Users are the people who actually use your product or service. Usually, they are medical professionals, but can also be patients themselves or family members who provide care at home. It is important to remember that there can be two types of users: “direct” and “indirect.”

An example of a direct user is a surgeon who uses a medical device in a procedure. An example of an indirect user is a GP who orders a test that is conducted by another medical professional. In this case, the GP wants information and will request a test with sufficient specificity and sensitivity to make a diagnosis/decision so is a user of the information generated by the test. The actual user of the test kit itself can be another medical professional. The test may have additional users if, for example, it happens to need interpretation by a specialist, such as a radiologist.

You need to understand who all these users are so you can understand what each of them want and the influence they have on the decision to use a product or service.

Economic Buyers are the people who make purchasing decisions. A user can also be an economic buyer, such as a clinician in a private practice.

However, in most cases, economic buyers make decisions on behalf of an organization. Their primary concern is typically to ensure that the cost of a product or service aligns with the organization's budget, delivers value, and supports the organization’s broader financial goals. They have the authority to approve or reject expenditures. In doing so, they typically weigh the economic considerations such as return on investment (ROI), total cost of ownership (TCO), and the impact on the organization's operational efficiency and profitability with input from experts.

Complicating matters further is that understanding who the economic buyer is for your product or service and the decision making process in an organization can be a challenge. Often, many people who themselves play a role in the process do not have a full picture of how a decision is made – so you cannot ask them who makes decisions or how they are made. For sure, the person make decisions will not have the title “Economic Buyer”!

Hospitals and systems often form “Value Analysis Committees” made of experts to make recommendations to the economic buyer. Such committees often rely on the input of “Technical Buyers” who are experts in a field and provide an assessment of the relative performance of the options available to purchase. The VAC’s recommendations are usually followed, so they are often de facto Economic Buyers, but could just play an “Influencer” role.

The economic buyer for your product can vary based on several factors. For example, organizational authority: some decisions are made at a department level, others are made for the hospital as whole, while others are made at a “corporate” or system level. The economic buyer and the decision process will also vary based on the type of product or service. For example, capital purchases will differ from that of consumables which are usually completely different from software purchases.

The point is that you need to understand the decision making process if you have a hope of understanding the basis on which they will make decisions. Experience is that to find out who your Economic Buyer is, you must talk to a lot of people and, unfortunately, the role can be very different in different institutions.

A value statement is a promise of value to be delivered to a user and reasons why they prefer to use your solution to others. In creating a value statement, you need to form and validate hypotheses as to:

• The user’s “Needs” and/or “Wants”
• The specific results that your solution enables a user to achieve. (“Outcomes”)
• Why a user would choose to use your solution rather than a competitor’s – why is it better? (“Benefits”)

Needs/Wants: There are many frameworks to describe user needs or wants. One that is recommended is the Jobs-to-be-Done (JTBD) framework developed by Prof. Clayton Christensen. (See for example LINK). The JTBD approach defines a user's need/wants by focusing on the underlying goal or problem they want to accomplish rather than only considering better ways of what they are currently doing. It shifts the perspective from the features of a solution to the context and outcome the user desires, viewing the "job" as the thing they aim to achieve in a given context.

In addition to the functional elements of a “job,” this method can include the emotional and social dimensions of the job. For example, some clinicians want to be known for being at the cutting edge of technology, so playing up the technical novelty of your solution may help satisfy that “job”. Another example, which is common in healthcare, is that clinicians want to feel confident in treatment decisions and feel assured that they are making the best possible treatment decision for their patients. What can your solution do to address this “job” which can reduce a clinician’s anxiety about outcomes and fosters professional pride? Thinking about the “job” broadly enables innovators to design solutions that align more closely with what users truly value. By understanding the "why" behind a user's actions, products or services can be developed that deliver meaningful, differentiated results.

Outcome Statements: Outcome statements focus on the desired results or changes a user wants to achieve by using the product or service. They clarify the "what" that users value most, emphasizing measurable or qualitative changes that align with their goals. For example, an outcome statement for a portable blood glucose monitor may be: "Provides glucose readings with 95% of the results within ±10 mg/dL in under 5 seconds"

Benefit Statements: A benefit statement summarizes why users will prefer your (future) solution over the alternatives. One way of approaching this is to develop a list of alternative ways that users get the “job” done and list your relative strengths and weaknesses for each. Remember that there may be many different ways a user gets a “job” done. For the example of the glucose meter, the benefit to users may be: "Provides expert level advice anytime I want to make a decision to manage my glucose levels over the next several hours."

As noted above, economic buyers are the people who make purchasing decisions on behalf of an institution with the primary goal of ensuring that the institution’s financial investments lead to sustainable, efficient, and strong patient-centered outcomes. As such, they typically look for hard evidence to support whatever product claims are made. In addition, they also look for hard evidence that the product or service meets all the institution’s minimum standards. So, for example, if a NewCo makes claims about cost savings and has strong ROI evidence, the economic buyer may not be satisfied if the NewCo does not also show sufficient financial stability to be a reliable long-term supplier.

The best way to know what an economic buyer in any setting is looking for is to ask about how decisions are made. Often this is best done by learning about past examples of similar products or services being introduced into the institution/practice/etc. Some institutions do have buying guidelines that they are willing to share. But in general, at a minimum be prepared to understand what they are looking for and evidence they need for:

• Safety
• Performance
• Economics: Cost savings and/or revenue generation

We recommend forming a summary value proposition that addresses both the individual users and economic buyers for introductions where brevity and clarity are essential. Remember, you only get to make a first impression once. The statement should concisely communicate what the solution is, who it’s for, what does, and its benefits for users and economic buyers over alternatives. A common format follows this structure:

“[Product/Service Name] is a [Description] that helps [target users] with the [Need/”Job”] by [unique benefits] and [Value Quantification] for [Institutions].”

The biggest mistake we often see in creating a summary value statement that describes the features or attributes of a product or service vs its value. The following are some examples of poor (feature focused) and better (value focused) statements:

There are several categories of people who, acting in their individual capacity, can have significant influence on the decisions of both users and economic buyers. While there are too many to list in the H-BMC box, you should create a list with names of real people, not just roles, who fall into one or more of the categories as you talk with stakeholders. Some of the key ones are:

• Clinical Champions: One of the most important influencers you need to uncover are your clinical champions. They are clinicians who want to see your solution used and will actively advocate for its adoption. They are not paid by or have any association with your organization, but are motivated by the unique benefits they believe that your solution provides. They often will seek you out, be involved in your clinical studies and/or trials, and many times are younger clinicians who are more open to new methods. They can be critical in getting your solution considered by the VAC or equivalent.
• Anti-Buyers: Anti-buyers are people who do not want to see your solution used. Often they prefer a different technique or method and see issues with your solution or just don’t believe that the benefits are real. In particular, anti-buyers can be the clinicians who are displaced by your solution. A well known example were cardiac surgeons who argued against stents when they first came out believing they were not as good in the long term as an open heart procedure.

However, the fact that some patients were instead being treated by interventional radiologists could have impacted their opinions. It is important to know who these anti-buyers are, and you should seek them out. Too often, innovators discount and do not explore negative feedback. Instead, you should try to learn all you can about why they do not like or support the use of your solution. They will be making their opinions known to users and economic buyers, so it is critical to understand the arguments they are making. The goal is not to change their minds, it is to be able to provide counter arguments. However, in some cases their arguments will be well founded, and you will need to either adjust your solution or target users. One mistake often made is that competitors are not anti-buyers, but they will use the arguments of anti-buyers!

• KOLs: The Key Opinion Leader (KOL) concept is well established in healthcare. KOLs are highly respected and influential experts in a field, usually a physician or researcher. They are known to have extensive knowledge and practical experience in their field, making them sought after resources for medical device companies seeking to understand clinical needs, refine product designs, and navigate regulatory requirements. Their influence extends to shaping industry trends, educating peers, and advocating for innovative solutions to improve patient care. By collaborating with KOLs, you can help ensure that your solution aligns with the latest clinical practices and standards, and enhance your credibility which will help drive the adoption of your solution. Unlike clinical champions, KOLs can be associated with your company and may consider sitting on an advisory board if they like your solution.
• Patients/Families: Increasingly, patients themselves and/or their family members can be significant influencers in what solutions are used in their care. They have an expanding wealth of information available from the web and in some cases from advertising that they can bring to the discussion with their clinicians. While this is particularly true in pharmaceuticals, it can happen with medical devices as well. One example is robotic surgery, which had a “high tech” appeal to some patients well before any clinical benefits were firmly established.

• Payors: The majority of healthcare costs are carried by public and private payors, with some care being private pay. In the US, the Coverage, Coding, and Payment framework used by the Centers for Medicare & Medicaid Services (CMS) often sets the standard for all other payors, where:
  • Coverage decisions establish what is eligible for reimbursement.
  • Coding translates services into billable items.
  • Payment defines the reimbursement rate based on the codes
• Note, the EU does not have a single, centralized framework equivalent to CMS’s Coverage, Coding, and Payment system. Instead, healthcare policies are determined by individual member states, with some coordination facilitated by EU-level initiatives (e.g., HTA and the EMA). While each country operates independently, efforts are underway to harmonize certain aspects, particularly in the areas of technology assessment and cross-border healthcare. So, it is critical to understand in which regions you will operate and the organization that sets the reimbursement rates for your solution if it not paid for directly by the patients.
• Regulators: The regulatory structure is like that of payors in the US and EU. In the US, the FDA regulates the uses of a medical solution while in the EU, each member state has an independent “Notified Body” which certify products comply with European standards with a CE (Conformité Européenne) Mark as well as a “National Competent Authority”, a government body which regulates and oversees the system to ensure safety and compliance. The key aspects of each is outlined below:

• Medical Specialty Boards/Colleges: There are a wide variety and diversity of medical specialty groups often called boards or colleges that influence the use and adoption of medical solutions in their specialty area. They can range in regional coverage, scope, and influence. Many provide important practice guidelines that strongly influence clinician’s decisions and can greatly help the adoption rate of an innovation. So, you need to understand which applies to your solution and target market(s)
• Patient Advocacy Groups: There are hundreds, if not thousands, of patient advocacy groups worldwide. These groups vary in size, scope, focus, and influence depending on the disease or health issue they address. They can be local, national, or global organizations, often focusing on specific conditions such as cancer, rare diseases, mental health, chronic illnesses, or general patient rights and healthcare accessibility. Again, you need to understand if any of these groups exert influence on your solution in your target market(s).

Too often when asked about the size of a business opportunity, we hear that it is an “X million dollar” market, with the source usually being a top-down market report of some kind. While this is helpful information, it is not a hypothesis that you can easily test. Plus, it is based on the products and services that are already in the market and may not accurately reflect the situation when/if your solution becomes available. Instead, particularly for your beachhead and target markets, we strongly recommend a bottom-up approach based on the number of uses, not the monetary value (yet).

The bottom-up transaction approach combines three sets of hypotheses:

1. The number of buying entities: The users and uses of a medical product or solution typically are in and occur within a medical institution, be it a hospital or clinic, etc. As such the place to start is characterizing the types of institutions that will use your product or service and how many of these institutions are in your target market.
2. The number of “units” the entities use in a period: The next step is to estimate the number of uses of your product or service that occur in each institution type. The estimate is usually based on the scale of the institution, measured in some appropriate way, for example by the number of patients (inpatients admissions, outpatient procedures, ER visits, etc.), facilities (# of beds, # of ORs, etc.), clinicians, etc. You can then build an estimate of the total number of uses of your product or service in your target market based on testable hypotheses.
3. The adoption rate. Finally, the number of uses of your product or service over time can be estimated by assuming adoption rates, both across and within an institution. Again, you can use the adoption rates of comparable products or services as a starting hypothesis which you can refine over time.

However, knowing the number of uses of your product or service is not enough to build a robust business model. You need to translate those uses into a revenue stream. To do so, you need to establish three things:

1. Transaction Basis: There are many approaches you can consider for how you convert the use of a product or service into a specific revenue generating event. A simple example is that you set a price for a single-use medical device. It is used once per procedure and the total revenue is the sum of the price times the number of uses/procedures. Another simple example is that you set a one-time price for a piece of capital equipment or software platform which can be used many times without additional charge. The total revenue is then the number of institutions that use the solution times its price. Or there are hybrid approaches such as the razor-razor blade model of setting a one-time or annual price (or giving away) for a piece of capital equipment that uses single or multi-use consumables priced separately. You should explore the options. Particularly as a start-up, you may want to be very creative in using a transaction basis that emphasizes expanding usage over profits to gather the evidence you need to convince future institutions. For example, rather than starting with a low price (which is hard to raise later) you may want to consider risk sharing approaches where your revenue is tied to the benefit received by the institution, be it cost or penalty reductions, revenue or incentive payment increases, etc.
2. Pricing: Determining the appropriate price to charge for use of a medical device or service is a delicate balance to maximize both profits and access. As US healthcare systems are transitioning from fee-for-service to value-based pricing it can have major impacts on how the price of a solution is evaluated. As noted above, you may want to consider value-based pricing to allow for higher prices when there is evidence of significant cost savings or revenue gains. While you must know your costs and need a reasonable margin, we strongly recommend that you do not base a solution’s price on its cost. Instead, analyze the price you charge from the economic buyers’ perspective and the alternative ways the user’s “job” can be accomplished to estimate the value they gain in using your solution so that you can set a price that results in a fair return.
3. Payment Terms: Finally, you need to be clear about the payment terms so you can manage your cash. Below are some typical examples:

   - Public Hospitals: 60 to 120 days
   - Private Hospitals: 30 to 90 days, though can be up to 120 days
   - Large Hospital Systems: 60 to 150 days.
   - Small/Independent Hospitals: 30 to 60 days.

   Further, some products are stocked and only invoiced when used (consignment) adding delays that can easily be months long. Running out of cash is a common reason start-ups fail, so make sure to manage the payment terms.

This block describes the most important activities a company must conduct itself to deliver its value proposition, reach customers, sustain its revenue streams, or maintain customer relationships, often called “core competencies.”

For example, in the medical device industry, key activities often revolve around rigorous product development, regulatory compliance, manufacturing, and post-market support. Deciding which activities you keep in house and which you work with an external partner is an important strategic decision. These decisions can and should change as a company matures.

For example, a NewCo may choose to only keep research and product development in-house and use external partners to like contract manufacturers to do prototyping and initial production, CROs to manage clinical trials, and consulting forms to obtain regulatory approvals such as FDA clearance or CE marking. This approach is common as it saves capital costs and improves time to market but often causes higher operating costs to start. Later, as the company grows, some or all these activities can be brought back in-house.

• Physical resources may include advanced manufacturing facilities, precision equipment, and laboratory environments for research and development.
• Intellectual property (IP) resources are particularly important for healthcare innovations. Examples include; patents for novel device designs; trade secrets for proprietary algorithms or data sets; trademarks to protect brand identity, such as names, logos, and symbols; copyrights to protect original works of authorship, including software, user interface design, and software code; regulatory approvals and supporting data.
• Human resources are another key component, comprising engineers, regulatory experts, clinicians, and sales professionals with deep expertise in medical technology.
• Financial resources are necessary to fund research, clinical trials, and regulatory submissions, which are often costly and time-consuming. For instance, a company producing an advanced surgical robot would likely require specialized hardware and software engineers, intellectual property protection for its unique robotic systems, and partnerships with hospitals for clinical validation.

This block represents the key external organizations such as suppliers, or other entities you believe are essential to a company’s ability to deliver its value proposition, reach its target market, and maintain its operations. Partnerships can take different forms, including strategic alliances, joint ventures, or buyer-supplier relationships. These collaborations help companies acquire resources, reduce risks, and improve operational efficiency. They can include entities that play a critical role in any part of the business, from design, production, and gaining regulatory compliance of medical products.

Common key partners in the medical device industry include component suppliers who provide specialized parts such as sensors or microprocessors, research institutions or universities that contribute to product innovation, and regulatory consultants who assist in obtaining FDA or CE approvals. For example, a company developing a wearable heart monitor may partner with a supplier of medical-grade sensors, a software firm for data analysis algorithms, and clinical research organizations (CROs) for conducting clinical trials.

• Direct Sales Force: Medical device and services companies often maintain an in-house sales team that directly markets and sells products to hospitals, clinics, and healthcare providers. They often provide training and can help with inventory control. This channel allows companies to build strong relationships with key stakeholders, offer tailored product demonstrations, and provide ongoing support.
• Distributors and Wholesalers: Partnering with third-party distributors or wholesalers is a common indirect channel. These intermediaries have established networks and relationships with healthcare providers and can facilitate wider market penetration, especially in international markets or remote regions. However, they have the relationship with customers, and you risk losing touch unless you create alternative pathways to provide customer support and training
• Group Purchasing Organizations (GPOs): GPOs are organizations that negotiate contracts with medical device manufacturers on behalf of healthcare providers. By selling through GPOs, manufacturers can access a large network of hospitals and clinics that prefer to purchase devices through pre-negotiated agreements. However, like with distributors and wholesalers, you risk losing touch with your customers.
• Online Platforms: Some companies sell directly to smaller clinics, independent physicians, and even patients through online platforms or e-commerce portals. This channel is more common for consumer-oriented medical devices, such as wearables or home-use diagnostic tools.
• Licensing and OEM Partnerships: In some cases, medical device and services companies license their technology or partner with Original Equipment Manufacturers (OEMs) who incorporate the device into a broader product offering. This channel helps expand market reach by leveraging the partner's existing customer base.
• Trade Shows and Conferences: Medical device and services companies often showcase their products at industry trade shows and conferences, where they can directly engage with potential buyers, distributors, and healthcare professionals. Being seen presenting at prestigious conferences can be very effective in building interest from KOLs and potential Clinical Champions
• Service Providers and Consultants: Companies may partner with service providers or consulting firms that specialize in medical technology or IT implementation. These partners can recommend a company’s solution to healthcare providers as part of broader technology solutions.

By strategically combining these channels, companies can maximize market penetration, ensure compliance with local regulations, and provide ongoing support to maintain and grow strong customer relationships.