3 things that will help hardware entrepreneurs build their startups | MedCity News

I’ve  suspected for some time that hardware, i.e., real life products, are tougher to successfully commercialize than software products.

hardware

For one thing, the cost of hardware product development is much higher. Assume that the hardware design cost is roughly equivalent to the development cost of a software product. For hardware, you then need prototype tooling, pilot tooling, and production tooling – all expensive. Real world testing and validation is time-consuming and also expensive. Animal and human clinical testing is complicated and risky. Then there are the costs of inventory and physical distribution as well as warranty and repair. Lastly, the profit margins are much lower than software!

“Starting a venture is hard — actually, if people knew how hard, they wouldn’t do it — but starting a hardware venture is three times as hard,” said angel investor and Txtr CEO Christophe Maire

The premise of this article is that there are a few things one can do to mitigate the risks inherent in hardware commercialization (these mitigations are not limited to medical technology):

  1. Launch the product online
  2. Simplify, simplify, simplify
  3. Combine hardware with a service

Starting with online sales and distribution limits your financial exposure by not having to stock a distribution channel/pipeline (assuming you can find distribution partners as a startup). You can also defer the substantial investment needed for a sales force. The upside is that you still have a global footprint. As demand and revenues grow, you can either bootstrap growth using early revenues or use the growth as evidence of demand to obtain angel or venture funding.

The big challenge with online distribution and sales is creating awareness and demand. Your online marketing skills will be put to the test. Of course, you could hire a freelancer or consultant for a short term project to “prime the pump” and get the product launched.

Creating online stores for physical products has never been easier or less costly. You can set up a store at Amazon.com for example. Amazon will take care of everything related to online sales, for a hefty percentage of the action, of course. You can even drop ship from your warehouse as the orders roll in. Companies like UPS and FedEx will physically store your inventory in strategic locations to minimize shipping time and customs delays to overseas markets.

Simplification is important, especially for a first product. You should select your most likely customer and develop a minimum viable product for that customer type. Extra features can be added later.

The prime objective is to get to market and scale up as quickly as possible. Since seed and angel funding is very difficult to obtain for early stage hardware startups, you will probably be doing a lot of bootstrapping and trying to save money everywhere possible.

Simplification can also be a competitive advantage. For every early customer you acquire, that’s one less customer for your competitors (unless you screw up the relationship with poor quality or unrealistic promises). Once you have established that early relationship, customers are more patient and more likely to wait for the enhancements you showed them on your product roadmap.

Finally, combining hardware with a service puts your startup into a different class altogether. You can create a recurring, high margin revenue stream in addition to ordinary product revenue.

There are obvious services like training, extra warranties, service and maintenance contracts, leases, short-term loaners/rentals and hardware upgrade/refresh cycles. There are new services being created every day like cloud-based storage of the data generated by your hardware. Many companies are developing mobile and desktop apps for remote viewing, control, or manipulation of their products and the data they generate. You may be able to offer data analysis or even offer access to anonymized, pooled data from all of your customers. That could be a strategic advantage for your customers!

Takeaways: Hardware commercialization is hard. Because we still live in a physical world, there will always be a need for tangible products. Because hardware development is expensive and risky, always try to limit your risk and exposure. Startups look a lot bigger online – use that to your advantage. Keep your first product simple. Ruthlessly eliminate any features or functions that are not necessary to get a sale. Lastly, look for alternate ways to generate revenue, especially recurring revenues through value-added services.

Read more: 3 things that will help hardware entrepreneurs build their startups | MedCity News.

Digital health needs more physician entrepreneurs | mobihealthnews

Are you aware of the Society of Physician Entrepreneurs (SOPE)? I was not. The CEO of SOPE, Dr. Arlen D. Meyers, a practicing ENT surgeon, says that doctors are not trained in business while in medical school or residency. That has certainly been my experience.

While many physicians have an entrepreneurial mindset, only a few I’ve met and worked with have business skills that would enable them to start and/or run a company. Some are just natural entrepreneurs although I think there are far more who believe they have business acumen but don’t have any or don’t have much business savvy. Those doctors are the toughest to work with as a medical device commercialization executive.

To address part of the problem, Dr. Meyers has created a certificate program in bioinnovation and entrepreneurship at the University of Colorado. The program is intended for postdoctoral students not interested in a career in academia.

Dr. Meyers also said, “most innovation in healthcare and medicine leaves out doctors and patients, particularly in the lucrative fields of drug and medical device development.” I’m not sure exactly what he’s driving at here. Most device companies, startups included, are happy to work with innovators or key opinion leader physicians to help create, develop, refine, and commercialize new products. They are well-compensated for commercial successes, much less so for market flops, of course. And patients are a necessary part of the process.

Medical device commercialization is not for amateurs and it’s not a part-time gig. Most physicians are incredibly busy people. It seems to me their natural role in a startup or on a new product development project in a larger company is to serve as a clinical/healthcare system resource, product endorser, and source of referrals. Of course, they are free to try their hand at business and create their own startups.

Dr. Meyers also points out that the burgeoning digital health segment is underrepresented by physicians. That may be because the technology, networking, and systems interoperability dimensions of digital health solutions and products tend to be far outside most physicians’ areas of expertise. However, there are multiple opportunities for doctors to innovate. For example, their detailed knowledge of the healthcare delivery system may have given them specific ideas about how to improve patient care delivery with apps. He also believes that non-face to face care using telehealth or digital health products and apps is going to be a substantial opportunity for entrepreneurs, whether physician or layman. Any of those ideas could be the basis of a digital health startup.

Takeaways: Medical device and digital health startups, even with their high failure rates, are attractive to at least some physicians – those with entrepreneurial mindsets. Startup founders and CEOs should identify and recruit like-minded doctors for their executive teams, boards of directors and advisory boards. If you are a digital health startup CEO with a tech/IT background, you can minimize the risk of making bad or just uninformed product decisions and enhance your commercial products by finding and engaging with an entrepreneurial physician.

Read more: Digital health needs more physician entrepreneurs | mobihealthnews.

mHealth, eHealth, Mobile Health, Connected Health: Not Fads, Not Going Away

Smartphones can be addictive. The convenience of obtaining information and maintaining social connections is a powerful benefit for just about everyone. Health-related smartphone apps have the potential to use that addictive property to inform and improve the health of smartphone owners.

Close to 60% of all adults in the U.S. use a smartphone. The proportion approaches 100% in well-educated, affluent, young-to-middle-aged, or urban/suburban demographic groups. Using “diffusion of innovation” terms, smartphone adoption has penetrated past the Early Majority and is deep into the Late Majority. That’s more than enough for a startup to base its technology platform on.

There are more than 40,000 smartphone apps focused on mobile health, growing each day. Many savvy entrepreneurs have identified mobile health as a Next Big Thing and are trying to stake out their territory during this “wild West” phase of the mobile health market.

According to an executive at Qualcomm, the exponential growth in mobile or connected health is being driven by two factors. The user experiences are getting better all the time and there is real opportunity for cost control at the provider level. App usage is growing even among clinicians: 34% of clinicians reports using apps to monitor data from medical devices now, up significantly from the 27% who reported doing so in 2012.

Of course, things like user interfaces and app features can make a huge difference in adoption and patient satisfaction. One recent study of diabetes patients showed that patients with passive monitoring and reporting apps on their smartphones to manage glucose levels had better adherence to their glucose management plans and also had better health outcomes than patients who used apps requiring manual intervention.

According to a Brookings Institution study, remote monitoring technologies could save $197 billion in the U.S. over the next 25 years. And adoption is spreading rapidly. For example, 45% of physicians report using mobile apps for data collection at the bedside compared to 30% in 2012. More than 70% of providers use mobile devices to access patient Electronic Medical Records (EMRs). Physicians are eager adopters of mobile devices with more than 66% reporting use of tablets in their professional practices.

Joseph Kvedar, MD in an article on The Health Care Blog, writes:

Mobile health offers us many transformational opportunities.  We can use smart phones as a data upload/home hub device.  We can use them as a device to engage the consumer around health content.  We can use them to display health-related information at  just the right moment in just the right context.  We can use the cameras to capture relevant health information (e.g., home test results).  We can use them to message you in the moment with contextually relevant, motivating messages.

Add to the list that we can harness the addictive properties of these devices to, perhaps, make health addictive.

Takeaways: The market opportunity for mobile health is here and now. Devices, sensors, networks, software, and connectivity have never been better, cheaper, or easier to access. Patients and providers have adopted mobile technologies in huge numbers. Yes, there is plenty of competition but there are rewards for any startup or company that can identify a market niche, develop a solution, and deploy a product that meets user expectations while maintaining a long term strategy of reducing costs and improving clinical outcomes.

Read more:

Why mHealth is not a fad but is here to stay (infographic) | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Could Mobile Health Become Addictive? | The Health Care Blog.

The Perils of eHealth | MDDI Medical Device and Diagnostic Industry News Products and Suppliers.

Fraunhofer iPad app guides liver surgery through augmented reality | engadget.com

Here is an excellent example of the innovative use of commercially available computer technology, in this case an iPad tablet, to address a clinical problem.

The problem is that surgeons performing liver surgery to resect a tumor must identify and then avoid the extensive vascular structure in the liver when removing the tumor. They must also be sure to leave sufficient liver tissue and blood vessels for the liver to function properly after surgery or the patient will die. Currently, surgeons either memorize the patient’s vascular structure after studying 3D CT scan images or they bring printouts into the operating room or they show the images on large computer monitors.

The first option for referencing the imaging information runs the risk of the surgeon forgetting an important detail or remembering something incorrectly (it happens). The second and third options’ risks are that the surgeon must repeatedly look away from the surgical field to get the structural information that will guide his/her excision. These “lookaways” prolong the procedure, cause the surgeon to lose his/her orientation, and can even cause damage if an instrument is moved during the period of inattention.

Fraunhofer, a German research institute that develops and licenses advanced technology, created a simple iPad app that allows the 3D CT images to be brought very close to the surgical field. The iPad is placed in a sterile sleeve so it can be manipulated directly by the surgeon or assistant. That would be plenty valuable if it was all that the app did. But (as the late night infomercials say) wait, there’s more!

The app uses the iPad camera to capture a live view of the surgical field and the patient’s liver. It then superimposes the vasculature from the 3D CT imaging study on the live image from the camera. That’s the augmented reality part. The app also enables the surgeon to measure the length of a blood vessel by marking it on screen and to “erase” excised blood vessels from the display. The app can also estimate the blood flow through the remaining vessels, helping the surgeon to determine if the remaining tissue will be viable.

The researchers plan to use the app next in pancreatic surgery, another organ that requires painstaking precision and relies heavily on preoperative imaging.

This app could be further improved, in my opinion, by adapting a head-worn, see-through display with a built-in camera. The surgeon would remain focused on the task and the 3D imaging would be superimposed on his field of vision. There would be no need for the awkward manipulation of a tablet on or near the surgical field. The other members of the surgical team could have their own headsets with the surgeon’s view displayed. Of course, there are no commercially available products in this category quite yet, although Google Glass is a promising candidate.

Takeaways: This is a great example of innovation in medicine by adapting the familiar (physicians are heavy adopters of iPhones and iPads) to a serious clinical problem through the development of an easy to use software app. The lesson for entrepreneurs and startup CEOs (again) is to leverage the billions of dollars of investments made by others in consumer technology and then to add value by 1. understanding the clinical problem and 2. developing a unique solution with the leveraged technology. It’s a fast, relatively inexpensive path to the market.

Read more: Fraunhofer iPad app guides liver surgery through augmented reality.

This startup wants to help you save on medical bills by taking control of your health | GeekWire

Health 2.0“, also known as digital health – focusing on improving people’s health through a constantly evolving mix of web or mobile device apps and educational software and websites, social media, personal health records, and various forms of connected sensors – is growing and attracting much attention, from entrepreneurs, investors, the media, and public health officials.

The basic idea is that people can take charge of and improve their own health – and reduce their healthcare expenses – if they have data about what’s going on with their bodies and some basic information about what to do about it. Sometimes the data is shared with a healthcare provider.

The organization Health 2.0 estimates that there are 2540 companies in the Health 2.0 segment as of June 2013. A majority of the companies, 1465, are consumer-focused while the next largest category, professional facing, has 643 participants. There are 203 companies involved with patient-provider communications and 229 companies working on data and analytics. I’m sure the overall count increases every day.

Why is Health 2.0 such a hot segment in healthcare? For one thing, the barriers to entry are lower than in other segments like medical devices or biotech. Many of the apps are unregulated or require a 510(k) marketing clearance at most. The cost to develop and deploy an app is a fraction of what it costs to commercialize a Class II medical device.

How do these companies plan to make money? That, as the (updated) saying goes, is the $64 million question. Many of the apps and web services are free. Some use the familiar freemium model where a basic version is provided free of charge and the fully-featured version is sold for a few dollars or so. What’s lacking is a recurring revenue model, or is it?

Just as Google and other companies with large user bases do, many Health 2.0 companies aggregate and sell the data generated by their apps. It’s appropriately anonymized but it’s probably worth much more in terms of lifetime revenue per user (LRPU) than the nominal charge paid by the consumer. Plenty of researchers and marketers in Big Pharma and insurance companies as well as government would love to have large data sets with behavioral data from a target population from one of their drugs, pipeline or on the market.

The company referenced in the article, Health123, was started by ex-Microsoft and Seattle tech veterans. They plan to approach employers with the prospect of reducing their health insurance expenses by improving employee health through deployment and use of their app. It’s another revenue model. It also raises serious privacy concerns as seen in a lively discussion in the article comments.

It’s tempting to think that your company could be the one to demonstrate positive outcomes. It seems to me that there is much anticipation regarding effective health apps that can improve public health and/or “bend the cost curve” as the healthcare policy wonks like to say. Looks like there are a couple of thousand startups that are in agreement.

Takeaways: Health 2.0 presents many opportunities for medical device and healthcare IT entrepreneurs. Even hardware companies can get in on the action via development and integration of all sorts of physiologic sensors. This could turn into a “land grab” where small and nimble startups do all of the innovation and are then snapped up for outlandish valuations by big medical device and healthcare IT companies who can’t afford to miss the market opportunity.

Read more: This startup wants to help you save on medical bills by taking control of your health – GeekWire.

You Can Now Find Out What Your Doctor Is Writing Down In That File | Fast Company

This is a follow-up in a way to yesterday’s post about interoperability in healthcare IT applications. It turns out that a team of researchers has developed and deployed software called Open Notes that allows patients to see their medical records and review their doctors’ visit notes. In a trial completed in 2012 of 14,000 patients at several leading medical centers, including Harborview in Seattle, study organizers reported that the results exceeded expectations:

Patients with OpenNotes reported better care, while doctors experienced little additional work. Of the patients with access to OpenNotes, almost all opened their records, more than 60% reported they took medications more regularly and 77% said they felt more in control of their care. By the end, every single doctor opted to continue with the program, along with 99% of the patients in the program.

This is the kind of innovation that costs almost nothing to implement and has the potential to have large positive effects on healthcare costs and patient health. Last month, the organization reported that the U.S. Veterans Administration (VA) joined as a full partner and is offering OpenNotes to its >1 million patients.

My knowledge of the VA is that they are heavily data and outcomes-oriented. I’m sure they will be doing analysis to determine the actual effect on costs and patient benefits. As they are a closed system and highly computerized, they have the ability to conduct relatively fast studies with high statistical significance.

The Open Notes projects is run by Tom Delbanco, MD and Jan Walker, RN, MBA. Both are on the faculty at Harvard Medical School and Beth Israel Deaconess Medical Center. They have been working on Open Notes since 2008 and have received funding from the Robert Wood Johnson Foundation, among others.

Now we need someone to take on the problem of corporate data silos in healthcare IT.

Takeaways: Even small ideas can have large effects. A side benefit is that small ideas are easier to explain. If you are having trouble finding angel or VC investors for your startup, consider “venture philanthropy.” There are many foundations that might consider a grant if it even tangentially helps achieve one of their goals. Not sure if you have a valid business model? This team charged ahead with grant funding and now has powerful evidence that they might have a solution to a very big healthcare problem.

Read more: You Can Now Find Out What Your Doctor Is Writing Down In That File | Co.Exist: World changing ideas and innovation.