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Strategic Engineering and Speed to Revenue

A REV•1 Engineering® White Paper

Strategic Engineering is a comprehensive approach to medical device development that drives speed to revenue while simultaneously scrubbing away risk along the critical, developmental path.  This White Paper sets forth to examine the value of Strategic Engineering and how to go about adopting and implementing the approach.

Strategic Engineering hinges on two key factors; highly coordinated resourcing combined with the rigorous execution of Design for Risk Management.  Perhaps a good definition would be – The efficient allocation of resources orchestrated in such a manner as to aggressively de-risk the project while simultaneously accelerating the commercialization of the device.

For early-stage companies, this approach has demonstrated rapid growth in company valuations, during both follow-on rounds of financing and at exit (examples to follow).  Regardless of the size of the enterprise, Strategic Engineering delivers ancillary benefits across the entire business that contribute to the company’s overall competitive fitness and competitive advantage.

Human Factors Analysis: Beyond Ergonomics

There’s an old computer science term I heard my father use back in the late 1970s…GIGO (garbage in, garbage out).  The quality of one’s outcomes was determined by the quality of one’s inputs.  This is painfully true in medical device development, as the cost of any missteps at inception are exacerbated by the time and capital required to move through regulatory and clinical studies. With such little margin for error, fully embracing Human Factors

Analysis, in both the spirit and the letter of the guidance, will undoubtedly serve you well.

The Quadruple Aim is the logical place to start. 

~ Improve patient experience of care.

~ Improve the health of populations.

~ Reduce per capital costs of healthcare.

~ Improve the experience of providers.

I think we all understand and fully appreciate the original three facets of the Triple Aim (e.g., less pain/faster recovery times, tools for the self-management of chronic conditions, lower rates of hospital readmissions, etc.).  Yet it is the fourth point that warrants a closer look.

Improving the Experience of Providers

Ten years ago, I was working with the University of Pittsburgh Medical Center (UPMC) and Alcatel Lucent (the original Bell Labs of transistor fame), exploring the opportunity of integrating all of the data and video streams emerging from the surgical suite into a single, touch screen platform.  A platform that could be transmitted to master surgeons, any where in the world, for real-time consultations.

At the very outset of the healthcare industries’ quasi-forced march to adopt Electronic Health Records, we were peering into the coming world of Big Data and Predictive Analytics.  The researchers at Bell Labs and I couldn’t even begin to place a value on the organized, collected data that would emerge through such an endeavor.  Unfortunately, that wasn’t enough.

Two factors derailed the initiative.  First, clinicians, and in particular nurses, were being bombarded with technology.  Technology that was disrupting their normal workflow rather than enhancing it.  Nurses consistently expressed their frustration with having to monitor yet another screen while they didn’t have time to place their hands on their patients…and actually nurse. Second, at the time, there was no way for physicians to bill for a virtual consultation.  While the technology made enormous sense on the surface, it was not perceived, by clinicians at the time, to improve their experience of providing care.

A few years back, the British Medical Journal published an editorial supporting the fourth tenet of the Quadruple Aim (guiding objectives now embraced globally in support of healthcare reform) by exploring the relationship between the experience of caregiving and clinician engagement.  The editorial stated, “The core of workforce engagement is the experience of joy and meaning in the work of healthcare.”1

The backbone to healthcare reform lies in the engagement of the delivery system’s workforce.  As device developers, how our products contribute to clinician engagement is a key driver for clinical adoption.   

Even within business and clinical environments, the field of Applied Behavioral Economics has shown us that upwards of 70% of economic decision making is emotionally-based (with the remaining 30% cognitively derived).2

When we seek to improve the experience of providing care it is imperative that we examine the impact the new device may have on the workflow, the continuum of care, and engagement of clinicians.  It turns out how clinicians feel about your device is as important as what they think about it.  While product satisfaction is a function of cognition; engagement is a function that is highly shaded by emotions. Understanding this at the outset of the design process is paramount to ensuring your device will be launched, several years down the road, on the right trajectory; positioned to capture the right market at the right time.

Maximized Speed, Minimized Risk

Strategic Engineering results in two critical deliverables; speed to market revenue and a level of risk management that helps ensure efficacy at launch.  While these results, faster to market with less risk, may appear counter-intuitive on the surface, the planning and execution that delivers these results are deeply intertwined.

Achieving Elegance In Program Management

The level of attention to detail expended during the Program Management phase of planning can greatly enhance developmental efficiencies throughout the project.  REV.1 Engineering has mastered this discipline.  In fact, the development of our Program Management plans can take upwards of forty (40) hours of work to develop.  This investment results in the refined orchestration of resource allocation at every point along the critical path.

The requisite resource is scheduled and prepared to contribute their particular expertise required at the identified phase of development. As the example above illustrates, during any given month, upwards of twelve (12) resources may touch a project, yet the project is consuming less than four (4) Full Time Equivalents.  Supported by a high degree of internal machining, prototyping and fabrication capabilities, this approach has proven to shave months, if not years, off development timelines.

The challenge for small medical device companies is this approach requires ample resources (for example, REV.1 employs 16 engineers and technicians) with exceptional skill sets (20+ years of subject matter experience and expertise).  The growing complexity of device technology, combined with an increase in regulatory scrutiny, may be ushering in the finals days of the five engineer startup as a viable business model.

Large companies may also be challenged to maintain this level of focus and discipline.  Rapidly shifting priorities, competing demands for resources and the shear size of organizational bureaucracy can weigh heavily on nimble resourcing.

Rigorous Design For Risk Management

With your clinician/patient-centric device specifications in hand, and the Program Management plan in place, it’s time to bring the device through Design for Risk Management, along the critical path.  There’s no secret sauce here…it comes down to focus, discipline and will.  Embracing a rigorous approach to design Failure Mode and Effect Analysis (dFMEA) while meticulously documenting the process, accelerates development while supporting timely compliance.

As resources are applied and the project moves forward, a form of highly orchestrated, parallel development emerges.  All of these efforts culminate in thoughtful bench test design and the efficient execution of Verification & Validation.

Proven Results

When properly executed, Strategic Engineering delivers a multiplier effect on the Net Present Value of development projects, optimizing Internal Rates of Return.  Some examples:

Back in late 2011, Topera was a virtual company with I.P. and an algorithm for mapping the interior walls of a beating heart for locating ablation targets (intended for the treatment of Afib).  With just a concept in hand, REV.1 applied the tenets of Strategic Engineering with breathtaking results.  Topera was positioned to file with FDA within eighteen (18) months of initiating the project.  Three (3) contract manufacturing facilities were then quickly ramped up for production.  In late 2014, the company was acquired by Abbott for $250 million in cash and an additional $250 million in future milestone payments.

Another example is Ablative Solutions (ASI).  ASI wanted to develop a combination drug/device product for the ablation of a renal nerve bundle that contributes to hypertension.  ASI was also a virtual startup company that decided, at its inception in 2011, to pursue Strategic Engineering with REV.1.  By March of 2014, the company had successfully filed their 510(k) with FDA.  Development and commercialization have continued at a brisk pace for a combination product, and the company announced the successful close on $77 million in Series D round equity financing on January 3, 2019.

Below is a Net Present Value and IRR model that demonstrates the financial benefits of Strategic Engineering.  Even with the flatlining of year five revenue, the strategic benefits of speed to revenue are readily apparent.

All The Best,

 

 

© 2019, REV•1 Engineering®.

Sources:

1.) Sikka R, Morath JM, Leape L, BMJ Qual Saf 2015; 24: 608-610.

2.) Dan Ariely, “Predictably Irrational”, Harper Perennial, 2010.