That’s the message of a PwC report released Monday that shows that the medtech industry faces real threats if it doesn’t focus more on innovation and having processes within the company that encourage it.
Entitled “Medtech companies prepare for an innovation Makeover,” PwC’s Health Research Institute found that only 14% of medtech executives formally manage their company’s innovation activities while only 17% believe they are innovation pionners. While 64% said that innovation is a competitive necessity today, a much larger percentage – 81% said that statement would be true in five years. These responses are based on interviews of 30 executives at major medtech companies, many with revenue of $1 billion.
One finding of the report that should not be a surprise to anyone following current trends, is that product innovation is no longer the key to success. The report declares:
The very notion of medtech innovation needs redefining in a new health economy that is focused on higher expectations for value and convenience. Medtech companies must be ready to compete in the new environment or risk being displaced by companies that can show evidence that their innovations create value.
In other words, companies banking on adding bells and whistles to existing products and charging a premium for it will no longer find takers. Customers today are looking for more than just products: they want a partner who can help to solve broader healthcare problems of cost, disease management and population management.
Here’s a slightly edited portion from the report:
The medtech industry has always viewed innovation as the critical element of success, and its importance continues to grow. But the innovation machine is not working like it used to. Today adding nifty features to existing products is not enough to warrant a price increase. Customers—be they hospitals, accountable care organizations (ACOs), or even individual consumers— now demand more in financial, convenience, and health terms. Medtech companies must focus more on service and business model innovations that meet new industry demands rather than on incremental product improvements. If they don’t, they risk fierce threats from new players eager to claim a part of this $349 billion global market, according to a market report from Evaluate.
One company that has already, and very publicly, taken this message to heart is Medtronic.
The Minnesota device maker intends to transform itself from a device maker to a medtech solutions partner, according to CEO Omar Ishrak. The company has also taken the leap into a services business by entering to contracts with European hospitals to manage their cath labs. The goal is to help hospitals be more efficient. Medtronic has also decided that it needs to play a bigger role in the contunuum of care that extends to patients beyond hospital walls. Earlier this summer, the company bought Cardiocom, a remote patient monitoring and disease management company targeting heart failure patients.
This squarely falls within the recommendations that the PwC report offers the industry. And they are:
Be ambidextrous by creating an innovation operating model that separates breakthrough and radical innovation from the incremental innovation necessary to support the core business.
Collaborate to get closer to the patient by integrating into the broader patient experience, the larger health ecosystem, and new payment models.
Measure innovation in new ways by using forward-looking metrics and connecting the dots for shareholders, who need help understanding the changing role and nature of innovation.
PwC also is releasing an interactive section on Monday called the Innovation Scorecard that scores 36 medtech firms based on HRI’s pre-set criteria around innovation practices.
[Photo Credit: iStockphoto.com user PashaIgnatov]
— By Arundhati Parmar, Senior Editor, MD+DIarundhati.firstname.lastname@example.org
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