Will radical innovation take medtech into the digital age?

To successfully bring digital or data-driven solutions to market, medical technology companies need to get out of their comfort zone and strike out in new directions. In this blog post, we’ll be discussing how radical innovation can help with this, and what factors are crucial to success.

The good news – there are prototypes and ideas aplenty. Far too often, however, after a barnstorming unveiling, these prototypes end up getting filed away in a drawer somewhere never again to see the light of day. Just another great idea that never made the leap into practice.

So what’s the missing ingredient for today’s medical technology enterprises? The answer, it turns out, is radical innovation. Exactly the sort of innovation being deployed in countless other sectors to realise new digital business models, rethink existing ecosystems and value chains – and wow customers. Time, in our opinion, for the medtech sector to get to grips with this issue and time to answer the question, is it possible to realise radical innovation in a sector as highly regulated as medical technology?

What is radical innovation?

Jürgen Hauschildt (2016) defines innovation as “qualitatively new products or processes, which differ ‘markedly’ – however you chose to define this – from a comparator.” It’s this word ‘markedly’ that represents the key distinction between different types of innovation.

As a regulated industry, medical device development tends to be dominated by incremental innovation. The focus is very much on developing or enhancing existing products.

And why would medical technology enterprises want to jettison the safety blanket offered by incremental innovation anyway? After all, incremental innovation has the advantage of being highly predictable and scalable, with manageable levels of risk.

Well, firstly because incremental innovation alone isn’t going to solve the challenges the medical technology sector is currently facing. And secondly, because incremental innovation is not the right way to effectively exploit the opportunities created by innovations such as digital business models.

New challenges for the medtech sector

The medtech sector faces some significant new challenges. New and existing regulations make developing new products an increasingly complex undertaking. At the same time, product requirements are also changing – because users have got used to different ways of doing things, for example, or because of greater awareness of sustainability.

Then there’s the fact that the healthcare system as a whole is also changing. People are increasingly willing to take responsibility for managing their own health. In future, the focus will be less on treating disease and more on early detection and, ideally, even prevention of disease. As a result, a number of new players, ranging from start-ups to big tech, have come onto the scene. For established medical technology companies these new players have the potential to be useful partners, but on the flip side they could also end up being serious competitors.

The changing environment means that businesses operating in this market need to adopt new approaches and a new mindset. Companies operating in the healthcare sector – pharmaceutical companies, hospitals, health insurers, even medical technology enterprises – will need fundamentally different products and business models. Incremental development of existing products and services is not the solution – what’s needed is radical innovation.

Why do medtech enterprises find radical innovation so hard?

What form is radical innovation in the medical technology sector likely to take? That’s not an easy question to answer. Some medical technology companies have already made attempts at radical innovation with the aim of making advances in areas such as digital health. None of these attempts can be described as spectacularly successful. The reasons for this are varied:

• One reason may be that the approaches taken were just not radical enough – they were too bound up in an incremental innovation mindset.
• Increasing regulatory complexity makes developing new products harder, especially if they’re based on genuinely innovative technology.
• Fragmented healthcare systems (in Germany for example) make it much more difficult to develop a solution that works across multiple organisations.

These early failures seem to have put many businesses off attempting radical innovation altogether. In the longer term, this is a dangerous attitude – whether you like it or not radical innovation in the healthcare sector is happening. It’s just that right now it’s not being driven by the European medical technology sector – it’s happening elsewhere.

In many cases it’s university research institutes, start-ups or even Silicon Valley big tech that are driving radical innovation in the healthcare sector – organisations which are not tied to existing products, organisational structures or sales channels, and in particular which operate within different regulatory (e.g. data protection) frameworks. It’s not for nothing that research firm Gartner is predicting that the first “digital blockbuster” will arrive by 2025 at the latest.

Innovation types for medtech enterprises

As we have seen, there are lots of good reasons to pursue radical innovation in the healthcare sector. But how does radical innovation differ from other approaches to innovation?

• Incremental innovation is innovation that happens within the boundaries of the enterprise’s existing core business. It includes innovations such as enhancements to existing products or processes. It usually takes place within the framework of a development project with relatively clear boundaries, and can be planned with relative accuracy.
• Substantial innovation is usually about extending your existing core business into new areas. One example might be a manufacturer of mechanical ventilators expanding into oxygen cylinder sales. This innovation generally starts out as a development project, but often expands beyond this at the point that it becomes clear, for example, that it means setting up new departments within the enterprise.
• Radical innovation (also known as breakout innovation) is about creating completely new markets – by developing digital revenue streams (e.g. platform models), for example. To enable the company to build on its existing sector expertise, these should, of course, be located within the ecosystem in which the company currently operates. This type of innovation represents an opportunity to break out to pastures new, and to think afresh, unfettered by existing products and processes. The ideal framework for this type of innovation therefore involves a greater degree of separation from existing corporate structures. This may, for example, mean setting up a separate, part venture-capital financed subsidiary.

Radical innovation often makes use of methods honed on the start-up scene:

• getting a minimum viable product (MVP) to launch quickly, then undertaking further development based on feedback received
• focusing on niches and unmet needs
• being quick to react to changes in the marketplace, including being prepared to modify your business model where necessary
• forming partnerships with and collaborating with other companies
• incorporating digital or data-driven technology into new solutions

Radical innovation timeline

Once your radical innovation has become successfully established, starting with the third product generation it becomes possible to move to an incremental approach to development.

Making it work in the medtech sector

So how do you make a success of radical innovation? In our view, there are five key factors that make the difference between success and failure:

1. An impassioned, driven leader. You need someone with a vision of course, but more than anything else you need that someone to have resilience and tenacity. They have to take the lead in driving the project forward year after year.
2. Taking responsibility. The team has to (and has to be allowed to) take complete responsibility for the project. That starts with development and defining the product, and runs all the way through to sales and marketing.
3. Time. Radical innovation initiatives need roughly 10 years of investment before they turn a profit. That’s true for both start-ups and corporate initiatives.
4. Freedom. Radical innovation is about creating something new. A new creation needs a new way of thinking and acting, a new mindset. And that means unbolting it from the existing business.
5. Seeing the wider picture. Tunnel vision can be a big problem, so it helps to have a range of perspectives, including – indeed especially – outside perspectives. This is particularly important when it comes to defining the product and scaling up your market position.

In summary: Dare to innovate!

Radical innovation is anything but simple – especially in a sector like medical technology with its very strong focus on product safety. Certainly the political and data protection framework within which medtech companies have to operate makes radical innovation in the medtech sector more difficult. Regulations such as the MDR and IVDR mean that medtech companies now have a lot more work to do to bring novel, innovative products to market. But it’s important to realise that, even with these regulations, radical innovation is still possible.

Perhaps the key question is therefore not whether medtech enterprises should be pursuing radical approaches to innovation, but how they can make themselves fit for the future without radical innovation. In view of the major challenges facing healthcare systems and the huge changes they are likely to undergo over the coming years and decades, medtech enterprises have to have the courage to dare to do radical innovation.

The rewards awaiting those enterprises that do have this courage are huge. They have the opportunity to create new markets, establish a clear competitive advantage, and massively boost their standing within the healthcare ecosystem. But more than anything else, rather than just delivering new features for existing products, they have the opportunity to develop revolutionary digital business models completely independent of their existing business and structures.