Featured in Alltop StartUpRoar

Tuesday, April 12, 2011

Did You Examine the Competitive Landscape for Your Future Market?

You are moving closer to consolidating the business opportunity and have negotiated rights to a technology in an area you are excited about.  You are prepared to management of your relationships and recognize this is an ongoing need.  You picked a lead product and examined the market potential and know it has a sufficient market to attract partners or investors.  Did you remember to explore where the competitors are likely to be by the time of your product launch?

This is not a simple task to perform, but it really needs to be considered.  Let me give you a few hypothetical examples or at least embellish a few real life examples.  Suppose you are planning to develop a product for treating cancer in a potential market having 200,000 patients annually and cost of product being around $50K each; i.e., a $1B market opportunity!  Not bad.  You know it will take at least 6 years and a cost of $80M to develop the product. Your clinical studies needed for approval would be treating end-stage cancer patients and there is currently no existing therapy for this population.  Again this is good!  What do you think would happen if a competitor launched a new product that completely cured the cancer you were trying to treat?  That would be a total disaster for the NewCo and you!  Suppose it was not a complete cure, but just before you were running your final studies the competitor’s product was launched as an effective treatment for same group of patients.  Now the FDA requires you to run a comparison study against the competition and show NewCo’s product is superior or at least the same.  NewCo now must plan to purchase the competition’s high cost drug for the study and enroll many more patients than previously anticipated thus escalating the cost of the trials.  Also, you now have to prove NewCo’s product to be at least as good or better or fail to gain an FDA approval to market the NewCo product.  Don’t think these kinds of things do not happen, they do.  Your best hope of keeping out of trouble is to constantly review the landscape of the competition and adjust your programs accordingly.

A second reason to explore the competition is found in the following example.  Suppose you are preparing to launch a product into a $2B potential market.  You have two competitors already in that market and both are very large companies.  They have an aggregate sales total of only $50M and that is after they have been aggressively selling product for 2 years.  To make things worse, the aggregate competition sales force is 800 people and your NewCo can only afford 30 people for the first two years of the launch.  You plan to raise the funds to hire your 30 sales staff to prepare for the launch.  Think about what questions you will encounter from investors when they see very low market capture and high number of the competitors’ well trained sale staff already in the market.  Your ability to raise the needed capital will be complex at best.  Making the situation worse is that your ability to capture market share post launch is likely to be hindered by significantly fewer sales professionals competing against a huge competitor force.  This stuff really happens!

From the time you select your product opportunity to the time you pull the product from the market, great care is required to ensure you optimize market capture/sales and make money.  As we prepare to develop the business plan and slide show needed to raise capital and find partners, recognize that your competitive landscape and many other issues will be addressed in these documents.  You also want to consider answers to key questions that are likely to come up that address your market, percent capture, and competition.  

This brings up another point I address with companies I help.  When you are deciding on what products to pursue, think of what the actual product to be marketed will claim to do.  What will the label read on the product?  Work backward to lay out your development plan to achieve that labeling.  When starting a vacation, determining the location of vacation and what you want to do there is usually the first consideration.  Then you develop all the plans to get there, side trips, who you are taking, and budgets etc.  In a similar manner, you need to do the same when laying out your product development programs, budgets, personnel needs, and other aspects of the company.  Determine where you are going and who you have to share the market with early and plan accordingly.

As always, I appreciate your comments, suggestions, and questions.


You can follow Taffy Williams on Twitter by @twilli2861 and you can email me with questions at twilli2861@aol.com and my company website is at http://www.ColonialTDC.com .

No comments:

Post a Comment