Dollars & Sense
A Blueprint for Navigating Economic Growth Challenges
It’s no secret the global economy is in a state of disruption. Between prolonged supply chain challenges, widespread inflation that is raising prices and consumer anxiety and a never-ending pandemic, today’s business landscape is difficult, to say the least. Medtech companies are uniquely positioned at the epicenter of this trifecta of obstacles, where each day has the potential to bring a maelstrom of supply chain, pricing and pandemic-related obstacles.
A deeper dive into each of these hurdles reveals strategies medtech companies can use to meet these challenges head-on while staying on track to achieve their projected growth.
Challenges Coming From All Sides
One of the biggest sources of frustration for medtech companies right now is the supply chain, which has been in a tailspin since 2021. Stemming from the Covid-19 outbreak both directly (through labor shortages) and indirectly (via delayed shipments and shifts in consumer patterns), supply chain disruptions have spread to nearly every industry—and it looks as if these disruptions are not going anywhere anytime soon. Many medtech companies are experiencing prolonged delays in obtaining raw materials, locating and securing enough microchips and coordinating freight and shipping. Alexander Group research found that medical device backorders are as high as 30%—a mind-boggling statistic considering the typical backorder rate is in the low single digits. Medical device sales reps and managers are not sure how to deal with annual quotas. Some reps continue to close deals but can’t get their product shipped or delivered, while others have product but can’t find customers who are willing or able to buy it. Before the COVID-19 pandemic, the supply chain might not have been on the radar of medtech companies, but now it is an unavoidable and crucial part of the product development ecosystem.
Price increases and inflation present another major challenge for medtech companies, regardless of where they are located. Economies are buckling worldwide under the pressure of inflation. Last year, the global inflation rate was 3.4%, up significantly from the previous year’s 1.92%. For device makers, prices are even higher—Alexander Group research concluded that prices have climbed 4.3% on average, and companies are scrambling to identify cost-saving measures. Healthcare leaders and administrators are striving to secure, review and renegotiate contracts. With significantly higher prices and shorter planning cycles, medtech companies face another uphill climb.
A third top challenge is patient volume. Predicting and managing patient volume prior to COVID-19 was certainly a priority, but nowhere near as challenging as it’s proven to be today. Between the ongoing spread of SARS-CoV-2 and its many variants, and hospital staffing shortages, patient volumes are less predictable than they were in the years leading up to the pandemic. Patient volume is an important planning component for device companies, and its recent unpredictability has certainly posed a challenge. Moreover, health centers and clinics have their work cut out for them in accommodating patient variability because they are grappling with their own staffing shortages. All in all, the disruptions in patient volume and clinician staffing have dramatically shaken up the entire healthcare ecosystem, and medical device makers are feeling the aftershocks.
Ways to Move Forward and Stay Focused
A disjointed supply chain, soaring prices and unpredictable patient volume are endangering medtech companies’ year-end key performance indicators. But there are several steps companies can take to address these challenges and keep their businesses moving forward.
First, companies can redesign their commercial models to prioritize efficiency and deliver profitable revenues The past several years have uprooted reality, and previous operating models no longer align with today’s challenges and opportunities. By adapting strategies such as hybrid roles, inside sales and advanced market analytics into their operating models, device makers can set themselves up for increasing profitability amid increasingly uncertain environments.
Another mitigating tactic medtech firms can employ is capturing new market share in previously underinvested segments. Any financial advisor will admit that diversification is key to a solid investment strategy, and the same is true for medtech companies. By exploring new avenues, placing some bets on new innovations and seeking out new solutions to old problems, companies can future-proof their businesses and position themselves to successfully tackle unexpected variables.
Finally, companies must invest in digital solutions to drive greater investment efficiencies. The medical device industry has, at times, been a laggard when it comes to new technology adoption. But current digital tech offers an opportunity for device firms to advance their competencies, which can lead to greater productivity in their commercial models. Medtech companies must act now to “lean into” digital-first solutions. Do not be discouraged; even seemingly incremental progress is a huge step in the right direction.
While it’s a challenging time to be a medical device manufacturer, challenges always bring opportunities with them. Between supply chain mayhem, rampant inflation and unpredictable patient volume, industry players have been forced to produce more with less capital and smaller teams. If, however, they can implement more agile commercial models, make strategic new investments and “lean into” digital solutions, medtech companies can turn this short-term crunch into long-term growth.
For more information, please contact an Alexander Group Healthcare practice leader.
Article: How to Transition to a Modern Marketing Organization
Article: Impact of Outpatient Procedures on Commercial Models