Process, Methods, and Tools
1 - Learned the language
I scanned a medical textbook on Pathology and Cytology (in ninety minutes) to learn the technology and language. This is important, so as to be able to relate to the technologists. I had to capture the respect of, and interview, highly trained medical specialists; pathologists (MD's), Cyto-Technologists (PAP smear readers), and the leaders of their organizations.
2 - Secondary market research
Secondary market research is the surfacing of historical data that others have already gathered. It is broad-based, "tops-down," and summary in nature. In spite of its name, secondary research is performed first. While of finite value, secondary research generates a starting point, identifies names of key players, and shapes the questions that follow in the primary market research.
In this assignment, the critical statistics were neither available in libraries, nor in published reports, nor obtainable from commercial secondary market research firms. Rather, the data were in file cabinets. The challenge was to find the key individuals controlling that information. As just one of the sources accessed, that meant identifying and penetrating to the Vice President of Registry of the American Society of Clinical Pathologists, the only certification and registration body for Cyto-Technologists.
While this was secondary market research, many of the methods of formal, primary market research were followed; in a special technique that I have termed "primary-secondary market research:"
The answers were forthcoming; by phone, FAX, and letter:
3 - Approached the US Congress for new legislation
A regulatory strategy and legal strategy should be an integral part of the business strategy. Market research is the fundamental intellectual discipline of strategy.
I began by working to understand Cytyc's customer demographics; market trends and the industry drivers, which precipitated an exposé of "PAP mills." The outcry lead to Congressional Hearings in Washington, DC, under Massachusetts' Senator Edward Kennedy. By that time, my market research was available to be used in testimony before Congress, helping to result in new legislation. The Clinical Laboratory Improvement Amendments focused on quality and increased disease detection, which had the result of speeding market demand for Cytyc products.
4 - Market segmentation and food-chain analysis
A market segmentation identified the portion to serve, while a food-chain analysis recognized the access point. Cytyc's market would be the high-volume clinical laboratory chain. This conclusion guided the primary market research. (As HMOs and medical insurance companies have asserted more of a role in the last few years, Cytyc has broadened their approach to include these third-party payers.)
5 - Primary market research is significantly higher value
Companies fail because they stop after gathering only secondary market research.
Primary market research is the direct gathering of new data, and of future-oriented intelligence. It is narrowly focused, "bottoms-up," and detailed in nature. In spite of its name, primary research is performed second, after secondary research.
Primary market research is significantly higher value than secondary research, and tends to require about twenty or more times the investment (and perhaps two hundred times as much). It answers the questions generated by the secondary research, and provides depth of understanding of the customer's needs. Primary market research steers the enterprise.
Formal, primary market research methods were employed for market confirmation; by phone, FAX, and letter.
Every answer to every question was documented in detailed interview reports. This usually means investing much more than twice as much time writing interview reports as was invested in the interview process.
A special section of each report itemized each customer's concerns and comments, outside of the formal questions. It was exactly these comments that led Cytyc to identify profound changes from the initial product concept. For example, one Pathologist who was the Director of a major clinical Laboratory said, "The False Negative (FN) rate would, by conventional medical custom, not only include the FN rate of the proposed Cytyc machine vision unit, but would also include the quality of the smear taken by the physician."
6 - Articulated the new product concept
I wrote the first customer-oriented description of Cytyc's proposed new product. It was intended to relate the potential of new technology to customers who, while highly trained in medicine, had no knowledge of machine vision or computer-based image processing.
It was created to focus the customer on the economic and business issues, and on the justification process that might lead to purchase. It was designed surface the facts with a neutral, dispassionate, and objective approach.
7 - Modeled the customer's business
I built models of the customer's current business, and of how their business economics might appear with the availability of the proposed Cytyc product. These models were built one customer at a time, for each interview.
8 - Customer payback analysis
rule: less than one year payback means a sure sale.
I calculated customer payback, one customer at a time, during each interview. With some customers, the payback calculations involved as many as fifteen steps.
Payback was as quick as five weeks! Clearly, the proposed Cytyc product would result in purchase decisions, and the customers said so. The evidence began to accumulate that would compel investment.
9 - "Bottoms-up" market sizing
There are fifty million PAP smears done in the United States every year. A handful of the country's largest Clinical Lab chains do about 40% of the PAP readings, for twenty million PAP tests per year. These numbers were known from the "tops-down" secondary market research. However, "Markets don't buy products, customers do." (Jim Geisman).
The task is to build a credible estimate of what real customers would likely purchase. A few of the largest laboratories were surveyed. The number of machines required for each customer lab chain was determined, one lab chain at a time, and totaled for a "bottoms-up" market sizing. This built a believable sales forecast to install into the financial section of the business plan.
10 - Regional primary market research
Just as new products may be rolled out (first sold) one region at a time, the up-front market research process may be rolled out regionally. Stan Lapidus, the entrepreneur, was scheduled to make several trips to one particular city on related business. I took advantage of his travel schedule to precede him into that region of the country with primary market research.
I guided the allocation of his time by developing a numerical ranking of contacts according to interest, size (Pap tests per year), dollar potential, and unique ability to contribute to Cytyc. With that preparation, Stan was then able to visit a selection of the most productive contacts, and to personally confirm and extend the market research.
11 - Competitive intelligence (CI)
The competition for most entrepreneurs starting new fields is the current method, not another company. Nevertheless, there may be potential competitors arising in their own basements or garages. This makes the gathering of competitive intelligence especially difficult, since the competitive new start is not yet selling any product, has no literature, and is surely very quite about their developments.
I was able to acquire Competitive Intelligence (CI) on competitors, while they were still "in the garage." I surfaced information on their technological approaches, state of development, and the people they were working with.