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Medical Device Service Businesses—Is Cash King Today or Is Survival?

A shift in strategy may be needed given the impacts of the COVID-19 pandemic.

Image by Peggy und Marco Lachmann-Anke from Pixabay

Spoken by the late and well-respected business leader Jack Welch, “Cash is King” is a mantra many business leaders live by, but what does that mean today in the midst of COVID-19? Think of the thousands of service businesses that had their business strategies laid out and their 2020 plans unveiled to associates and leaders. Then, only a month and a half into the year, they had to suddenly pivot from executing their strategy to placing it on hold and moving into a reactionary tactical mode.

Though service businesses across many industries have been impacted by COVID-19, the medical device service industry has certainly felt a significant shift in focus. Based on conversations I’ve had with medical CSOs, I see that:

  • Approved 2020 budgets are frozen.
  • Non-essential travel has been eliminated.
  • Hiring has slowed down or has frozen.
  • Overall spend is scrutinized.
  • Reallocation of resources is happening.
  • Project deferment and/or limiting project activity are occurring.

This is being done to preserve cash as customers stretch payment terms and demand improved flexibility. So, what are companies spending money on then?

Is the new strategy to operate with the sole purpose of keeping the lights on, or does the pivot that many companies are making gear them up to support specific actions? The answer is somewhere in the middle.

Digital Tools Take Priority

The COVID-19 situation has certainly influenced companies in some similar ways given the halt in non-essential travel. In the service world, however, most travel is absolutely essential. We support the systems and machines that save and sustain life, so there isn’t a way to eliminate travel, but there is a way to control it.

Through the use of digital field service management tools, remote diagnostics, IoT, AI, and even tools like AR, medical device companies can reduce the unnecessary travel of the field service teams by triaging and remote fixing as much as possible. A successful triage can ensure that a field service engineer doesn’t need to make repeat visits as he or she is prepared with the right information and the right parts to allow for improved overall first-time fix while optimizing uptime. Remote fix and remote upgrades prevent the need to send a field service engineer or even an applications expert to the site at all. The interest in digital initiatives in medical devices was already high, and COVID-19 has likely raised the interest even further.

An Increased Focus on the Engineer

Hiring freezes, furloughs, and layoffs are certainly at an all-time high, but you don’t see that happening on the field service side in medical devices. If anything, some medical device companies continue to hire and staff their field teams as the volume of work increases. Take ventilators as an example—GE, Medtronic, and Phillips to name a few are all ramping up manufacturing of their ventilators by double or triple.

For field engineers, this means increases in installs, preventative maintenance, and repairs based on the massive spike in install base numbers. With the high focus on getting all of these ventilators installed and serviced along with other life-critical systems, field teams may be limited in the ability to perform revenue-generating tasks.

This environment also means that spend is being focused on supply chain, manufacturing, spare part inventory, and PPE equipment to allow field service engineers to successfully and safely perform their work.

The Critical Survival List

This all being said, we are seeing companies and customers take actions to preserve the health of their business all while allowing them to deliver critical services in this time of need. The survival list that service organizations are following and asking themselves are:

  • What can I stop doing today?
  • How can I leverage remote technology to limit field service deployment?
  • Where can I stop spending?
  • What projects need to continue forward, and which can be delayed?
  • What position can I pause on hiring and which are business-critical?
  • How can I redeploy underutilized staff to take on new work while other work stops?
  • Do my field engineers have the PPE needed to stay safe?
  • Does my field staffing and operations meet the current demand?
  • Do I need to create new shift schedules to allow response but decrease cost at the same time?
  • Does my supply chain of spare part and consumables meet the current and forecasted demand?
  • Do I need to defer PM’s?
  • Do I need to contract third-party providers to take on work that exceeds current capacity?
  • Do I need to move all technical training on-line and remote?

I am sure there are more items to think through, but these are some big ones that are forcing service businesses to think differently and change gears to ensure patient care is met. Companies like GE Healthcare are shifting resources to take on the high volume of work in certain modalities while other modalities are low. This also means PMs and low-level maintenance work is getting temporarily pushed out to accommodate greater demands.

The good news is companies are starting to see indications of the pendulum swinging back to where they can begin catching up on what was parked. Even the Joint Commission is looking at ways to work with medical device companies to provide additional time to catch up and regain compliance.

Is Cash still King in this immediate time? In my opinion, Survival is King right now, and as a medical device family, we are all doing what is needed to support our customers and patients during this unprecedented time. The key to today’s survival is controlling spend, focusing on the critical activities, and preparing to move forward post COVID-19.

Shawn LaRocco

Shawn LaRocco

Shawn LaRocco is the vice president of digital transformation for the medical device industry at ServiceMax. With his vast experience in the medical device field, LaRocco acts a trusted advisor to  customers and prospects, sharing the best practices he has gained to help transform their service organization. Prior to ServiceMax, LaRocco led Alcon’s Global Technical Service organization within the Surgical Franchise, where he was responsible for global service strategies, operations, functions, and growth objectives. He previously served as the senior director of U.S. & Canada service technologies within the GE’s expansive service organization supporting 5000 employees and a $2.5B business. Starting out as an R&D engineer developing prosthetics and orthopedics for children, LaRocco has held many positions across engineering, marketing, and service operations. He holds a B.S. degree in Biomedical Engineering and MBA in Global Management.

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