Lessons to be Learned from Disruption in the Hearing Care Market
Paul Harkness has spent his career in hearing care, helping patients and providers. In this episode Paul explains the prevalence of hearing loss, why it occurs, how hearing loss actually effects patients, the newest trends in hearing care technology, how care is delivered and by whom, and what the business models are. He also shares how his company, Lantos Technologies, is providing a new product that can benefit hearing-loss patients and providers initially, with the promise of delivering a better experience for any device that is inserted in the ear. He also discusses his management philosophy, and the company culture he is living and building.
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Episode Transcript
This transcript was generated using an automated transcription service and is minimally edited. Please forgive the mistakes contained within it.
Patrick Kothe 00:31
Welcome. Every medical device market has its own unique characteristics. The hearing care market is no different. My guest today is Paul Harkness, who spent his career in hearing care, helping both patients and providers. Now, we all know what a hearing aid is. But most of us stay ignorant about the technology providers and costs until either we or someone we love has a problem. Paul is going to help us understand the prevalence of hearing loss, why it occurs, how hearing loss actually affects patients, the newest trends in Hearing Care Technology, how care is delivered and by whom and what the business models are. He also shares how his company Lantos Technologies is providing a new product that can benefit hearing loss patients and providers initially, with the promise of delivering a better experience for any device that is inserted in your ear. And I imagine there are a lot of you listening with one in there right now. Paul is currently CEO of Lantos. And in the past 27 years, he's held sales corporate accounts and senior leadership positions at AudConnex, Elite Hearing Network, Starkey, GN Resound, and Sonic Innovations. I really enjoyed talking to Paul about the market in his company, but also about his management philosophy and the company culture he's living and building. Here's our conversation. Paul, you've spent most of your career in hearing care, what drew you to medical device and hearing care in particular?
Paul Harkness 02:17
Hi, Pat, thank you for the question. So the The answer is I was very early in my career, working at 3pm, which I grew up in the shadow of in St. Paul, and happened upon the industry three, I'm had a hearing project way back then in the 90s. And so I was introduced to the group, and was working with them in more customer relations kinds of positions. Once I had that indoctrination, it became clear that this was a industry where you could feel really good about the outcome at the end. So helping patients helping people here better changing lives, it grabs you. And it's very difficult to let it go. I've had a lot of colleagues and friends over the years that have said to me, you know, if you stay in this for a couple of years, even if you didn't go to school for audiology, you will have a hard time leaving. And I'm another perfect poster child for that. I think that probably took it for granted initially that I was proud to work in a space that made a difference. But now I wear it very, very proudly that it's hard for me to imagine working in in a different arena that doesn't have the same impact on people
Patrick Kothe 03:35
just said that it changes people's lives. How does it change people's lives?
Paul Harkness 03:41
for so long, we have taken for granted the effect that not having the ability to communicate with one another. What that what that does, and so that there are all kinds of studies now that have been done at all kinds of research hospitals that talk about the connections of hearing loss to things like dementia, and cognition, chat challenges and other health conditions. But really a huge one is around loneliness and isolation. So in my mind, I see it as that connection between a mom and a child. But a lot of it ends up being a family and their parents, their grandparents and the fact that we for a long time. Those that have hearing loss have not wanted to admitted if that wanted to wear something and have chosen to separate themselves and not partake in life the way they did before. So that's what I have seen over time, technology has certainly improved, gotten much better. We've done a better job of helping patients meet patients where they are consumers where they are so we can give them something that's going to make a difference. And I've seen that, you know with my own eyes, I think just to highlight the point was able to go on On a hearing mission 15 years ago or so down in Guatemala? Well, I worked as part of the Starkey team, where you go to a third world country where hearing health is not readily available. Take what I already said. And then an accentuated with mothers and children being able to communicate for the first time together, it stamps on your heart. And it's, it's something you won't forget. And so that has always stayed with me, of course, worked very hard to support practice owners who are in the trenches helping patients every day, but won't forget the impact it can have in places where you just can't drive into a hearing center easily.
Patrick Kothe 05:44
That's really interesting, Paul, because you hear about hearing loss, but it's really your reframe to be communication loss, and connectivity loss. That's really the reason you know, the main result of this hearing loss. That's that's a very, very interesting way of framing it. So how pervasive is it? hearing loss,
Paul Harkness 06:06
it's more than you might imagine. So the latest numbers say there are 40 million people in the in the US that have a hearing loss that affects them. Interestingly, while 80% of those people could be helped with some sort of hearing device, about a quarter of them have taken action. So there's that there's a big opportunity out there to find ways to help people decide to take the next step and get help. There are phenomenal. Hearing hearing healthcare providers are all around the country doing that in a variety of settings. We still just haven't reached enough people.
Patrick Kothe 06:50
Well, I think we're gonna get into some of the reasons why in a couple of minutes. But let's go a little bit further into the problem and the demographics of the people who have the problem. So what causes hearing loss? And what ages do we really see it?
Paul Harkness 07:08
So hearing loss typically is other than if you are born with it, which which happens as well. But hearing loss generally is related to being around noise. And that could be industry specific and has been over over time, although we've done a much better job over the last decades at providing hearing protection, and thinking that through being preventative, but generally it's being impacted by the way we listen to the world. Interestingly, the the first time patient, that age hasn't really shifted much over time, it might surprise you, it's still something like 68 years old. And though the baby boomer generation, of course, has aged significantly, so there's a lot more 68 year olds out there now, we haven't done a great job of helping people get to the decision point earlier than that yet. So the sheer numbers are going to grow this business. And overall, the hearing business has grown significantly over time. But the reality is, people certainly are noticing impacts well, earlier than 68, I would say the patient base is more in their 50s, mid to late 50s. Now, or trying hard to help those people make a decision. It really isn't, you know, 60 years ago, when they first decide to do something, it certainly isn't when they decide, you know, when they decide to have a loss. And oftentimes it can be five to eight years before from the time where people notice something before they finally take take the next step.
Patrick Kothe 08:42
How good is the tracking of hearing loss? Because I would imagine that most people, but their spouse or their kids, you know, that's where they first hear it. But when does a professional start to hear about hearing loss in an individual?
Paul Harkness 08:58
Yeah, so I like I say, I think it's it's, a lot of times they don't even walk in and respond until mid to late 60s. But when they do, that's when they'll come back. And you know, they we do a workup on how did we get here? What are you experiencing? And that's when they start to uncover? You know, oftentimes because the the third party, the spouse or the loved one joins them for that appointment. And that's when they get the rest of the story.
Patrick Kothe 09:25
It's also interesting because when you go in for a wellness exam or physical hearing is not typically on that list is it?
Paul Harkness 09:34
It's interesting not not typically, to accentuate the point. There are a significant number of your nose and throat physician offices out there that these these patients work with all the time. Even within some of those realms, though they have an audiology a hearing, division within their walls, even those same physicians don't send all of those referrals Their own internal department. So that's gotten better over time. But as you say, for many years, we haven't made it obvious for patients that this is the next step, and that you should go see this expert.
Patrick Kothe 10:15
So let's dig a little bit into that 68 number. Why do people wait that long? What are what are the barriers to someone going and seeking out solutions to something that's preventing them from communicating with people?
Paul Harkness 10:30
the good and the bad news is that in my 27 years in the space, when I started, you, there was still a really big issue around stigma. Now, putting that hearing aid in a place that people are going to see is going to make me look and feel old. There's just there's no way around it. I think just in the last five years, Pat, things have really changed. Take hearing is out of the out of the equation. Think of the things that people of all ages put in their ears now to listen to devices, whether they're wired or wireless headphones, especially that it just isn't it isn't a big deal anymore. We even see younger generations putting the big bows, or Beats headphones on. I sincerely believe it isn't as big a thing as it once was. But to answer your question, when you're 60, something 50, something, even 70 something our pride doesn't go away. So that this is the reality of it is that people have felt for years, and I understand that, that this is an admission of aging. The good news is over time. Well, other types of devices have helped to shift that feeling I believe, the industry also has done a great job of making hearing aids less noticeable to others. So that we've gone through big shifts from these behind the ear hearing aids that are obviously pretty noticeable for men, especially without, you know, hair, covering it, to devices that fit almost invisibly inside of your ear that are custom made. Now we've seen a shift back to smaller behind the ear hearing aids, with a certain kind of custom earpiece inside, which yields better listening results, still provides a pretty hard to see device. But I do think the shift has been a positive one and that we we've helped patients become less concerned about what it physically looks like, that's been my perception over the last five to 10 years.
Patrick Kothe 12:31
When I was in my mid 20s, I thought I had perfect eyesight. And I went in and got a sight test and found out that I didn't got a pair of glasses, which, again, pride wise, geez, I need glasses. I'm not perfect anymore. so to speak. Yeah. And I remember walking out and looking up at the trees and saying there's leaves on that tree,
12:56
you know, there's,
Patrick Kothe 12:58
there's a shape around that stop sign. I mean, the amount of sight that I had lost or didn't have was just amazing to me. And putting those on really opened my eyes to be able to see that I was missing out on something. And really, I blame not being able to hit a curveball and not getting glasses. But in getting those I was I was amazed what a great tool that was and what a great addition to my life that was I am assuming that that's the same thing you hear the same thing from people who get good hearing aids
Paul Harkness 13:32
are very similar. And I'm like you I've used glasses since I was a young child. So you know, you don't build up a stigma when you when you're young because you have to have it. But I'm with you, I think glasses in many ways, which has always provided a fair or unfair corollary to to the hearing space. Glasses is such a clear, you know, improvement or not improvement is as they take you through all those tests. With hearing it can be a little bit more subjective, because everyone's listening environment is so different. I think the other reason that people wait a while is in a quiet one on one setting, which most of us spend a good amount of good amount of time in those settings. And I would think that's that's true as as, as we're older in our our lives as well. People can wait a lot longer, because in those settings, they can tough it out. My my words, right? When they start socializing and getting involved with their friends and being involved in other things like that. That's where they notice the challenge is more, but you're right, the moment that they can tell that they are now being able to hear something that they haven't heard in a long time. That is I say eye opening your opening, right so you know ultimately, that is what the professional can't say. Right? It's it's actually listening to the differences that if I don't have this in, I'm not going to able to go back in time and get that like I can with this with this device. The other challenge, of course, is just helping people reach those things, while still giving them a natural feel to it, you know, hearing aids of old, were ultimately amplifiers, which meant Yes, we'll turn it up for the things you need speech, but everything else gets turned up to and ultimately, that's very hard to listen to and very uncomfortable. We've come a long, long way where hearing aids are so sophisticated that they can, very minute Li identify certain sound sources and just give people the appropriate amplification and algorithm to give them what they need for that sound. And it's a matter a matter of getting that messaging that clarity out to others who maybe didn't have a good experience initially and have them jump back in again.
Patrick Kothe 15:55
As you said, you know, the old the old way of doing is amplification. And now we've got significant technology improvements to uh, to allow people to just take out the the things that is necessary to listen to, and then kind of blank out the rest or minimize the rest. There's been quite a lot of improvement and a lot of technology that's been applied into the hearing aid industry.
16:21
How does
Patrick Kothe 16:22
that come about? Is it been one company driving it? It's been many companies, you've got it? Is it old guard versus new guard, how's the technology kind of evolved?
Paul Harkness 16:32
So I, it's several companies. Number one, there's a lot of a lot of investment over the years, from a variety of companies, there's there's probably six major manufacturers that have carried that torch forward. And of course they have, many of them have a variety of brands within them. But the amount of research and development is has been significant, all of them, for the most part have delivered something significant that ends up becoming commonplace baseline technology across, you know, it wasn't that many years ago, where signals were processed analog, digital technology within hearing aids is not that old. So of course, everything that happens along those lines is here now. And we've made great strides specifically focused around speech pad, I think that that's been in my opinion, the big game changer is having the hearing aid. Specifically seek out the speech that you want, from the direction that you want. And then mitigate naturally as possible. The things that you don't want. Almost every company has done good work in there, some get there faster, and then another leapfrogs I think that the other thing that's that's become more of the buzz Now, is this idea around artificial intelligence and machine learning. There are companies that are specifically focused around how can the device literally overtime, get better? Based on someone's experience? How can it learn, just like we use that technology in all kinds of industries. So I think that's really curious to me to see how that goes. And there are some newer companies that are bringing that to life. So I think the space has been interesting to outside industries for a long time, I would say companies, and some have common and jumped in and others have have not made it for me. And you know, part of how why you and I are chatting as well as the pressure on practitioners is such that finding ways for a hearing aid, a hearing healthcare professional to separate themselves from non professional options has become more and more crucial. As I see some of these newer companies are coming up with new ways to provide patients with something that's going to get better over time, I think will allow professionals to continue to set themselves apart.
Patrick Kothe 18:56
So Paul, is it's safe to say then that the old basis of competition was the form of the product and year behind the year outside the year end. And now the basis of competition is shifted towards processing of the information coming in.
Paul Harkness 19:12
Yes, but I think it's still both. Did you think that that what's happening inside absolutely is a is a differentiator between companies No, no doubt about that. And thinking beyond what can I do today? What can I do something even more over time and learn? I think that's crucial. But I think the way we deliver the technology, the prescription to the patient is is also an even bigger separator. Now. I think that will be a key and that that can be form factor. That can be just the way that patient experience is handled inside the office. I think those are key separators because I still believe strongly that most patients are going to want an expert to take care of them just like we do with most of our other healthcare needs, being able to accentuate that in a variety of ways using technology, and workflows will be the next big separator to keep patients going to experts.
Patrick Kothe 20:15
So let's let's go to the provider who provides this service of hearing care.
Paul Harkness 20:22
So there's a couple of different groups that are licensed to deliver hearing health care. Over time, the educational aspect of our space has been really around an audiology degree. And so that for many years started out as a master's level, some years ago, 10 or 15 years ago, that turned into a an actual doctorate degree. So it's called an A UD. And so these are people that are highly qualified to provide hearing care, and all things related to testing and, and helping people with anything within hearing. So there's another group that is as licensed, they're called the hearing instrument specialists, they're licensed by the state, they aren't required to have an audiology degree. And they are able to dispense hearing aids, and do hearing exams. years ago, that was the bigger faction Pat, that has become much more of a minority, and the larger group of people that deliver our audiologists, both master's level or doctorate level. And then these live in different in different arenas, different settings. So there's still a large group of these people that work with the manufacturers, and help them with their research and their training meet needs. But in terms of delivering to patients that can happen in private practices, some of those are in retail settings. Some of those are in private practice audiology settings. Some of those are in medical, ear, nose and throat or hospital settings. This is where people have generally gone consumers generally gone for hearing hearing healthcare health,
Patrick Kothe 22:01
which ones are growing, which ones are declining.
Paul Harkness 22:04
So So as I mentioned, the hearing instrument specialist group as a as a whole, that we have had more of a dwindling number of people, new people coming into that. So the private practice audiology group is definitely is definitely growing. EMT groups are Nose and Throat groups, more of them are making audiology a focal point for their for their practices. That has not always been the case. So I'd say that that's growing as well. But overall, I would say audiology schools, we're not putting out nearly enough audiologists to meet the demand of the growing consumer need.
Patrick Kothe 22:43
So when a patient identifies, hey, I'm having problems hearing, I need to go and talk to somebody. what's the what's the top of the funnel there? How are they being captured? Are there direct to consumer programs that different groups are using to capture this group of customers? Or how do they learn about? Where do I go to get hearing care?
Paul Harkness 23:07
Great, great question. So first of all, it's important to note in the US, you don't need a prescription from a physician to go get help. So that that is very different than it is in other places. But I would tell you, there are some some national groups, but but by and large, it's local people in local markets, delivering messaging to help people learn about how they can get help. Certainly, that is local practices, as I mentioned, but over the last just few years, over the counter options, or options in other kinds of retailers, like Sam's Club, or Costco, these kinds of places has become more prevalent as well. So I would say for the most part, you're going to see messaging coming through local markets like that, of course, AARP and other groups like that are delivering messaging, as well. But to be fair, Pat, I would say that it can be confusing and overwhelming to the consumer, because they are getting mail and emails and messaging from all kinds of different places with all kinds of different offers. And it's probably, it's probably pretty challenging to try to weed through to figure out who the right person is.
Patrick Kothe 24:21
One of the other unique things about the hearing care market is reimbursement. Can you explain to us about reimbursement within this space?
Paul Harkness 24:34
That could be a whole nother session pad, to be honest, but I would just say this. Over the years, until very recently, the vast majority of hearing aids were paid for out of pocket. So insurance companies in general, didn't cover them didn't subsidize them. What's happened over time now is a lot of larger insurance groups, providing some sort of benefit to their members. And so this has become a much bigger opportunity and challenge for the market as it is for those that deliver hearing healthcare as it is. So I would just say, you know, there are Medicare Advantage programs, there are state Medicaid programs as well. But third party will become a bigger and bigger piece of, of where patients come from come through. So most practice groups are participating in these in some fashion. And there's large debates over its its overall impact on the industry. As I said, we could probably have another another session.
Patrick Kothe 25:40
So scope me, Paul, the cost, if it's out of pocket, the cost of someone to come come in, get tested, diagnosed, fitted, get a pair of, of hearing aids, and then follow up what what's kind of the range or an average cost to do that.
Paul Harkness 26:01
It's across the board, depending on market size, but I would tell you, it's somewhere between four and $6,000, for a set of hearing aids, depending on where you go, depending on what what technology level. Interestingly, many practices will charge you that amount. And then you will receive with that a certain number of office visits, no charge and follow ups and of the sort. Some other more modernized offices are now offering models where the hearing aid is one price, and then they'll unbundle their services. So you'll get maybe a lesser number of included visits, and then you'll pay something for some of the other visits and some of the other services. That's that's the typical setup.
Patrick Kothe 26:49
So we talked earlier about 68 and 25% of people adopting or not, are 75%, not not adopting. I imagine that cost is one of the other drivers within that as well.
Paul Harkness 27:05
I think it is, I think it is with a lot of studies have been done on this, though, Pat, I would say so. I think the belief has always been that price is a big part of it. There's they're great organizations, within hearing that have worked hard on a consumer level to understand their decision making process. And in truth prices, we've done this look, it's a it's a study that has been done many times over over the years called market track. And if you were to look that up, I think you'd find, interestingly price ends up being at least four or five, six on the list, you know, versus working with a professional and the quality and being able to address their listening difficulties tend to be much higher on the list than price. It certainly is a factor. You know, as the government stepped in recently to deregulate our industry, which makes the entrance of more over the counter options more realistic. The belief there was we needed better access, and we needed to make it more affordable. As you might imagine, supporting private practice all these years. I just don't think it's that simple. Regardless, the government has spoken. And so as in as in many industries, consumers will have more choices than they've had in the past, which makes it more important for practitioners to be really clear on why working with them is unique. And something the patient will want versus not having that personalized service.
Patrick Kothe 28:40
You referred to that earlier is that is that kind of what we're talking about here. And the reason why they want to be able to have unique offerings is it's not only competing against the other hearing services that are out there, but also this new wave of OTC big box competitors 100%
Paul Harkness 29:01
I, there is a belief out there with some that hearing aids in this is my opinion, but hearing aids can be consumer electronic in a way where people can self fit. And I just don't believe that's true for most patients. And yet, patients will be given that opportunity to try that out. The belief is for me that just like what we need for our eyes or other health, health, or other health needs that we have going to see an expert who has been fully trained in supporting our hearing needs is the right and best way for us to get to an optimal ideal state, not just in the prescription, but even delivering and how it's going to work for us. What's the form factor? What does that support look like? I don't believe for a second that a hearing aid is just a transactional thing that you just go Purchase, and then you forevermore handle on your own, helping retrain your brain to hear more naturally and go back and grab things that you don't you haven't listened to and heard for a long time takes time, it takes someone to hold your hand through the process, and reassure you and adjust based on their background, how to best meet your needs.
Patrick Kothe 30:23
What's interesting about that to Paul is if somebody comes in and they get the 20 $500, self fitted, self bought product, and they don't have a good result, you can go one of two ways you can either your goal and say, Okay, now Now I get it. Now I need to step up to the professionals and really do that or you pollute them for life. Okay, the hearing aids don't work, I tried them, they don't work. So it's kind of a high stakes game, at least for a stretch of time. And it's our belief that unfortunately, the risk is more on the downside than the upside. But it is the new reality. And so it just puts the onus back on the professional channel to make sure that it's clear to their marketplace, what they can expect to receive
Paul Harkness 31:09
in terms of service and results. But it's a really great point. It's the industry worked hard to to make these points clear before deregulation happened. And so we'll just have to keep working in our local markets to help patients understand why working with practice X or Y is worth it not just for whatever today's cost is, but for that assistance over time, which is really necessary. Again, no different than what you and I would do with our physical or other health, we would we would count on that person that's going to be there, we wouldn't expect it to to handle it all ourselves.
Patrick Kothe 31:45
Within a practice. If there's six major companies, do they carry all six companies hearing aids? Do they carry one or two? What's the basis of competition amongst the companies?
Paul Harkness 31:58
I think the best the best practices are hyper focused on being good at a couple of manufacturers. Most manufacturers have a good stronghold to be one of those two in many practices, but those that try to offer all of them. And equally, I don't think ever get great at any one of them, the top three or four companies probably have pretty equitable share. But the best practices are really hyper focused on a couple of great options. I would also say patients generally speaking, are going to that practice to count on the practice. And those practitioners are going to recommend what they think is best. Certainly, patients come in asking about company XYZ. But for the most part, they're looking for that recommendation.
Patrick Kothe 32:48
The companies are providing the products, the hardware, the appliances, the hearing aids, but they're also providing services as well, our companies have they stepped into the practice management side of things, have they stepped into promotion, and helping the practitioners build their business.
Paul Harkness 33:13
So there's a lot of ways to get that done now. So certainly the hearing aid manufacturers would love to corner that opportunity with their brand. In reality, especially in audiology, Pat, most practices don't want to be just focused on one, just from their education, they want to have options to best serve their patients. And so that's why they'll carry at least a couple, two or three lines. So so the manufacturers will certainly try to help with the business building. But there's also some great practice management groups out there. I've run one in the past that are primarily there to provide access to several different companies have products, but really to help them focus on how do they adapt their business model. in all ways, to better understand how to how to create success throughout the different roles within their company. How do they get the messaging right in their marketplace to help draw people in? And how do they best manage and optimize their operations to make sure that it works well for the patient, but also works well for the business. So there's a lot of good, a lot of good groups out there. I think there are also there's also, I would say a great faction of what I call key opinion leaders are early adopters that are constantly looking to use technology to help that lawn and make that more realistic. use different tools to help patients have a more tangible idea on why working with them is different than unique.
Patrick Kothe 34:50
Paul, I'd like to shift gears a little bit and talk a little bit about success and what you've done in your career because you've gone gone from a individual contributor to leading teams on the sales side and now as CEO, within this this marketplace when you're an individual contributor, what made you successful? What what what are the main things that that that you did that made you a successful individual contributor?
Paul Harkness 35:17
I think the answer is the same, believe it or not for individual contributor success, and for what I'm doing now, in the core, and it's really about the people, I believe what made me successful, whether I knew what I was doing or not at the beginning, Pat, is you build relationships, you build trust, and then you follow through. And I don't think that changes, regardless of where you move up, up in the ranks. At the core level, you still have to do those same things, that means you're listening, trying to identify the needs of the customer, and then you try to provide the solution, you don't show up and force the solution before you've even asked what problem you might be trying to solve. So I think that that was the reality for me was around building relationships, and then trying to try to activate whatever tool or solution I might have, or product and help that fit into their practice. As time has gone on, and I've been able to work with teams, I just really believe that people are the differentiator, you know, in our space and hearing, every company over time has, has identified and built and manufactured new products that that take us to the next step. They all have their their time in the continuum, sometimes get in the right place at the right time. Sometimes you have to wait for it. But at the end of the day, how you're going to separate it is what difference do you make, at the practice level, all of my years, even today, still highly focused on private practice and medical model? Hearing practices. I just believe in it, I believe that these people in their heart are trying to make a difference for their patients. That's why I feel like it's that same extension. As I as I've moved into building a leading business teams, I still believe that the separator is building a culture that people can buy into that, ultimately, which might seem unusual, but I believe it's true. Ultimately, if you build that culture internally, it will pervade into the customer base, have seen it, we've lived it, it's already happening with with my new position at Lantos as well, people want to work with people that can trust and that they that they like doing business with, and that can make a difference for them, and people they can count on. So I know that seems simplistic, but that that really is the heart of the matter for me is still the other critical pieces, you know, as the leader, you've got to hire people that are smarter and better than you at certain certain functions, and you have to your ego is going to be able to handle that. And I've never ever been tripped up by my ego in that way in that regard. So that's also been I think, a critical pathway for success for me, is identifying great people developing them, and then sometimes, you know, bringing people in, that we're going to bring something to the to the party that I didn't have giving them the empowerment to then bring that. So long answer. But I think those are the biggest reasons why I've been able to be successful.
Patrick Kothe 38:27
Paul, how do you identify those people that are going to share those same values and are malleable, malleable enough to be able to fit within and grow within your culture.
Paul Harkness 38:38
It's hard work, Pat. And you know, in today's day and age, especially where you're doing so much virtual, it's a lot harder than it used to be trying to identify those people. To me, you have to have a process or use tools as you're trying to hire, to determine ahead of time, if they might be built that way. And, you know, I've been very fortunate to hire a lot of the right people. And like everyone, Pat, I've hired some other people too. So the other critical. The other hyper necessary thing is when you hire the other people, for their sake and for you, you have to be brave and courageous enough to not let the wrong person stay in your in your correct culture. It's not that you're looking for that to be the case. In fact, I'm always in search of catching my people doing something right. But when someone isn't a fit, then you've got to help them find a place that is a fit for them.
Patrick Kothe 39:38
Yeah, I just saw some some research recently about the effect of keeping someone with a negative attitude in your team. And it is profound, just profound, how they can drag the total performance down just with one negative attitude within a high performing group. And the other thing that I've seen is when when you've got somebody Do you like that the rest of the team knows it. And they're looking at the leader saying, I can't believe this leader is not taking action on this. This is somebody that doesn't belong within our team. And it disenfranchises the people that are that are in the group and brings the leaders reputation down.
Paul Harkness 40:17
I 1,000,000% agree with you. It's a recipe, lose your best people. And it's a recipe to create factions in silos inside your business. And I have always taken a strong line on that I've, in my past, been fortunate to work for groups that allowed me to hold that line. And I just believe that there's nothing more important. Regardless of your technology, there's nothing more important than then protecting your culture.
Patrick Kothe 40:46
When you go to hire somebody, do you have criteria that you're that you're looking for? I mean, not not skills, but different criteria about the type of people that you'd like to have working in your organization?
Paul Harkness 40:58
Certainly, and it's hard. I mean, sometimes you can use some some assessment tools, I've used those effectively. In the past, I don't think a resume gets it done. Really, I try to involve as many people on my team as possible in the interview process. So make sure you don't have blinders on. But I try to work on asking questions and getting some background from them that will help me understand how they're really built, regardless of what the answer is just how do they think, how do they How are they built? Like you asked me, what's made you successful? In my opinion, hiring on individual talents and skill contribution alone is again, not likely to work out well, in the culture that I am building. It can work well, for others, for me, doesn't really go as well. You know, at the end of the day, I'm looking for selfless drive. So it's not so simple to get to let to get somebody to open up to make sure you can understand if that's who they are. That's what I'm constantly looking for, though, I need some way to determine Is that who they are hyper driven, hyper successful, but doing it through other people. And when you find those people, they'll be loyal as long as you protect the culture.
Patrick Kothe 42:13
selfless drive, I love it. Paul, let's talk about Lantos. Tell me about what Lantos is all about.
Paul Harkness 42:21
So very excited to be a part of and lead the Lantos story, it's a 10 year old story, it began at MIT. The belief all along was let's build a 3d ear scanner that provides a more comfortable experience for the patient, and a more accurate digital geometry view of their ear, so that a practice could then offer endless personalized options to a patient. Of course, it relates to hearing aids, hearing aids have been customized, as I mentioned, for many years, you can purchase form factors that literally are performed to the inside of your ear. But getting a scan of your ear goes well beyond hearing it, you literally could customize the ear tips that you put in your ears with air, air or air pods, you could have custom hearing protection, custom sleep plugs, if we're honest as consumers, a custom experience is something we prefer, and helps helps us feel differently about who we worked with to get that experience. And that's what I think we should be providing at the hearing care practice level. We became the new version of Lantos earlier this year came back to the market under some new investment. And our goal is to make 3d scanning the next best practice standard of care across the professional channel. We believe that every patient that comes into an office should be scanned, it should be part of the intake process. And it should be a way for a practice to separate themselves from some of the other mentioned ways you can get here in care. As that is going to be our focus for our ears scanners is going to be the professional channel.
Patrick Kothe 44:15
Paul is better fitting lead to better performance of the device itself or better, better hearing it as well as comfort.
Paul Harkness 44:24
It's a whole host of benefits to the patient specifically but also to the practitioner as you say. Having a fissure ear means you will retain it where it needs to be meaning that the prescription that the expert, the audiologist or hearing care professional prescribed you will literally be delivered. What's been commonplace in more recent times are these smaller behind the ear instruments that are called receiver in the canal devices we call them Rick's so we put a ton of technology into the Ric device itself. But the piece that goes into the year are what we call three size fits, I say three size fits none domes. So the reality is one of them will fit a little bit, but they're constantly moving their, their their way in and out of the year. And most practices will admit to you that they their office spends a ton of time dealing with domes that don't fit resizing, the dome fell out. So we believe you shouldn't just be putting the technology in the device, you should be putting it, you know, into the the earpiece itself. So that's a big focal point for us is helping practices fits their Ric devices, they're receiving the kind of devices with a custom fit dome. The other the other big advantages of is comfort, of course, but but it's also when we're trying to create the right amplification recipe for the patient. If it doesn't fit there perfectly, you also can deal with what we've all heard before, which is feedback and squealing. So this this custom concept, personalizing for the patient also has huge benefits around noise reduction, and feedback suppression.
Patrick Kothe 46:12
So how does your technology work? What is it? What is it physically,
Paul Harkness 46:16
so we use a scanner that was developed as a set out of MIT, that then uses of proprietary balloon membrane of sorts, Pat, that inflates inside the ear, and then the practitioner is able to watch and let the patient be part of the process as they go through a scan path to digitally capture what their hair looks like. It only takes about a minute in here, it's very quick. But it obviously helps the patient feel like they're part of the process. And once they have the digital scan, that scan can then be uploaded to the cloud, where they're able to then order all kinds of different products from one scan. And that patient could order a custom Rick tip, as I mentioned today, next month, next year, they could order custom swim plugs, sleep plugs, custom hearing protection, all from that one scan. And the fact is that allows the practitioner to have a broader, more personal relationship with that patient, which we think really is worthwhile.
Patrick Kothe 47:20
Does the geometry of the year change over time? Or is it pretty much the same?
Paul Harkness 47:23
Not dramatically. If there were significant weight change, which isn't typical, then it might be worthwhile to take a new scan, but a scan you take today like that could be used for many years to come.
Patrick Kothe 47:38
So what's your business model, Paul,
Paul Harkness 47:41
the business model has shifted from the original company to the new company we are now and I think that is the biggest reason that we are having great six such great success in short time. Ultimately, we manufacture the scanner. And it's a scanning system. So it's a scanner, it's a laptop that's dedicated because of graphics needs. And it's our balloon membrane. The business model is this though we in the past, we're selling scanners. Someone else in our space also sells scanners and scanners used to cost 12 to $15,000 pet. So you'd have to have a pretty big capital outlay. And then we're also selling our balloon membranes, we've decided our new model is not one around selling scanners, we want people to have the usage of our scanners. So our new model is simply the fact that when people agree to use our scanner, meaning that they'll agree to purchase a certain number of our balloon membranes there used one per patient, we allow them to use our scanner at no charge. So they agree to work with us over a period of a year, we're going to place that scanner, we're going to get them the proper training that they need to become proficient. And then they're going to use that scanner over time. And they'll agree to on a monthly basis receive these blue membranes. This has been received very, very warmly. We've now I believe created a model around the usage, you know more the ink than the printer if you think of it that way. And it will allow practices in a much more reasonable way, get involved with how to use our system and not have as big of a burden upfront to decide to work with us.
Patrick Kothe 49:28
So let's go back to the to the practice again. How are they structured business wise, with with hearing aids? Do they buy them and resell them? Do they order them? Do they take them in and consignment? What's their business model?
Paul Harkness 49:44
Generally speaking, practices are purchasing a hearing aid. So they then have that cost of goods and then they're selling it to the patient at an upcharge. So that's typically how it works. There are other arrangements third party as well. talked about before again, and that arrangement for participating offices, they simply receive a fitting fee. And the cost of goods is not part of the equation, that fitting fee, of course, is not typically going to come close to what they would charge in scenario one. But they also didn't have to spend the marketing dollars to find an acquire that person, there's still some other arrangements where, you know, leasing options, where again, there's not a cost of goods piece to it. And if they work with that particular company, they'll receive, again, a fitting fee of sorts, but it might be a little bit bigger, bigger number. So that's how the practices operate.
Patrick Kothe 50:40
So I can see how your business model is very well received, because they don't they don't have that capital outlay anymore. And that's, I'm sure that that's a significant portion of their business right now. Not having that as is a real good thing for him.
Paul Harkness 50:54
Exactly. And I would just to just to follow up on how our model works to simplify even practices are going to pay a per membrane per balloon, dollar figure of $50. The question, of course, is, is that how do they handle that $50? Right, and so I would just just to be clear for you, because we're not shying away from it at all, we see it as a couple of different couple of different things. If if we were able to show people that the patient retention improved, because right now, it's it could be up to 50% of patients will buy their next hearing aid somewhere else. So if we could easily increase that number, if we could help them increase their NPS scores, and how that patient feels about the practice all of this, we believe, if we could reduce their cost to acquire, then we think a one time $50 investment in your patient, which then gives you the ability to work with them in a broader way than you did before is totally worth it. So we think a practice could absorb that cost, and have good reason to. However, there are other practices that may feel like they don't want to absorb that cost. And we talked earlier about about eyes, and we'd like it to when we go to the doctor, and the days gone by, they would dilate your eyes. Now they have machines, optional machines that don't require you to dilate the eyes and still get the measurements they need. They actually give you you know, more accurate a wider view and doesn't it doesn't impact your drive home. Right. But you have to pay 45 or 50 bucks for out of pocket. Patients generally. Pun intended. Don't blink it that I know I haven't. So for practices in our space, who feel like the $50 is something that is hard to swallow. You know, we've suggested to them that why don't you offer it as a as a service unbundle and many practices of unbundling unbundled many services. So I think there's a lot of there are a lot of different ways to manage the economics of this. I just believe that we have to change the habit, right? We just have to change the habit of making people feel like this should be part of their intake. We're trying to separate the decision about is that patient coming in today going to make a decision today? And if they are then oscan to we want that scan. And maybe they'll make a decision today. But if they don't make a decision today, they're going to make one at some point.
Patrick Kothe 53:22
Paul, how long has it been since you've rolled out this new business model?
Paul Harkness 53:26
So we became a company, the new Lantos, if you will, in November last year, we brought it back to the industry February. So it's only three months, and really started signing up customers towards the end of that month, we're already well beyond our expectations for gaining traction. And part of the reason it pad isn't anything magical. On on my part of the team's part, it's still back to the people. We have industry experienced leadership throughout my team. And that allows us and has allowed us to target the right key opinion leaders to jump on board. That that then helps activate them that to not only use our system, but then to go to their network groups and help influence them to jump in and the demand has been more than we expected.
Patrick Kothe 54:19
What are you looking to learn over the next year,
Paul Harkness 54:21
we're really looking to learn specifically from the practices that have jumped in just how across a variety of settings, how do we make this standard of care? We have our own ideas on it, but we really need the practices to show us in conjunction with us how to make that happen. And then I'm you know I'm looking for ways even on internal parts on our side Pat, of of how do we help create a faster path to proficiency on how to use our system. In order for us to scale we have we have a purposeful small team. In order for us to scale. We've got to get people to self learn how to get good at this faster. And so we're already investing in ways to look at different kinds of solutions to get us there, I think the next year is just going to be exciting. And ultimately, we're not going to have a big challenge, I think in placing scanners and getting people to jump in, it's really going to come down to helping us or helping those same practices to adopt. That will be the that will be the big hurdle for us, and we're on top of it.
Patrick Kothe 55:33
You certainly could hear Paul's passion for the industry, and his customers, and also the people that work on his team. A few of my takeaways, first, understanding the problem. So Paul discussed hearing loss is not only hearing loss, but it's communication loss, and loss of connections, and ultimately loneliness. But he also said that the average age that people start to tackle this is 68. And only 25% of people that have hearing loss, adopt hearing technologies, and the understanding that the stigma, the confusion about where to go, the cost, past experience, all of those things are really important to understand and why because it helps us design products. But it also helps us help the providers help the patients. So that's that's first understanding the problem. The second thing that was really jumped out was understanding the customer. Now their customer is really changing, because the markets changing. There's some regulatory things that have occurred. Now some people think, think that it's more of a consumer product, as opposed to a professional product. I've got changing reimbursement. We've got more degreed professionals providing the care, we've got E and T clinics that are that are becoming more important. So a lot of things that are that are going on there. It's really important, again, to understand this customer, because if you choose the wrong horse to back here, if you're choosing the consumer, and it does not end up to be the consumer marketplace and ends up to be the professional marketplace where you may have alienated your long term customer base. So you really have to be strategic in defining who your customer is understanding and defining who your customer is and who you're going to support. Paul's clearly chosen the professional route as being the long term answer within this within this marketplace. But really, we have to understand who our ultimate customer is and who it's going to be in the future. It's a very strategic decision that we're making. Finally, Paul discussed people are the differentiator, he is the term selfless drive. That's what he's identifying. That's what he's trying to get to people that have selfless drive. And it's kind of like, you know, the hyper drive hyper successful person is a table stakes, but it has to be done correctly in his company. That's what he's trying to build. That's, that's the culture that he's trying to build. It's doing it through other people's selfless drive. And to do that, you've got to hire correctly, and you've got to make sure that the wrong person doesn't stay on your team. You're cultivating that culture, you're cultivating that team, that's what's going to lead to your ultimate success. Thank you for listening. Make sure you get episodes downloaded to your device automatically by liking or subscribing to the mastering medical device podcast on Apple podcast, Spotify, or wherever you get your podcasts. Also, please spread the word and tell a friend or two to listen to the mastering medical device podcast. As interviews like today's can help you become a more effective medical device leader. Work hard. Be kind
