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Identifying Meaningful Metrics For Strategic Engineering & Development

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It’s often, and rightly said, if you can measure it, you can manage it. Yet, performance metrics are applied in a somewhat uneven manner throughout most businesses. Commonly used in manufacturing (yield rates, COGS, assembly times) and sales (the simplest of metrics…hit the number!), metrics are not as common with marketing (marketers are notoriously metric-averse) or in new device development.

Granted, there’s a modicum of discovery that is necessary at the outset of new medical device development. Engineers need to be given a degree of intellectual freedom at the outset if you’re ever going to capture lightning in a bottle. That said, once the design parameters have been determined, establishing performance metrics can help introduce the benefits of continuous process improvement to a company’s strategic engineering endeavors.

In previous blogs, I’ve explored some of the engineering metrics that can drive value (and valuation!) within medical device firms. In the last blog, we explored aspects of developmental efficiency, driven by a highly granular and meticulous approach to Program Management. Considering the high cost of knowledge workers, measuring the efficiencies of the application of engineering talent is a critical metric. The constraint to most early to mid-stage medical device companies of leveraging this metric is the lack of critical mass, in terms of depth and breadth of engineering expertise, in order to accomplish said efficiencies. (Of note, 80% of medical device companies in the U.S. have less than 50 employees.)

Back in September, I explored the time value of revenue, in terms of Internal Rate of Return as well as Net Present Value. These models clearly illustrate the impact of time-to-market (and revenue) as compared to the cost of development. The speed of engineering market-ready devices, even at a premium cost, greatly outweighs the premium cost of high-speed development. In clearly measurable terms.

Perhaps for startups and early stage enterprises, the most critical metric may be the ability of the firm to raise follow-on, equity financing. We’re talking about getting down to the brass tacks of metrics here; relative to the potential life and death of the firm.

A timely example of this is Ablative Solutions, Inc. (ASI). REV.1 Engineering has been ASI’s outsourced engineering solution since their very beginnings. Yesterday, ASI announced they have successfully closed on $77 million in Series D round, equity financing. To date, Rev.1’s contributions and responsibilities with ASI include product development, test method development, verification/validation testing, regulatory/documentation creation and support, clinical study support, optimizing the design for profitable manufacturability and product Life Cycle Management. All optimized through the application of the metrics discussed above, and resulting in the demonstrated performance of our strategic development for Ablative Solutions. (And most importantly, validated by the investors through their $77 million placement!)

ASI isn’t an outlier. Over the past 11 years, REV.1 clients have achieved more than $1 billion in valuation growth at exit. Two immediate examples that come to mind include Topera, which was acquired by Abbott in 2014 for $250 million and Spinal Modulation, who received $190 million from St. Jude in their staged exit.

The Return On Engineering Investment our clients commonly achieve is a pretty good metric as well!