PwC: Medtech companies need to rethink innovation

Medical technology companies need a new approach to innovation to keep their competitive edge, according to a report from PwC's Health Research Institute (HRI).

The report, "Medtech companies prepare for an innovation makeover," includes a web-based interactive innovation scorecard to assess medtech companies based on leading innovation practices. Only 14 percent of medtech executives say that they formally manage innovation activities, which is essential to creating new services and business models, according to the consulting firm. Just 17 percent believe their companies are innovation pioneers. The HRI report outlines how medtech companies need to expand their approaches to innovation outside traditional R&D, in order to remain competitive.

“Historically, medtech innovation has relied on incremental improvement,” said Christopher Wasden, managing director and global healthcare innovation leader, PwC.  “But ‘innovation’ needs redefining for an environment that rewards value—measured in affordable patient outcomes and customer satisfaction—over volume. True innovators learn from failure—fast, frequent, frugal failure. Medtech leaders need to change their business models, their corporate DNA, to embrace lean innovation beyond their core operations.”

Key report findings include:

• The value of a device is no longer solely in the product itself but in a company's ability to help customers solve broader problems.  
• New competitors are staking their claim—at least 18 companies have entered the medtech space and are driving innovation at the pace of technology.
• New integrated services and business models that address clinician and consumer needs are becoming more important.
• Medtech executives expect a higher level of innovation over the next three years but lack formal processes to achieve their goals for new services and business models.
• Medtech companies have been slower to apply new social, mobile, analytic and cloud (SMAC) technologies than other industries.
• Medtech companies are looking to open innovation as a key approach to drive future growth.

“Three things are essential to transform today’s medtech companies for the future,” said PwC principal Ed Yu. “Embrace failure—create an innovation operating model that separates breakthrough and radical innovation from incremental innovation. Embrace the disease—select a target area and collaborate with health industry counterparts to get closer to the patient. Finally, measure innovation in new ways with forward-looking metrics and connect the dots for shareholders. That’s the formula for success.”