By Glenn Snyder, principal, Benjamin Ninio, managing director, and Erik Kiær, managing director, Deloitte Consulting LLP
MedTech companies have a considerable role in driving the future of health, using transformative technology to enhance products and services and enabling predictive, preventative, personalised and participatory (4P) medicine, as we highlighted in the sixth prediction of our report, ‘The future unmasked, predicting the future of healthcare and life sciences in 2025’. A major aspect of achieving this future is the move to value-based models of care and funding. This week’s blog, by Glenn Snyder, our MedTech Practice leader in Deloitte Consulting, Benjamin Ninio, managing director in Monitor Deloitte, and Erik Kiær cofounder of Deloitte Launch, appeared first as a US Center for Health Solutions, Health Forward Blog and explores how medtech companies could transform to respond to this changing health ecosystem.
Finnish-American architect Eliel Saarinen once advised: “Always design a thing by considering it in its next larger context—a chair in a room, a room in a house, a house in an environment, an environment in a city plan.” Medical technology companies generally have followed this rule, designing products to fit into the larger contexts of their sector—the life sciences industry, and the health care marketplace. But what happens if the context changes? Do the rules for designing medtech products change as well? If so, how should companies respond?
Over the years, medtech companies have typically built their products around a standard of care delivery that has proven to be relatively stable. Their products are generally used for episodic care delivered in a physician office or hospital. But the context of health care and its delivery is transitioning—from a focus on sick care to prevention and wellness, from in-person appointments to virtual visits, from physician-directed to patient-managed treatment regimens—propelled forward in many ways by the COVID-19 pandemic. As the options for care delivery become richer and more varied, they provide opportunities for medtech companies to expand the marketplace for their products. The plethora of devices that can monitor our health, catch a disease early, and keep us well are making their way into retail locations and into the homes of consumers.
To thrive in this increasingly consumer-centric landscape, medtech companies should consider ways to incorporate digitally enabled consumer-engagement capabilities into their product designs. The rules that worked for the old context should be modified so that they also work for the new one. This could be a major undertaking that could require a fundamental transformation of the business.
Altering course could be a challenge for some medtech companies
Most large medtech companies have historically engineered hardware products using a linear and sequential waterfall-development approach where the specifications are defined beforehand. A major product release is typically followed by regular, scheduled updates. In the new, rapidly evolving context of consumer-focused health care, software-oriented products move to the forefront. Developing and rapidly iterating on these offerings (and continuously learning) will likely require that companies adopt an agile approach that supports smaller and more frequent product updates. This might be comparable to trying to turn an ocean liner, and some large companies might not be able to change course quickly enough using their existing operating models, systems, and processes.
Some medtech companies have acquired or formed partnerships with technology companies to gain the capabilities they need to fuel innovative software development. This path, however, is not always successful. It can be difficult for a small (and likely entrepreneurial) acquisition to survive when it is absorbed into the larger parent company. An alternate—and usually preferred—path for an established medtech company is to launch a completely separate venture that is underpinned by a growth- and transformation-oriented mindset. This will make it easier for the company to take full advantage of opportunities that might arise.
Consider this: A legacy organisation currently generates 100 per cent of its revenue. It creates a new venture, which contributes ten per cent of the organisation’s revenue after its first year. Ten years later, that venture should generate 80 per cent of revenue, and after 20 years, it generates 100 percent of the organisation’s revenue. The legacy business is then shut down.
Unlike the parent company—which may be hamstrung by siloed operations and systems, and hardware-oriented product development processes—a small, nimble new venture might be better equipped to capitalise on rapid shifts in the value chain. It might also be able to enter new markets, monetise growing data assets, bring to life and deliver on bold new ideas, navigate non-traditional competitors, leverage changing customer needs, demographics, and behaviours, and extend boundaries of the business while building a legacy of leadership.
Jumping-off point to transformation
Many medtech companies want to rapidly identify, validate, launch, and monetise new businesses that can unlock shareholder value and deliver new growth opportunities. We suggest parent company leaders begin this process by using the new context as a jumping-off point for strategic planning. The questions below can help frame the transformation journey:
- Which care locations deliver the best long-term outcomes for the patient, not just the lowest procedure cost?
- How do alternative sites of care (outpatient services, retail services, and home-based services) take advantage of resources to provide more flexibly in care delivery and balance outcomes with cost?
- What external dynamics are shaping this new consumer-/patient-focused context?
- How does this context differ from the old/existing one?
- How do we build products and services that optimise the experience of consumers?
- How can we quickly learn and adapt to create a competitive advantage?
- What is the most critical uncertainty for the longevity and viability of this business, especially when conditions/contexts change quickly?
Forming a new venture has many moving parts, and it is important to select a transformation strategy that provides measurable outcomes throughout the journey. Also important is selecting the right person to stand up and run the new venture. Whether this individual is recruited from within the parent company or hired from outside, they should be both a realist and a visionary. This individual should have the trust of the CEO and board, but also be confident enough to champion the entity’s independence rather than trying to shoehorn it into an existing business unit. In addition, this person needs to understand the parent company and how it operates. While it provides resources and capabilities that are assets, hefty liabilities could lie downstream.
Organisational resistance to change runs deep and introducing a new context of health care will be neither quick nor easy. As management consulting guru Peter Drucker said, “Culture eats strategy for breakfast.” Yet, increasingly we see the adoption of new innovations happen with greater speed and effectiveness. It is, for instance, hard to remember life before the smartphone, or a time when smart speakers or search engines weren’t used to settle disputes during dinner conversations. Technology, when designed for a new context, can have a fundamental impact on behaviour. Medical technology can learn from consumer technology. The opportunities to design for and drive toward a new health care reality—where place is not fixed, and physical co-location is no longer required—can fundamentally transform care delivery and change how patients and their caregivers lead their lives. We expect that human experience will decreasingly be supported by separate domains of medical technology or consumer technology. Instead, we expect technologies will take the human experience into account from the start.