Originally posted to LinkedIn. Full list of 17 LinkedIn articles – all are found here at this blog as well.

Everybody wants to live longer and feel better, nobody enjoys seeing another human suffering or in pain. Demand for products that help create healthier, longer lives will continue to grow. If you’re producing an industrial good these markets are always enticing – but they are scary to enter. The regulatory alphabet soup is complex, the fear of product recalls is real. The accelerated growth, higher margin, and greater customer lock-in is offset by higher quality costs, greater warranty reserves, and increased labor costs.

With current global macroeconomic uncertainty, interest rate volatility, and confusion – everyone is looking for ways to grow. Here are six signs that healthcare supply chains might be a good area to explore.

6/ There’s a Clear Goal

Plans work best with a clear goal, for example – “This product will lower the cost of production for mABs (proteins) by a factor of four, so we want it in lab scale pilots with CDMOs in four years, leading to scale production in 2030.” This clarity can continue, “given the bill of materials for the production system, we can sell at [$s] leading to revenue and EBITDA of [$s].”

This clarity is crucial in working backwards to identifying the gaps to where you are today. Without clarity, the goal is to create clarity. Once you have that big end goal identified, you’ll find that the product that can hit that goal will also be valuable in many other interim markets that can turn an attractive long term healthcare product goal into an even larger nearer term goal with applicability in other higher quality industries.

If your product improves profitability for proteins in healthcare, it’s going to do the same for food, beverage and water. Industrial enzyme, nutraceutical, and cosmetic products will also benefit. It starts with that big goal, because that’s what will guide your development and documentation efforts.

If the best goal you can come up with is, “hey, we’d like to make more money” – then that’s not specific enough. Know how your product improves ROI for specific products and have an understanding of the long term outlook for that product.

5/ You’ve Got Time

Healthcare markets take time. Procurement teams are desperate for new vendors, but they are also cautious in managing new entrants that scale up will take a while. This often leads to a whipsaw, where shortly after qualification demand moves from “far in the future” to, “we need a lot now.”

It’s important that a business can manage itself through the evaluation and adoption phase. This can be done by laddering your way into the market and addressing interim markets with faster adoption curves while waiting on healthcare penetration. If you need revenue next quarter, then that is too short of a time horizon to make entry into healthcare supply chain part of your planning.

4/ Your QMS is Good Enough

“Will the team have to wear hairnets? Does this mean we’ll have to be an FDA registered site?” Your production team will have many legitimate question before beginning this journey. Confusion about GMPs and HACCPs will grow before they become a comfortable part of life once you’re in production.

Your quality management system (“QMS”) does not have to be perfect on day 1. These supply chains are growing and they need vendors – your goal is to be top half, and then top quartile – not top 10% from day one. A big part of the initial process is knowing when to admit you don’t know what your gaps fully are, and when to provide more clarity.

For industrial businesses that depend on trade secrets and shop floor know-how in their production process, the degree of transparency required by a healthcare audit team can be nerve-wracking. The end regulators – most often the FDA or EMA, require a degree of transparency far beyond what can be practiced in the automotive or microelectronic supply chains. Many vendors fall apart at this stage and kill their pipeline by refusing to provide the needed transparency in order for supplier auditors to coach them up.

3/ Reference Documentation Exists

Going back to the example in #6, if you’re going to be part of a protein supply chain, your product will benefit from a validation guide – commercial / technical documentation used for the production of therapeutics (example from Pall’s Supor membranes).

Your buyer won’t expect you to have all of that information on day 1, but just as with your QMS, you need to be working towards the goal. Like a tourist learning a new language, fluency isn’t required – but a good guest knows basic communication in the local language.

A trap that many businesses fall into when entering into more tightly regulated markets is that they try to stair-step into the product. For example, if they want to be in healthcare, they plan first to enter food, then beverage, then cosmetics, then nutraceuticals, and then finally get to healthcare. The vision is one of sequential market entry, adding capabilities as gaps become known.

This stair-step approach fails because it takes too long and chews up too much cash as the long adoption cycles in each market consume time. Investors lose faith because of a lack of clarity and nearer term opportunities create distractions for management.

Instead, the team must build a ladder – whereby they know the top rung and the entire build out of the right QMS and documentation is known from the outset. By having an integrated device – the ladder – as opposed to a bespoke construction project (is it a spiral staircase? how big are the steps?), the team is able to march towards the end documentation goals of the highest level of documentation while clearing the expectations of lower quality / compliance expectations in earlier markets.

If we’re using Moore’s Crossing the Chasm as a framework and apply his bowling pin analogy – the top rung is like the back pin. We won’t hit it first, but we’ve got to know that knocking it over is part of our goal in creating a high score.

2/ There is a Reference Account

For many high tech and industrial good vendors with good basic documentation there is already a healthcare buyer in their portfolio. These industries have brilliant people and ample funding – if your product solves a problem, they will find you. Early in the product life cycle a clever engineer, physician or plant manager saw how the product could produce better patient outcome and integrated the product into their processes and products.

Somewhere in the company a helpful customer service or sales team member helped them get their additional documentation needs completed. These buyers are probably known as “difficult” and are paradoxically often cited as reasons that the company cannot formally enter healthcare markets, “because we know how difficult those guys are.”

Often times this reference account is often asking for additional help, regular audits, and much greater visibility into quality processes and raw materials selection. They never complain about price increases or non-recoverable engineering (“NRE”) fees, because they’ve built a whole set of shadow QMS infrastructure for the product within their organization to keep the vendor in compliance. There is great lock-in.

The key then is to re-engineer these relationships socially – to go with hat in hand and enlist their coaching to be a better vendor. It is easy for this to be met with skepticism by the buyer – they’ve trained you up, they get the benefit of your product – now the last thing they want is to enable you to go to their competition. If you can grow the business with this reference account, that is the first place to begin the journey.

1/ Healthcare Supply Chain is Trying to Buy It

A great CRM tool is used to make your sales team more effective – that doesn’t always happen. With increased pressure to perform and greater macroeconomic uncertainty, a canny account manager learns to enter into the tool the kinds of opportunities that are truly sellable. The information within your CRM becomes a subset of what your account managers are willing to spend time on.

“We keep getting calls about whether the product can meet these FDA claims – and I know those take forever to answer, so I just tell them ‘No’ and don’t put it in the CRM.”

Your Account Manager When Asked About Healthcare Opportunities

These are the answers you’ll hear if your product is a fit for this market when you talk with your AMs. They know the product can work – but without the right corporate infrastructure, they don’t get paid to persuade you to address these gaps, they’ve already got enough day to day pressure. The answer is to start looking at the documentation gaps mentioned above in [3] and to pick a few of the more enthusiastic AMs to go back and call some of the accounts they’d previously said “no” to.

You’ll be surprised to learn of accounts with sophisticated purchasing teams that have been trying to buy your products year after year, because their growth forces them to constantly pursue new vendors. By finding ways to say “yes” to these buyers where you don’t break the bank by incurring high up front costs, you can quickly put your products on a path to being in higher growth, higher margin healthcare markets with high lock-in.

Often, when the ‘Reference Account’ from (2) is not exactly in healthcare, but in a technically adjacent space, that can be enough for healthcare supply chains to start exploring use of the product. This is common in protein production where a seemingly innocuous innovation in microbial control for food, beverage, wine or beer can demonstrate effectiveness for pharma applications. Finding that the supply chain is already trying to purchase shows that the cost of market entry will be lower and that vetting proof of concept can be faster than anticipated.

Closing

These are six signs I look for – what else indicates that the effort is worth it for positioning industrial products into a healthcare supply chain?

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