Startups are innovation engines that serve an essential role in future of the orthopedic industry. While small companies are often laser-focused on technology, they must advance strategically to be successful.
Tiger Buford is an orthopedic executive, thought leader and small-company recruiter with more than 30 years of industry experience. After sharing tips about starting a company, he continues to pull from his “30 Lessons Learned in 30 Years of Orthopedics” with thoughts on ways that the right business execution promotes growth and increases value.
Identify Your Weaknesses
No orthopedic startup is perfect. Each comes to life with specific strengths and deficiencies. While no one likes to focus on their shortcomings, Buford encourages founders to recognize early on where they excel and where they fall short to determine what additional expertise they need to hire.
“All startup founders have inherent blind spots,” he said. “They know what they know. If they don’t bring in complementary skills early, they will struggle.”
For example, founders with backgrounds in sales and marketing may understand customer needs and how to develop strong messaging, but may lack operational skills. Thus, Buford advises them to bring in strong operational leaders. Likewise, founders with clinical backgrounds have a closeness with the customer and the ability to solve clinical problems, but could need to hire a CEO to lead the company. The list goes on.
Know Your Secret Sauce
“Your ortho startup has a unique thing that differentiates it in the market—and only one thing. This is your secret sauce,” Buford said. “As a comparison, the ‘Big Five’ orthopedic companies win with massive distribution, a ridiculous breadth of product lines and mountains of cash—scale, but no sauce.”
A company’s secret sauce is its unique value proposition for the market, such as a new treatment, better software or less expensive implants. Buford advises startups to nourish, protect, market and improve upon this superpower. “Hire people who have expertise in it and keep them happy,” he said. “Spend more time on your sauce than feels right.”
Everything else that does not define or differentiate your company is an ordinary commodity. For instance, commodities could be packaging, pricing, implant materials, surgical training, sales or distribution model, the device itself, the instruments, surgical technique, manufacturing process, building, etc. Buford noted that startups don’t own these aspects, and should outsource them if possible to maximize focus on what’s important to nurture to win in the long run.
Make Speedy Decisions
As a result of their small size, startups have an advantage when it comes to their ability to make choices quickly. Buford said that, unlike larger providers, startups can make decisions in days, hours or sometimes minutes, even with little information.
“Don’t over-analyze,” he advised. “You don’t need more information; you probably cannot get more that is helpful, anyway. Even if the wrong decision is made, most can be reversed. The speed of the decision is more valuable than the time spent deliberating.”
Forget the Magic Formula
This one is simple: There’s no single formula to building an orthopedic company—it’s not magic. Everybody does it differently, Buford said.
“Listen to everyone who has ideas, but make up your own mind,” he said. “The most successful ortho companies find value in unexpected places by focusing on clinical problems.”
Create Incentives Linked to Valuation
To be successful, startups need to tie employee incentives to key company milestones, growth and increased valuation. To illustrate, Buford shared a personal story.
The board at Ellipse Technologies (later acquired by NuVasive) created incentives that drove enterprise value so that 100% of employees received stock options and were paid cash bonuses for hitting key company milestones, such as a regulatory clearance, a first-in-man surgery, completion of a key product design or clinical trial enrollment or hitting a new sales goal. Bonus milestones were designed to move the company’s valuation needle.
“Many were crazy stretch goals. Some were sane, but in the end, the company achieved 80% to 90% of them,” Buford said. “It worked. Whatever goals were written on that sheet of paper (taped to everyone’s walls), you knew that the employees would move heaven and earth to accomplish them. Everything else took a back seat.”
Focus. Focus. Focus.
There’s a reason that Buford repeats this three times. “Young orthopedic companies that win have a common culture—they focus like crazy on one, two or three things,” he said. “Young companies that lose try to do everything at once.”
Again, Buford references Ellipse’s laser-like focus on key milestones that drove valuation. The focus was technology first, and everything else later. It was all about getting the product right before investing in the other areas rather than worrying about regulatory, IP, quality, sales and distribution, marketing, surgeon training, reimbursement, sales and other aspects.
“Just focus on getting the Gen 1 product working ASAP,” Buford said. “This intense focus helped to avoid distraction pitfalls that other startups encounter, such as hiring the big roles early, continual fundraising, silly press releases, fancy office environments, in-house manufacturing to lower costs, fancy websites, regularly scheduled meetings, etc. Paul Graham from seed money startup accelerator Y Combinator says it best. ‘Though the immediate cause of death in a startup tends to be running out of money, the underlying cause is usually lack of focus.’ ”
Minimize Risk ASAP
Buford generally sees two major risks with any new orthopedic product:
- Technology Risk: Will the product work?
- Market Risk: Will the product gain traction?
“Take one of these risks off of the table ASAP,” he advised. “If the technology is easy to develop, then eliminate the market risk. If the market acceptance is a given, then eliminate the technology risk.”
Choose Better over Best
Perfectionism kills companies, so Buford warns startups not to let it become their Holy Grail. “Better is good enough,” he said.
When orthopedic startups become obsessed with perfection, they fail to execute the business within the frame of time and cash on hand. Instead, Buford said, companies should get their first product into clinical use and then improve and iterate. There will always be Gen 2, Gen 3 and so on.
“To quote Facebook’s COO Sheryl Sandberg, ‘Done is better than perfect,’ ” he said. “Know when good is good enough by asking yourself, ‘What is the marginal benefit of spending more time on this task or project?’ If the answer is ‘very little,’ stop where you are and be done with it.”
For example, shavers were so prone to failure in the early days of arthroscopy that every instrument tray contained a magnet on a stick to fish the broken shaver pieces out of the joint at the end of the case. The take-home message: The arthroscopy pioneers didn’t wait to market the best product.
Kathie Taylor is an ORTHOWORLD Contributor.