9. Going to Market

To all of our die-hard Kinnos fans out there, sorry for the long gap since the last blog post. We’re sure everyone has been dying to know what we’ve been up to, but truthfully, all of the most exciting things that have been happening are not fun to write about. For example, we’ve made significant breakthroughs on developing Highlight® for other disinfectant chemistries beyond bleach, but we can’t share anything due to confidentiality (who knows if there are any large corporations out there that have alerts every time we release a blog post, whereupon they immediately and very carefully dissect every word, scavenging for morsels of relevant information). It’s also not possible to write in detail about our talks with partners for bringing Highlight® Wipes to market (blame the NDAs) or the studies that are being conducted on the technology in hospitals (the researchers insist on publishing the data in peer-reviewed journals first instead of on our blog). So instead, we offer you this consolation prize – a heart-warming picture we took this summer with our superstar team!

 Kevin finally realized his dream of getting salad for team dinner.

Kevin finally realized his dream of getting salad for team dinner.

One great experience we do want to share is attending this year’s APIC Annual Conference, one of the largest infection prevention trade shows. Exhibiting Highlight® at APIC was like selling the only bone treats at a dog convention – it was awesome. Literally every person we talked to understood the importance of what we were doing and why Highlight® is so needed right now. Studies have shown that as much as 50% of healthcare surfaces are not properly disinfected, and that improvements in disinfection compliance and reductions in human error can reduce infections by 40-90%. While most other innovations in the infection prevention space are supplementary technologies aimed at addressing human error post-disinfection (e.g. UV-C light machines that are brought in after wiping/spraying down surfaces), we’re going back to the basics and improving human behavior as disinfection occurs in real-time. We might be biased, but we believe that empowering end-users to use existing tools properly makes a lot more sense than introducing radically different equipment and protocols. It seems like most people agree because we got just as much interest from potential industry partners as we did from infection preventionists at hospitals. Maybe this isn’t that surprising, but the more conferences that we go to, the more we realize that the real work happens outside of the exhibit hall – behind closed doors and on rooftop bars.

 This picture was taken moments before we headed to the aforementioned rooftop bar.

This picture was taken moments before we headed to the aforementioned rooftop bar.

While we can’t share specific partnership developments, a key takeaway we’ve learned is that going to market in the hospital space requires a lot of resources. As a result of the higher standards required by the Affordable Care Act to reduce preventable readmissions and improve quality of care, most hospitals have partnered and consolidated management by forming integrated delivery networks (IDNs) as a way to streamline operations and reduce costs, and virtually every hospital and IDN is affiliated with a group purchasing organization (GPO) that leverages the high number of hospitals they represent to get price discounts. There’s some overlap between the functions of an IDN and GPO as larger IDNs also have pricing leverage, but the general gist of things is that distributors such as Cardinal Health, Owens & Minor, Medline, McKesson, Henry Schein, etc., negotiate prices with manufacturers and GPOs and are then responsible for delivering products to the hospitals. However, the manufacturers of the products are often still ultimately responsible for closing the sale at hospitals. So to recap how this system works, we can simulate one way Kinnos might scale Highlight® in US hospitals:

Step 1. Build relationships with hospitals and get a few to adopt Highlight®. This is done through research studies, pilot trials, publishing papers, introductions from advisors/mentors/key opinion leaders, and/or meeting people at trade shows (like APIC). Once the hospital's key leadership approves the sale, spend months getting contracts signed and executed, and sell directly to the hospitals.

Step 2. Selling directly is an option in the beginning to show traction, but to scale a healthcare commodity, most companies tend to work through distributors. Once a hospital has decided to purchase, instead of spending months signing contracts with individual hospitals, have the hospital request the product through their distributors and then go through the process of signing distribution services agreements with each distributor (which could potentially take months as well), who already have agreements in place with hospitals.

Step 3. Either pay the distributors to market the product, or as most larger companies do, build out an internal sales and marketing team to develop more direct relationships with hospitals by basically repeating Step 1 in different local geographies (but without needing to sign individual hospital contracts since that’s what the distributors are for). While theoretically distributors should be incentivized to sell our product, it’s difficult to have a large distributor devote that many resources into marketing the product when they literally have hundreds of thousands of products in stock, with each manufacturer claiming that their product deserves individual attention. This is where niche or smaller distributors could come into play, but also why it’s important to have your own people on the ground working with hospitals and not relying on a distributor’s manpower.

Step 4. As traction grows, a major goal would be to get a large system (e.g. IDN, GPO, contract services group such as Crothall, Sodexo, etc.) to adopt Highlight® as a standard to bring in a lot of hospital customers at once. This makes it infinitely more difficult for a copy cat to take market share. But it also takes a long track record, brand recognition, and relationship building to make this happen.

As you can imagine, the road to profitability at scale is difficult, expensive, and time-consuming. But just as consolidation is occurring between hospitals, partnerships are similarly becoming more common among manufacturers. And this is why talking to industry partners has been so exciting. Given that Highlight® is intended to improve existing disinfectants that hospitals are already using, why reinvent the wheel when we can take advantage of existing sales and distribution channels and brand recognition? We’ve always viewed existing disinfectant products as complementary rather than as competition and we see this as the most straightforward way to make an impact sooner instead of later. There’s an argument to be made for higher margins working alone, but there’s another argument to be made about implementing a new technology successfully and at scale. The process of partnering is something we're learning more about everyday and hopefully our next blog post can touch upon this process.