Medical Technology

The central roles in the medtech model, played by innovation and physician relationships, are being replaced by a new ethos: containing costs and addressing the needs of a broader range of constituents. Yet leading players in medtech can cut costs only so far. And they have fewer options to increase revenue through incremental, non-disruptive product iterations or by strengthening relationships with physicians.

To thrive in this emerging environment, Bain’s teams of experts help medtech companies across the globe address the new set of priorities:

• Recast the understanding of the customer base: Companies must refresh their understanding of how they segment customers and update the segmentation over time.
• Develop new, flexible commercial models: Tailor models to meet the needs of a diverse and evolving marketplace without increasing the cost of sales.
• Create a sustainable model for physician engagement: The new model needs to be as productive as the old model even as it strengthens, transparently, the role of the physician as innovator, advocate and customer.
• Move to a more efficient R&D model: Successful medtech companies of the future will focus on innovation, sourced internally and externally, spread across technologies and based on applications. They will allocate capital to strategic acquisitions, obtain and retain key talent, and shift from a design-to-ideal approach to a design-to-value one in commoditized product markets.
• Rationalize manufacturing and G&A costs: Companies must maintain a strategic focus on costs in order to shed unnecessary expenses but reinforce areas of strength.
• Invest to win in the remaining white spaces: Medtech companies still have the opportunity to choose a few new areas for disruptive innovation and develop new markets–both therapeutically as well as geographically.

The medical technology sector's tried-and-tested formula for success is fundamentally changing. Three trends, in particular, are transforming the way the sector generates value: the pace and relative differentiation of innovation; the purchasing power and role of physicians; and the ability to charge a premium for incremental product features and benefits. Healthcare reform in the US is further accelerating these changes.

Increasingly, industry leaders discover that they can no longer weather the storm by charting the same course; nor can they claim that another cycle will take the industry back to old market dynamics.

Today's leading medtech companies are well positioned to outperform competitors if they adjust to the new reality and deploy their scale advantages in new ways. Those that can change will thrive in this challenging environment. Those slow to adjust risk displacement by a new crop of companies—agile competitors unburdened by the past and conceived with the specific purpose of serving medtech's new, evolving landscape.