What will a successful medical device company look like in the future? Such a company must be able to compete on a global scale, focus on core competencies, deliver products of increasingly high quality on time, and offer reduced costs year-over-year for its customers. If that sounds overwhelming, and maybe a little impossible to you, you are not alone. Becoming that company is a challenge, to say the least, and only the most successful medical device firms will find innovative ways to do so.

One way to approach such goals is to explore strategic partnerships. Firms that offer partnerships are streamlined to offer improved competitiveness. OEMs looking to refine their ability to deliver innovative products in a highly competitive market may find this method cost-effective and reliable.

Frost & Sullivan recently released a research paper titled “Strategic Product Life Cycle Management Partnerships as the New Means of Competitive Advantage for Medical Technology Companies,” which suggests that to succeed in this changing market, medical device companies will need to get better at meeting increasing demands from their customers and shareholders for continuous innovation.¹ At the same time, they need to maintain fiscal efficiency and profitability, meet detailed regulatory requirements, and manage a highly complex supply chain.

As part of a patient-centric market, healthcare technology providers are realizing that they need to further invest in innovation to stay competitive amid increasing pressure to manage product costs. Outsourcing partnerships must respond to a market that is expanding geographically and changing rapidly on the regulatory front.

The ultimate goal for advancing the innovation of medical devices is to enable healthcare providers to deliver better and more accessible patient care. As such, medical device manufacturers need to go beyond lowering the total cost of production and work on better understanding the diverse needs of developed and emerging markets. Different types of products may be required for different regions to suit the local healthcare infrastructure. These products will also need to meet varying regional regulatory requirements.

A strategic partner with the relevant global footprint and knowledge can help navigate those disparate markets. Through the partnership, medical device companies might be better able to expand their market reach cost effectively by uncovering and seizing growth opportunities in emerging markets. Strategic partnerships provide clear advantages, but they are not one-size-fits-all. Every organization faces its own challenges. However, close collaboration with market-leading strategic partners can lead to major benefits, according to Frost & Sullivan.

Sandra Ketchen

Reducing Capital Requirements

Medical device innovations often need to be developed with the support of venture capital funding. Limited capital can be a common and ongoing concern. For example, a firm might not have funds to build a dedicated new manufacturing plant. But the right strategic partner can provide capabilities for production and on-demand inventory management of everything from raw materials to finished goods.

Responding to a Competitive Landscape. With markets expanding globally for many firms, a strategic product life cycle management partner with a global footprint offers a sophisticated, cost-effective manufacturing and distribution model that many firms can’t afford alone. Partnerships provide new capabilities to respond successfully to rapidly changing product demand requirements.

Looking to Other Industries

Medical device companies can capitalize on the wealth of intellectual capital that their strategic partners may have developed in other industries. In the increasingly competitive medical device market, manufacturers require relevant new sources for the ideas that drive success. Research, design and manufacturing expertise developed by the aerospace, defense, and information technology industries holds value for some medical device companies.

Lowering R&D and Manufacturing Costs

Faced with rising labor costs in developed countries and higher R&D expenditures as a percentage of their revenue, companies today face pressures to globalize operations to maintain profit margins and grow a global revenue base. The globalization of industry over the past several years has created a new world economy. And as manufacturers increasingly outsource to countries such as China and India, these emerging markets keep improving their ability to offer technically advanced services at a lower cost.

Improving Access to Global Markets

As outsourcing of manufacturing to India and China increases, per capita income in these countries has created new wealth and a prime market of consumers for future revenue growth. These emerging markets represent key future opportunities for medical device companies.
Effective strategic partnerships take time and effort to establish. Experience suggests that medical device companies that invest in developing such a deep relationship reap long-term benefits for their business.

For medical device OEMs, embracing a partnership model to meet the new economic reality is only the first step. The next critical component is to better understand how to select the right partner.

Selecting the Right Partner

Look for an outside partner considered best in class in the specific areas of expertise needed by the medical device company’s operations. In many cases, a good partner company will already have made the investments and gained the experience in what works and what does not. All of those resources and experience can benefit an OEM’s organization immediately.

Consider the following questions when identifying a partner:

• Does the partner have experience in highly regulated industries?
• Will the partner be able to navigate changes in regulatory structures?
• Does the partner have experience in high-complexity and low-volume production?
• How will the partner accelerate the OEM’s market strategy?
• Does the partner have an extensive supply chain network to deliver efficiencies?
• Does the partner have an established infrastructure that will be reliable, flexible, and scalable to meet and anticipate market changes and needs?
• Can the partner deliver a quality control system that is transparent and integrated with the OEMs? Can it also deliver cost benefits?
• Does the OEM organization have an infrastructure that allows high-level collaboration, engagement, and commitment to the partnership and does the partner organization engender the kind of trust needed to make a partnership work?

Such questions can be addressed by performing a comprehensive audit of the OEM’s own strengths and needs and then match that against a suitable partner’s offerings. Mutual goals need to be agreed on at the outset. A quarterly or annual review process is recommended. If the relationship is actively managed, there should be no surprises.

Plan and Execute Together

When engaging with a partner, it is crucial to jointly define objectives at the outset of the relationship. Ensure that there is alignment on each specific partnership objective at all levels of each organization. Medical device firms need to establish realistic objectives with partners, whether they be cost reduction, optimizing the supply chain, or improving time to market. Once both parties have agreed on how the objectives will be addressed, manage performance toward achieving all of those goals. These goals should be customized for each OEM.

Successful partner relationships require partners to share a high level of communication and collaboration throughout the relationship. Having that communication ensures continued success in addressing issues or problems amid changing conditions. As priorities change over time, it is also crucial to ensure through communication that the partners are aligned in meeting new objectives. Make no mistake; open and honest communication is essential to the success of any partnership.

Measure Performance

The partners also need to agree on appropriate metrics to gauge performance. Customer needs and demands, supplier partnerships, and market conditions constantly change and evolve. It is therefore important to formally review the progress of a partnership on a regular basis. One way to do that is to continuously gather feedback on how improvements can be made to a process. Parties should meet on a scheduled basis (perhaps annually) to revise objectives.

For example, a medical device OEM wanted to respond more rapidly to changing customer demands and identified the need for a more flexible supply chain. Part of that process involved defining new metrics to specifically measure improvements in component lead time. The customer's goal was to reduce material costs, increase spend leverage, reduce risk in its supply chain. It also wanted to mitigate excess and obsolete materials.  Due to the changes made by the OEM, its vendor took multiple steps to make the supply chain less vulnerable to disruptive lead-time extensions or costly supply interruptions (see the sidebar "Optimizing Supply Chains").

Keep in mind that consultation with a potential partner will reveal much more about what a successful relationship will require, based on the unique needs of your own organization. Many medical device companies need to get their products to market faster without sacrificing quality. At the same time, setting up their own improved infrastructure for manufacturing and regulatory control can take up to 18 months and be an extremely expensive proposition. All things considered, they might decide to look for partners that already have systems in place that they can quickly tap into for ongoing success and improvement.

Conclusion

Beyond gaining faster time to market, medical technology companies are reevaluating core competencies to focus more on innovation and less on operations. The innovation cycle is speeding up, and medical device companies need partners to not only deliver product to market faster, but to also find new, low-cost ways to innovate, especially in markets outside of traditional spaces. To do that, device companies need partners with a robust infrastructure. The components of that infrastructure do not need to be novel, but they need to be reliable, flexible, and scalable.

Medical device companies that pursue and build powerful strategic partnerships with full-service external companies are becoming far more competitive. Fundamentally, partnerships are about teams of people collaborating, sharing ideas, and solving problems. A successful partnership needs to be built on trust and it is crucial to assemble a team with the right skills, experience, and chemistry.

More firms are recognizing the value of these new models for success and, as those companies drive deeper into strategic partnerships and the array of benefits available, they will continue to increase their advantage over competitors that are slower to evolve.

Reference

1. “Strategic Product Life Cycle Management Partnerships as the New Means of Competitive Advantage for Medical Technology Companies,” Frost & Sullivan (October 25, 2010).

Sandra Ketchen is vice president of healthcare for Celestica Inc.