We spotted this article on MedCity News and were intrigued. The piece is written by Greg Davis, the founder & CEO of MedCelerate, a consulting firm focused on “helping medical device companies grow and succeed in international markets at a faster velocity”. Greg opines on “Six Costly Mistakes to Avoid When Launching Medical Devices in Europe: Practical and Timely Advice for Start-Up CEOs”, identifying some of the basic pitfalls that lie before the (presumably) US company considering market entry.
Now, we’d consider ourselves experts in this particular field, so can share our own six costly mistakes. We’ve made many of them ourselves, in fact probably all, which either qualifies us perfectly qualified to comment or disqualifies us on the basis that we’re incompetent. Let’s assume the former.
Greg’s list
I’ll publish our six below, but here in essence, are Greg’s;
1. Chasing conflicting commercialization objectives: What are the strategic reasons for launching your product in Europe?
2. Believing that CE Mark approval proves product viability: It doesn’t, so focus energies post-CE Mark on building clinical data set and listening closely to customers’ feedback.
3. Going broad before understanding how to go deep: CE Mark approval, with its access to 27 countries, makes it tempting to expand rapidly across Europe.
4. Underestimating what it takes to increase product supply tenfold: Establishing a robust supply chain takes significant time, expertise and effort. Selling in Europe means new, multi-language labeling and documentation and local logistical support.
5. Relying on distributors to develop new markets/technologies: If your product requires changing clinical practice or developing a new market, hire direct sales professionals. Distributors do not have the incentive or patience to build for the long term.
6. European talent equally motivated by ’The Big Payout’: Choose your top sales leader wisely.
Yep, nice work Greg. There’s no doubt that “Europe” is one word that conjures up conflicting emotions in medtech America. We’ve seen it all… arrogance, excitement and fear in equal measure. Arrogance because how difficult can it be? Excitement at the prospect of tapping into a huge population, and fear because it’s not America, it’s a long way away and well, where would you start?
Most pointedly, it’s a hugely culturally, linguistically, regulatorily, clinically, economically diverse continent. Leaving aside the language, which is an obvious, but often ignored component (they all speak English don’t they?), the individual countries are so diverse that one really has to ask whether a particular country that is small, yet highly discrete in any or all of the ways we’re alluding to here, is economically worthy of the effort. This is why so many companies employee hybrid schemes of direct sales people and distributors. Getting that right is vital. Of course appointing a distributor looks cheap because no sales means no costs. But its not that simple. As Greg rightly points out, many distributors are utterly hopeless pioneers-it’s so difficult to arm a foreign distributor with the tools to go pioneering and for the distributor it’s just too much like hard work.
Our list
So our pitfall 1 relates to timing and sharing of expectations, so is in agreement with Greg’s. Getting the distribution/commercialisation strategy sorted out and implemented takes time if it’s to be done right. And if it’s done wrong it all needs to be unpicked… direct staff sacked, distributor contracts terminated. Not to mention the lost opportunity cost.
Pitfall 2 relates to man management. Distributors and direct subsidiary business take a lot of management. It’s not enough to give them a financial incentive… nowhere near enough. Unless you have a blockbuster product with a queue of hungry distributors wanting it, early imposition of ambitious and ramping quarterly quotas with the clear intent to stick to them (ie order this quarter or you’ll be fired) is a blunt instrument that might work for a short time, but will result in disappointment. Distributors will be forced to hold too much stock, extend payment terms, do bad deals to get inventory into hospitals… nothing good.
Pitfall 3 is “don’t jump at the first distribution opportunity you get” even if it comes with a recommendation. Just because company X is a “good guy” at distributing one product in one specialty, that shouldnt be considered a guarantee. What’s also important is to get the opportunity and the distributor somewhat matched in terms of size. A big distributor may be powerful and well known, but is by definition likely to negotiate hard, already have a big bag of products and needy of a big margin or large volume if he or she is going to give your product air time. Get that wrong and you’ve got the wrong distributor. Sometimes all of the time of one guy is better than almost none of a team.
Pitfall 4 is “don’t rely 100% on salespeople to do the job.” You wouldn’t do that in your home market would you? You’d have workshops, congresses, clinical advisory boards, advertising, country-relevant websites and so on. A marketing communications mix that relies on distributor or direct salesperson contacts and relationships will work for a while, but is a huge missed opportunity because it usually fails to influence the majority of the target population. And in any case, just because your local man knows Dr so and so, doesn’t mean Dr so and so is robotically going to buy everything he’s shown. So marcomms needs to hit him from several angles if the ground is to be made fertile for a rep to benefit.
Our pitfall 5 is to not let your limited management resource get dragged around the continent chasing tiny nuggets of interest. Adopt a strategy and stick to it, and that strategy will obviously be dependent on the opportunity. If success in Germany desirable and a key performance indicator, don’t spend too long in Belgium. Sounds really obvious, but sometimes these smaller opportunities look easy right up to the moment you realise each one brings its own problems. And doing your homework is vital. There are so many misconceptions about Europe that you, or someone you employ, need to understand it.
So you read all the above and think it’s still within your grasp? It all makes sense. We should employ a hybrid approach comprising direct operations in UK and Germany, distributors who already have a calling pattern that matches our speciality in all the others, multi language materials and websites, annual distributor get-togethers, attendance at six congresses and a multi centre study. Job done.
Except as usual it’s not even that easy. Remember the bit about choosing distributors. That’s the vital component here and the one where information at your disposal when sitting behind your glass wall in California is so lacking that you’ll revert to type, employ an experienced EU sales manager and by defaults get all his or her distributors. That’s pitfall 6. Avoid going the easy route.
Oh and don’t forget pitfall 7: Avoidance of the backhander culture. It’s probably been done to death in recent months, but the requirements for compliance with good business practices that seem so obvious, remain “culturally” open to interpretation in some countries. It’s consequently absolutely vital that you do your homework here too. Make sure nothing is or looks questionable. What might look like the most “normalised behaviour” in country X, should be stamped on at the outset in your organisation by having codes of practice and rock solid, transparent compliance measures in place. Do it right and be seen to be doing it right ought to be your mantra, stated up front and clearly to avoid any doubt.
So to summarise, our six(ok seven) deadly sins should be considered a supplement to Greg Davis’s six. For example we haven’t even considered logistics, because he’s already done that for us.
More to follow, remembering medlatest’s stated intent is to bring innovations in medtech to European markets. We’ll therefore definitely be back to this subject.
Source: medlatest staff, MedCity News
published: April 9, 2012 in: medlatest Editorial