Many Medtech firms have successfully relied for growth on competitive advantages such as large distribution networks, brand recognition, pricing leverage with suppliers, competitive acquisitions, economies of scale, etc.. In many cases, several major players have been able to entrench themselves with near monopolistic power across various lucrative healthcare segments. While such strategies have provided a certain degree of immunity and revenue assurance, they cannot and will not protect from new, emerging types of threats. This short article touches on three of the biggest threats which established Medtech firms, especially large & mature ones, are probably already facing or about to.
A wave of new Healthtech startups, supported by deep-pocketed seed investors and VCs, threaten to disrupt the cozy order of things. Their single-minded focus on new or disruptive technologies promise to upend several healthcare segments including their entrenched leaders. With an abundance of investment money chasing highly focused business ventured powered by advanced technologies or new development processes, “old guard” firms are arguably more vulnerable than ever before. Even as they chase their 10% annual YOY growth rates through incremental improvements and cost reduction initiatives, newcomers are setting their sights on far more ambitious market disruption goals. Free from the shackles of installed bases, cumbersome administrative processes and legacy products & technologies, startups are able to innovate and attack the “fat cow” segments that big firms count on to subsidize their less successful initiatives.
Solution: Established Medtech players need to play more active roles as investors, accelerators and even incubators within the whole startup arena. The best way to protect their future will be for them to play an active role in trying to disrupt it. Startups offer the agility and innovation which are increasingly missing in big medtech today. Entrenched players will need to play a role more akin to investors, enablers and integrators of innovation through startups vs. their own R&D organizations. Internal R&D will in turn need to pivot towards supporting legacy products and applying newly acquired technologies within existing product lines & solution platforms. One note of caution: Acquired startups are likely to encounter resistance from individuals or organizations which may feel threatened. Beware of the “not invented here” syndrome.
2. Emerging Market Rivals
The last decade or so has seen a proliferation of new Medtech players from emerging countries like China, India and Brazil — to name only a few. While it was easy to dismiss their early efforts given their tendency to (often poorly) copy western technology and focus on low cost segments/markets, the same cannot be said today. Several of these newcomers have metamorphosed into world-class contenders who make considerable investments in R&D & IP while attacking markets & countries long believed to be the exclusive hunting grounds of established players. They’ve graduated from “selling something vaguely similar with questionable quality at a much lower price” to “offering more features and quality guarantees for the same price or less.” They have been quick to embrace the double threat of innovation and speed to market. And while many would question the impacts on safety and reliability of all this rapid innovation, the discourse with customers is no longer just about price anymore.
Solution: While focusing more on value added services and full-solutions, Big Medtech should also invest in emerging markets/players but not just with an eye on creating value-brands or low cost production centers. They should seek instead to cherry pick the best and most innovative EM players in order to learn from them and to inject fresh thinking within the larger organization. While there are undeniable cost advantages to manufacturing in and for emerging markets, the story cannot just end there. It would be a great sin to not recognize the incredible local talent, innovation and vitality these new Medtech players offer.
This is a tricky one as it manifests itself in many insidious forms. Basically its an organization’s inability to continuously re-invent itself, re-energize its people, re-focus on breakthrough innovation. Many companies have yet to recognize that they are slowly stagnating or suffocating under the weight of their internal processes and narrow view of the market. Clues or symptoms of this type of “corporate atherosclerosis” include:
· Low turnover or employees staying in the same role/function for years on end
· General contentment with 5%-10% YOY growth
· Too many concurrent projects, an absence of clear priorities and slow/no decisions
· Over-reliance on legacy products & incremental flankers
· Excessive zeal for formalization, documentation and procedures
· Overall risk aversion and a climate of “fear of failure”
· Multiple re-orgs with few tangible results (“Different trees, same monkeys” syndrome)
· Unquestioned adherence to corporate edicts, tools and practices
· Too much emphasis on looking and sounding good. Heavy focus on aesthetics & appearances vs. action
It’s quite normal for organizations, as they get bigger, successful or more mature, to gradually become set in their ways. It’s part of the human experience. Yet concepts such as innovation and agility cannot be relegated to R&D alone. It’s the responsibility of the entire organization and its leadership to support innovation. Not the other way around.
Solution: Big Medtech leaders have a responsibility to challenge and press their organizations out of any comfort zone or conventional thinking. They must remain vigilant to any signs mediocrity (settling often disguised as “compromise”) and continually raise the expectations bar. Increase staff turnover rates to bring fresh thinking and to stimulate organizations (circa 10% feels about right). Nobody should be in the same role doing the same work after more than 3–5 years. With every year in the same role, there is an increased risk of complacency and decline in creativity. Encourage a minimum amount of risk-taking and support action takers. Celebrate (quick) failures and reward those who stick out their necks to make stuff happen. Bring back the BHAGs and ensure everybody has one of their own. Empower & reward internal change agents but also hold them accountable. Look for new top talent not just within your industry but also from outside. Decide, as an organization, what you will be the best-in-class at, but also at what & where you intentionally won’t be. Don’t waste time trying to be good at everything.
There are, of course, many other threats and dangers lurking out there. But these (2) external and (1) internal threats, represent a very clear and present danger to organizations that cannot or will not read the writing on the wall. History is littered with examples of large businesses (and empires!) which failed to heed the warning signs. Don’t let your firm become another cautionary tale in the annals of Medtech history.
Andrew Hyncik is an International Strategic Marketing & Product Development veteran with 20+ years of experience in the Medtech, Healthcare and Pharma industries. For more Medtech insights and original articles, visit Medtech MojoBetter yet, try our very own Medtech Mojo chatbot here.
Andrew Hyncik and Pascal Malengrez are International Strategic Marketing & Product Development leaders who amplify classical medtech marketing with digital startup thinking.