can allocate more money to support the commercial launch.”
II. Make sure your initial customers are in the right target segment.
Ben, let’s review our discussions on customer segmentation. It’s critical to ensure the first customers are in your product’s sweet spot. You should recall that market segmentation is a subgrouping of customers that have one or more characteristics in common, which causes them to have the same product needs. [2] Dr. Lynn, you told me earlier that “everyone” would love your product. As a scientist, you know that’s not true. Ben, let me provide an example. Imagine a bottled water company trying to sell their water to everyone. While everyone needs to drink clean water, some people might be traveling and need bottled water, while others might be working from home and need a water purifier. If you try to sell bottled water to everyone, you’ll end up wasting precious marketing resources on people who just won’t buy it.
Ben stopped me. He said, “I think I get it. If Static Charge doesn’t focus on the right customers, we won’t have the information needed to attract the leads who are a perfect fit for the product. Rather, my team will waste a lot of sales time trying to close sales. Our first customers may be unhappy, because our product doesn’t fit their needs. Worse, in this age of Twitter, Facebook, LinkedIn, and healthcare blogs, those unhappy customers might debase and devalue my company and product. I remember this restaurant down the street. They received a lot of one-star reviews and soon went of business. I don’t want that to happen to my company.”
Ben, you got it! By specifically targeting the right segment, you can hone your sales and marketing efforts and maximize the effectiveness of your commercialization efforts. If you want to learn more, I’ll send you some recommendations of articles and books on customer segmentation. [3,4,5]
III. Validate value proposition and positioning versus the competition.
Dr. Lynn, you indicated that you agree it is wise to revalidate your product’s value proposition and positioning versus the competition. Why don’t you tell me how you will do that? Ben then told me that he planned to ask his team to take several key steps:
- study their competition;
- use publicly available information on product features and performance such as the web, healthcare publications, sales brochures, investment reports; [6]
- hire an independent firm to interview customers in the target segment to understand what they like and don’t like about the competition;
- develop competition price-performance charts; [7]
- refine the product value proposition, positioning and pricing, and
- test with a few customers in the target segment.
By taking all of these steps, Dr. Lynn and his team then knew they were taking the right approach.
IV. Develop a product awareness strategy.
Dr. Lynn, you probably know that, in general, healthcare professionals are quite conservative regarding new technology. They won’t incorporate a new product into their workstream until they see evidence that it works. While FDA clearance provides some level of assurance of product quality, healthcare professionals look to other evidence, such as publications in peer reviewed journals, presentations at clinical symposia, and adoption of the technology by the key opinion leaders in their fields.
Thus, as a first step, I recommend that you form a Scientific Advisory Board (SAB), consisting of five to eight key opinion leaders in your target customer segment. The purpose of the SAB is to help shape the company strategy, provide input on new product development, assess product positioning, and provide advocacy for your company by speaking at conferences and publishing. However, the SAB can be a distraction and burn up your team’s time with managing egos and going down rabbit holes, [8] so you need to carefully plan the board’s purpose and composition.
Dr. Lynn then said, “That sounds great. Can’t I also use the SAB to help me create a product awareness plan that includes scientific studies, publications in peer reviewed journals, participation at key industry conferences, and writing ‘white papers’ for the company website, LinkedIn, Facebook, and trade magazines?” You’ve got it! You can use your SAB to provide advice on the strategy and introduce your company to additional collaborators and influencers. However, a comprehensive scientific product awareness campaign can be a long-term effort; the team should focus on approaches that will have a major impact in the first 12 months of the launch.
V. Hire the right commercial leader.
Ben, you’re right on target. I like the way you’re thinking. I think you’re almost ready to launch. So, who will be leading your sales and marketing effort? Dr. Lynn thought he knew an energetic recent college graduate who was the son of one of his colleagues. I suggested that was exactly what investors fear and would not be a good approach. Hiring the wrong commercial leader is a recipe for disaster. Sales people come in all different varieties but domain expertise for a technical product almost always trumps enthusiasm.
A successful launch requires hiring the right people. Ben, look for people who have relevant experience—selling to your target customer. Make sure they have recent selling experience; someone who is closer to the front line and is willing to roll up their sleeves and get their hands dirty. Ben, there’s a wealth of information available regarding how to hire the right leader. I suggest you check out these references. [9,10,11]
VI. Develop a sales execution plan and execute.
Dr. Lynn, you’re now at the starting gate. You have cash to fund the commercial launch. Your product is ready to sell. Your team knows the target segment; validated the value proposition, positioning and competitive differentiation; developed marketing collateral, and have a comprehensive product awareness campaign. You also hired a strong commercial leader. What’s left to do? I suggest you get started. Your plan probably is not perfect, but as a wise man once said, “perfect is the enemy of good.” [12] So, get started, and I wish you good hunting.
[1] J. Schneider and J. Hall. Why Most Product Launches Fail. Harvard Business Review. April 2011.
[2] Pride, W., Ferrell, O.C., Lukas, B.A., Schembri, S., Niininen, O. and Cassidy, R., Marketing Principles, 3rd Asia-Pacific ed, Cengage, 2018, p.200.
[3] Dickson, Peter R., and James L. Ginter. “Market Segmentation, Product Differentiation, and Marketing Strategy.” Journal of Marketing 51:1-10.
[4] Gabriel, Angela. “Single Message May Not Hit All Markets.” Phoenix Business Journal. November 20, 1998.
[5] MacDonald, Malcolm. Market Segmentation: How to Do It and How to Profit from It. 4th Edition. John Wiley & Sons. 2012.
[6] MaGee, S. How to Conduct and Prepare a Competitive Analysis [Web log post]. Retrieved July 8, 2018 from http://edwardlowe.org/how-to-conduct-and-prepare-a-competitive-analysis/.
[7] D’Aveni, Richard A. Mapping your competitive position. Harvard Business Review. November 2007.
[8] Booth, Bruce. Biotech Scientific Advisory Boards: What Works, What Doesn’t. Forbes. Sep 10, 2012.
[9] Gulati, Ranjay and DeSantola, Alicia. Startups that Last. Harvard Business Review. March 2016.
[10] Cespedes, Frank V. and van der Kooij, Jacco. Hiring Star Salespeople Isn’t the Best Way to Grow. Harvard Business Review. February 2016.
[11] Dunn, Greg. What Tech Startups Get Wrong About Sales. Forbes. Oct 11, 2017.
[12] Attributed to Voltaire, Confucius, Aristotle, and others, M.P. Singh (2005), Quote Unquote (A Handbook of Quotations), p. 223, ISBN 8183820085.
