From Research Lab to Consumer: The Manufacturers' Point of View
Carlton Fillauer, CPO *
Charles H. Pritham, CPO *
The matter of transferring new developments from the researcher to the consumer is one that has bedeviled the American prosthetic-orthotic establishment for years. The researcher, the agency that funds the research, the manufacturer, the clinician, and the patient are all, of course, interested in seeing new products brought to market, and all stand to benefit. Financially, the manufacturer is the one who stands to benefit the most from the successful introduction of a new product. Only by such means does a manufacturer expand his base and increase earnings. If the incentives are greatest for a manufacturer, the risks are also proportionately greater. In making a decision to produce a new product, the manufacturer must weigh the risks against the potential benefits and make a decision about committing his resources. It should be obvious that once resources of time, effort, and money are lost backing an unsuccessful product, they are lost forever. What is not so obvious is the fact that the loss is threefold.
Potentially, at least, the resources expended for backing a losing product could have been invested in a successful one, turning a loss into a profit. Also, in making the decision to back a new product the manufacturer commits his prestige and credibility. A positive result resounds to his credit, attracting new attention to products currently being produced and assuring a positive reception for future products. A negative result has the opposite effect, tarnishing the image of other items in the manufacturer's product line and damaging his credibility. That the investment in a new product can be a high one should not be discounted, therefore.
A small group of highly skilled and motivated individuals (or an inventor working alone) can, with a relatively low investment in machinery, produce complicated prototypes efficiently and with a low rejection rate. When the time comes to produce the same object in large numbers, the factors are fundamentally different. Production workers are seldom so skilled or motivated. Oftentimes, to overcome bottlenecks in production and to achieve consistent results, a product must be redesigned. The cost of this redesign must be borne by the manufacturer. To achieve productivity and consistent results, the manufacturer will develop tools, dies, and molds with which to produce a device. Resorting to such an alternative can enable relatively unskilled personnel using inexpensive materials to produce products of great appeal and excellent quality. While the material costs of such objects can be measured in the cents, the cost of the molds and dies can frequently run in the thousands of dollars each. If it is necessary to produce the device in a range of sizes and in right and left, the cost can be prohibitive. It should also be borne in mind that the researcher or inventor frequently has only partially tested the prototype and further testing and development must precede redesign for production. The direct expense of manufacturing an object, however, is only a portion of the cost.
In order to sell a product it must be promoted and advertised. The total expense of attending a convention (often far from home), renting space to exhibit, and obtaining a suitable display is not cheap. Commissioning the art work and copy of an advertisement, and obtaining space for it in a journal are, similarly, of considerable expense.
The organization that makes all this possible (research and development, production, and promotion) can frequently be quite large and demand a sizable indirect labor force to administer the resources and personnel involved. The total expense of all factors involved in developing a new product is a figure to be reckoned with and can be justified only if the product has the potential of selling in sufficient quantities to recoup the original investment and earn a favorable rate of return. It is in connection with this that the greatest stumbling block is encountered. Whatever the merits of a design may be, a manufacturer can not afford to devote the resources to its development if it will not sell in a large enough volume to enable him to sell it at a reasonable cost.
Despite the optimistic expectations of a developer, the market for his new object is seldom as large as he hopes. All researchers and developers seeking federal research money are asked to project the number of individuals for whom their work will be applicable. As all involved will admit, it is a fundamental fact of the way that health care is funded in the United States and the way that health care statistics are gathered that the best of projections are crude estimates. What statistics are available point to the fact that the total market for any one product is small. This market is rendered smaller because not all members of that market are in the marketplace at one time, or even interested in the new product.
A new product must compete for a share of the market with existing products that do the same thing. It should be kept in mind that few, if any, developments are so radically different as to have no potential competiton for market share. The price at which established products are sold limits the price for which a new product can be sold. For a new product to rapidly gain market share, it must be reasonably priced versus the competition, potentially much better than the competition, and current users must be very dissatisfied with the competing product.
On a practical level, the people to whom a product must be marketed are not the ultimate consumer, but the prosthetist-orthotist who will render that product into a form suitable for a particular patient, and who must also frequently convince the physician to prescribe the device.
At any one time, there are said to be about 2,000 practicing prosthetists-orthotists; that is hardly a mass market. Prosthetists-orthotists as a group are not the easiest group to introduce to a new product. Most of them have experience with one or more products that, despite the manufacturer's best efforts, were released before all the problems were worked out. Like the car buyer who chooses not to buy a car during its first model year, they prefer to wait and see. Others, while interested in trying a new product are "waiting for just the right patient." On the other hand, a disconcerting number are all too ready to rush in without thought.
Battling for preeminence in every prosthetist-orthotist's lexicon of adages to live by are the two:
If all else fails, read the instructions.
Don't force it, get a bigger hammer.
Every manufacturer can recount instances of practitioners who provided a device to a patient for whom it was specifically contraindicated, or who neglected one or more crucial precautions in fabricating the completed device. This can result in a wave of negative word of mouth publicity despite a manufacturer's best efforts to promote a new product and educate the profession about its proper use. The end result may be passive indifference, or active rejection whatever the positive merits of a new device are when it is properly prescribed and utilized.
A developer of a new object has a vested interest in making it work successfully and will go to considerable pains to make it do so. It is a well recognized fact that a product, when transferred to even the best motivated and prepared practitioners, seldom works as well as it does for the developer.
In summary, then, the following points can be made:
The following factors are sizable expenses:
Research and development of the original idea to a workable prototype
Production design
Tooling
Manufacturing
Quality control and testing
Marketing
Considerable uncertainty surrounds the business of gauging market size and reception for a new product.
However well an object sells, the field of prosthetics and orthotics can hardly be said to constitute a mass market of sizable proportions.
Experience has repeatedly shown that it takes three years to achieve a profitable volume of sales once a new product is introduced.
The result of these facts is that the manufacturers of items for use in the prosthetic and orthotic market are confronted with the need to make sizable initial investments for a rather small market that is oftentimes slow to adopt new products of even the greatest merit. Considerable uncertainty surrounds the decision to make the investment and it can take many years for a return on the investment to be realized and the decision to be vindicated. Given these facts, it is understandable that manufacturers differ from developers and their backers about the utility and acceptability of many developments, and that they are slower to adopt new products than others might wish.
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