Tagged: M&A

  • Many large diversified MedTechs are experiencing stagnate growth and aging products in slow growing markets
  • Initially, MedTech expansion leveraged disruptive technologies and underserved markets
  • As MedTechs’ evolved they shifted from innovation-led to financed-focused management taking advantage of low interest rates and cheap money
  • M&A substituted for innovation as a growth strategy
  • Today, MedTechs grapple with volatile politico-economic environments, stringent regulations, ethics, and increasing patient demands
  • The solution lies in visionary leaders driving R&D-focused growth, and more strategic M&A
  • This requires leaders able to blend finance, innovation and patient-centricity
Redefining Leadership in the Evolving Landscape of MedTech
Balancing Innovation, Profitability, and Patient Care
Over the past four decades the medical technology (MedTech) sector has experienced substantial transformation. Its initial rapid growth was driven by sophisticated devices, unmet clinical needs, entry barriers, and available funding. Later, expansion was primarily fueled by mergers and acquisitions (M&A), the integration of technology, market consolidation and financial undertakings. Decades of low interest rates, cheap money, and, the pursuit of top-line revenue growth, rather than profitability, led to an overemphasis on M&A, which enlarged the industry without equivalent enhancements in R&D. Over time, many large diversified MedTechs faced challenges associated with legacy products in slow-growth markets, and an overreliance on M&A. While the industry maintains ~6% compound annual growth rate (CAGR), much of this progress comes from smaller players. The industry’s maturity brings new challenges distinct from those of its early days. M&A, once effective for diversification, now struggles to sustain growth for larger companies. The industry’s financialization has shifted leaders’ focus from vision to short-term gains, creating a void in leadership. Amid current headwinds - political uncertainties, commercial pressures, stringent regulations, ethics, and patient empowerment - successful navigation requires visionary leaders committed to patient care over short-term gains. Emerging leaders must combine financial expertise with innovation. The next decade calls for a break from an overreliance on M&A-centred growth, embracing research-based, value-driven solutions and services, which enhance patient outcomes and reduce healthcare costs. This transformation demands leaders skilled in business strategy, R&D, and patient-centered approaches.
In this Commentary

This Commentary is comprised of four sections. Part 1 draws a distinction between leaders and managers and suggests that while both roles are necessary for a successful commercial enterprise, it is important for executives to balance the two roles. Part 2 describes the merits of M&A, the financialization of the MedTech industry, and its repercussions on leadership and innovation. Notably, financialization and M&A activities shifted executive focus away from innovation towards transactions. Part 3 explores the interplay between transactional proficiency and innovation and discusses the implications of M&A-focussed expansion on R&D and patient outcomes. Part 4 suggests a strategy for enterprises to reignite their stagnating values and slow growth rates, which entails less M&A-driven expansion and more innovation-centred growth. Achieving this involves developing leaders with a blend of financial and R&D acumen.
Part 1
Leaders and Managers

Leaders and managers play important roles in the success of commercial enterprises, each having distinctive yet interconnected functions. However, leadership and management differ, and this differentiation is important to understand their respective contributions to the medical technology industry.
Leadership, which has evolved over time, involves guiding, influencing, and motivating individuals and groups towards shared objectives. It includes envisioning a direction, making strategic choices, and inspiring growth within organizations. Leaders prioritize people, nurture relationships, and understand individual strengths, and motivations. This enables them to empower others to embrace change and achieve their potential. They adopt a forward-looking, longer-term strategic perspective, fostering innovation while being prepared to take calculated risks for growth. Effective leadership influences a company’s trajectory, culture, and efficacy. It fosters productivity, innovation, and a positive attitude to work. In an environment characterized by technological advancements, constant organizational change, and market shifts, leadership is crucial. Under such conditions, embracing change rather than resisting it not only brings stability but also reduces stress and prevents chaos. Leadership is essential for guiding enterprises and employees through uncertainty, fostering innovation, creative thinking, and stability. Leaders often possess a combination of leadership and managerial skills; and they know how to balance these and have the capacity to navigate dynamic environments which require adaptability, agility, and inspiring visions.
Conversely, management, revolves around organizing, planning, and efficiently controlling resources to attain specific goals. Managers address operational challenges, and focus on processes, structures, and day-to-day operations, ensuring tasks adhere to plans. Their strength lies in executing business plans, maintaining stability, control, and consistency in operations to ensure that organizations function smoothly. Managerial skills excel when supervising daily operations, allocating resources, and completing tasks efficaciously. Managers perform well in project-oriented environments, overseeing planning, execution, and monitoring to achieve objectives. They allocate budgets, personnel, and equipment optimally, managing risks and performance to ensure stability.
Part 2
The Rise of Financialization in MedTech

The financialization of the MedTech industry took root over several decades when interest rates were low and access to affordable capital was relatively easy. This encouraged corporate executives to lean away from developing innovative scientific devices for expansion and lean in on M&A to provide growth. One recent period during which central banks maintained low interest rates, and adopted accommodative monetary policies, is the aftermath of the global financial crisis of 2008. In response to the crisis, central banks, including the US Federal Reserve, (Fed) implemented measures to stimulate economic growth and stabilize financial markets. One of the primary tools used was reducing interest rates to near-zero. For instance, the Fed held its federal funds rate [the benchmark interest rate] at near-zero levels from December 2008 to December 2015. The purpose of this was to encourage borrowing and investment, which in turn was expected to stimulate economic activity, job creation, and consumer spending.
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The Financialization Dilemma of MedTechs

Have diversified medical technology companies blown their competitive advantage?

Such extended periods of low interest rates encouraged MedTech executives to explore growth opportunities beyond conventional R&D investments. With significantly reduced financing expenses, and a large, underserved, fast growing sector, managers turned to M&A to bolster their resources and expansion efforts. This trend was further buoyed by investors seeking higher returns amid limited profitability in low-interest rate environments. Consequently, MedTechs gravitated toward M&A and financial activities, which promised near-term gains and broader market reach. This shift diverted executive focus away from innovation-centered expansion to transactional approaches for growth, ultimately reshaping the industry's trajectory toward financialization. M&A opportunities initially helped companies to strengthen their presence in underserved, rapidly expanding market segments. By merging with, or acquiring, near adjacent enterprises, MedTechs accessed new customer bases, technologies, and product portfolios, which allowed their executives to consolidate company resources, increase market share, and achieve economies of scale, which drove growth.
Perceived benefits of M&A

This shift towards M&A and financial optimization did not diminish the significance of scientific progress and innovation; but it did incentivize many MedTech executives to recalibrate their reliance on R&D. As the industry evolved, several factors encouraged executives to prioritize M&A and financial engineering as their principal drivers of growth. These included the increasingly stringent regulatory landscape for medical devices, which extended the time and costs associated with new product launches. Executives recognized the value of acquiring readily available innovations with existing regulatory approvals. Additionally, M&A offered the opportunity for MedTechs to streamline their operations, eliminate redundancies, cut costs, and enhance financial performance.
Over time, intensifying financial activities increased the industry’s global competition, and many MedTechs employed M&A to expand internationally and gain access to new markets. Simultaneously, acquisitions facilitated the diversification of product offerings, which lowered risks associated with relatively narrow product portfolios. Publicly traded corporations faced pressure from investors to deliver near-term financial results and shareholder value, which further steered executives to lean in on M&A for quick returns and access to a wider talent pool and complementary technologies.
Impact on leadership dynamics

The rise of M&A activities and the financialization of the MedTech industry reshaped leadership dynamics. While the sector was initially driven by innovation-focused leaders, the shift we describe has led to a gradual transition towards transaction-oriented managers taking control. Visionary figures like Willem Einthoven, a Dutch physiologist and Noble Laureate for Medicine, Thomas Fogarty, an American inventor, innovator, and cardiothoracic surgeon, Patricia Bath, an American ophthalmologist, and inventor and Robert Langer, an American engineer, scientist, and entrepreneur, are just four  among many others  who laid foundations for the industry's growth with their pioneering medical technologies. For instance, Einthoven's invention of the electrocardiogram (ECG) changed cardiology, Fogarty's embolectomy catheter, (balloon catheter), transformed vascular treatments, Bath’s Laserphaco Probe, disrupted cataract surgery, and Langer's work on biomaterials led to several breakthrough medical devices.
Notwithstanding, over time, M&A pursuits by companies altered resource allocation, diverting attention away from R&D towards activities like due diligence and integrations. This shift redirected budgets and talent away from innovation, affecting the creative and scientific progress of enterprises. Metrics tied to M&A outcomes gained precedence over those that encouraged internal innovative momentum. Further, the growing financial acumen of MedTech executives overshadowed R&D capabilities, emphasizing short-term gains over longer-term strategic innovative initiatives. After decades of successful M&A, changes in economic, financial, and technological landscapes prompted concerns about the industry’s sustained growth and innovation-centric leadership.
Consequences of M&A for innovation and R&D

Prioritizing financial transactions over R&D in a fast-paced industry can undermine innovation, sustainable growth, and competitive advantage. Companies favouring financial activities at the expense of R&D have tended to show diminished ability to create novel medical technologies, which results in fewer disruptive solutions and a weakened ability to address evolving healthcare challenges. The significance of R&D for longer-term sector growth cannot be overstated. A disproportionate focus on financial transactions leads to short-term mindsets, which tend to neglect opportunities for organic growth through innovation, and thereby disadvantaging companies by hindering their adaptation to economic trends and market dynamics.
Companies with robust R&D cultures attract scientific talent. Conversely, leaning away from innovation makes it difficult to attract and retain top researchers, engineers, and experts. An enterprise's reputation is tied to its innovation and scientific capabilities, while an overemphasis on financial transactions projects profit-centric motives, which can erode stakeholder trust and credibility. In the rapidly advancing technology landscape, neglecting R&D invites obsolescence. Companies not allocating sufficient resources to innovation run the risk of falling behind competitors as new breakthroughs emerge, jeopardizing their market share. Over emphasising M&A introduces dependence on external factors such as regulations, negotiations, and integration challenges, which can disrupt an enterprise’s growth predictability. While financial transactions may promise more immediate gains, they tend to divert resources away from longer-term strategies and R&D, which can compromise sustained growth and value added. This shift risks a company losing a core identity, which can undermine employee motivation and reduce stakeholder alignment. Further, prioritizing financial transactions can create discord within an organization between transaction-focused executives and innovation-aligned employees, which could impede strategy execution. Thus, leaning away from R&D for financial gains can jeopardize innovation, growth, and competitive edge, ultimately hampering a company's longer-term success.
Part 3
The Implications of M&A-Centric Growth

The implications of M&A-centric growth are multifaceted and extend beyond the immediate area of financial transactions. A trend that emerges within MedTechs as they prioritize M&A activities over R&D, is an innovation gap, which can introduce strains within leadership dynamics as resources are disproportionately allocated to financial pursuits rather than fostering technological advancements. Reallocating resources in this way can stifle the development of innovative technologies. Moreover, often the shift is accompanied by a transformation in executive skill sets, where financial acumen takes precedence over the ability to drive R&D. Consequently, there is a shift in the overall performance metrics of companies. Short-term gains resulting from transactional activities, often overshadow longer-term, research-driven achievements that are essential for innovation, growth, and competitive advantage.
The change in company culture is another potential consequence of this growing inclination toward financial activities. The once-pervasive values of creativity calculated risk-taking, and scientific exploration, which have historically fueled innovation, start to wane. This is further exemplified by a shift in talent attraction strategies. The attraction of financial expertise can eclipse the allure of nurturing disruptive innovation, thereby resulting in a dearth of fresh perspectives that could potentially drive growth and value.
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As decision-making processes prioritize short-term financial outcomes, there is a gradual sidelining of research-driven innovations that are needed for the sustained growth and relevance of MedTech companies. The ramifications of this choice are significant. Entities that opt for transactional expansion rather than innovative evolution may find themselves trailing behind competitors who continue to invest in R&D endeavours. This divergence in strategy could lead to a subsequent loss of market share and a gradual erosion of overall relevance. Innovation remains important to address the adaptive challenges that arise from evolving healthcare demands, increased patient voices, rapidly advancing technology, and increasingly stringent regulatory requirements. The transformation of MedTech companies into entities that prioritize financial outcomes run the risk of leaving them ill-equipped to effectively navigate these headwinds. A reduced focus on innovation tends to render companies vulnerable, impairing their capacity to anticipate and effectively respond to future industry and societal trends.
The importance of striking a balance between short-term financial goals and longer-term innovation objectives cannot be overstated. Companies that are unable to reconcile these contrasting perspectives risk compromising their ability to anticipate and adapt to the evolving healthcare landscape. In essence, the ramifications of an M&A-centric growth approach are not solely confined to fiscal aspects; they extend to the core of a company's competence to foresee, adapt to, and thrive within a rapidly evolving MedTech sector.
Reduced R&D resources impact on patient care and outcomes

The impact of diminished R&D resources on patient care and outcomes can be significant. At its core, a vibrant and forward-thinking MedTech industry is essential for the development and successful deployment of medical technologies, diagnostics, and treatments that increase the efficacy of healthcare and improve patient outcomes. The combination of innovation and healthcare can translate into tangible benefits for patients. For instance, personalized medicine therapies, which are outcomes of R&D, offer a transformative approach that enhances patients’ therapeutic journeys, and minimizes adverse effects.
Smart devices often mean swift and precise diagnoses, which pave the way for timely and effective interventions. Beyond this, innovation extends to healthcare accessibility. Remote monitoring and telehealth technologies reduce geographical barriers, bringing healthcare within reach of those in remote and underserved regions. This can reduce disparities in healthcare access, leveling the playing field for all individuals, regardless of their location, ethnicity, or socioeconomic status. Further, the shift toward minimally invasive technologies not only fosters quicker recovery times but also shortens hospital stays. The combination of improved healthcare protocols that promote better adherence and more efficient, cost-effective medical procedures helps to make quality healthcare accessible to more people.
Concern arises when MedTech innovation takes a back seat, which tends to perpetuate outdated medical devices that can result in suboptimal outcomes and the continuation of existing healthcare disparities. The neglect of innovative R&D endeavours delays the development of disruptive technologies, thus prolonging inequitable healthcare access and outcomes. In this context, companies that lean away from innovation could find themselves deepening divisions between different patient outcomes. The role of healthcare providers is associated with the availability of advanced technologies. Optimal care requires the integration of innovative technologies into medical practices, and the neglect of this can limit access to care, and potentially compromise patient outcomes. It is important to stress that the direction of the MedTech industry has an impact on the quality of healthcare that a society can provide. By placing innovation at the forefront of strategic priorities, companies are more likely to enhance treatments, patient experiences, and the overall efficiency of the healthcare ecosystem. Neglecting innovation, on the other hand, can result in stagnation that perpetuates inequalities, delays healthcare access, and slows the development of patient-centered care. The symmetry between financial considerations and the pursuit of innovation is important. The consequences of overlooking either aspect have effects, which can extend beyond company balance sheets into the health and wellbeing of patients who depend on the MedTech industry to provide leadership for a healthier and more equitable future.

Part 4
A Strategic Approach for MedTech Transformation

The phase of MedTech's growth driven by M&A has now matured, necessitating a fresh perspective and refined strategy. The transition from visionary leaders to financial managers has, in many medical technology companies, created a void in leadership, especially given the current headwinds faced by the industry. To improve patient outcomes and foster sustainable growth, a recalibration is required, which places innovative leadership and patient-centric care initiatives at the forefront. A synergy between financial and R&D strategies is important for success. Only by reconciling financial operations with innovation endeavours, can the potential for competitive advantage and improvements in patient care take place.
Strategic allocation of resources, particularly towards dedicated innovation efforts, drives research. Notwithstanding, the realization of this relies on company executives leaning in on the transformative potential of R&D endeavours. To counterbalance any undue focus on short-term gains, it is essential to develop and implement a balanced set of performance metrics that connect financial milestones with innovation breakthroughs. This provides the basis for a strategy, which fuses financial decision-making with the promotion of innovation-driven initiatives. Further, to help executives develop diverse and adaptable mindsets, enterprises might consider increasing collaborations with research institutions and start-ups, with the aim to gain access to talent and knowhow that complements internal capabilities.

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The establishment of structured innovation frameworks, closely tethered to fiscal objectives, should help to provide a consistency of purpose. Safeguarding innovations requires robust intellectual property (IP) strategies, and regular evaluations, attuned to prevailing market trends, and assisting with the ongoing alignment of a company’s strategy with exogenous trends.  This nuanced approach hinges on executives being able to balance essential financial imperatives with innovations to create a balance, which, in turn, is expected to contribute to sustainable growth, heighten competitiveness, improved patient outcomes and reduced healthcare costs.
Cultivating leaders with balanced expertise

Successfully blending transactional expertise with R&D capabilities requires leaders with vision and purpose able to develop and implement strategies that harmonize with an enterprise’s goals and politico-economic trends, evolving stakeholders’ demands and changes in healthcare systems. Let us briefly suggest a roadmap to achieve this.
First, develop cross-functional leadership teams that unite financial and R&D experts, and are expected to help ensure that decisions become grounded in both fiscal considerations and innovative pursuits. Advocating for innovation within finance and R&D units, helps to foster alignment between financial choices and R&D priorities. Developing and implementing key performance indicators (KPIs) is crucial. These should measure both financial outcomes, and advancements in innovations. Consider incorporating into performance evaluations metrics such items as newly filed patents, and the delivery of product launches and impactful R&D projects on-time and within budget.
Establish a dedicated venture fund to drive and reward innovation. Facilitate collaborative workshops that bring together finance, R&D, marketing, and other functions to ideate transformative solutions and services. Such endeavours should aim to increase growth, enhance enterprise value, improve patient outcomes, and reduce the cost of care. Align financial objectives with innovation goals, linking bonuses to achievements in both financial performance and successful innovation. When contemplating M&A, give precedence to targets that enhance a company’s innovative capabilities by aligning with R&D expertise and novel product portfolios, thus amplifying innovation.
Create small cross-functional review groups to assess innovation projects for alignment with business goals and fiscal viability. Establish agile committees to oversee resource allocation and to ensure consistent R&D funding. Implement programmes to recognize and celebrate employees who contribute to innovative ventures to help cultivate a culture of inventiveness. Set up platforms to facilitate interdepartmental sharing of creative ideas. Actively involve financial specialists in innovation discussions. Cultivate external partnerships to infuse fresh perspectives into R&D initiatives. Foster communication channels between financial and R&D teams and encourage regular exchanges of insights and opportunities. Provide training to enhance financial experts' understanding of R&D processes and offer financial literacy training to R&D teams. By integrating transactional expertise and R&D acumen, MedTechs can more effectively balance financial growth and innovation, to help enhance competitiveness, adaptability, and industry-leading innovation.
Reviving visionary leadership

This Commentary started by describing differences between leaders and managers to highlight the prevalence of transactional management during a period of M&A-driven growth, which in turn diminished the demand for visionary leadership. As the industry has reached a mature phase, and facing significant headwinds, a juncture arises that calls for leaders capable of bridging the gap between financial success and technological advancement. This involves aligning financial strategies with a broader vision of innovation and patient-centric progress. In doing so, visionary leaders establish a framework that both augments a company's financial performance, and drives healthcare technology forward, ultimately enhancing patient outcomes. This strategic evolution depends on leaders embracing a forward-thinking mindset that extends beyond immediate gains and helps to steer enterprises towards sustained innovation and growth.
Central to this transformation is the synchronization of financial goals with a company's longer-term vision. This ensures that financial policies are conducive to fostering transformative technologies. Cultivating an innovative culture within an organization, leaders instill a spirit of expansive thinking, experimentation, and the pursuit of innovative technological solutions and services that address healthcare challenges. Acknowledging the need for strategic investments in R&D, these leaders allocate resources optimally to bolster novel solutions and services. Furthermore, they have an awareness of market trends, emerging technologies, and evolving patient needs. This equips them to anticipate shifts in both the market and technology landscapes, which enables them to strategically position their companies to take advantage of emerging opportunities. By balancing innovation and astute risk management, leaders blend calculated risk-taking with prudent financial decisions, thereby contributing to stability and improved competitiveness. With a focus on the longer-term impact of their actions, visionary leaders understand the interplay between present-day technological advances and a company's future standing.
In the dynamic ecosystems of contemporary medical technology, visionary leaders exhibit adaptability in navigating change, guiding companies forward by skilfully adopting new technologies and strategies. Their longer-term strategic outlook attracts top talent from both finance and technology. Inherently collaborative, these leaders forge alliances with other companies, start-ups, research institutions, and industry experts, which increase the potential for accelerating the pace of technological innovations from the bench to the bedside. Harnessing novel technologies to create distinctive solutions and services, they lead their organizations to prominence within a competitive market. Upholding ethical considerations, these leaders ensure that technological progress not only yields financial gains but also has benefits for patients and healthcare systems. Investors tend to gravitate towards enterprises with visionary leaders. The ability to articulate a compelling narrative that emphasises how innovation drives future growth and financial returns enhances their allure. Thus, visionary leaders orchestrate a successful synergy between financial acumen and technological ingenuity, encouraging an ecosystem where strategic foresight translates into substantial dividends.

The evolution of the medical technology sector over the past four decades has presented a dual-edged transformation that healthcare professionals must now grapple with. The shift from pioneering innovators to adept managers within the industry reflects the interplay between economic, technological, regulatory, and ethical factors. As these converge, healthcare companies face significant headwinds that demand leadership rather than management. The financialization of the industry, driven by prolonged periods of low interest rates and accessible capital, has had a significant influence on the industry’s ecosystem, accelerating growth while simultaneously steering priorities away from innovation towards financial pursuits. This shift opened a new era, characterized by an abundance of skilled managers but a deficit of visionary leaders. Today, the MedTech industry stands at a juncture, with the demand for strategic foresight and innovative thinking never more acute. The need to pivot towards sustained growth and enhanced enterprise value necessitates leaders who can balance the strategic imperatives of R&D and the financial acumen required for M&A. The future trajectory of the medical technology sector hinges on the ability of healthcare professionals to recalibrate leadership dynamics. By addressing the scarcity of visionary leaders, the industry can leverage its potential to overcome the headwinds it currently faces and pioneer transformative innovations that redefine the landscape. As healthcare professionals navigate the future, their collective efforts will determine whether the MedTech sector continues to evolve along its current trajectory or takes a bold new direction towards enhanced growth, innovation, and added value.
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  • MedTechs have experienced significant transformation through mergers and acquisition (M&A) to achieve steady growth, diverting resources from innovative research and development (R&D) initiatives
  • The industry’s M&A activities were fueled by a prolonged period of low interest rates and easy access to capital
  • Consequently, R&D efforts focussed on incremental improvements rather than breakthrough innovations
  • This financial-centric business model led to risk-averse bureaucracies among many MedTechs, resulting in a strategic deadlock with limited growth prospects
  • Adding to the challenges, the current era witness’s debt and asset prices surpassing productivity and economic output
  • For many MedTechs, these macro-economic conditions potentially pose funding constraints, reduced market demand, tightening regulatory challenges, cost pressures, and market volatility, further hindering their ability to overcome the deadlock
  • To address these issues and help MedTechs break free from their strategic deadlocks and create long-term value we propose seven strategic initiatives
The Financialization Dilemma of MedTechs
In the 1990s and 2000s, medical technology companies received praise for their rapid growth. However, they currently find themselves at a crucial juncture, facing challenges of low and stagnant growth rates. Additionally, an uncertain long-term outlook looms over them due to the expansion of global balance sheets surpassing GDP, as well as debt and asset prices outpacing productivity and economic output. This Commentary aims to shed light on how many MedTechs reached this strategic deadlock. It also proposes strategies that these companies can pursue to break free from this predicament, which have the potential to significantly enhance growth rates, improve balance sheet health, and foster value creation.
An era of low interest rates and cheap capital

The financialization of MedTechs has played a significant role in their current strategic deadlock, and the most viable solution lies in accelerating productivity. This financialization was facilitated by a prolonged period of low interest rates and easy access to inexpensive capital. Over the span of four decades, starting from the 1980s to the early 2020s, interest rates steadily declined across most industrialized nations. In the aftermath of the 2008-09 financial crisis, many countries adopted a low interest rate environment to stimulate economic recovery and restore liquidity in their banking systems. For example, the US Federal Reserve Board (Fed) lowered short-term interest rates from 4.25% in December 2007 to nearly zero by December 2008, registering the lowest rate in the Fed's history.
During the era of persistently low interest rates and readily available capital, MedTechs experienced a surge in merger and acquisition (M&A) activities, primarily targeting companies in near-adjacent sectors to capitalize on low-risk opportunities for incremental growth. This trend fostered a culture of consolidation, driven by the desire to access new technologies and broaden product portfolios. While M&A activities bolstered short-term profits and shareholder value, they often led to a neglect of research and development (R&D) initiatives. Acquisitions were perceived as a less risky and quicker avenues for expanding product lines, overshadowing investments in R&D. Consequently, many MedTechs adopted a risk-averse approach, channeling their R&D efforts towards incremental improvements of existing products rather than pursuing ground-breaking innovations that could significantly improve patient outcomes and disrupt the industry. Moreover, the increasingly stringent regulatory environment for medical devices, particularly in Europe, further discouraged companies from investing in R&D due to longer development timelines and escalated costs.
Over the years, these policies resulted in the consolidation of power and resources among a few large players, leading to the emergence of market oligopolies and the decline in industry diversity. This scenario posed challenges for smaller companies with innovative ideas, as they struggled to compete with established enterprises, thereby impeding both innovation and healthy competition. Moreover, established MedTechs benefited from the significant and rapidly growing healthcare demands in affluent Western markets, particularly North America and Europe, which account for ~65% of the global medical device market. In these markets, compensation was often tied to medical and surgical procedures rather than focussing on patient outcomes, further favouring the established industry players. While M&A can be an effective growth strategy, it is important for companies to strike a balance and prioritize innovation alongside their consolidation efforts to ensure sustainable success and drive meaningful advancements in the industry.
An era of surging prices and low productivity

We have now entered a distinct era that differs significantly from the previous era characterized by low interest rates, and easily accessible funds. Starting from March 2022, the Fed has implemented 10 consecutive rate hikes, bringing its benchmark rate to 5.25%. These increases, coupled with high leverage in the corporate sector, escalating geopolitical tensions and  instability in the banking world triggered by the Silicon Valley Bank (SVB) collapse in March 2023, compounds the challenges faced by MedTechs. Furthermore, global balance sheets have expanded at a much faster pace than Gross Domestic Product (GDP). Debt and asset prices have surged far more rapidly than productivity and economic output. This trend is underscored by a report published in May 2023 by the McKinsey Global Institute, which reveals that the past two decades have resulted in the creation of US$160trn in paper wealth but have been marked by sluggish growth and the rise of inequality. According to the report, every US$1 invested has generated US$1.9 in debt.
Strategic initiatives to adapt and thrive

When global balance sheets expand at a faster rate than GDP and debt and asset prices outpace productivity, it becomes a concerning sign for MedTechs who find themselves trapped in a strategic deadlock characterized by sluggish growth and a fading belief in long term value creation. Under these conditions, companies should expect to encounter funding limitations, decreased market demand, stricter regulatory obstacles, cost pressures, and increased market volatility. In such a testing business environment, it is important for MedTechs to adopt bold adaptive strategies and navigate wisely to ensure continuous growth and enhanced value. We suggest seven such initiatives that are likely to help MedTechs break free from their strategic cul-de-sacs. By implementing these with vigour, companies can position themselves for success in an ever-changing and demanding economic and geopolitical landscape.
1. Revamp R&D
In recent times, costs associated with MedTech R&D have escalated. A study published in the September 2022 edition of the Journal of the American Medical Association (JAMA), and carried out by the US government’s Office of Science and Technology Policy, found that the development cost for a complex therapeutic medical device, from proof of concept through post approval stages, is US$522m. Significantly, the nonclinical development stage accounted for 85% of this cost, whereas the US Food and Drug Administration (FDA) submission, review and approval stage comprised 0.5%.
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Thus, MedTechs have the potential to optimize their R&D processes, enabling them to develop more swiftly and economically ground-breaking devices that result in enhanced patient outcomes and expanded market share. To achieve this, companies may consider the following strategies to improve their R&D processes: (i) Integrating artificial intelligence (AI), machine learning, and big data techniques into their R&D endeavours and harnessing the power of these advanced technologies. (ii) Collaborating with academic institutions and start-ups to gain access to novel innovations and expertise. This collaboration can involve joint development and co-creation of innovative offerings. To tap into a diverse pool of expertise and resources, companies should consider a platform-based approach to R&D, which potentially improves the capacity to drive breakthrough advancements that improve patient care. (iii) Implementing agile methodologies to accelerate the R&D process, which involves breaking projects into smaller, more manageable segments and swiftly iterating based on stakeholder feedback. (iv) Engaging patients in the design process to ensure that newly developed offerings cater specifically to their needs, ultimately enhancing patient satisfaction.
2. Emphasize patient-centric care
Enhancing patient-centric care to improve outcomes is a crucial factor in the future of healthcare provision. There is a growing body of evidence indicating that patient choices will have an increased influence on the provision of healthcare over the next decade. With patients having more options and autonomy, MedTechs can leverage patient-centric strategies to better understand and address their needs, ultimately leading to improved market share. To achieve this, companies must prioritize effective communication, product education, and support services to build stronger relationships with patients. This requires increased utilization of electronic health records, advanced AI, data analytics capabilities, active engagement with patient communities, leveraging social media platforms, establishing patient advisory boards, and forging partnerships with payers and providers.
Further, embracing value-based care models is important for MedTechs. By prioritizing positive patient outcomes over quantity, companies can contribute to the development of sustainable care. As global healthcare systems transition toward value-based care, MedTech companies should align their offerings accordingly. Emphasizing solutions that enhance patient outcomes, reduce healthcare costs, and provide overall value positions, MedTechs become indispensable partners in the evolving healthcare landscape. This also may involve developing outcome-based pricing models, implementing remote monitoring solutions, and demonstrating real-world evidence of product effectiveness.
3. Revitalize organizational and operating models
Revitalizing organizational and operating models is essential for MedTechs to boost their growth rates and adapt to a rapidly evolving market. While companies experienced significant growth in the past, recent trends have shown a shift towards risk-averse bureaucracies, accepting modest annual growth rates as the "new normal". To overcome this stagnation and meet evolving customer demands, traditional MedTechs should consider embracing agile and flexible structures.
By flattening hierarchies and fostering cross-functional teams, organizations can facilitate faster decision-making processes. Implementing lean manufacturing and optimizing operational processes can reduce waste, enhance productivity, accelerate time to market, and lower costs. Leveraging AI-driven data analytics enables the extraction of valuable insights from vast datasets, empowering MedTechs to anticipate customer needs and market trends.

4. Harness the power of digital, AI and big data
Digital transformation has become a necessity rather than a choice. Although companies like Stryker and Siemens have championed digitalization, widespread implementation still remains a challenge. Indeed, Siemens’ suggests digitalization is “something that is often talked about but not fully implemented”. Previous Commentaries have shown how MedTechs can employ digital technologies to improve products, streamline operations, enhance customer experiences, and reduce costs. Streamlining operations and optimizing costs without compromising quality is crucial in the face of escalating economic pressures. This may involve re-evaluating supply chains, improving manufacturing processes, and adopting digital solutions.
In today's rapidly evolving digital age, investing in digital and analytics capabilities has become indispensable for companies as they shape their R&D, hone their processes and shift to a customer-centric stance. The seamless integration of digital and AI-driven techniques, along with data-driven decision processes, has emerged as a crucial factor in maintaining and improving competitiveness. For MedTechs, it is imperative to cultivate a culture of innovation that encourages and rewards experimentation and risk-taking. By doing so, organizations create an environment where employees are empowered to explore ideas, learn from failures, and ultimately drive meaningful innovations.  Therefore, actively seeking external partnerships with technology companies, start-ups and academic institutions is a strategic move for MedTechs to access cutting-edge technologies and expertise in digital and analytics. By embracing these capabilities as core rather than adjunct components of their strategies, fostering an innovation-centric culture, and investing in talent development and retention, corporations position themselves optimally to leverage the transformative potential of digital and analytical technologies. This, in turn enables them to thrive in an increasingly interconnected and data-driven healthcare ecosystem.

5. Talent acquisition and retention
The rapidly changing landscape of globalization, the increasing influence of AI techniques, and the demands of a new generation of consumers seeking personalized experiences have compelled MedTechs to reassess their approach to talent acquisition and retention. To keep up with the pace of change, it is crucial for these companies to attract and retain highly skilled professionals with expertise in technology, healthcare, and business. A talented workforce plays a vital role in driving innovation, ensuring efficient and safe processes, navigating complex market dynamics, and effectively executing growth strategies. To achieve this, companies should invest in the development of their employees, foster a culture of innovation, and offer competitive compensation packages to attract and retain top performers.
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According to a study published by the Harvard Business Review in January 2020, retaining top talent has become increasingly challenging for employers. The study revealed that in 2018, 25% of employed Americans left their jobs, with approximately 33% of this turnover attributed to unsupportive management and a lack of development opportunities. MedTech companies are not exempt from this trend, and to acquire and retain talent, they must strategically revamp their value propositions to align with the evolving needs and expectations of the modern workforce.
A crucial step in this direction is fostering a purpose-driven culture that highlights the significant impact medical technology companies have on improving people's lives. By instilling a sense of purpose, employees are more likely to develop a strong connection to the company's mission, inspiring them to consistently deliver their best work. Furthermore, providing ample career development opportunities is essential in empowering employees to enhance their skills and progress in their professional journeys. This can be achieved through training programmes, mentoring initiatives, and leadership development schemes.
Recognizing the importance of work-life balance is also critical. MedTechs can prioritize flexible working hours, a 4-day week, remote work options, generous vacation policies, allowing employees to effectively balance their personal and professional lives. By creating a supportive environment that promotes overall well-being and job satisfaction, companies can foster employee loyalty.
Competitive compensation and benefit packages are essential. Additionally, a commitment to diversity and inclusion is pivotal for MedTechs aspiring to become employers of choice. By emphasizing diversity in hiring practices and cultivating an inclusive work environment where every individual feels valued and respected, corporations can attract and retain a diverse array of talent. This, in turn, creates an environment conducive to enhanced innovation, creativity, and problem-solving.
Despite best efforts, there may be instances where companies are unable to attract and retain individuals with the necessary capabilities. In such cases, strategic partnerships, joint ventures, licensing agreements, and co-development initiatives allow MedTechs to tap into external expertise and resources, which can be employed to enhance product portfolios and gain access to new markets.

6. Realize global opportunities
MedTechs, traditionally reliant on most of their revenues from affluent US and European markets, now have the chance to expand their horizons and explore the untapped potential of the rapidly growing markets in Asia, Middle East and Africa, and Latin America. These regions boast transitioning demographics, with aging populations and a surge in chronic diseases. Additionally, their large and expanding middle-class populations demand advanced care, prompting governments to increase their healthcare expenditures significantly. By venturing into and expanding their footprints in these markets, Western MedTechs can diversify their revenue streams and leverage the growth opportunities stemming from the escalating demand for cutting-edge medical technologies and services.
Expanding into emerging markets not only provides a means to mitigate risks associated with economic volatility and changing regulatory environments but also necessitates acquiring new capabilities, fostering a change in executive mindsets, and embracing flexible pricing models. By adapting to the unique demands and challenges of these markets, MedTechs can position themselves strategically to tap into the vast potential they offer. This expansion serves as a catalyst for sustained growth and allows companies to seize opportunities that would otherwise remain untapped, thus bolstering their long-term success.

7. Align with rising ESG standards
To fully leverage their capabilities and resources and meet rising standards in ESG (Environmental, Social, and Governance), MedTechs might consider taking bold actions that: (i) embrace sustainable manufacturing practices to minimize their environmental impact, which entail reducing waste, water, and energy consumption, as well as transitioning to renewable energy sources. Such practices contribute to environmental conservation and mitigate a company’s carbon footprint, (ii) adopt circular economy principles, which involve designing products with a focus on reusability and recyclability. Additionally, establishing take-back programmes for end-of-life products, which ensure responsible disposal and encourage the reuse of valuable materials, thereby reducing waste and promoting sustainability, (iii) develop products that improve patient health, safety, and overall quality of life. This requires a patient-centric mindset, discussed above, that emphasizes the social impact and positive contributions MedTechs can make to society, (iv) produce offerings that are accessible and affordable to all segments of society. By addressing underserved communities and partnering with them to provide better healthcare solutions, companies can contribute to reducing healthcare disparities and promote equitable access to quality care, (v) enhance transparency and accountability, which includes setting clear targets, regularly measuring and reporting progress, and disclosing ESG performance, and (vi) engage with stakeholders, such as investors, customers, payers, employees, and patients, to better understand their expectations and concerns regarding ESG issues. Such a bold proactive approach to ESG issues contributes to a more sustainable and equitable world, strengthens a company’s reputation, and fosters its long-term success.
In today's rapidly evolving and technology-driven world, a successful pivot for MedTechs, which have been financialized and now find themselves in a strategic cul-de-sac, requires a simultaneous introduction of the suggested strategic initiatives, rather than a sequential approach. To regain high growth rates and create long-term value, MedTechs must:
  1. Revamp R&D efforts to develop innovative solutions and services that address evolving market needs, prioritizing cost-effectiveness, and improved patient outcomes as primary drivers of value creation.
  2. Prioritize patient-centric care by delivering solutions and services that significantly enhance outcomes, establishing a reputation for consistent value provision.
  3. Revitalize outdated organizational and operating models through increased collaboration with industry stakeholders, enabling accelerated technology development and adoption. This ensures alignment with patient needs and facilitates swift market entry.
  4. Harness the transformative power of digital technologies, AI, and big data to unlock new possibilities for innovation, efficiency, and personalized healthcare experiences.
  5. Attract, retain, and develop talent equipped with 21st-century capabilities while fostering a purpose-driven culture that fuels innovation and drives organizational success.
  6. Recognize and capitalize on the vast and rapidly expanding opportunities present in emerging markets, approaching them with a strategic mindset.
  7. Align with ascending ESG standards, demonstrating a commitment to sustainability, ethical practices, and social responsibility, which reinforces the credibility and long-term viability of MedTechs.
By embracing these strategies simultaneously, corporations position themselves to navigate policy shifts, overcome global uncertainties, and take advantage of evolving technologies, which stand them in good stead to enhance their growth rates, and significantly improve their value.
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