2019 Preview: Predicting the Trends and Their Potential Impact on Business Plans
The prognosticators are at it again. With 2019 well underway, industry pundits are deeply ensconced in a longstanding New Year’s tradition—predicting the trends and developments likely to impact medtech over the next 12 months (and beyond). Forecasting, however, is not an exact science; without a crystal ball to peek into the future, it can be difficult to separate fact (or at least a kernel of truth) from pure fantasy. We’re here to help sift through all that conjecture. Let’s examine some of the key predictions and how they could affect the medical device industry in 2019. Big data will drive the industry: This prophecy has been circulating for years. Business leaders will probably agree that valuable information is critical to their companies’ success. And large volumes of data (regardless of its accuracy) does indeed drive key industry factors, including regulatory approvals, reimbursements, “population health” decisions, government regulations, insurance coverage, provider behavior, etc. But data for the sake of data is not the panacea that some prognosticators claim. What is important is targeted data that is meaningful for decision-making. What does this mean for medtech firms? It depends upon the type of medical technology currently being delivered and innovations being considered for future development. Ultimately, what matters most in medtech is addressing the clinical unmet need; correspondingly, the key to business success is helping customers “win.” Therefore, when thinking about data and business success, it’s important to combine those two important factors to deliver targeted data that (1) validates the performance of a medical device; and (2) helps customers successfully use the product while (3) being appropriately compensated for using the product(s). Digital health is the next big thing: Similar to big data, digital health and its revolutionary impact on medicine has been written about (and debated) for years. But what exactly is “digital health”? Ten different industry professionals (from CEOs, providers, and venture capitalists to private equity firms and payers), would likely answer that question 10 different ways. Similar to medtech’s dot-com era, when many companies’ valuations prematurely skyrocketed due to the dot-com “aura,” many startups today are experiencing similar valuation build-up simply by being associated with digital health. It’s important to not be fooled when considering the true value of digital health. For example, a software company that delivers meaningful, targeted data (as outlined in the previous paragraph) will probably become more valuable over time. The results will be different, however, for a company that regards digital health as a device with software included. It’s critical for any medical product—especially those in the digital health sphere—to deliver profitable solutions that address clinical unmet needs. Developing software that benefits practitioners, patients, and payers will beget significant long-term value regardless of whether or not it qualifies as a true “digital health” product. Blockchain will make healthcare more efficient: To date, this statement is all talk and no action. Most, if not all, medtech firms understand the need for both increased security and efficiency throughout the healthcare system. In that respect, the promise of blockchain seems attractive. But there are still many doubts about companies’ ability to implement the technology in an effective manner. If that changes, medtech firms must determine how blockchain could potentially impact their businesses; and how they can benefit from the invention’s assimilation into healthcare. Cross–border predictions: As is often discussed in Medical Product Outsourcing, the medtech industry’s gradual globalization over the past 20 years has radically affected C-Suite decision-making at various levels. Key decisions are continuously and dynamically made regarding commercialization, manufacturing, and supply chain. Prognosticators are literally all over the map on this subject, so let’s break it down by key organizational functions. Commercialization: With the current global environment, some industry experts are encouraging companies to expand internationally, while others are offering words of caution. The issue, however, is not so clear-cut. In our opinion, commercialization has become business-specific. There is no right or wrong way to introduce a new product to the market, nor is there an industry-wide approach. It truly depends on a company’s positioning in the sector as well as the products it has developed for each international market it has targeted. Naturally, market dynamics like the regulatory environment and reimbursement determine timing but these factors are often more important than worldwide trends because a company does not expand globally all at once. Successful multinational companies conquer one key market at a time. A European Union product launch, for example, is really not a continental event but rather, a country-by-country approach to ensure attainment of the sponsoring organization’s goals in each market. Consequently, companies must determine for themselves the right time and place to market their products. There are no easy (or general) solutions anymore. Manufacturing location: Site selection is a more critical decision now than ever before as “offshoring” and/or “reshoring” become an increasingly common question for the medtech C-Suite. This area, however, is fraught with organizational, commercial, EBITDA, and even political landmines that have long-term impacts.Today’s C-Suite executive must consider (relative to manufacturing location) both current and future commercialization plans. This issue wasn’t always important. But with in-market regulatory dynamics, challenging supply chain logistics, and nationalism in vogue across the globe, medtech companies’ success is largely dependent on their manufacturing locations being positioned appropriately for existing and forthcoming commercialization efforts. Rather than worry about offshoring or reshoring, organizations should consider manufacturing “in-market” to maximize potential growth opportunities in each major global region. A European manufacturing site, for example, can be instrumental in expanding sales in Europe; the same strategy can be used to grow revenue in Asia, North America, South America, or virtually any region in the world. Companies that follow this approach over the long term will maximize their international growth opportunities because they won’t be beholden to tariffs or local manufacturing mandates. Supply Chain: Where should components be purchased—China, Mexico, Eastern Europe? Perhaps from all three? There are plenty of advisors willing to provide direction to companies on most any topic. In deciding whether to take their advice, though, C-Suite executives should determine whether these advisors are acting in the best interest of their businesses, as supply chain execution is extremely complicated. In the past 20 years, supply chain management in medtech has grown from its origins as a simple tactical purchasing organization into a strategic functional vertical that dramatically intersects throughout the organization (marketing, sales, finance, manufacturing, etc.) to impact both revenue growth and bottom-line success. True organizational achievement in 2019 is impossible without a well-executed supply chain plan. Regardless of manufacturing logistics, a company’s supply chain performance will generally determine its organizational opportunities domestically and internationally. Artificial Intelligence vs. Applied Intelligence: Almost every year, consultants and industry experts envision artificial intelligence (AI) driving markets, products, and business across industries. Indeed, there are developing AI applications and algorithms to improve business efficacy, but we believe that AI is not the “end-all, be-all” solution it’s constantly touted to be. As C-Suite executives know, good data drives better decision-making; therefore, the use of some types of AI to improve any data received is always welcomed at the C-level. However, the ultimate solution should combine AI and “old-fashioned AI” (applied intelligence). Certainly, applied intelligence is fallible, since humans are inclined to make mistakes, but nothing can top experience (combined with the best data available, of course) when making critical-to-success business decisions. AI alone may miss some of the nuances key to a company’s success such as people factors and cultural issues, among others. Additionally, when mistakes are made, humans have the capacity to learn (and dynamically adjust) from them. Nobody likes to fail, but mistakes make for better leaders, as it forces people to acknowledge their less-than-perfect choices and share the successful ones with their colleagues. Regardless of what the prognosticators say about 2019, there is reason to be excited about the future of medical technology and the business decisions that lie ahead. Although it is wise to consider trends, companies know themselves better than anyone, so harnessing their applied intelligence will help ensure future growth. Here’s to a successful 2019. Florence Joffroy-Black, CM&AA, is a long-time marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She can be reached at email@example.com. Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now a Managing Director at MedWorld Advisors. He can be reached at firstname.lastname@example.org.