Entrepreneurs often pitch new products by comparing them to familiar ones—for example, describing Instacart as the Uber of grocery shopping or Nest as the iPod of thermostats. These comparisons can help attract investors and entice consumers.
“There is significant research that firms shouldn’t aim for maximum novelty when developing and releasing new products,” says Harvard Business School's Tiona Zuzul. “Whether you are trying to attract customers or venture capital, it’s helpful to use a reference point because it anchors expectations about what the firm’s new product is going to look like.”
But do comparison tactics help companies win regulatory approval? Zuzul, the Ralph J. Maffei Associate Professor of Business Administration, explores that question in an article “Strategic Positioning and Accelerating Regulatory Clearance for New Ventures,” published in Strategic Management Journal in February. Zuzul cowrote the article with University of Washington Foster School of Business Associate Professor Emily Cox Pahnke and Iowa State University Professor Michael Howard.
The researchers examined a trove of letters written by medical device companies to the US Food and Drug Administration (FDA) to see how companies could strategically leverage required comparisons to past products, as mandated by the FDA, to speed the road to approval. They found that some comparisons are effective in shaving days—and in some cases, weeks or months—off the approval process.
The reason: Firms could use product comparisons to help overworked, stressed regulators better understand a new product, the researchers say. “Anytime you want to join a club of any kind, it’s helpful to look like you belong in that club already,” Pahnke notes. “It’s not about tricking regulators—it’s about giving them clarity.”
The research also revealed that it matters greatly what products businesses use as a reference point, as well as when they use them. For startups racing to bring new products to market as investors increasingly demand tangible results and a credible path to revenue, the findings offer insights into easing the bottleneck of regulatory clearance.
Many businesses wait months or years for approval
Getting over the hurdle of FDA approval is critical in the medical device industry, where firms often strive to maintain strict timetables as they compete to launch products faster than rival companies. In an analysis of 239 new firms’ clearances between 2001 and 2019, the researchers found an enormous range in the amount of time approvals take, anywhere from seven days on the low end to 800 days—more than two years—on the high end.
In more than 50 interviews with founders and regulators, the research team discovered that the time difference can make or break a product.
“One founder said to us, ‘You don’t understand. Whether we’re delayed two weeks or three months, my investors don’t care if it’s the FDA’s fault—being close isn’t good enough,’” says Pahnke. “‘We have to have this officially stamped, or we’re going to miss a big conference where we can market the device, and then our investors won’t give us the next round of funding.’”
The right comparisons speed approval
The researchers hand-coded letters from firms to see how often they cited similar products in their applications, then examined the impact of these citations on the number of days devices took to earn approval. They found:
More comparisons can slow approval. For a company’s first-time products, citing a greater number of comparable products didn’t translate into faster approval. In fact, applications were approved fastest when firms cited just one comparable product. Each additional comparison increased approval time by 8%. As one entrepreneur they interviewed said, “If you have too many predicates, it confuses the situation.”
The closer the comparison, the better. Applications that compared a new product to an approved device in the same product category had an 80% chance of approval within 200 days. Meanwhile, applications citing an item from a different product category had only a 20% chance of approval in that timeframe.
A focused comparison makes regulators’ jobs easier. Interviews with regulators revealed that a single, clear comparison to a similar product reduced the cognitive load of evaluating a new product’s safety and effectiveness.
Citing a category’s “star” product helps even more. The researchers also pored through the letters to see what products were cited most within each product category. They found that firms that cited one of these “star” products in their first application were cleared faster, with about a 65% higher likelihood of approval at any given point in time. The reason, the researchers say, is that a well-known product gives regulators a familiar benchmark, and one that has already met the agency’s standards.
“FDA regulators are sorting through so many of these applications,” Zuzul says. “Your job as a firm is not necessarily to convince them of anything so much as it is to make their job easier.”
Subsequent products won faster approval when compared to the firm’s own product. When seeking approval for a second product, firms reduced approval times more substantially by comparing it to their own previously approved product than to a star product from another company—even if their own earlier product was not widely known.
“If you are telling the regulator in your application that your second spinal screw is the same as your first spinal screw, it doesn’t really matter if the regulator knows what your first spinal screw is like,” Zuzul says. “They’re going to believe you.”
How companies should navigate regulatory approval
While the researchers studied medical devices, they believe the results could be applied more broadly to industries that rely on regulatory approval for success. Based on the findings, the research team makes the following recommendations about positioning new products:
Facilitate a straightforward comparison
Choose a first product that regulators can readily place in an established category. When deciding which product to bring to market first, consider how easily it can be compared with a familiar, previously cleared product in the same category. This can help regulators understand the product more quickly, potentially reducing follow-up questions.
Make the case using a single similar product
Resist the temptation to cite numerous comparable products to demonstrate that an innovation fits within an established category, since a single comparison can speed review by giving regulators fewer competing points of reference to assess.
Plan a product pipeline with future approvals in mind
Companies developing a series of products should consider how an initial product can serve as a useful regulatory reference point for subsequent ones, allowing each new item to build on the approval of its predecessor, rather than relying on comparisons with a competitor’s product.
“One can have a real impact on regulatory approval through these kinds of framing strategies,” says Zuzul. “Firms often think about regulators as stakeholders we need to be persuading, when they really need to be thinking about: How can we help these stakeholders do their jobs?”
Illustration created with image from Adobe Stock.
