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This article was originally published in MDDI on May 2006.
Looking at broad trends in technology and society can help medtech companies in their long-term technology forecasting.
In few industries do the words of British industrialist James Goldsmith ring as true as they do in medtech: “If you see a bandwagon, it’s too late.” Success in the medical device realm requires disciplined foresight and advance planning.Yet even intelligent people can be spectacularly wrong when predicting the impact of technological trends and making investment decisions accordingly. Banker JP Morgan, after reviewing the new invention of the telephone, stated, “Mr. Bell, after careful consideration of your invention, while it is a very interesting novelty, we have come to the conclusion that it has no commercial possibilities.”
Predicting the impact of technological and social change in the three to five-year future is arguably easier for themedtech industry than for consumer industries; medtech product cycles are longer and change happens more slowly. It can take a medical device company two years to get its next-generation product to market, and it is not uncommon for a product to have a life of five to seven years.
Regardless of such relative predictability, fast-moving changes driven by other industries and new technologies can sometimes wreak havoc on a medical device company’s planning. However, it is from these slightly chaotic and disruptive events that great new opportunities are born. When it comes to looking ahead 10 or more years, the medtech industry needs a different perspective to shake up linear thinking and unearth new opportunities.
Long-wave economic theory provides a historical perspective on the major technical revolutions of the past 250 years, and a little immersion in it can have a refreshing effect on one’s thinking about future technological change on the 10- to 15-year horizon. This article briefly reviews this theory and suggests some ways in which medtech companies can apply long-wave theory for longerterm forecasting.Long-Wave Economic Theory
Long-wave theory focuses on the technological revolutions that have characterized the significant surges of economic growth since the start of the Industrial Revolution in the late 18th century. Long-wave theorists say society is in the middle of such a revolution right now, and if the current revolution follows the pattern of previous ones, the world is in for some exciting long-wave riding.
According to theorists, each revolution lasts about 30–40 years and is characterized by two distinct phases of roughly equal length. First there is the installation phase, during which the technology is developed, refined, and installed around the world. This is the period of greatest upheaval in the established order of business and society. The deployment phase follows, during which the technology begins to improve economic prosperity through increased productivity and spreads significant social advantages in the form of lifestyle improvements.Long-wave theory offers four examples of past revolutionary change: the initial Industrial Revolution of the 1770s, the mechanization of steam and transport of the 1830s, the growth of heavy engineering in the 1870s, and the automobile in the 1910s. According to long-wave theorists, the fifth revolution, occurring today, was started by the genesis of the microprocessor in the 1970s.
As a means of understanding the two phases of each revolutionary spurt, one can consider the revolution of heavy engineering,when rapid advances in civil, chemical, electrical, telegraph, and naval engineering laid down a new infrastructure. One effect was the globalization of the food industry: during the northern winter, producers in the southern hemisphere could start shipping vast quan- tities of fresh foods to northern markets. As a result, established industries went through massive upheavals as their business models were turned on their head by new economies of scale and speedier communication. In the northern economies, however, the resultant growth and cheaper fresh winter foods had an undeniable benefit across wide swaths of society.Taking a long-wave view requires one to rethink society’s current revolution. For example, many herald the Internet as a revolution. While the Internet certainly is revolutionary, it is not in itself the revolution of the present; it is an inextricable element of the microprocessor age that has yet to fully play out its potential for economic upheaval and global prosperity.
Under long-wave theory, revolutions are like tides in a harbor. They are large, cyclical forces that raise all boats. Medtech has had its own upheavals, including surgery, antibiotics, imaging, and genetics. However, for the purposes of riding the long wave, these must be viewed as components of society’s larger revolutions rather than revolutions in themselves. Just as the transistor’s development in the 1950s can be thought of as the microprocessor revolution in gestation, the combination of biotechnology, bioelectronics, nanotechnology, and new materials may well be the gestation phase of the next revolution 20 years on the horizon.Developing Better Foresight
When it comes to developing a future vision, medtech manufacturers often get in their own way. Today’s executives and the inertia of their companies represent the old guard, still pursuing goals in the same way they always have. Riding the long wave can help executives broaden their vision. Recognizing broad changes and currents in the past can help stimulate an interdisciplinary perspective on the future. This can be accomplished by analyzing nascent technologies and speculating on potential long-term social, technological, and economic outcomes. Executives can then work backward from these end points to create a map of products and technological platforms that could be in a position to take advantage of the shakeups of a revolution’s deployment period.
Of course, executives can’t predict the future. However, looking toward distant horizons and developing an appreciation for where the medtech industry is in the current upheaval process can lead to betterinformed management decisions. Even when predictions for the future lead in the wrong direction, they can still offer solid vantage points from which a company can adjust its route.
Venture Advisory Boards
Companies seeking strategic innovations should strike a balance between internally driven initiatives and incorporating external perspectives. Historically, the innovations that have disrupted industries or created new growth opportunities have rarely come from established companies. “Internal approaches to innovation are critical since priorities, commitment, and investment for the future must come from within,” says Soren Kaplan, a principal at strategic innovation consulting firm InnovationPoint (Piedmont, CA). But he also notes, “Incorporating the external viewpoint—from industry thought leaders, consultants, academia, start-ups, customers, and partners is absolutely essential for moving beyond today’s assumptions and identifying beyond-incremental opportunities.”One of the methodologies Kaplan advocates is the establishment of a venture advisory board to provide an immediate infusion of outside expertise into the organization.“By pulling together industry experts with complementary perspectives and inviting them to join an advisory board focused on future growth opportunities, companies can create a new capability that delivers significant new insight almost overnight,”Kaplan says.
Such venture advisory boards are similar to the industry advisory boards that are becoming popular among progressive medtech companies, which seek a panel of outside experts to advise on the customer and disease-management trends within given specialties. The difference is that venture board members are chosen based on their perspectives outside of a particular medical specialty. In fact, they may not even be from the medtech industry. For example, a company might be interested in longer-term healthcare trends in the wireless networking arena. To gain a broader perspective, a company may invite a senior executive from a software and network solutions provider to join its venture board. To reciprocate, an executive at the medtech company might consider taking on a healthcare trend advisory role at the software company.After all, the business of technology forecasting is a two-way street.Future Forecasting
In forecasting future scenarios, most companies look at existing trends and extrapolate from there. If they are creative, they may even explore the implications of intersecting trends within their industry. While this might be useful in near term predictions, it is less useful for the longer view. According to Kaplan, “Real growth opportunities don’t usually come from looking at what everyone else can already see. The longer-term breakthroughs result when companies consider alternative future scenarios—ones that incorporate potentially disruptive trends and events beyond today’s radar screen. Of course, the goal is to tie all this back to your current business, but you need to start with the future and then jump backward from there.”
To create a future scenario that looks at prospects 10 or 20 years into the future, a company will need to poll a variety of sources, beginning with its internal R&D staff who are immersed in near-term technical trends and attend all kinds of industry forums. The marketing team and others with substantial customer contact should also contribute information that might hint at broad social and technical trends that may influence customer expectations. The company may also poll existing advisory boards and seek input from experts outside its immediate sector—especially from those who are in a position to know of disruptive technologies that might have a large effect on a long-term scenario.
The types of elements that might be expected to arise as part of a future scenario—in this case emphasizing developments that could influence the business of a company with a specialty in patient-monitoring technologies. Some aspects of this scenario are based on a linear extrapolation from present-day products and technologies—such as the development of intelligent implants and broader use of information technologies—showing how the synergies of intersecting technology trends may result in new products and market opportunities.
However, the illustrated scenario also incorporates two disruptive events—developments that cannot be predicted but could have a nonlinear influence on the product and market opportunities available in the future. By considering several such disruptive events, companies can ensure that their future scenarios move beyond mere description of step-by-step product development to reveal events with true market-altering potential. In the case illustrated here, the disruptive events are a radical new drug-device combination that relies on very sophisticated closed-loop in vivo monitoring, and the unexpected demographic shift resulting from greater life expectancy. With a disruptive drug-device combination successfully increasing life expectancy, the aging population would continue to increase, putting massive pressure on the healthcare reimbursement system and exerting significant downward pressure on the price of medical products.With such a large and growing elderly population, the Medicare system would require a radical overhaul.
Reviewing such a scenario, a medtech company in the patientmonitoring business might gain ideas about the types of technologies it should be working on in order to best position itself for the projected future. A company whose present-day monitoring technology is based on a relatively small number of vital signs and is used primarily in hospitals and clinical laboratories, for instance, might want to consider whether its market niche is likely to exist in the long term. As advances in microelectromechanical systems (MEMS), microelectronics, and sensor technologies act in concert to make subtle and less-invasive measurements possible for widespread home use, it seems likely that tests now performed infrequently in the lab could soon become noninvasive and frequent. If the patient-monitoring company’s technologies and products do not already anticipate such a possibility, the company might want to consider gaining some firsthand experience with the relevant technologies in order to become better positioned for the future.
The illustrated scenario also suggests the continued inevitability of price pressure on the medtech industry. Unlike the consumer electronics and automotive industries, the medtech industry has historically not responded readily to such routine pressure. The patient-monitoring company of this scenario might anticipate such long-wave-driven cost pressures by routinely leveraging broad technological advances to lower its costs progressively. A company’s prices may not need to fall as rapidly as its costs, but companies will be better prepared if they anticipate that the unexpected might force them to make dramatic pricing changes.
Given the rapidity of technical and social change in the wider world, managers of medtech companies can gain insight into potential disruptive events by asking what could destroy their business as well as what might grow it. Such issues might include technical, medical, or demographic trends, but they might also include competitive strategies and shifts in customer behavior.
In the case of the illustrated scenario, for instance, the patient-monitoring company might want to consider how the globalization of high-speed communications and the strong growth of knowledge-based service industries in the developing world might affect its business. When data from a wireless personal monitor can elicit a real-time advisory from a healthcare professional viewing a computer screen in Delhi, for instance,what would be the effects on the company’s products and market presence?
Setting a Pace
It is always hard to act today on the basis of uncertain events tomorrow. If a medical device manufacturer asks its customers what they want within the next 10 years, the manufacturer will receive notoriously bad advice.Customers are often not capable of envisioning scenarios that are radical departures from the way they have always done their jobs. As Kaplan notes, “Before they existed, how many consumers would have asked for Microsoft’s Office or an iPod, let alone a home defibrillator? Today all these things are mainstream, and the organizations behind them have seen nothing but growth.”
In contrast, companies occasionally move on innovative ideas for which the market is not ready. The keyhole heart surgery system developed by Heartport Inc. failed to achieve widespread adoption because it was considerably ahead of its time. Despite the fact that leading heart surgeons expect coronary artery bypass graft procedures to become less invasive in the future, the Heartport system did not meet market expectations when the company went public.
One way to tackle the difficult job of identifying winning technology opportunities is to approach these investments in a manner similar to the way the venture capital community proceeds once it identifies broad opportunity areas. Venture capital firms rarely try to pick a single winner; instead, they back several different players and technologies and meter their investments according to strict performance milestones. Successful venture capital firms reward an atmosphere that encourages taking risks. They nurture small, highly focused,multidisciplinary teams that can act fast but also respond quickly to changes in the wider world. However, they rarely back technology platforms that are looking for a problem to solve. Instead, they fund ideas that are focused on specific market needs—even if such needs are further on the horizon than those typically addressed by an established company. Unfocused advanced technology research groups rarely lead to breakthrough products. In order to surf the big wave, medtech companies have to learn to ride the smaller ones first and be willing to fall off a few times before succeeding.
1.A Kleiner, “Carlota Perez: The Thought Leader Interview,” strategy+business magazine 41 (Winter 2005): 131–137; available from Internet: www.strategy-business.com/press/article/05410.
2. C Perez,Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (Cheltenham, UK: Edward Elgar, 2002).
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