Bridge Design

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.


References
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).

3. S Kaplan, “Discontinuous Innovation and the Growth Paradox,” Strategy & Leadership 27, 2 (March–April 1999): 16–21.