In the fast-paced world of medtech innovation, startups often rush to quantify the value of their products or services. While quantification is essential, it’s equally important to spend time understanding the value their innovation confers. When consulting with these firms, I frequently have to redirect them to spend more time understanding value before they move to quantification.

In my last article I presented the following figure:

  • Considering Value: This initial stage is crucial for setting the direction. It involves identifying the key aspects of value that are relevant to the startup’s product or service. This could include patient outcomes, cost savings, or improved efficiency. It’s important to encourage startups to think broadly and consider both direct and indirect benefits.

  • Understanding Value: Once the initial aspects of value have been identified, the next step is to delve deeper into each aspect. This involves understanding the specific benefits that the startup’s product or service offers, how these benefits align with the needs of patients, healthcare providers, and other stakeholders, and how they compare to existing solutions.

  • Quantifying Value: This stage involves converting the understanding of value into measurable terms. This could include calculating cost savings, improvements in patient outcomes, or other quantifiable metrics. It’s important to use credible data sources and methodologies to ensure the quantification is accurate and reliable.

  • Communicating Value: The final stage is about effectively communicating the quantified value to various stakeholders. This involves creating compelling narratives that highlight the unique benefits of the startup’s product or service, using visual aids like infographics or white papers to make the data more accessible, and tailoring the communication to the audience’s needs and interests.

This illustrates the stages medtech startups travel through as they seek to demonstrate the value of their innovative solution. As you can see, before a firm can adequately quantify value, they must first fully understand it. The stage of Understanding Value is where firms gain clarity about the unique benefits their product or service offers and how it addresses market needs. Without a solid understanding of the value, firms risk major mistakes when attempting to quantify and communicate value.

Those who spend adequate time and effort in the Understanding Value stage will experience several benefits:

  1. Clarity of Vision: The “Understanding Value” stage is where firms gain clarity about what value they are offering and how it addresses market needs. This clarity is crucial for the subsequent stages of quantifying and communicating value.
  2. Reduction in Errors: Skipping the “Understanding Value” stage can lead to inaccurate assumptions and miscalculations in the quantification of value. This can result in an overestimation or underestimation of the financial and non-financial benefits, which can affect the firm’s ability to attract investors and achieve market success.
  3. Effective Communication: A clear understanding of value is the foundation for effective communication. Without a solid grasp of the value proposition, firms may struggle to convey the benefits of their innovation to stakeholders, investors, and the market.
  4. Strategic Decision Making: Understanding the value is essential for strategic decision-making, including product development, market entry, and partnership strategies. It helps firms align their efforts with the market and customer needs, which can lead to a more focused and effective approach.

When pitching to investors, firms have to be fully versed in value of all kinds, not just in the typical monetary metrics. Simply identifying the Total Addressable Market (TAM) or including a standard hockey-stick revenue graph in your pitch deck is no longer sufficient for investors. They’ve seen it all before. To stand out, you must demonstrate that you understand value across the care pathway, both upstream and downstream of your product or service. Convey to the investors that you have confirmed that demand exists and that you know what your solution is “worth” to everyone from front-line workers to C-suite administrators.

When trying to convince clinicians and health systems of your innovation’s value, they will want to see the flow of value, both in its current state and under the proposed changes your solution brings. This demonstrates that you’ve considered the potential disruption your solution may involve and have considered real-world implementation barriers that may be faced by staff and patients.

The firms that have a full understanding of value go on to develop accurate and robust estimates of quantifiable value and are able to communicate their value more effectively to stakeholders and investors. Investing time and resources at this stage will pay dividends down the road.

 (For more information regarding this process, check out my Value Roadmap and take a Free Assessment that determines your current readiness to demonstrate value.)