Medical Device and Healthcare

Digitalisation in medtech – five tips taken from practice

doctor looks after a patient in the hospital
10 minutes to read

  • In order to take advantage of the opportunities arising from global megatrends, medtech companies have to master some major challenges.

  • The digital transformation offers a lot of exciting solutions here - but the introduction is anything but easy.

  • Five tips from Zühlke's project practice reveal how medtech companies can make a successful start in the digital transformation

For some medical technology companies – particularly companies manufacturing ventilators, surgical masks, protective clothing and disinfectants – the ongoing COVID-19 pandemic has driven a mini boom. But recent successes should not be allowed to obscure the fact that the industry also faces some major challenges. In this post we outline these challenges as we see them, how digitalisation can help and five points all companies should take note of.

Even putting aside the latest positive news on the coronavirus front, on the surface the future for the medical technology sector looks bright. An ageing society and other factors are set to ensure ever rising demand for healthcare solutions, and therefore medical devices. That’s especially true for smaller devices and sensors, two areas in which medical technology companies boast a lot of expertise – expertise which is currently very much in demand. There are also exciting opportunities in rapidly growing markets like China, India and South America.

Big challenges for medical technology businesses

But recent successes should not be allowed to obscure the fact that medical technology companies have some major challenges to overcome if they are to take advantage of these opportunities, and that the market situation in general also poses some difficulties. Starting with those rapidly growing new markets. Price expectations in these markets are very different – medical devices have to be much cheaper. The cost of manufacturing a simple ventilator for use in developing countries, for example, is just 250 euros. That would be inconceivable in Europe, but their much more basic functionality would also be unacceptable. On top of this, regulatory requirements, though much simpler, are very different from the regulatory requirements European companies are used to. Companies that want to operate in these markets therefore need to specifically develop products just for them, whilst continuing to develop highly complex devices for Europe and the US. The development process for these two cases is fundamentally different.

A further challenge is that existing customers in local markets are becoming more demanding. With health systems always short of money, many customers, for example hospitals, are under great pressure to make savings. In some cases this tendency has been further exacerbated by the fact that hospitals are having to keep beds free for COVID-19 patients. This means reduced income for hospital operators, whose costs, however, remain unchanged. With less income, they are less willing to invest in new equipment. Being able to prove the value of such investments – through metrics such as improved patient outcomes – is also becoming increasingly important.

Are tech giants set to muscle in on the medtech sector?

A third challenge for medical technology companies is the general situation in the medtech market. Technology giants such as Amazon, Apple and Google are increasingly pushing into areas that had previously been the exclusive preserve of medical device manufacturers. Rather than complex, regulated products, they are primarily focused on sensor-driven, consumer-facing devices, such as smart watches and fitness trackers. But their scope is expanding – there are already first approaches for blood pressure measurement via smartphones being tested. Data from these devices is then used to train algorithms. The results that can be achieved with simple sensors and a big data approach are quite astonishing. To achieve such results with conventional devices would either be impossible or would require far more complex products. Amazon’s Alexa offers an interesting example, with the suggestion that it might soon be able to detect diseases like Alzheimer’s and depression.

At the other end of the scale, the healthcare sector is also witnessing the rise of more and more start-ups, which are increasingly succeeding in becoming serious competitors. This is especially, though not exclusively, true for consumer-facing products. Some of these start-ups offer highly attractive products and services. They are also much faster and nimbler at developing and improving them than more established companies. Noctrix Health, Inc., for example, which we are involved with through Zühlke Ventures, has just been granted FDA approval for a device for treating restless legs syndrome. Its device delivers an evidence-based treatment which is free of side effects and much cheaper than existing treatments. It also tracks treatment results.

So what should medical technology companies be doing about it?

Medical technology companies are currently confronted with challenges on two sides – demand-side challenges from existing and prospective customers and supply-side challenges as a result of new competitors. The key question is how companies should position themselves in order to be able to respond to these challenges and be better placed to exploit the opportunities on offer.
From a purely abstract perspective, there are two options. One is for companies to become more efficient and better at what they do at present. They need to develop their products faster, make then better meet user needs, and make them cheaper. Alternatively, they need to break new ground, expand into new fields, or find new revenue streams. These could involve devices for the growing home healthcare market or pay-per-use solutions for hospital operators. In our view, the medical technology companies that are going to be most successful in the long term are those that view themselves not as medical device manufacturers, but as providers of complete healthcare solutions.
Looked at this way, the reason digitalisation is becoming increasingly important in driving commercial success in the healthcare sector is clear. All of the above points – from faster development, focusing on customer needs and cost reduction, to greater flexibility and developing new revenue streams – are classic features of digital transformation.

How digitalisation can work for you

But how do you become a digital champion? It’s not like there’s a product called digitalisation that you can just purchase and install. You need to know how to identify digital points of attack and how to go about turning them into products, processes, platforms and revenue streams. There isn’t a one-size-fits-all recipe that works for every business – there are too many parameters to take into account. But I can offer you a few key lessons that we at Zühlke come across again and again in the course of our digitalisation projects.

1. Don’t tiptoe around existing products and business models

On their digitalisation journey, sooner or later most companies face the dilemma of what to do when their new products and business models become a threat to their existing products. When confronted with this situation, it’s essential to keep an open mind and to switch off any mental filters. One thing is certain – your competitors aren’t going to tiptoe around your existing business models.
Even if it your deliberations don’t culminate in a concrete product, the process of thinking about potential digital competitors to your existing products can deliver some useful results – it helps you to stay one step ahead of the competition and to identify any weaknesses in your own products. It can also provide useful inspiration when it comes to improving and developing your products.
Of course, taking off the blinkers of habit is never easy. But there are techniques that can help, ranging from a change of scene (e.g. for a creative workshop), to bringing in a digital innovation partner, to using an outsourced innovation lab or incubator.

2. Avoid excessive perfectionism – don’t just develop a strategy, do something!

Finding the right balance between a scattergun ‘just do something’ approach and overengineering your strategy is far from easy. In our experience businesses in DACH countries often tend towards the latter, constantly searching for the ‘perfect’ strategy to avoid making any mistakes. But trying things out, making mistakes and learning from them as quickly as possible is a big part of any digital transformation. Avoiding excessive perfectionism is a key point here – otherwise more nimble competitors will nip in ahead of you and exploit your market opportunities. If in doubt, speed is more important than completeness.

With often long-winded decision-making processes, this is where a lot of DACH companies make life difficult for themselves. This stops them from testing out their products in the marketplace quickly and collecting feedback. This kind of feedback is essential and provides valuable pointers in areas such as missing features and device operability. Contact with end users is especially important in the context of user-centred design. Incidentally, user-centred design is not just useful for getting a product established – it can also help make devices safer!

3. Think ecosystem

More than in most sectors, new products and business models in the healthcare sector are rarely standalone entities – they are almost always embedded in solutions from other providers. The key questions when developing new products and services are: “Where might there be synergies?”, “Who else might benefit from this business model?” and “How can we work with other providers to make our solution more durable?”

A good way of getting your bearings here can be to start from a ‘patient journey’ or ‘digital therapy management’ and ask yourself two questions: “How can my company or department make a contribution here?” and “Who do I need to work with to achieve this?”

4. Think data

When it comes to collaboration within the healthcare ecosystem, communication is often via data. The ability to capture, securely transfer and make optimum use of data is perhaps the most important factor for making a success of digitalisation. Data is not just useful information – more than anything else it represents a base on which to build exciting new revenue streams. From additional services to new payment models (e.g. pay-per-use), it’s always founded on data.

Even with highly sensitive health data, the above still applies. Most companies view health data primarily from a data protection point of view. But using this health data to generate revenue is also becoming increasingly feasible. Techniques such as federated learning, for example, enable algorithms to be trained on complete data sets without requiring direct access to that data. Ocean Protocol takes a similar approach, aiming to provide each user with precise control over who has access to what aspects of their data – and is even aiming to create a marketplace for health data. Companies which jump on board with this issue now have an opportunity to play a formative role in shaping this emerging marketplace.

5. Start with a sound business case

It’s important to realise that innovation is not alchemy. Sure, uncertainty is a built-in feature of innovation, but that doesn’t mean innovation can’t be planned. Identify any low hanging fruit and do the maths – what needs to happen for this investment to produce a return? How realistic are the assumptions involved? It’s at this point that it may be worth getting an experienced partner on board. This generates sound, well-researched business cases, which ensure that your innovation projects deliver a return and help position your company for long-term success.

COVID-19 has shone a spotlight on the fact that many industries still have some catching up to do in terms of digitalisation. The medtech sector is not alone in this respect. It is important that companies make good use of the current situation and get to work in tackling any weaknesses identified without delay. That way, they can ensure it’s not just ventilator manufacturers who look back on this crisis as an opportunity.
I would be very happy to discuss this further with you – from the initial idea right through to the finished digital product!

Jörg Sitte
Contact person for Germany

Jörg Sitte

Director Business Development, Germany

As Director Business Development, Jörg Sitte is responsible for business development in the mechanical/plant engineering and MedTech sectors in Southern Germany. He is intensively involved in IoT and digitalisation projects as well as all the disciplines required for these projects, such as software (embedded, cloud and apps), electronics, sensor technology and mechanics/construction. He is convinced that the competitiveness of companies is increasingly determined by a successful digitalisation strategy. 

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