It will take more than a fancy design
With each passing day it seems like we have a new company jumping into the diabetes device pool. Lilly, and OnDuo are working on way cool whiz bang insulin pumps. There are a host of companies developing a Tyler. Plus, heavens know how many CGM companies working on something that is just as good as what Dexcom already has. Throw in all the way cool whiz bang apps that are supposed to do way cool whiz bang things and the diabetes pool is getting crowded.
Having looked at several of these efforts we have some advice for all the wannabes; it will take more than a fancy design to win the day. There is no question design matters but the fact is business acumen matters more. This is truer today than ever before.
Look at the insulin pump space as an example. The king of the hill is Medtronic who by all accounts has the worst design ever. While the Tandem pump looks like an iPhone the Medtronic pump looks like a pager. While the Tandem user interface is hailed by patients, the Medtronic patient interface is panned by patients. While the new Tandem pumps will allow for upgrades via the cloud, Medtronic’s 670G doesn’t even have Bluetooth technology. Yet even with all these design advantages Tandem has an uphill battle on their hands.
This does not mean they cannot win but what it should say to all the insulin pump wannabes is it will take more than a fancy design to be competitive in the insulin pump space.
Folks Medtronic depending on who you believe has between 70 to 80% of the insulin pump market. They own the most valuable piece of real estate when it comes to pump selection; formulary position. Additionally, they have the resources to fend off a price war. Even if one of these newbies went nuclear and gave away the toy for free Medtronic could compete with that.
This is the beauty of not just having scale but also having existing infrastructure (something the newbies don’t have), existing payor relationships (the newbies don’t have this either at least not when it comes to insulin pumps), a developed support system with CDE’s and physicians (the newbies must build this too), brand name recognition (the newbies kind of have this but again not with insulin pumps) – need we go on here.
It’s for these reasons and more that we have never understood why a company like Lilly or OnDuo didn’t buy Tandem when they were desperate to be bought. This would have given them everything they need and would not have prevented them from developing their own way cool whiz bang toy which will be like every other way cool whiz bang toy. Whatever issues Tandem had at the time (some which still exist) it’s not like they couldn’t be fixed.
As we say consistently building the toy is the easiest part of the process. Any idiot can build an insulin pump, many have, and more are jumping in. Do we need to go through the list of companies who have tried and failed? Do we need to remind everyone of all the money these companies spent only to get their heads bashed in by Medtronic? Is it necessary to remind everyone that management talent in the insulin pump arena is in short supply and that it’s talent not design that wins?
Listen Medtronic has been through several management changes since the company acquired MiniMed. The company has a poor reputation with key opinion leaders, a large portion of physicians and even patients who use a Medtronic pump. The company is also very predictable for each time it looked like the goose that lays those eggs was about to be cooked management was shown the door and a new team was given their marching orders – DON’T KILL THE GOOSE THAT LAYS THE GOLDEN EGGS, OR YOU’LL BE SHOWN THE DOOR TOO.
Once again, we are at an inflection point as soon Medtronic will not have the coolest toy in the toy chest. Once Tandem gets their hybrid closed loop system to market it will be the coolest toy in the toy chest. Unlike Medtronic Tandem is not seen as the evil empire but as the rebels who are supposed to destroy the Death Star. However as good as the Tandem system will be by no means does it mean it will be a commerical success. Tandem still must navigate the treacherous waters when it comes to payors knowing full well Medtronic will fight back.
This is what the newbies just don’t get. They seem to be operating under the delusion that having a way cool whiz bang fancy toy is enough. They seem to believe that payors care about something other than money, which they don’t. They seem to believe that insulin using Type 2 patients will use insulin pumps in greater numbers, something we’ve been hearing for over 20 years and something that has never happened. They ignore the impact Tyler will have on the future of the insulin pump adoption.
No, the newbies are all about whiz bang way cool and are clueless when it comes to understanding that this is a business not a philanthropic endeavor. A perfect example of this convoluted thought process came early this year when at the JP Morgan conference we asked Lilly why any patient would select their coming fancy new toy. In classics newbie fashion the answer was their toy would be “different” and “better” than the current toys in the toy chest.
Not one of these newbies can outline in a clear manor what their business strategy is. How they plan to MAKE MONEY. Point out any of the very real hurdles they will face, and you get the classic deer in the headlights look. The classic comeback is yes, we are aware of these hurdles, but our toy will be “different” it will be “better”.
These newbies remind us of something the Wizard (Momma Kliff’s hubby) used to tell his sons when they were dating; “You can’t talk to pretty. Pretty is nice but it takes more than pretty when it comes to having a real relationship.” Since Momma Kliff and the Wizard were married for over 50 years I think he knew what he was talking about.
