Expansion of services and ecosystems create opportunities to grow faster than ever before
The 2020s are bringing many opportunities for the medtech industry to generate value and growth beyond historic industry norms. Medtech companies willing to do business in new ways and develop holistic approaches to meet their customers’ needs stand to exceed industry growth forecasts and reap significant revenue rewards.
To achieve this growth, medtech companies must move beyond the traditional playbook of incremental product improvements, narrow M&A activity and investment in sales and marketing efforts. They must also take into account the rapidly changing healthcare ecosystem and the transformational effects of the COVID-19 pandemic, including supply chain disruptions, healthcare staffing shortages, shifting care settings and the rapid uptake of digital health solutions.
These changes are creating big opportunities. According to the Centers for Medicare and Medicaid Services, annual US healthcare spending on medical devices is projected to reach around $300 billion to $400 billion – 5-6% of $6.8 trillion in total healthcare spend – by 2030.However, medtech companies that are able to predict and meet changing customer needs within the evolving ecosystem will be well positioned to seize not only their expected share of traditional revenue growth, but also to tap into new opportunities that access the remaining $6 trillion in projected total annual US healthcare spend by 2030.
Today, medtech companies’ revenue growth is primarily driven by incremental product improvements. Only about 1% of devices cleared for the US market in 2021 were novel and required premarket approval; the rest were cleared via the 510(k) pathway.Medtech companies must sustain their core business, but those seeking to capture growth beyond their traditional market share must navigate disruptive market trends and partner with customers to help meet their larger needs and future goals. With vision, the industry can increase the number of truly new products and solutions that improve outcomes and lead to customers’ overall success.
Below, we present three growth strategies to win in this competitive and rapidly changing environment. Each medtech company’s path to growth can draw from any or all of these strategies. The most successful will find the right blend of the three.
Growth strategies for medtech companies
- Master products and care settings. Meet the evolving needs of patients and customers with high-value products that deliver better patient outcomes, customer value and efficiency. This path is the closest to the industry’s traditional approach to achieving growth.
- Create product-enabled services. Design services that take on a customer-success mindset to help customers address larger business challenges, not just a single problem. Great services complement and increase the value proposition of core products.
- Build or participate in an ecosystem. An ecosystem meets the complex needs of healthcare segments by bringing together partners and encouraging their collaboration to solve complex problems. A medtech company can either become a leader that brings all of the players together or join one as a contributor. Both have economic advantages.
Blending these new strategies in a way that accounts for your company’s individual resources, market forces and competitive pressures will likely lead to an acceleration of growth and increased share of the medtech market.
Strategy 1: Master products and care settings
Definition and value
Product and care setting mastery is the ability to deliver market-leading solutions that improve patient outcomes and user experiences, and drive overall customer success. This can be achieved by understanding, predicting and addressing the needs of your customers as they navigate in markets faster and better than their competitors do. It means you must go beyond the traditional incremental medtech approach to product innovation and deliver products that improve the care setting and the care experience while also providing value-chain improvements and efficiencies. Many companies are already proficient in these areas, but there is potential for further improvement and to lead the market.
With this approach, a well-known orthopedics company created a new path to success for a decade-old knee implant by bypassing the status quo of incremental improvements in areas like materials and instead leveraged surgical robotics and 3D printing to make a real difference in outcomes, efficiency and experience for its customers and their patients. Studies show that robotic techniques can speed recovery after surgery and reduce the length of time patients need to spend in the hospital.5,6
Others have created premium brands by developing new approaches to existing procedures, advancing products well beyond improvements in features. NuVasive improved spine surgery by developing the products and tools to enable new, less invasive surgical approaches that reduce operating time by up to 15%, improve overall case efficiency by 20% and lead to 50% shorter hospital stays for patients. Standard Bariatrics has been growing its market share through a new approach to bariatric surgery that cuts down on operating times and provides procedure standardization for improved outcomes.7
To master the care setting, companies are combining their expertise, experience, and product portfolios in ways that generate increased value, better outcomes and brand loyalty for surgeons and patients. There are two levels to this type of approach. Some companies are enhancing their imaging equipment solutions by connecting to cloud services that enhance providers’ experience and capabilities. Some surgical tool manufacturers are even more advanced, aiming to create fully digital operating suites where all of the tools are connected within the care setting. This could help drive value in four areas: operational excellence, data-enhanced workflows, analytics and insights, and data enrichment.
Strategy 2: Create product-enabled services
Definition and value
Buyers are no longer looking for just point-solution vendors, they’re interested in partnerships that can deliver holistic solutions to broader business challenges. This shift to a customer success mindset, a concept first developed in the technology industry by software as a service vendors, can position medtech companies for success.
Product-enabled services help target pain points and address gaps to better serve a larger share of customers’ needs. While the margin and investment profile of services differs substantially from that of products, there are often significant advantages, including faster development cycles and more rapid implementation of new capabilities that expand the value to customers. For example, a medtech company that makes a great surgical implant, may increase growth by extending the impact the product makes on the customer in non-traditional areas across the care pathway. This can mean extending into surgical planning, navigation, physical therapy, consultations and multiple other areas of care that impact outcomes and lead to better experiences for customers and patients.
Following this line of thinking, BioIntelliSense is developing actionable insights from the avalanche of medical device data by automating patient monitoring in the cloud. Through a suite of patient wearables, the company is continuously monitoring patients with advanced analytics that can assess up to 1,440 vital sign measurements per day per patient, compared to four for the average healthcare worker. That capability has the potential to ease healthcare staff shortages. New entrant Best Buy Health is leveraging its retail expertise and healthcare acquisitions to meet clinicians’ and patients’ home health needs with innovative product-enabled services that allow clinicians to monitor patients remotely.
Strategy 3: Build or participate in an ecosystem
Definition and value
An ecosystem is an environment that brings together stakeholders from across the value chain and enables them to build, collaborate on and use solutions to address big, complex healthcare problems. Ecosystems build on the capabilities required for product-enabled services, but the involvement of many diverse players drives increased complexity and requires more sophistication across strategy, development and execution. While high-tech companies such as Salesforce and Apple have developed successful ecosystems, medtech companies have yet to achieve similar success, but the industry can benefit from high-tech lessons learned:
- Ecosystems thrive on the transparency and sharing of information between collaborating partners but there are strategic decisions to make about how to provide that transparency, for example, through structured app stores.
- The establishment and use of standards (even if proprietary) enables multiple players, from multiple parts of the value chain, to collaborate and share valuable experiences and resources to solve problems that no single player could solve on their own.
- New business models are required to enable ecosystems with the right incentives for all participants. Those ecosystems revolve around four components: value proposition, network of partners/stakeholders, profit model and technological capabilities.
There are relatively few medtech ecosystems today. Some imaging companies have started down the path, with the development of ecosystems that integrate their own product lines with complementing pieces of partners’ portfolios. The early adopters of ecosystems are catering to specific patient populations based on disease states and demographics, care settings (surgical, ambulatory, at-home) or breakthrough products and technologies. The ecosystem model in the medtech industry is in its infancy, with plenty of potential to bring greater collaboration to solve an increasingly complex set of issues for providers, patients and payers.
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