Diagnosing a MedTech Startup

Houston, Do We Have a Problem?

The first sign of trouble at a startup often arrives with your feelings. Maybe you feel like things are moving too slowly, or like your team is mired in the details rather than making progress against your plan. Maybe you feel like your team’s work isn’t up to your usual standards. Or perhaps you’re worried that you lack sufficient visibility into your organization.

If the issue is real, it will grow from a feeling to an observable problem. Deadlines are missed. Budgets are shattered. You’re hit with negative surprises, such as escalating rework.

As a problem becomes more apparent, you’ll start to wonder where it is. Were the budgets and schedules wrong? Or is the team not working as they should?

The purpose of this diagnostic is to systematically reveal where your business is, and what’s holding it back. Note that many of the points are US-centric.

Before we get into the details, use these diagnostics with a “measure twice, cut once” approach. In other words, if you’re not facing an emergency, investigate the diagnostic questions with some rigor. Don’t just meet with your direct reports; also have skip-level meetings with individual contributors. Use tools like consultants, anonymous suggestions, or raw data.

If you are facing an emergency and need quick answers, you’ll need to rely on your instincts. Imagine that, for each diagnostic, the answer was “no,” and consider how that would show up in your organization. Some of those visions might look a lot like the emergency you’re facing today. This should yield a short list you can prioritize.

Finally, when the stakes are high or there are leadership questions, it may be wise to have a board member or outside consultant diagnose the organization. Someone who is less involved in day-to-day operations can provide a less biased perspective and potentially improve the credibility of the results.

First, Know Your Long-Term Vision

If you don’t have a detailed long-term vision, you’re not alone. The first thing I ask CEOs when they explain their project to me is a variant of, “How do you want your business to be different a year after this project?”

One year hardly constitutes a long-term vision — this question is meant to assess the project's impact. But the question often reveals a chronic short-sightedness that patches up today’s concerns without checking the long-term compass. I once had a CEO give the wonderfully honest answer along the lines of “I’d like to take advantage of this project,” which is circular. The output of a project at the CEO level should reflect progress toward a larger goal, not clicking a single checkbox.

To drill down to the progress aspect, I ask, “Besides the completion of this project, how is your life or your business activities different afterwards?”

If the CEO can’t explain what change they’re looking for, we need to find it; otherwise, consulting won’t help. To paraphrase Alice’s Adventures in Wonderland, if you don’t care what you get, any approach to a project will work. So, diagnosis must always start with a preferred condition we’re working toward.

These clients sometimes haven’t thought through their vision in concrete terms, and sometimes they’re surprised to realize that the project they requested doesn’t match their desired outcome. Considering that a MedTech product roadmap might last five or more years, that’s a real problem.

Getting work on that scale across the finish line requires not only guardrails but also long-term principles that both raise the level of ambition and make decisions easier. For instance, if your vision is to deliver the world's best patient experience, any questions about cutting corners in design and user experience are off the table.

Here are some concrete outcomes you might base a vision around:

The first X where surgery for the final commercial product takes less than one hour to complete on average
The first X where 90% of all patients can complete the maintenance tasks without clinical assistance
The first X where 80% of patients report a score of 70 or better on the clinical diagnosis scale within 90 days
A competitive X that is profitable at a fraction of the competition’s cost
A portfolio of patents to create a competitive moat around the product
The most effective treatment for X for this clinical outcome…

Diagnostics

Do you have a detailed long-term vision for the business?
Does the vision include specifics such as dates, revenue targets, and other metrics?
Is the vision ambitious? Does it create a competitive business?
Is the vision specific enough to measure when it has been achieved?

Multi-Dimensional MedTech Chess

Compared to MedTech, my B2B SaaS friends have it easy. So much of the MedTech game is fixed by the regulatory pathway, quality systems, manufacturing, evidence, reimbursement, and fundraising gymnastics. Many of these concerns must be managed simultaneously and years before a product’s commercial phase. The costs and regulatory controls mean MedTech has a minimal margin for error.

Any MedTech diagnostic must include an assessment of each critical pathway and how they relate to each other. This starts with understanding which regulatory pathway you must follow. Is it 510(k), De novo, or Premarket Approval (PMA)? What class and category does your medical device fall under? These factors determine the evidence you'll need to collect and the level of scrutiny you'll face from regulatory agencies. All of these factors affect time and cost, and will require regulatory expertise to navigate. (For a deeper dive into regulatory strategy, see Regulatory Due Diligence 101.)

These regulatory questions also inform your investment strategy, product development, and clinical approach.

On the investment side, a 510(k) product generally requires significantly less funding to bring to market than a PMA product. Investor due diligence will also be higher, since the PMA path entails greater risk.

From a product development perspective, you’ll need to align your product with your expected clinical endpoints.

The clinical evidence you need (and therefore cost) will also heavily depend on your regulatory needs. Acquiring that clinical evidence may be one of the most expensive and difficult-to-plan activities. You'll need to negotiate your clinical endpoints with your regulators, agree on an experimental design, and partner with the right MDs and clinics. The clinical team will need to work with manufacturing to ensure an adequate supply of devices. You’ll need to recruit study participants and support them throughout the study. As challenges and questions arrive, the clinical team will need to work with R&D to investigate solutions.

And then there is reimbursement. Does your actual manufacturing cost (not just the BOM) support your commercial reimbursement strategy? What about your operational cost?

Then there’s manufacturing. Did your design efforts yield a robust and reliably manufactured device? The more customized aspects and design complexity in your hardware design, the more work you’ll face either in improving the manufacturing process or tweaking your designs. Can you secure the components and other supply-chain needs, and ensure availability where possible? This work affects not only R&D but also your clinical team, budget, and timelines.

All of these concerns must then work within your quality management system (QMS). You must balance the planned, documented rigor of the QMS with the urgency of a startup at every phase. The QMS documents the design process, hazard analysis, evidence from clinical trials, and more for regulatory assessment.

Each discipline must collaborate with the other disciplines and ensure alignment. For instance, if the clinical trial team observes that surgeons struggle to interpret a readout, the product team should consider whether the design should be improved before the commercial phase.

If the disciplines are siloed, that creates blind spots where unexpected problems can persist for years.

Diagnostics

Do you have leaders for each MedTech concern (e.g., regulation, reimbursement) appropriate for your stage, class, and category?
Do these leaders regularly monitor each other’s status to keep in sync?
Is everyone in the organization aware of the goals of each of these MedTech concerns?
If you’ve started manufacturing, do you have eyes on yield, reliability, and failure mechanisms?
If you’re within a year of commercial launch, are you on track for manufacturing, marketing, and operating a sales organization?

Know Your Constraints

Every business has constraints, and startups have even more. You have limited money and time. That’s a given. You also have limited expertise and visibility into the marketplace.

Some of these constraints are inevitable; others are not. It’s up to the CEO to identify those constraints early and act strategically to reduce their impact.

For instance, startups, especially those in heavily regulated sectors, often need to raise multiple rounds of funding. A CEO without a strategic mind can easily fall into the trap of raising funds at a stage where funding will inevitably become an emergency. If funding is an emergency, investors will have tremendous leverage over your business. (For practical strategies on navigating difficult fundraising environments, see Fundraising in a Difficult Capital Raising Environment.) I have seen it many times: layoffs, massive dilution of the employee and investor equity, and sometimes even a sale of the company at a fraction of the invested capital.

Any startup that doesn’t know its constraints will face unpleasant surprises.

Diagnostics

Do you track your burn rate monthly?
Are there financial controls?
Do you know when you will next need to raise funds?
Do you have a plan for scaling up and down different parts of your organization as you move from one phase to another?
Do you monitor the competitive landscape and reimbursement changes?
Do you periodically review regulatory guidance as it (or your operation) changes?

Goals and Milestones

Constraints and long-term vision must inform goals, which should be broken into milestones. The reason for this, of course, is that time is a resource.

Goals, such as completing a design phase by a certain date, set expectations for work. Milestones are specific criteria with associated dates that indicate progress toward the goal. For instance, you might design a new version of a blood chemistry monitor that you want to complete in two years. A milestone might be the completion of the electronics PCB layout by month eight. A new package design by month ten, and an integration test of the prototype PCB and package by month eleven.

Goals and milestones should be informed by the team's estimates, not by decree. Your team needs to own the estimates and have responsibility. If estimates don't align with the constraints, the next step should be a discussion of trade-offs. (For a framework on prioritizing uncertainties and focusing on what matters most, see From Idea to Impact.)

Diagnostics

Are estimates backing goals and milestone dates set by the people responsible for implementing the work?
Do the goals and milestones fit within the business constraints?
Is project progress tracked at least monthly against goals and milestones?
Is there a clear process for alerting senior leadership to deadline threats?

Evaluate Your Current State

You have a vision, goals, and milestones. But where are you today?

So far, these diagnostics have focused on where you want to go. To get there, you need to plant a flag for your current location on the map. The coordinates for your current location include:

Your talent
Your culture
Completed relevant projects (e.g., a working prototype)
Progress against goals
Organizational function and dysfunction

The objective here is to evaluate where your current situation conflicts with your milestones. This activity may sound similar to estimating and planning, but the focus here is on your team’s performance so far and current composition. This examines both the skill sets required and the behavioral patterns within the organization. The longer a team works together, the more behavioral patterns are solidified into its culture. If you need to adjust team behavior, the easiest time to do so is today.

First up, you need to take stock of your team composition. Now that you know where you want the business to go, you should have a good idea of the talent you need to get there. What expertise and skill level will you need to add within the next year? Which skills will no longer be needed? (For lessons on hiring the right people for early-stage startups, see Five Mistakes I Made Building a Healthcare Startup.)

Next, consider how your team has performed so far. What progress has your team made against your stated goals? Are they being completed on time and on budget? Can you quantify progress, or do some projects have a generic, intangible status? Have the work products been executed to an appropriate quality standard?

Every startup builds at least two products. Everyone can identify the first product: this is the medical device you’ll sell. The second product is the organization itself. The organization’s performance is often given secondary importance within the business, but it can be a material factor for an investor or acquirer. After all, the organization has the full responsibility for building, selling, and supporting the product. The outcome of evaluating your current state is identifying areas where it can’t support future business needs.

For example, I once worked with a startup where an executive spent most of their time trying to sell a hypothetical future product rather than bringing the existing product to market. This executive would have been an incredible resource for the organization in the ideation phase, but during the commercialization phase, their behavior was a distraction from getting the current product across the finish line.

Identifying gaps between the current state of the organization and the required state is the first step in realigning the organization to achieve the stated goals.

Diagnostics

Are hiring and contracting decisions made based on needed skills and other relevant criteria?
Are priorities reflected appropriately by your budget?
Are all projects on track to hit their goals?
Is your team composition ready for next year’s work?
Are your key team members focused on results or on organizational politics?

Risk Landscape

Business and investment always carry risk. Not every great idea works out. The unforeseen happens.

Key people are the first risk. You might lose key people, including yourself, to other businesses, illness, disability, and other factors. You might also learn, too late, that a key person has a blind spot, isn’t as skilled as they seemed, or simply isn’t competent. That person might be you.

The way to mitigate key people risk is to ensure that institutional knowledge is captured, documented, and shared throughout the organization. You don’t want to discover you can’t access key files or critical accounts because a principal engineer, consultant, or C-level executive had a diving accident. These things happen.

It’s also useful to have a second set of eyes, whether a board member, executive coach, or psychologist, to offer perspective and guidance. This can include giving you the tough love your team can’t when you make a mistake or need to improve your skills.

Market risk is another risk every startup faces. What happens if you're developing a device for an obesity side effect, and a new drug cuts your TAM by half? What if you can't get the codes for reimbursement, or if clinicians simply prefer their old way of doing things?

Technical risk poses another challenge. If you can’t build it or manufacture it, you don’t have a real product. If the science behind the device doesn’t work, you don’t have a product. You can mitigate technical risk through prototypes, pilot studies, researching similar devices, and identifying evidence in the current body of research.

Co-founder risk can upend the most promising of businesses. Co-founder disagreements, especially if public, can provide a destructive distraction. I’ve seen more than one business held in limbo because a co-founder would rather the company fail than hire a competent replacement for themself, sell their equity, or have equity diluted through investment. These risks can be mitigated to some extent by an unbiased board of directors and clear vesting requirements for founder equity.

Finally, there is a governance risk. What if your investors (board members) can’t agree on your strategy, have conflicting goals, or simply can’t get along? This happens. Perhaps one board member wants to cash out early, while another wants to swing for the fences and aim for an IPO.

Diagnostics

Does critical knowledge have redundancy?
Do you monitor market signals (e.g., competitor press releases and patents) for signs of market change?
Do you have partnerships with M.D.s and researchers in your space who can validate your technology?
Have you validated that clinicians will adopt your product?
Do your key people receive coaching or mentoring?
Are co-founders aligned on vision, pace, exit, and contribution level?
Is your board aligned with your vision?

Root Cause Radar

When this diagnostic identifies a concern, most leaders want to identify a single “root cause” for that problem. While I recommend investigating serious problems, attempting to identify a single root cause can mislead investigators and create an environment where blame allocation is more important than solving problems.

If you read accident reports for commercial airliner crashes, you rarely see a single root cause causing a crash. Instead, multiple forces usually interact to cause the accident. This happens, in part, because commercial air travel is so safe. Many single-cause failures have been ruled out through improvements in design, safety technology, and operational practices.

While it is easy to say, “Well, Pat entered this incorrect value on line 37 of VoltageTransform.hh,” the diagnosis is bogus from an organizational perspective. Engineering best practices call for peer review, automated testing, training, and other interventions to ensure quality. Ideally, every critical task has a second person working to reduce the risk of errors. Ideally, a culture of quality ensures checks and balances not only from the top down but also from the bottom up.

This thinking doesn’t just concern work on a product. It also concerns how the business operates. If a project misses an important deadline, I rarely find that one person is responsible. Except in very authoritarian cultures, which are problematic for their own reasons, a missed deadline usually involves multiple people.

For example, there was a poor assumption that wasn’t caught. Or, the project status wasn’t monitored regularly. Or perhaps the project was understaffed, training was inadequate, or a key person left without a clear successor.

In short, the problems found in most organizations usually have multiple causes. Beyond any direct, obvious causes of that problem, there is often also a problem with how the organization works. Any investigation, therefore, should continue its search beyond some direct physical cause and ask how the organization might collaborate to avoid such problems in the future.

One technique frequently used to get beyond the single cause is the Five Whys. The Five Whys is a technique for tracing a failure to its root causes by repeatedly asking “why.” For example:

Q: “Why did the device fail early?”
A: “Because the wrong value was entered in VoltageTransform.hh”
Q: “Why was the wrong value entered?”
A: “It was a typo.”
Q: “Why wasn’t the typo detected?”
A: “Because the value was never reviewed or tested.”
Q: “Why was the value never reviewed or tested?”
A: “There is no process mandating a review of code or the testing of every voltage transform constant.”
Q: “Why are there no processes mandating a code review or test of every voltage transform?”
A: “Leadership did not consider code review a priority, and the voltage transform has no patient safety impact.”
Q: “Why didn’t leadership consider code review a priority, and why is patient safety the only criterion?”
A: “Leadership didn’t understand or value the connection between peer code review and quality; the business impact of reliability was not a priority during the design phase.”

You can learn more about the Five Whys here (https://asq.org/quality-resources/five-whys).

Another approach is the fishbone diagram (https://asq.org/quality-resources/fishbone), which helps look for contributing factors by category.

More often than not, root cause analysis uncovers something that you’d rather not see. Sometimes, it’s a mistake that seems obvious only in retrospect. Sometimes the root cause is an accident. Sometimes the root cause looks like a combination of arrogance, incompetence, and low standards. If you’re facing a big problem, you may see anger, resentment, fear, denial, arrogance, or cynicism.

What you find may require a mountain of effort and creativity to address.

Diagnostics

Do you examine problems through the lens of organizational improvements?
Do you investigate problems beyond the direct physical cause?
Are people who bring forward concerns in good faith treated with respect and protected from reprisal?

Conclusion

Based on this diagnosis, you now have a clear idea of where you want to go (your vision) and the corresponding goals to get there. You have a clear picture of the many MedTech-specific activities that must occur in parallel with normal business concerns. You know how your team has performed, and how it will need to evolve as your business evolves. You know your constraints. And finally, you have tools to help you analyze any deficiencies you may have identified.

Unfortunately, a diagnosis isn’t the same thing as a cure. Even once you know the cure, you have constraints. You have a board of directors. You have limited time and funds. You may even have limited political capital to effect the desired changes.

As you bring your product to market and mature your organization, you will likely face many tradeoffs like these. You will need to prioritize which issues to allocate your limited resources to. Is it more important now to improve your organization, or to stay focused on the product? Can you keep focus on your product without improving your organization? I suggest fixing the organization first—otherwise, you're accelerating in the wrong direction.

You may also find that your current progress isn't good enough to meet your constraints. How do you decide whether to pivot your organization, product, or business plan? Those are the types of questions that naturally arise after diagnosis, and I suggest addressing them as soon as they arise. Finding areas for improvement has no value unless it is followed by corrective action where necessary.

You might also uncover an unfixable problem. Perhaps you can’t hit your endpoints. Maybe the current reimbursement situation means the product lacks economic viability. Startups are risky, and sometimes the best option is to find a graceful end for the business.

In general, I think an organization should try to get ahead of its problems. If project milestones are missed due to significant delays or work products have serious quality issues, your organization is the first place to look. Many leaders instead want to add resources to the immediate problem. If your project is late, they hire more people to work on it in the hopes of “getting through” the issue. But the issue might be organizational, and your organization is the root from which the product tree grows.

Constraints are your second place to consider your diagnostic results. If any of these issues exhaust your resources (e.g., time or money), you have no choice but to address them.

Finally, in business, like in engineering, perfection isn’t possible. A good strategy works by deliberately preventing perfection; you don’t have the resources to fix everything, so you have to prioritize. Perfection doesn’t matter if you run out of money.