Imagine your team has been iterating on an innovative idea for a new MedTech device. So how do you decide if commercializing that product will result in ROI for your business? Costs to develop MedTech products can be significantly higher than in other industries, which makes commercializing a new product a high-risk proposition. To ensure your team makes a smart, informed decision for your business, start by estimating the potential market opportunity.
“Market opportunity” is defined as a need or demand in a market that a company can capitalize on by introducing a new product or service. You should be able to express market opportunity in terms of numbers, not just by describing trends. For example, it’s not enough to say that a current product on the market doesn’t work well enough so surgeons will want to upgrade to the new device. Instead, you should be able to determine the size of the market in units and dollars and how much market growth (or decline) that market will experience in the next few years — which allows you to calculate the revenue you could expect to capture with your innovation.
To develop a clear picture of a new product’s potential market and calculate market opportunity, follow these four steps.
1. Define the Target Market
The first thing you need to do is decide what type of healthcare providers will use the new device, which types of patients and specific diagnoses would be the best candidates for the technology and in which types of procedures or treatments they would be using it. If this isn’t clearly defined at the outset, you could find that the market data you collect isn’t accurate at best or worse is misleading — and that you invested in product development for which there will be little return.
2. Size the Market “Top Down” or “Bottom Up”
The next step is to choose a method for sizing your target market. There are two basic methods:
Top-Down: This method calculates market opportunity by using the size of a broad market, in terms of total revenue from all current products used or patients treated, and then taking the percentage of that market that your target represents.
Bottom-Up: This method looks at specific factors that will create the market, such as the total number of patients undergoing treatment that would use your new device and projections for the number of those treatments over the next several years.
Both methods can result in valuable information, but the bottom-up method may be more accurate and precise, especially if you are planning on developing a MedTech device for a very specific procedure or treatment. The level of accuracy and precision needed will likely be influenced by a number of variables such as the stage of development of your product, the risk the new product presents to your business, and the amount of data available to inform your sizing exercise.
3. Crunch the Numbers
Once you have chosen the method or methods you will use to determine the size of your market opportunity, you need to find data on which to base your calculations. Focus on finding reliable data. Your market opportunity estimation is only as accurate and valuable as the data you use. Good sources include government and trade statistics (which are available to the public) as well as research from market analysts and sales data from current suppliers.
4. Verify Accuracy
Using one method with data from one source will give you a one-dimensional view of market opportunity. If you only evaluate one set of numbers, you could be basing the future of your business on an inaccurate result — too high and the income you are counting on won’t be there, too low and you may decide not to develop, missing the opportunity of a lifetime.
Consider triangulation to gain a better understanding of the market. Through triangulation, you verify your market opportunity by comparing calculations using multiple sources, different methodologies, or looking at different theoretical possibilities. In the case of MedTech market opportunity analysis, you may choose, for example, to use both top-down and bottom-up methods, or use data from a number of different resources. Your results may align, giving you a reasonable range of numbers to work with, or they may show discrepancies, which means you need to do more research into the market.
You may also want to consider qualitative information along with the results of your calculations. It won’t contribute any numbers, but qualitative information may help confirm that your estimations match up with what’s going on in your market. Some sources of qualitative information include:
5. Apply the Goldilocks Principle
Once you’ve estimated market opportunity, you need to assess whether the projected market is too large, too small, or just right. If the market is too small to produce for the revenue you need, you likely cannot justifying continuing with the current plan. If the market is much larger than you anticipated, you should confirm that you defined and sized your target market accurately. If your market is well-defined and sized correctly, then consider how you would keep up with demand if you were the only supplier, how these insights would shift the competitive landscape and whether the pace and scope of your product development plan supports the market opportunity.
If the market opportunity aligns just right with your business goals, then consider one more box checked in the product development planning cycle. There will still be more to do before you decide whether to take the product to market, such as the best ways to handle prototyping, testing, and complying with regulations. But as you continue to invest time in your decision-making process, you can be assured market potential is there.
About the Author
Carevoyance contributor Bernadette Wilson of B Wilson Marketing Communications is an experienced journalist, writer, editor, and B2B marketer, specializing in content for technology companies.