Creating Exponential Value, Part I: How Far Should You Take Your Idea?

Our series of articles for the physician inventor continues with a three-part look into the business side of developing and commercializing your ideas. Part One, presented here, introduces a few common situations that you may face when choosing a course of action for your idea. These hypothetical scenarios seek to answer the all-important question, “How far should I take my idea on my own?” Part Two will address ways to value your idea from a strictly financial perspective, giving you some tools for estimating, communicating and supporting the value of your idea. Finally, Part Three will walk through the real life example of a surgeon idea that was developed, tested and sold to an orthopaedic device company, also known as an original equipment manufacturer or OEM.

• Part I: How Far Should You Take Your Idea?
• Part II: How to Value Your Idea?

While ideas can have huge potential, it is the manifestation into a functioning prototype, the testing, the protection, the clear path to commercialization and the communication of that idea that realizes the most potential.

Stating Your Objective

Recognizing that you may not be seasoned at developing and selling new product ideas on your own, realize that the road ahead is full of potential pitfalls. Conceiving the idea is just the first step. What comes next is a challenge, no matter how much experience you may have. One of the most important questions to ask early on is, “How far do I want to go with this?” A closely-related question would be, “How much of my own money and time am I willing to risk for this idea?” In order to answer these questions, it is important to first identify your main objective. Usually, this will fall into one of the following categories:

1. You are an aspiring medical device company business owner and want to commercialize and distribute the device or system on your own.
2. You like the idea of building value in the idea before selling it off to a medical device company, but you do not want to commercialize it on your own. The thought of maintaining control over the design, using the device in your own practice and the financial rewards of building exponential value are enough to entice you to spend your own money, sweat and tears in order to see it through development and regulatory clearance.
3. You recognize that there are many ideas out there to be developed, and you want to work on several of them. Perhaps selling off the idea early on in the process is the best option.

The main difference among these categories is your level of commitment to seeing the project through to completion and, of course, the amount of risk you are willing to stomach. While there is nothing like starting your own company, this option creates significant work, not to mention significant risk. The rewards are high, but the price may be high, too. On the other end of the spectrum is the notion of selling off an idea once you conceive it and maybe apply for patent protection. The cost is low, the risk is low and much of the time, the payoff is as well. Obviously there is no universal right or wrong answer here. The right answer is the one that best suits your particular situation.

This article addresses options b) and c); that is, you’d like to see your idea commercialized, but you’re not about to go creating a company in order to do it.

Key Milestones

With a clear objective in place, it’s time to develop a plan for moving forward. There are four basic stages/milestones, shown here in a simplified manner, to consider in the progression of your idea:

1. The Beginning – sketches, models and a patent application
2. The Functional Prototype – proving feasibility
3. The Test – engineering, making and evaluating
4. The Approval – obtaining regulatory clearance

Successfully completing each of these stages builds more value in your idea, mitigates risk for a potential acquirer and takes you one step closer to realizing the full potential. Looking at it another way, incremental investment creates exponential value. So take it as far as you can; it can pay off in the end.

When considering the road ahead, remember that you will be investing your time, money and attention. It helps to be realistic when asking yourself the following:

1. Your Investment of Dollars and Time: How much money and how much time do you have, that you are are willing to invest? Will it be enough to meet your project goals?
2. Your Investment Return: What kind of return do you expect from your investment?
3. Your Timeline: Is your expected timeline realistic? What if the project takes twice as long?

Let’s walk through a couple of scenarios to illustrate the decision making process.

Case Scenario #1: You have a napkin sketch idea for a novel orthopaedic implant, but have limited funds for development and/or limited time or interest to focus on it. Your objective is to sell your idea off to an OEM as quickly as possible.

Depending upon the circumstances, the motivation for an OEM to acquire your idea may be to incorporate the concept into their product portfolio, or to prevent the competition from doing so.

How much an OEM is willing to pay for your idea will be heavily dependent upon how novel it is, whether there is a market potential and how much risk has been removed from the product development process. The longer the real or perceived time to market, the lower the value.

This scenario represents the highest risk profile for the OEM, since only a napkin sketch is being provided and feasibility hasn’t been proven out. In this case, Value is based upon the perceived novelty of the idea and whether or not it could conceivably provide a clinical and/or market benefit over what is currently available. While many, many ideas look promising at first, most become less appealing once investigated. In addition, OEMs are inundated daily with ideas from surgeons.

While this scenario is often the path chosen, many surgeons are surprised at the amount of time and energy required to assemble a package worthy of presentation to industry. Speaking with others who have navigated this path previously can be beneficial when deciding how far to take your idea. Regardless, if this is the scenario that you decide to pursue, it is critically important to at minimum have your ideas well-documented and to have a patent application submitted for protection.

Case Scenario #2: You have an idea for a novel orthopaedic implant, and funds available for product development. In addition, you want to be involved in the process to ensure that your idea is developed with your input and in a timely fashion. Your end objective is to sell your device to an OEM.

By funding some or all of the product development, you now have the opportunity to remove risk from the product development process and improve the risk/reward profile for the OEM. This will dramatically increase the value of your idea.

Since your end objective is to sell your device to an OEM, you will want to achieve a few milestones before discussing your idea with potential acquirers. Referring to the list of milestones presented above, both a Functional Prototype and Feasibility Study are critical. To reach the functional prototype stage, you will work with an engineering team to first create 3D models of your idea and create rapid prototypes (often plastic) to get physical parts in your hand to analyze. Following this process (which may involve several iterations), it’s time to create manufacturing drawings and build prototypes. A functional prototype will be manufactured using production materials and processes, and will represent the function of the finished device.

With a Feasibility Study, you will use your functional prototype(s) in a simulated setting to prove functionality or equivalency to a predicate device. This can take place in the form of a cadaveric evaluation with simulated surgical use or with biomechanical bench testing, or both. The cost and time of this stage is widely variable based upon the complexity of the device and the regulatory pathway.

To increase the value of your idea even further, you could consider obtaining regulatory clearance. Obtaining this clearance on your own will increase the value of your idea. By providing a complete package including designs, prototypes, a patent application, a feasibility study with testing data and 510(k) clearance to an OEM, you have effectively removed all of the technical risks for the OEM, and business issues are all that is left for them to consider. Given the right set of circumstances, you may even find yourself with multiple potential acquirers.

Conclusion

When deciding how far to take your idea, you first need to consider your main objective. This objective is critical for formulating a strategic project plan that maximizes the chance of success. Many entrepreneurs dive into the process and try to sell a nascent idea without a clear objective, only to realize with hindsight that the time and money spent could have been used to fund a well-thought-out feasibility study. The more risk and uncertainty that can be removed from the development process, or the more evidence you can create to prove the efficacy of your idea, the more value your idea will generate. Remember that incremental investment could mean exponential reward.

Victor Hugo said, “There is nothing more powerful than an idea whose time has come.” This is certainly true in the world of medical device innovation. Perhaps the time has come for your idea.