Porter’s 5 Forces in Medical Devices
Aloha and welcome to another Imua on TV episode. If this is your first time watching, this is a great resource for you if you’re developing a medical product or if you just have an idea for one and you haven’t started. You can also check out our website, it’s imua-services.com, that’s I-M-U-A services.com. There we have more resources for you, we have a podcast, you can find all the episodes of Imua on TV and I will see you over there. So let’s dive in to our video today. So you may remember from your upper level business classes or your MBA, those Porter’s five forces. So if you haven’t had that then I’ll just tell you what that is and if you had just think of it as a reminder. This is a framework designed by Michael Porter and he is a Harvard Business School Professor. His methods are use in practically ever under graduate and MBA program. So why are they important? Will they utilize all of the different forces around your product that can pull it in different ways? Today we’re gonna be using an example of medical device and looking how this apply. So ideally what I want you to do is look at these on how they apply to your idea, your product, and development or if you already have a product on the market, this is really good. Just dive into and look at occasionally. So for our example today, we’re gonna use a shoulder implant to show you how this applies in medical devices.
The first force is Supplier Power. So in this case, you usually use a material called Polyether ether ketone or PEK and that’s a polymer used in implants and it’s usually compression moulded. So in this case, your supplier is the manufacturer that you go to purchase your PEK material. If that manufacturer is low on material, or something happens that they can’t fulfil your order then you don’t have access to the PEK needed to make your implant. So that’s no blame of. At this point in time, you could be in binding contacts with this suppliers or maybe the materials is very commodity so the prices can rise and fall, that is a threat to you. In the past, I’ve advised clients to always carry extra inventory of their material, have that on hand because if something happens you wanna be maybe few months ahead to have that on hand. You don’t have to stress about that. And I’ve even heard that once a plastic company caught on fire and they weren’t able to supply any of their clients. So you’re dead in the water on that point if you can’t get your material to make your product. So one thing that you can do to avoid this is I always advise to register different suppliers, validate them early, go through that process of looking at their materials so you have few different ones to choose from if something happens like this. That’s the very least that you should do is already have their material validated, have them on your system as your supplier. Something extra to do would be maybe you set up contracts where you order half of your material from one supplier and half from another. I know that’s hard to do especially if you have a low annual volume of product that you’re manufacturing but it can work out at situations like this.
So the second force we’ll talk about today is Buyer Power. So what the shoulder implant, you’re not selling the patients themselves directly, you’re usually selling directly to a distribution company or maybe you have your own sales force at this point. So you’re selling direct in the hospital systems or direct into these networks of clinics. So there’s competition in your industry that can impact a buyer decision. You need to keep an eye on the pricing for your product related to the reimbursement. If they’re not getting reimburse for you well for your particular product, that’s a problem. They’re not gonna want to buy from you. They’re wanna buy from someone else or go with a different procedure where they are reimbursed. So you need to keep an eye on that. Keep an eye on what the insurance is doing, maybe what the affordable care act is doing.
So the third force is Competitive Rivalry. So in this shoulder implant niche, there’s several player and each one has unique portfolio. So maybe this is your only product, your start up company this is the first one that you’ve launched so far. Competitor A has more diverse orthopaedic portfolio. They’re into knees, they do hip products as well as the shoulder products. But your competitor B, they choose to specialize in shoulders. They are the person to go to when people think shoulders. They have several different models built for several different things more of a budget friendly one that lasts x money years, than a more built one that lasts longer and then they have their premium model that lasts the longest. So after analyzing this, you wanna really look at where you fit in. What is your unique selling proposition? How are you standing out from the competition here? Maybe go back and look at opportunities if it makes sense for you to be acquired by one of these competitors.
Threat of Substitution
The fourth one is Threat of Substitution. New surgical procedures that can minimize demand for your product, this happen all the time. There are surgeons out there pushing the limits on what can be done, new ways of doing things that are more efficient and better for patient outcome. There’s also new rehabilitation techniques to heal the shoulder to protect it from future injury and to help spur on bone re-growth that was actually no point intended with bone spur. Some people would appreciate minor sense of humor there. But this can prevent surgery altogether. So you need to stay on top of not only the competitors in your particular space but what is happening in this whole healthcare ecosystem coz that has a big impact. Perhaps insurance company start limiting procedures that patients can have and if they deem, implant is medically not medically necessary, that’s a big deal to you. At this point, it’s up to the patient if they want to elect to do that surgery. Are they gonna pay out of the pocket to get you an implant? See you need to think about that.
Threat of New Entry
So the fifth and final force is the Threat of New Entry. So there is certainly other shoulder implants on the market in addition to yours, but there is also new technologies coming out all the time. You need to watch out for this. You need to be aware of the competitors coming into your space. What are they doing? What are these new start ups doing? Watch that and learn from it. So now it’s your turn. Where did your product fit in when you look at these five forces, okay.
So just a recap, the first force we have Supplier Power. The second force we have Buyer Power. The third force is Competitive Rivalry. The fourth force is Threat of Substitution and the last force is Threat of New Entry. So do you feel like you want some more guidance like this is just the tip of the iceberg of medical devices? If you’re watching this in November of 2016, I just opened up my program that’s actually in beta right now called Invention Idea to Profitable Product. So you can apply for a free spot and it’s free right now because we are now on a beta. I’m taking ten testers to help me shape the program, give me feedback, and once we relaunch it you’ll be able to take the product for free too. So you have one of this founding spots not many people are getting. If you’re watching this and it’s after November 2016, hey that just means you got the finish product and I am offering scholarships every year too. So all of this information will still be good. You can click here or you can text the word INVENTION to 44222 if you’re just on your cell phone watching this video. So in this program, what happens you might ask would you learn step by step how to get started in developing your idea into an actual product you’ll get information on how to develop your pitch to investors, get connected to the right investors as well as development partner that can really make your product a reality from there. So I hope to see you over there and until the next video, Imua!