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Disrupt or be Disrupted

HealthPad

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Medical Technology

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Disciplined M&A

MedTech

personalised medicine

remote patient monitoring

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virtual care

virtual healthcare

AI-driven diagnostics, virtual care, and advanced analytics are transforming healthcare, enhancing outcomes and efficiency
To remain competitive, healthcare organisations must actively invest in digital transformation, forging strategic partnerships and embracing innovation
Leveraging AI and targeted M&A is essential for expanding capabilities, accelerating growth, and securing market leadership
This Commentary offers a strategic roadmap for capitalising on digital health, emphasising collaboration, talent development, and agility

Disrupt or be Disrupted

"We need to ensure that we have an environment here that’s conducive to creativity, to boldness, to new ideas, to recognising the dynamic world in which we live - one that is changing faster than it has ever changed before." These words, spoken by Marco Rubio on January 21, 2025, just hours after being sworn in as America’s Secretary of State, were meant to inspire diplomats navigating an unpredictable global landscape. Yet, they also serve as a clarion call for an industry at a crossroads - healthcare.

Healthcare is not immune to the forces of disruption. On the contrary, it is being upended by digital innovation at a pace that traditional institutions struggle to match. AI-powered diagnostics, virtual care platforms, precision medicine, and wearable biosensors are redefining how care is delivered, driving better patient outcomes, lowering costs, and expanding access. And yet, many of the boldest advancements - the very ones with the potential to reshape the industry - come not from established institutions but from start-ups, outsiders, and unorthodox thinkers.

These disrupters, often found at the periphery, are sometimes unpolished and undiplomatic. Lacking the silver tongue of seasoned executives and the political correctness of corporate boardrooms, they challenge long-held assumptions and force uncomfortable conversations. Their ideas can be raw, their methods unconventional, but their impact is valuable. However, since they are different to traditional norms - failing to align with established structures - they are often dismissed, marginalised, or resisted by incumbents who, whether knowingly or not, seek to preserve the status quo.

Yet, history has shown that industries that ignore or suppress disruption do so at their peril. The digital health revolution is not a passing trend but an irreversible shift, evidenced by ~$10bn in venture funding that flowed into health-tech start-ups in 2024 alone. The question for healthcare leaders is clear: Will they embrace the agents of change and harness their disruptive power or will they resist, only to find themselves disrupted?

In this Commentary

This Commentary explores the shift underway in healthcare as digital innovation redefines care delivery, operational models, and competitive dynamics. It explores the rise of AI, virtual care, and precision medicine, showcasing how disrupters - often start-ups and unconventional players - are reshaping traditional institutions. With billions in venture funding fuelling digital health, the Commentary urges healthcare leaders to adapt to disruption or risk being left behind in an increasingly tech-driven landscape.

Leveraging Disrupters

Revenue Diversification and Growth Opportunities

Healthcare organisations, whether providers, insurers, or technology developers, are operating in an era of significant change, driven by digital health innovations that are redefining traditional business models. Historically, the sector has been dominated by capital-intensive infrastructure and human-intensive processes, such as surgical interventions, diagnostic imaging, and administrative workflows. While these remain fundamental, the advent of software-driven solutions and data-centric care models presents new revenue opportunities that transcend conventional market limitations.

Start-ups have emerged as primary incubators for disruptive technologies, pioneering advancements in AI-enabled diagnostics, virtual care ecosystems, and remote patient monitoring. These innovations not only enhance clinical efficiency but also introduce scalable, subscription-based revenue models that provide long-term financial sustainability. Established enterprises that fail to integrate such advancements risk stagnation, while those that actively embrace disrupters are better positioned to leverage digital tools that can unlock new revenue streams, drive operational efficiencies, and enhance patient outcomes.

Investment trends affirm this paradigm shift. In 2024, funding for digital health spanned diverse clinical domains, from cardiovascular care to mental health, with start-ups securing billions. This underscores the investment community’s recognition of digital solutions and services as catalysts for growth. Healthcare incumbents must actively scout, partner with, or acquire disruptive players to mitigate reliance on legacy offerings and tap into high-growth market segments that promise sustained profitability.

Enhancing Valuations Through Innovation

In today’s investment landscape, entities within the sector are assessed not only on their present performance but also on their capacity for innovation and agility. Venture capital firms such as Andreesen Horowitz and General Catalyst are making decisive investments in AI platforms, recognising their ability to transform clinical workflows, improve patient engagement, and optimise financial outcomes. This trend signals a broader industry shift - companies that harness technologies command higher valuations and attract stronger investor interest.

For established enterprises, the case for digital transformation is not only strategic but financial. Mergers and acquisitions in this space have surged, with deals targeting AI-driven decision support, analytics-powered risk stratification, and virtual care infrastructure. These investments create synergies that enhance efficiency, strengthen market positioning, and elevate financial performance. Providers, insurers, and life sciences companies must rethink their innovation strategies - not just as an enhancement to existing operations but as a core driver of valuation and competitive differentiation.

Competitive Advantage in a Changing Landscape
Healthcare is witnessing an unprecedented shift, where agility and technological adoption define market leadership. Large incumbents often struggle with structural inertia, as long-tenured executives grapple with managing disrupters while prioritising the stewardship of legacy offerings in increasingly saturated markets. However, the rapid proliferation of digital health start-ups is reshaping competitive dynamics, and established enterprises that do not proactively engage with disrupters risk losing their competitive edge.

Start-ups are leading the charge in AI, telehealth, and remote patient monitoring, capturing ~37% of all digital health funding in 2024. This signals a market appetite for next-generation healthcare solutions. Forward-thinking enterprises must not only acknowledge but actively pursue collaboration, investment, or acquisition strategies that integrate these innovations into their existing frameworks.

Strategic alliances with disrupters accelerate the adoption of cutting-edge technologies, and reinforce an organisation’s reputation as a leader in innovation, attracting top talent, fostering investor confidence, and securing long-term competitive advantage.

Sustainability Through Innovation
Sustainability extends beyond financial and environmental considerations; it encompasses the capacity to continuously evolve while maintaining high standards of care. Digitalisation is redefining sustainability by addressing systemic challenges such as cost efficiency, equitable access, and resource optimisation.

AI-driven analytics enhance diagnostic accuracy and streamline workflows, allowing clinicians to focus on patient-centred care. Virtual care platforms eliminate geographical barriers, expanding access to underserved populations while reducing operational overhead. Predictive modelling empowers insurers and healthcare systems to implement proactive interventions, improving population health management and reducing unnecessary hospitalisations.

Additionally, the shift towards value-based care necessitates advanced technological capabilities to ensure compliance, optimise reimbursement structures, and improve care quality. Digital solutions facilitate real-time data capture, regulatory adherence, and personalised treatment pathways, positioning organisations for long-term resilience in a rapidly evolving regulatory environment.

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Key Trends

Early Investment Surge

In 2024, ~63% of funding rounds targeted early-stage start-ups, marking a significant increase from 2023. This surge highlights a pipeline of innovation driven by emerging companies. Stakeholders - ranging from providers and payers to technology vendors - should leverage this momentum by engaging with start-ups through strategic investments, partnerships, or incubation programmes. Early-stage investments offer a dual advantage: access to pioneering technologies and the opportunity to shape their development in alignment with industry needs.

Notable deals, such as Regard’s $61m Series B funding for clinical decision software, illustrate how established players can incorporate emerging solutions to enhance operational efficiency and patient outcomes. By collaborating with innovative start-ups, organisations can expand into high-growth areas such as decision support systems, patient engagement tools, and population health management.

AI’s Dominance in Healthcare Innovation

The investment trend we have highlighted shows the increasing acknowledgment of the transformative potential of AI. Advancements in this space span a wide range of applications, from optimising clinical workflows to enhancing patient-centric solutions. Trailblazers such as Hippocratic AI and Infinitus exemplify this momentum, offering technologies that simplify administrative tasks, improve diagnostic precision, and deliver personalised care with unprecedented efficiency.

Integrating AI into established portfolios is important. Whether through partnerships, acquisitions, or in-house development, AI can improve operational efficiencies, optimise resource allocation, and deliver more personalised and predictive care. Staying ahead in the AI race enables organisations to remain competitive and meet the evolving expectations of patients and providers.

Strategic M&A as a Growth Lever

M&A in digital health is accelerating as organisations seek solutions that address a broad spectrum of healthcare needs. Analysts predict that 2025 will bring an increased wave of M&A activity, offering opportunities for players to expand their capabilities through targeted acquisitions.

Examples like DarioHealth’s acquisition of Twill and Fabric Health’s series of strategic purchases demonstrate how M&A can create end-to-end virtual care platforms and broaden market reach. By adopting a similar approach, stakeholders can accelerate entry into high-demand segments such as telehealth, chronic care management, and AI-powered diagnostics, while creating synergies that enhance scalability and innovation.

The Rise of Smaller Market Opportunities

While large enterprises dominate the healthcare AI market, smaller start-ups are finding success by focusing on niche segments, including solutions tailored to small- and medium-sized practices. This trend opens new avenues for traditional players to diversify their offerings and serve underrepresented markets.

Organisations can capitalise on this by developing or acquiring technologies that cater to these specialised needs, strengthening their position in the broader ecosystem. Addressing niche markets not only diversifies revenue streams but also fosters deeper relationships with a wider range of healthcare providers, ensuring more equitable access to innovation.

A Roadmap for Enterprises

To capitalise on the transformative potential of digital health, organisations must embrace a structured yet adaptable approach - one that balances ambitious innovation with operational pragmatism. Crucially, this requires a willingness to engage with unconventional thinkers and disruptive technologies, even when they challenge traditional corporate cultures. The following roadmap outlines five essential steps to navigate this landscape effectively:

1. Define Strategic Objectives Enterprises must first identify high-impact priorities that leverage their core strengths while addressing pressing market needs. Whether it is optimising clinical workflows, deploying AI-driven predictive analytics, or expanding virtual care capabilities, these objectives should be grounded in data insights, market intelligence, and an awareness of industry shifts. The key is to ensure that investments drive meaningful, measurable outcomes rather than just becoming exercises in experimentation.

2. Foster Strategic Partnerships The pace of change demands collaboration across diverse stakeholders, from start-ups to research institutions and tech giants. Partnering with disruptive innovators - even those whose mindsets differ from conventional corporate paradigms - can accelerate development cycles, introduce fresh perspectives, and unlock novel approaches to patient engagement or operational efficiency. Beyond innovation, these alliances also help enterprises navigate regulatory challenges and enhance system interoperability, ensuring that emerging solutions integrate seamlessly into existing care frameworks.

3. Invest in Talent and Skills Development Transformation is as much about people as it is about technology. Enterprises must cultivate a workforce equipped with expertise in AI, cloud computing, data science, and healthcare informatics. This requires a multi-pronged approach: reskilling existing employees, recruiting domain specialists, and fostering a culture that values continuous learning and cross-disciplinary collaboration. Encouraging interaction between clinical and technical teams ensures that solutions remain grounded in the realities of care delivery, enhancing both adoption and long-term efficacy.

4. Leverage M&A for Strategic Advantage Acquiring innovative companies can provide a fast-track route to leadership in emerging domains such as cybersecurity, data integration, and patient-centric engagement platforms. A disciplined approach to M&A allows enterprises to complement organic innovation efforts, filling critical capability gaps while maintaining alignment with overarching business and care objectives. However, success in this arena depends not just on financial transactions but also on integrating acquired innovations in ways that preserve their disruptive potential rather than diluting it within rigid corporate structures.

5. Adopt Agile Operating Models Agility is essential in an environment where regulatory frameworks, technological advancements, and consumer expectations evolve rapidly. Enterprises must embrace iterative development, cross-functional collaboration, and rapid prototyping to ensure solutions remain adaptive, user-focused, and future-proof. Crucially, an agile mindset must extend beyond product development to enterprise-wide decision-making - enabling organisations to pivot swiftly in response to emerging trends and disruptive forces.

By adopting this roadmap, enterprises can unlock new frontiers in digital health, fostering innovation, enhancing care delivery, and driving sustainable growth. Success will depend not only on technological sophistication but also on a openness to new ways of thinking - particularly those introduced by disrupters who may not conform to legacy corporate norms but hold the key to the next breakthrough.

Takeaways

The time for cautious, incremental change in healthcare has passed. The digital health revolution is not a hypothetical future - it is happening now, and the stakes could not be higher. Organisations that fail to engage with disrupters will find themselves outpaced, outmanoeuvred, and ultimately obsolete in a market that rewards speed, innovation, and adaptability.

Healthcare leaders must reject the outdated notion that disruption is a threat to stability. Stability is an illusion in an industry undergoing significant changes. The true risk lies in standing still while the landscape transforms around you. The $10bn in venture funding that flooded digital health in 2024 is not just a financial trend - it is a signal that the future of healthcare belongs to those willing to think beyond the limits of legacy systems and embrace a new paradigm driven by AI, virtual care, and precision medicine.

The choice is clear: disrupt or be disrupted.

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A Third Way Growth Strategy for MedTechs

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Medical Technology

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MedTechs traditionally prioritise M&A over in-house R&D yielding size without always improving quality
Amidst healthcare's rapid evolution, companies must explore new avenues for growth and staying competitive
Embracing a Third Way, MedTechs can invest in start-ups to access disruptive technologies, mitigate risks, foster growth, and competitive advantage

A Third Way Growth Strategy for MedTechs

MedTech industry leaders must welcome fresh ideas to maintain their competitive edge and ensure ongoing growth. However, the conventional avenues of development, such as merger and acquisitions (M&A) and in-house research and development (R&D), often encounter obstacles that diminish their effectiveness. As the industry advances, companies face the dual challenge of adopting new technologies while breaking down entrenched organisational barriers. In an era marked by transformative breakthroughs and turbulent market forces, adaptability and innovation are indispensable drivers of success.

The line separating established enterprises from agile newcomers has blurred, paving the way for potential collaboration and strategic investment. To excel in this environment, traditional MedTechs should consider recalibrating their conventional growth strategies. Rather than solely relying on M&A or low-risk tweaks to in-house R&D, they should explore a Third Way: investing in and collaborating with a range of innovative start-ups. Giant MedTech have been doing this for decades and reaping the benefits of nascent enterprises, fuelled by high-energy talent, leveraging novel technologies, and offering a fresh approach to growth and value creation.

Collaborating with early-stage entities empowers traditional firms to foster a culture of innovation and adaptability, thereby improving patient outcomes and strengthening healthcare systems to thrive in an era of unprecedented change. Effectively managing inventiveness becomes imperative for traditional MedTech companies to successfully navigate the evolving healthcare ecosystem.

In this Commentary

This Commentary emphasises the importance for MedTechs to define a clear strategic path in response to the challenges posed by rapid technological advancements, geopolitical shifts, and advancing market dynamics. We propose a Third Way that moves beyond conventional strategies of M&A and internal R&D. We advocate for investment in a varied portfolio of innovative early-stage enterprises focused on developing disruptive healthcare solutions and services. This approach aims to avoid the drawbacks associated with conventional growth strategies and set up MedTechs for long-term growth and improved competitiveness.

Challenges of M&A

For more than four decades, the MedTech industry has predominantly relied on M&A as its primary growth strategy, which, over time led to the financialisaton of the industry. Larger conglomerates emerged, but their size does not always translate into enhanced patient outcomes or improved operational efficiency. This pattern emphasises a tendency where short-term financial objectives frequently overshadow longer-term strategies focused on quality systems, organisational structure, and talent within the acquired companies.

In many instances, early-stage enterprises have deficiencies in their operational and human resource systems. These weaknesses are frequently overlooked or insufficiently addressed during the integration phase. While the repercussions of such oversight might not be readily apparent, they tend to surface over time, potentially hindering growth.

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The Financialization Dilemma of MedTechs

The fallout from prioritising financial integration strategies can jeopardise the long-term viability of the merged entity and hamper its ability to innovate and adapt to shifting market dynamics. Successfully merging disparate corporate cultures, technological platforms, and operational processes requires meticulous planning and execution across all facets of the integration process. Neglecting to allocate adequate time and resources to address these non-financial aspects can lead to disruptions in workflow, employee discontent, and diminished performance.

Moving forward, corporations might consider adopting a more balanced approach to growth, one that not only factors in financial gains but also prioritises the assimilation of quality systems, organisational coherence, and human capital to ensure sustained success. Strategic complacency seems to be present in many large entities, and associated with an excessive dependence on conventional M&A for growth can dampen internal innovation.

Challenges of In-House R&D

Traditional MedTechs encounter challenges when considering disruptive in-house R&D endeavours. The inherent risks, coupled with resource constraints, often dissuade many traditional companies from pursuing innovative avenues of development. Also, complex regulatory environments present hurdles that require expertise, investment, and stringent compliance measures. The infrastructural needs for integrating new technologies exacerbate the situation, necessitating updates to current manufacturing facilities, supply chains, and distribution networks. These conditions emphasise the demanding nature of pursuing innovative R&D in-house.

The demands of sales and marketing add additional complexity to internal development initiatives. New offerings require educating healthcare providers and consumers regarding their benefits, alongside developing specialised sales teams and tailored marketing strategies aligned with the product's unique demands. Incentivising sales teams to prioritise new offerings over established ones can be testing, which reinforces the hesitation of traditional MedTechs to pursue disruptive R&D projects.

A culture of risk aversion often prevails within traditional firms, leading to a reluctance to depart from established business models and technologies. This is reinforced by corporate structures that highlight stability and predictability over innovation and agility. Executives may hesitate to invest in ground-breaking R&D projects, opting instead for incremental improvements to existing devices. The allure of legacy products, despite their age and slow growth rates, provides a sense of security that dissuades corporations from exploring new technologies.

A Third Way

A Third Way for achieving growth and competitiveness, involves investing in innovative early-stage enterprises. Start-up culture thrives on creativity, fuelled by agility, entrepreneurial spirit, and a focus on disruptive solutions. Unlike traditional MedTechs, new ventures are free from the constraints of legacy systems, which enables them to take bold risks and explore new ideas. The collaborative culture of emerging businesses frequently attracts top talent from diverse disciplines, promoting interdisciplinary cooperation and fresh perspectives. This convergence of talent, flexibility, and risk-taking propels start-ups to the forefront of progress, extending the boundaries of what is achievable and contributing to transformative change in healthcare delivery and patient outcomes.

Engagement with entrepreneurial businesses warrants larger companies access to cutting-edge technologies while mitigating risk across a portfolio of ventures. Investment in early-stage entities opens avenues for collaboration, partnership, and potential acquisitions, enabling traditional firms to capitalise on emerging trends to maintain and enhance their competitiveness. Overall, embracing a broad-based investment strategy in start-ups represents a prudent approach for traditional MedTechs aiming to reconcile progress with risk.

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Healthcare disrupters

Supporting a variety of new ventures that are developing novel products through off-balance sheet investments presents a strategic advantage for traditional corporations. This approach allows them to access advancements without immediately bearing the financial burden of traditional acquisitions, thereby preserving their financial flexibility, and safeguarding their core business.

By providing tax benefits and mitigating the impact on financial ratios, these commitments contribute to the overall financial wellbeing of the company. Additionally, they facilitate low-risk incremental acquisitions. As start-ups mature and demonstrate success, traditional enterprises can acquire them, leveraging their initial investment and minimising the risk associated with unproven technologies. This model fosters an ecosystem where new entrepreneurial entities thrive with support from established players.

Investing in emerging businesses for MedTechs extends beyond financial contributions and can include injections of expertise and knowledge. Established firms possess the capability to offer invaluable guidance and mentorship, drawing on their experience in navigating complex regulations, executing successful clinical trials, and effectively scaling manufacturing operations. By sharing their expertise and knowhow, mature companies amplify the impact of their financial stakes and strengthen their ability and reputation to drive innovation.

The Potential of Venture Arms for MedTechs

The creation of venture arms by leading MedTech companies has facilitated creativity and driven commercial success. Johnson & Johnson (J&J) and Medtronic, for example, have embraced this trend with positive outcomes. J&J's venture initiative, JLabs, was initiated in 2015 in San Francisco to nurture ~50 start-ups across a spectrum of healthcare sectors, including medical devices and digital health. Since then, it has burgeoned into a dynamic ecosystem with key incubation hubs worldwide, from New York to China.

While J&J typically refrains from immediate investments, its strategic commitments to enterprises like Mauna Kea Technologies, Protekt Therapeutics, Cara Care, Cala Health, and Sight Diagnostics demonstrate the company's interest in nurturing entrepreneurial solutions aligned with its strategic objectives. Similarly, Medtronic's venture arm has effectively made strategic investments in a diverse array of early-stage businesses, with Axonics as a notable example. Axonics' recent (January 2023) FDA approval for its fourth-generation rechargeable sacral neuromodulation system serves as a testament to the success that can arise from such collaborative endeavours.

Traditional MedTech companies can take valuable lessons from industry giants such as J&J and Medtronic, especially in establishing their own venture funds to invest in a range of start-ups. This strategic manoeuvre not only provides these companies access to cutting-edge technologies and disruptive innovations that might outstrip their internal development capacities but also allows them to diversify their product portfolio and helps mitigate risks associated with reliance on a narrow range of offerings.

Entrepreneurial ventures often boast agility, enabling them to swiftly bring products to market, surmount bureaucratic hurdles that larger corporations may face, cultivate a culture centred on innovation within their organisations, and inspire employees to explore fresh ideas and collaborate with external partners. However, this can only be achieved if the MedTech market offers realistic opportunities.

The MedTech Start-up Market

We have argued that the MedTech start-up market holds potential for traditional companies seeking to revitalise their portfolios to maintain and increase their competitiveness. However, what are the realities of this market? Recent studies shed light on its trends and opportunities, and from these, we can judge whether such investments strategies are a viable option for mature MedTechs.

A 2017 study by the Deloitte Center for Health Solutions and AdvaMed Accel suggested that venture capital investments in early-stage MedTechs were slowing because alongside lacklustre returns, investors showed reluctance towards unproven technologies, and were deterred by regulatory and reimbursement obstacles. However, findings of a similar study repeated in 2021 paint a more promising picture. Since 2017 and the onset of the Covid-19 pandemic in 2020, venture financing in early stage MedTechs surged by ~67%, suggesting a renewed investor confidence. Notably, the bulk of investments were towards late-stage diagnostic and digital companies, highlighting a shift in investor priorities towards more mature ventures. Furthermore, alternative financing avenues such as public markets and family offices have emerged as viable options, opening new pathways for entrepreneurial endeavours. Notwithstanding, amidst this surge, seed, and Series A funding continued to decline, which poses difficulties for fledgling MedTech entities.

For traditional MedTech companies contending with aging legacy products in slow-moving markets, bridging the funding gap presents an opportunity to enhance their growth prospects and strengthen their competitive position. As we have asserted, beyond financial backing, start-ups often seek guidance on regulatory navigation, clinical studies, intellectual property, and reimbursement procedures. Leveraging their wealth of experience and established networks, large firms are ideally situated to provide such valuable insights and support to emerging ventures.

Takeaways

By strategically committing to a diverse range of start-ups, traditional firms bolster their capacity to navigate the complexities of the technology ecosystem. This proactive stance not only positions enterprises to shape the future of healthcare but also augments their prospects for sustained growth and competitiveness in an industry experiencing rapid evolution.

Collaborating with emerging businesses at the forefront of technological development empowers large corporations to respond adeptly to market dynamics and drive progress. Such strategic engagement reinforces their relevance in the market, fosters a culture of cooperation and improvement across the healthcare continuum, strengthens traditional enterprises' competitive edge and ensures their long-term viability.

The entrepreneurial spirit inherent in start-ups can rejuvenate the development pipelines of traditional MedTechs, enhancing their decision-making and cultivating an environment of creativity conducive to growth. Establishing a fund to invest in start-ups helps to reduce risk and maximise returns, thus protecting corporations against potential disruptions. Adaptation is crucial for survival, and the approach outlined in this Commentary provides traditional companies reliant on legacy offerings with an opportunity to adapt and thrive, reaffirming their relevance in an era characterised by constant change.

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