Voices: the CMB Blog

Over the past 3 years, there has been no shortage of attempts to forecast the impact of the Affordable Care Act (ACA) on patients and insurers, but the truth is, the changing care model has ramifications that extend well beyond the waiting room. The multi-billion dollar medical device industry is smack-dab in the middle of tremendous regulatory and economic changes—including the ACA and the Medical Device Excise Tax (MDET). Earlier this year CMB’s MedTech team partnered with the Massachusetts Medical Device Industry Council (MassMEDIC) to survey 123 of their members for their perspectives on the past, present, and future expectations for innovation and growth in the medical device industry. Below, are a few highlights from The 2013 MedTech Industry and Innovation Study:   

• One of the most profound shifts, reflected in the results of our study, is the emerging influence of economic buyers on medical device innovation. The traditional med device market model places physicians at the center of innovation efforts, and to be sure they’re still very much at the forefront of med device companies’ minds. But as the ACA’s cost containment policies come into effect, hospital administrators and insurers will see their influence grow, as they become increasingly involved in purchasing decisions. Indeed, while just under one third of respondents said they have focused their innovation efforts on economic buyers in the past, 53% said economic buyers would receive their attention in the future.

• Not surprisingly, the MDET has elicited a great deal of conversation, with med device companies’ still strenuously objecting to the tax that came into effect last year. However, while the industry as a whole has actively advocated for MDET’s repeal, a surprising 40% have yet to plan to address the tax. For those who have made or acted upon plans to address the tax, workforce reductions and reductions in R&D spend top the list of mitigating actions.  Despite considerable concerns over the changing care model, many respondents were optimistic for the future, with the bulk of respondents expecting increased revenue, both inside and outside the US in the coming 5 years.

• Asked to evaluate their performance on key success factors, the vast majority indicated that their company currently meets or exceeds expectations when it comes to identifying customer wants and needs and determining the most compelling features set—table stakes in new product development in any industry. Respondents also identified areas for differentiation (i.e., capabilities that are important for future success, but that most don’t perform well on).  Organizations that with the following core skills will win in the future - prioritizing resources, determining how to price product(s)/service(s) given the dramatic changes, and developing compelling clinical data to support their product(s)/service(s). 

Click here to read the full report.

The results of this study were presented at MassMEDIC's 17th Annual Conference on May 8th 2013.

Andrew runs CMB’s MedTech practice and has spent the better part of the past decade helping some of the most successful MedTech companies make difficult strategic decisions.  In his free time, Andrew enjoys scrubbing into tracheotomies with clients, and running with his dog Moby.

While the rest of us breathe a sigh of relief that the fiscal cliff threat is behind us, the MedTech industry is feeling the pain of the new medical device excise tax, a part of the Affordable Care Act (ACA).  While it remains to be seen whether the promised influx of patients resulting from the ACA will ultimately generate enough revenue to offset the tax, looking at the current state of US healthcare (Click on Figure 1 for Larger Version) it is painfully clear that additional tax revenue alone is not the solution; rising costs must be addressed in a meaningful way. 

Innovation to develop products, services, and systems that are more effective and efficient is critical to solving the healthcare cost problem. While the majority of MedTech organizations historically focused their sales and service efforts on their relationship with physicians, there is an increasingly vocal group, including doctors, patient advocates, and policy makers, who believe the key to healthcare innovation lies in empowering patients. Because patients ultimately make decisions about things like diet, exercise, when to seek treatment, and disease management, they have an enormous influence on the cost and the effectiveness of their own care.  In fact, some believe that 80% or more of healthcare decisions are made by patients, not medical professionals. The idea is that if we can empower people to be more informed and engaged in their care decisions, they will be the driving force behind improving the efficiency and effectiveness of the healthcare system. 

Assuming the care system does evolve in a way that empowers patients, many MedTech organizations will be under increased pressure to incorporate features in their products that impact patient’s behaviors and help them make better lifestyle decisions.  For example, imagine a pacemaker that can provide a patient with information in real time through a smart phone app that will help him become more conscious of decisions about sleep, diet, and exercise.  These types of patient empowering innovations have the potential to dramatically change healthcare in the US (and worldwide).  And MedTech companies have the opportunity to drive this change; however it will require a shift in how they have traditionally learned about their markets.

As MedTech companies race to innovate, they will likely hold internal brainstorming sessions, meet with physician advisory boards, and speak to their sales and customer service groups. The problem with these approaches is that it leaves out the most critical component— the patient, the key to successful innovation.  To generate this intimate knowledge of patients, organizations need a plan—a change from how MedTech organizations traditionally approach innovation.  One that does the following:

1. Identifies what customers ultimately want and need from their healthcare.  Talk to patients living with the disease state; understand their daily struggles, and what would improve their healthfulness.

2. Prioritize what matters most to patients based on the most pressing needs of the patients; organizations should not invest time and money in trying to address each item identified by patients.  Fortunately, all wants and needs were not created equal. Instead, companies should focus on developing solutions that address those needs that are most important to healthcare consumers.  Additionally, there are likely groups of patients that have different priorities, and organizations should consider whether and how they address these different groups.

3. Translates these prioritized wants and needs into solutions.  Armed with a detailed understanding of what matters to healthcare consumers, organizations can apply their expertise to develop elegant solutions that satisfy the most critical unmet needs.

4. Establishes metrics that indicate whether the solutions they have developed are truly empowering healthcare consumers and adding value to the system.

MedTech companies face a future of great uncertainty and opportunity; however it seems clear that in the context of the Affordable Care Act and the evolving nature of today’s care model, patients are going to become increasingly important.  MedTech companies will need healthcare consumer insight programs to uncover the wants and needs of their patients and discover the addressable white space. Their intimate understanding of their patients is enabling them to pull ahead and gain a decided competitive advantage.The winners aren’t going to be those who bring solutions to market first but instead those who can translate deep insight of patients into game changing products and services. 

Andrew runs CMB’s MedTech practice and has spent the better part of the past decade helping some of the most successful MedTech companies make difficult strategic decisions.  In his free time, Andrew enjoys scrubbing into tracheotomies with clients, and running with his dog Moby.

This summer, a Harvard Business Review case study presented the dilemma of a modern dance  company caught between their mission to grow and enter new markets, and their mandate to remain creative and groundbreaking. The arguments on both sides are pretty compelling.  A new employee pleads her case that the dance company needs to know who their customers are and what they want, while the Company’s founder argues this information would be detrimental to creating challenging dance performances— “if we ask them what they want, we’ll end up doing Swan Lake every time.”Conversations like these aren’t just happening in the halls of fictional dance companies, they’ve been challenging companies for at least a century. Take this quote from Steve Jobs, founder of what is arguably the most consistently innovative company today:

We figure out what we want.  And I think we’re pretty good at having the right discipline to think through whether a lot of other people are going to want it too.  That’s what we get paid to do. So you can’t go out and ask people, you know, what’s the next big [thing]?  There’s a great quote by Henry Ford, right? He said, ‘If I’d have asked my customers what they wanted, they would have told me ‘A faster horse.’ [2008 Interview with Fortune magazine]

In the past several years, I’ve sat in on talks, read articles, and spoken to lots of product developers who now feel that research and talking with customers provides little, if any, value.  They invariably point to Apple or that ubiquitous Ford-ism, but it seems to me that those who are dead set against customer research are missing the point.  It’s not the customers’ job to develop the solution, it’s simply the customers’ job to tell you about their experiences and what they’re trying to accomplish.  In the famous quote by Henry Ford, the takeaway isn’t that they should develop a faster horse.  Instead, it’s that people want to travel faster, and Ford came up with a better solution.

Let’s look at Apple, for example, if you take the latest version of the iPad, you’ll see they haven’t ignored customers at all.  People are more connected today than at any other point in history; our desire to connect with people and share, access, purchase, and manage media/content from anywhere at any time has only grown stronger with time.  Recognizing these trends, Apple made an incremental shift in current tablet technology and created a game-changing product.  The iPad might not be the perfect device for every user, but it performs great on attributes that allow us to connect with one another and consume content. 

What makes Apple special is their ability to anticipate needs becoming more important and that's what they did in the case of the iPad. But they don't just understand the customer needs from a macro level, they have a complete and nuanced understanding of the detailed needs that make up the entire customer experience.  So when it came time to build the next generation of tablets, they made the right decisions about screen size, processing speed, connectivity options, virtual keyboard size, touch screen sensitivity, gestures, etc., because they knew what mattered to customers.  The customers’ experience was the driving force behind those decisions.  This vision allows Apple to consistently churn out game-changers.

But donning a black turtleneck and taking the buttons off of your products won’t get you the next iPad.  While Apple may not engage in typical customer experience research, they have a culture that is customer focused from top to bottom. Their product development process is motivated, from concept to implementation, by the goal of providing seamless, user experience. Apple’s greatest innovations—the iPod, iPhone, and iPad—embrace simplicity and usability. Uncovering customer needs and creating products and services to meet them doesn’t require one of the greatest visionaries of all time, it can come through comprehensive customer experience research.

So we’re back to our dance company. How can they maintain their desire to grow with their commitment to boundary breaking dance?  The answer is customer research that identifies all of the customer wants and needs for a given product/service, and then tells you which ones matter the most.  Show goers may say they want to see Swan Lake, but do they really mean they want to recreate a powerful experience they had the first time they saw dance? Customer research that focuses on needs is a powerful tool, and critical to innovation whether developing a dance program or building a new processor. By knowing what matters to customers, organizations can discover unmet needs, find opportunities for disruptive innovation, know where to focus resources, and set the foundation for developing game-changing products and services

Needs based customer research is not about asking the customer to dream up the next new product, feature, or technology.  Nor is it about learning new ways to sell customers products they don’t really want.  It’s a proven method to help organizations connect with their customers and focus on what matters to them.  Apple’s success is based on a fundamental and detailed understanding of their customers.  Do you understand your customers in that way—or are you giving them Swan Lake?

Posted by Andrew Wilson, Andrew is an Account Director at CMB, he isn't sure about modern dance but awaits the iPad Mini with baited breath.

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Chadwick Martin Bailey's Andrew Wilson talks about the role of customer experience in helping organizations innovate, and why getting and understanding the answers to what your customers want and need is critical for successful innovation.

Andrew Wilson is an Account Director at CMB. He's a skier and long-distance runner, he also has a delightful 3 year old lab who deserves his own video.