Medical device incubators and accelerators help innovators launch start-ups and bring devices to market. While at first glance The Innovation Institute appears to be just that, President and CEO Joe Randolph started the company with a slightly different approach.
Randolph knew from his background as COO and CFO at St. Joseph Health System that these institutions weren’t set up to offer technology transfer and often don’t have a culture for advancing innovation. Technology transfer incubators are more common in academia, but funding is always a stumbling block when moving medical device development toward commercialization.
So Randolph came up with a new approach.
“We started by visiting hospitals around the country – Cleveland Clinic, Mayo Clinic, Kaiser Permanente Garfield Specialty Center, and others. What we found was that there are a lot of good organizations that are great centers of innovation, but many are focused internally, with the exception of Cleveland Clinic with its Innovation Center,” Randolph explains. “Next we looked at stand-alone incubator models and realized that, while they get investment and funding that is betting on ideas that will come to market, the runway for commercialization can range from five-to-seven years. Often, the startups run out of funding around year three, having to go back and raise more to continue.”
It was after seeing all the various operations in the sector, and how they operate, that Randolph realized he needed to have a different model, which starts with being self-sustaining. He also wanted the company to be collaborative to bring people together – one that would be independent and operate separately from bureaucracy and politics of hospital systems and how they make decisions.
3 parts make 1 institute
And so began The Innovation Institute (TII), comprised of three elements – an innovation laboratory, investment fund, and enterprise development group.
TII is authorized to have seven non-profit health systems as equity investors or member owners. Each investor holds a seat on the members committee, with day-to-day operations managed by a board.
The heart of TII is the lab, the incubator/accelerator that works with clinicians to bring ideas to market. Based in Newport Beach, California, onsite tech-transfer experts at the lab work with inventors to advance innovation. Through a strategic alliance with Cleveland Clinic, the lab is able to gain depth and subject matter expertise as needed, while its social ideation software – Brightidea – is used to conduct targeted innovation challenges.
Next is sustainability of TII – the Enterprise Development Group, referred to by Randolph as the economic engine that drives the cash flow to support innovation – and what differentiates this model from existing incubators. The Innovation Institute owns a portfolio of companies that provide services to hospitals across the country, with profits from these companies invested in innovation and to support the lab. Each of the companies are for-profit LLCs with no requirement that these member owners use the portfolio companies.
The final of the three areas is the growth fund, which will invest in companies that have innovative products. Once TII seeds the fund, most of its future capital will come from private investors. While the lab is primarily focused internally to advance innovation, the fund will focus externally on what other organizations are doing, bringing market intelligence, and providing significant synergies with the lab.
Ideas to commercialization
Randolph explains that in his talks with various health systems, as he was starting TII, he found that some only wanted to work internally to drive innovation. Yet, on the other side of innovation was the Cleveland Clinic that was open to collaboration, knowing that there are only so many employees and physicians they could tap into within their system.
“They were open to the idea of TII, knowing that by bringing many people and ideas together can help bring more to market,” Randolph says. “It’s a win for them to be part of new ideas on the road to commercialization.”
The lab in Newport Beach is where development starts, combined with using local designers, manufacturers, vendors, engineers, and nearby academic institutions. One example Randolph gives is an agreement they have with the California Institute of Technology (Caltech) – bringing additional expertise in areas such as wireless technology. Additional examples of partnerships that form the backbone of taking ideas to market are companies such as Boston Scientific, Dell, Deloitte, and others that help underwrite the lab – all interested in co-developing products with TII and tapping into its portfolio of ideas.
Tapping into ideas
“Many ideas are embedded in health systems, and if they are standalone, they don’t have sufficient funding. We are all about tapping into the frontline clinicians and getting their ideas and mining them, helping evaluate and take them to market,” Randolph says.
He goes on to note that he has not seen a model similar to TII – one that is interested in advancing innovations and investment. It is doing just that, getting a return on investment within six months. His reasoning for large health systems not going down the path TII does is because they don’t like to take risks. This detached culture, where healthcare is risk-adverse and ideas for new products require risk, stems from healthcare facilities naturally being based on risk-avoidance to protect patients.
According to Randolph, “You have to take risks and reward failure to pivot to find the solutions to the big problem. And much of what comes to TII are people with passion for ideas, and that adds an emotional side to it as well. That’s one of the favorite parts of my job, hearing stories and ideas and seeing their passion, knowing we can take the risk on them and their ideas to follow them through to commercialization.”
A terrific example Randolph points to regarding taking risks or missing out are examples of when he was with health systems, and a surgeon would suggest changing an angle or tip of a device, but because the product wasn’t theirs, nothing could be changed. However, once suggested to the OEM, within a few months that option might become available with health systems paying a steep premium for this design – one that actually originated from the surgeons that used it.
Today, Randolph is working to “tap into these ideas early and capture them before they seep out of the surgeons’ grasp. We are doing this to make a difference, advance innovation in healthcare, and innovating for the long haul.”
The Innovation Institute
About the author: Elizabeth Engler Modic is the editor of Today’s Medical Developments. She can be reached at 216.393.0264 or firstname.lastname@example.org.