Michael Barbella, Managing Editor02.04.13
“If you want something new, you have to stop doing something old.”
Better. Cheaper. Faster.
Like a badly scratched vinyl record, those words played over and over in Peter von Dyck’s mind nearly a decade ago as he developed and commercialized two gastrointestinal catheters for his privately held medtech firm.
“The inefficiencies and frustrations I felt and encountered with my own startup companies in the medtech arena really began to show me that there needed to be a better business method,” the accomplished innovator and entrepreneur told Medsider.com, an online educational resource for medical technology executives. “Then simultaneously the development of the Internet around this over the last 10 years and new digital horsepower really fueled me to say, ‘We can do this a better, faster, cheaper way.’ ”
It took von Dyck several years to devise a better, faster, cheaper method for product development but he did so through a concept known as open innovation. Thrust to the forefront of modern corporate culture by Henry Chesbrough, a professor and executive director of UC Berkeley’s Program in Open Innovation, the term refers to the formal discipline and practice of engaging outside help to problem-solve and advance technology. Open innovation (OI) is the antithesis of the traditional research and development (R&D) approach that relies mainly on internal resources/knowledge to drive innovation.
While it has become an accepted business practice of late, OI has, in fact, existed for centuries. In 1714, the British government offered the Longitude Prize to anyone who could develop a practical method of determining a ship’s precise longitude (its east-west position). Lawmakers lured participants with £100,000 in “encouragements” and awards, ultimately bestowing the grand prize of £14,315 upon self-educated carpenter and clockmaker John Harrison for his work on marine chronometers (the winning design—dubbed “H4” to distinguish it from earlier incarnations—resembled a large pocket watch).
Roughly two centuries later, Manhattan hotel magnate and Frenchman Raymond Orteig offered a $25,000 reward to the first allied aviator to fly non-stop between New York City and Paris, France. Several famous aeronauts unsuccessfully tried crossing the Atlantic before unknown mail pilot Charles A. Lindbergh won the prize in 1927 with his 33.5-hour solo trip in the custom-built monoplane “Spirit of St. Louis.”
Though it has left a smaller, less storied mark on the medical device industry, OI nevertheless has spawned a venerable array of technological advancements. Laser surgery, for instance, owes its existence to unwanted tattoos, while magnetic resonance imaging (MRI) started off as a chemical and physical analysis tool (scientists had no interest in using the MRI for health purposes until Armenian-American medical practitioner Raymond Damadian demonstrated in 1971 that tumors and normal tissue are discernable in vivo by nuclear magnetic resonance due to their relaxation times). Some of the more humble innovations have come from other industries: Surgeons borrowed bone saws, drills and screws from carpenters, and the modern-day scalpel evolved from prehistoric cutting instruments fashioned out of wood, bone, antlers, shells and stone.
More recent examples of open medtech innovation include bone glue (designed to replace screws in reconstructive surgery), and needles that more easily penetrate the skin. The bone glue technology is based on research of the underwater adhesive manufactured by mussels, and the next-generation hypodermics are modeled after North American porcupine quills. Researchers at The Massachusetts Institute of Technology (MIT) and Harvard Medical School discovered that porcupine needles contain “microscopic backward-facing deployable barbs” that easily penetrate surfaces and adhere strongly to tissue. In other words, the barbs allow the needles to both break the skin and stay in place.
“This is the only system with this dual functionality, where a single feature—the barbs—both reduces penetration force and increases pull-out force,” explained Jeffrey Karp, a biomedical engineer at Harvard and co-senior author of a study on the porcupine quills.
Such duality makes porcupine-inspired needles ideal for long-term IV use, but the technology could have other applications as well. Researchers at Harvard and MIT currently are working on a way to incorporate the quill’s natural properties into wound dressings to prevent allergies or infections. Rather than rely on a chemical adhesive, quill-influenced dressings could use tiny barbed needles to pierce the skin and hold the incision in place while healing. Similarly, barbed staples potentially could replace their longer, larger-diameter standard counterparts despite the fact that porcupine quills rip the flesh when they are removed. Still, extricating smaller, quill-like staples likely would cause less damage than pulling out medical staples currently used, researchers claim.
“To spur innovation in health, traditional players must act in non-traditional ways, especially by working together in new ways to improve outcomes,” notes Michael Idelchik, vice president of Advanced Technology Programs at GE Global Research. “Innovation doesn’t live within borders; it can’t be controlled and confined. We need to be more open in how we collaborate.”
GE is opening up its innovation process by collaborating with ultrasound professionals to enhance the development of ultrasound technology and microbubbles, an emerging area of research that involves the use of microscopic bubbles to perform contrast-enhanced imaging or deliver drug treatments such as gene therapy to specific areas of the body. After being injected into the body, ultrasound is used as the mechanism to pop the bubbles at their desired locations.
To accelerate research into this promising technology, GE has created the Ultrasound Innovation Circle, an initiative that gives scientists and other independent researchers access to the company’s vast knowledge base and expertise to integrate, test and validate their ideas. “Through the Ultrasound Innovation Circle, we are seeking to connect with this community and collaborate with them to enhance development of these technologies,” Idelchik said.
GE is one of a growing number of medical device companies turning to open innovation to foster new ideas and meet the global demand for healthcare services. Organizations that employ this strategy openly partner with various knowledge pools—universities, laboratories, individuals and other entities well outside their usual sphere of influence—to develop new product concepts.
Boston Scientific dove into one of these pools roughly two years ago to evaluate the use of galectin-3 as a screening tool for cardiac resynchronization therapy (high galectin-3 protein levels have previously been linked to heart failure). The Natick, Mass.-based device behemoth teamed up with cardiovascular diagnostics developer BG Medicine Inc. (in neighboring Waltham), using data from the 1,800-patient MADIT-CRT study for its analysis.
Medtronic Inc. tested the open innovation waters that same year, launching an online idea portal that allows people to submit product proposals to the company through its website. Executives hatched the portal concept while brainstorming ways to drive innovation at the company.
“This industry is driven by physicians,” said Mike Hess, Medtronic’s vice president of Innovative Excellence. “A good percentage of ideas come from inventor physicians. We realized we didn’t have a way for people to engage with us.”
Conveying an idea to the company had, in fact, become so difficult (impossible, really) that one inventor submitted his product proposal on a form reserved for website error reporting.
Such drastic measures are extreme. But the move nevertheless epitomizes the typical reclusive approach to medtech research. The industry historically has invested heavily in R&D (the sector’s top five revenue-generators spent $12.8 billion chasing innovation in FY2011) but mostly has done so behind closed doors. Over the last decade or so, however, that door has slowly been opening to new research models as longer lifespans, pricing pressures, new diseases and emerging markets drive the need for speed and efficiency in new product development.
Sharing resources and soliciting ideas through open innovation and/or collaboration enables device companies to leverage the knowledge, creativity and investments that exist within the industry and expand their own internal capabilities. By tapping into the planet’s collective intellect, medtech organizations can innovate both faster and cheaper, industry experts claim.
Those kinds of benefits could help explain the abundance of new swimmers at the OI pool these days—from groups like the International Society for the Advancement of Spine Surgery (the group operates an online idea portal for orthopedic clinicians and physicians called scrubstorm.com) and the California Healthcare Foundation (an OI contest the agency funded in 2011 spawned nearly 100 new concepts for diabetes-related devices) to midsize firms such as West Chester, Ohio-based AtriCure Inc., which has partnered with OI provider NineSigma Inc. to advance its cardiac surgical ablation technology.
“Medical device companies that understand the benefits of leveraging the expertise of others and balance all the sources of innovation are the most successful,” noted Bob Evans, business development/marketing manager for KMC Systems Inc., a Merrimack, N.H.-based supplier of contract design, manufacturing and field support services for the medical and biotechnology instrument markets. “The best new product development and manufacturing programs are with companies that understand their core competencies well and are willing to seek assistance from competent, experienced outsourced partners for areas outside their expertise.”
KMC is one of those partners. The company helps customers develop diagnostic instruments through a combination of internal R&D, collaboration and off the shelf (OTS) purchasing, Evans told Medical
Product Outsourcing.
Companies usually will handle the first step of the product development process themselves, creating assay chemistries in their own R&D laboratories using conventional methods for proof of principle. KMC gets involved at the next step, when customers need help automating the assay process. Evans said the company works with clients to clearly define functional interface requirements between the disposable and the instrument. Once a design is agreed upon, KMC will evaluate and manage the potential new product’s features, functions and risk through simulation.
While purchasing R&D might initially seem counterproductive—particularly in an industry that faces enormous pressure to reduce manufacturing and development costs—the use of OTS products actually can save companies money in the long run. KMC, for instance, has developed a family of scalable, flexible diagnostic instrument modules with various footprints and configurations. The modules, according to the company, include all major elements needed to build a complete platform: Positioning/motion control/robots, drive and control electronics, control/data processing/graphical user interface software, liquid handling, and precision fluidic control and dispense.
“The real value of utilizing KMC’s off-the-shelf solutions is that these designs are proven and verified, not only reducing custom development costs but also the subsequent module test and integration costs, which shortens the development schedule,” Evans said. “We have seen this leveraging of expertise and various sources of innovation for a product development program to be very successful. So indeed, innovation should encompass all three sources—in-house, collaborative partner, and purchased [research].”
The recipe for top-notch innovation ideally should be that simple. But the medical device realm is a complicated beast—it is an industry governed by confusing and at times, conflicting regulations, where risk and reward are equal partners, and quality often triumphs over cost. It is an industry driven by profit margins and speed to market, where intellectual property is cloaked in Vatican-style secrecy and the technology is constantly evolving.
Any one of these elements can impact a company’s innovation strategy. Firms without experience developing a certain type of technology, for example, obviously should seek outside help with it; likewise, companies that want to retain control of a proprietary invention are better off conducting their own R&D.
Defining the type of research involved also can help companies figure out the appropriate R&D pathway. At College Park, Ga.-based Vernay, innovation is divided into three categories—new product engineering, the research of new, non-existent technology, and the application of existing development work.
“It’s important to define what kind of R&D you’re talking about. The interpretation of R&D can be a gray area in a lot of companies. R&D can really span quite a range of what people are talking about—it’s not always so black and white,” explained Bob Ferguson, vice president of Global R&D at the fluid control solutions provider. “There are different ways we assess whether a project is best suited for research and development, just research alone or if the project would better align with the development of existing technologies. Some of the parameters we look at to make this determination are the types of innovation that can be realized from the research and development—these types include incremental, radical or disruptive innovation.”
“Another parameter is the cost to develop that type of innovation, whether or not you want to pay someone externally to do it or do you want to absorb the cost internally,” he continued. “Time is another parameter. The time to develop a disruptive technology would be exponentially more than what it would take to develop an incremental type of innovation, so you have to balance that time of resource absorption and compare it back to how the innovation would benefit the market—how fast is the market moving? You could spend maybe two years developing a technology but if it’s intended for a specific type of market where typically you have advances coming out every year or maybe twice a year, you’re going to be behind the times already. Technology lifecycle has a lot to do with it as well—how long could the technology benefit the company before it is substituted by another technology.”
Talent also should be considered. Kenneth A. Fine, president and co-founder of Mansfield, Mass.-based Proven Process Medical Devices Inc., believes the secret to successful innovation lies not in the source of the idea, but in the people ultimately developing the technology.
“The real conversation is how to best manage innovation,” he contends. “If you look at the population of people in high-tech development/innovation, in any organization you tend to have some people who are considered innovators and early adopters of technology and you have others who are better at taking something that’s already been thought of and either refining it or engineering it to a finished product. The key is to identify who those people are in each of those categories and properly manage them.”
“The issue is not where does it come from—is it through collaboration or through purchase or developing it in-house—it’s really a function of how is management set up to recognize who the innovators and early adopters are versus who the sustaining engineers are and using them correctly. If an organization doesn’t have innovators, then naturally they need to go outside if they want to innovate. Or conversely, if they don’t have people who can take the innovation and turn it into products then they need to go out and collaborate or find partners to get that balance of personnel.”
Finding a Match
Peter von Dyck is a matchmaker of sorts. Four years ago, he created an online meeting place for medtech inventors, developers, OEMs and financiers—a match.com so to speak, for the medical device community. von Dyck describes his Web-based interface (dubbed e-Zassi) as a “collaboration and networking” tool for the medical device ecosystem: “You need to have a tremendous amount of partnerships and partners as you go along,” he explained to Medsider.com, “and building that network is very time-consuming, very expensive, and part serendipity and not very organized because our market is so fractured.”
Finding partners and building relationships is challenging in any industry, but it particularly is difficult in the patent-centric device sector, where confidentiality and intellectual property disclosure can discourage interactions. Quality control, risk, core competency/experience level and regulatory knowledge are other factors that can complicate a company’s search for its manufacturing or product development soulmate.
Though serendipity may always play a role in the medtech dating game, device firms are the true masters of their fate.
Industry experts recommend that companies follow several best practices when searching for a research teammate or outsourcing cohort:
“After researching all the advantages and disadvantages of outsourcing and a rigorous selection process for partners, remember that R&D has a very human face,” noted Jahnavi Lokre, vice president of strategy and director of software engineering for Aubrey Group Inc., a contract manufacturer and product development firm based in Irvine, Calif. “It will not succeed without effective communication and relationship management with your outsourced partners. Communication keeps you informed of the progress and risks involved, allows you to take timely action and reduces any surprises along the way. Relationship management is key because it is always easier to work with people that you trust, respect and like and can get along with.”
* * *
Over the last half century, medical technology has helped humanity conquer disease and overcome the body’s physical limitations. Pacemakers, for example, regulate irregular heartbeats; balloon catheters open up clogged arteries and blood vessels that cause heart attacks or strokes; CT (computed tomography) scans can diagnose specific body parts; artificial skin replaces burned or diseased flesh; and experimental bionic devices are helping the blind to see and the crippled to walk. The companies responsible for these cutting-edge technologies traditionally have developed them in secret to keep ahead of the competition.
But surging healthcare demand, longer lifespans, cost pressures and increased competition from emerging markets is forcing medical device manufacturers to ditch their traditional “closed-door” research and development models for alternatives such as open innovation (the process by which companies openly reach out to various pools of knowledge), corporate portals and crowdsourcing. In practice, these new R&D models encourage companies to use both internal and external ideas and paths to market in order to advance technology. Open innovation goes beyond traditional outsourcing by arming the company with resources that are available outside its own laboratory. Yet it still cannot completely replace outsourcing.
Observes Maura Leahy, marketing manager for Creganna-Tactx Medical, an outsourcing provider based in Galway, Ireland: “As R&D budgets are increasingly under the microscope, every dollar spent must really count. In that context, the value of a proven and experienced outsourcing partner is more attractive than ever. From the perspective of a medical device company, R&D efficiency is imperative to meet the challenges of the evolving medtech landscape; efficiency is also the by-line on which an outsourcing partner delivers, therefore both are well aligned for the challenges of the future.”
— Peter F. Drucker
Better. Cheaper. Faster.
Like a badly scratched vinyl record, those words played over and over in Peter von Dyck’s mind nearly a decade ago as he developed and commercialized two gastrointestinal catheters for his privately held medtech firm.
“The inefficiencies and frustrations I felt and encountered with my own startup companies in the medtech arena really began to show me that there needed to be a better business method,” the accomplished innovator and entrepreneur told Medsider.com, an online educational resource for medical technology executives. “Then simultaneously the development of the Internet around this over the last 10 years and new digital horsepower really fueled me to say, ‘We can do this a better, faster, cheaper way.’ ”
It took von Dyck several years to devise a better, faster, cheaper method for product development but he did so through a concept known as open innovation. Thrust to the forefront of modern corporate culture by Henry Chesbrough, a professor and executive director of UC Berkeley’s Program in Open Innovation, the term refers to the formal discipline and practice of engaging outside help to problem-solve and advance technology. Open innovation (OI) is the antithesis of the traditional research and development (R&D) approach that relies mainly on internal resources/knowledge to drive innovation.
While it has become an accepted business practice of late, OI has, in fact, existed for centuries. In 1714, the British government offered the Longitude Prize to anyone who could develop a practical method of determining a ship’s precise longitude (its east-west position). Lawmakers lured participants with £100,000 in “encouragements” and awards, ultimately bestowing the grand prize of £14,315 upon self-educated carpenter and clockmaker John Harrison for his work on marine chronometers (the winning design—dubbed “H4” to distinguish it from earlier incarnations—resembled a large pocket watch).
Roughly two centuries later, Manhattan hotel magnate and Frenchman Raymond Orteig offered a $25,000 reward to the first allied aviator to fly non-stop between New York City and Paris, France. Several famous aeronauts unsuccessfully tried crossing the Atlantic before unknown mail pilot Charles A. Lindbergh won the prize in 1927 with his 33.5-hour solo trip in the custom-built monoplane “Spirit of St. Louis.”
Though it has left a smaller, less storied mark on the medical device industry, OI nevertheless has spawned a venerable array of technological advancements. Laser surgery, for instance, owes its existence to unwanted tattoos, while magnetic resonance imaging (MRI) started off as a chemical and physical analysis tool (scientists had no interest in using the MRI for health purposes until Armenian-American medical practitioner Raymond Damadian demonstrated in 1971 that tumors and normal tissue are discernable in vivo by nuclear magnetic resonance due to their relaxation times). Some of the more humble innovations have come from other industries: Surgeons borrowed bone saws, drills and screws from carpenters, and the modern-day scalpel evolved from prehistoric cutting instruments fashioned out of wood, bone, antlers, shells and stone.
More recent examples of open medtech innovation include bone glue (designed to replace screws in reconstructive surgery), and needles that more easily penetrate the skin. The bone glue technology is based on research of the underwater adhesive manufactured by mussels, and the next-generation hypodermics are modeled after North American porcupine quills. Researchers at The Massachusetts Institute of Technology (MIT) and Harvard Medical School discovered that porcupine needles contain “microscopic backward-facing deployable barbs” that easily penetrate surfaces and adhere strongly to tissue. In other words, the barbs allow the needles to both break the skin and stay in place.
“This is the only system with this dual functionality, where a single feature—the barbs—both reduces penetration force and increases pull-out force,” explained Jeffrey Karp, a biomedical engineer at Harvard and co-senior author of a study on the porcupine quills.
Such duality makes porcupine-inspired needles ideal for long-term IV use, but the technology could have other applications as well. Researchers at Harvard and MIT currently are working on a way to incorporate the quill’s natural properties into wound dressings to prevent allergies or infections. Rather than rely on a chemical adhesive, quill-influenced dressings could use tiny barbed needles to pierce the skin and hold the incision in place while healing. Similarly, barbed staples potentially could replace their longer, larger-diameter standard counterparts despite the fact that porcupine quills rip the flesh when they are removed. Still, extricating smaller, quill-like staples likely would cause less damage than pulling out medical staples currently used, researchers claim.
“To spur innovation in health, traditional players must act in non-traditional ways, especially by working together in new ways to improve outcomes,” notes Michael Idelchik, vice president of Advanced Technology Programs at GE Global Research. “Innovation doesn’t live within borders; it can’t be controlled and confined. We need to be more open in how we collaborate.”
GE is opening up its innovation process by collaborating with ultrasound professionals to enhance the development of ultrasound technology and microbubbles, an emerging area of research that involves the use of microscopic bubbles to perform contrast-enhanced imaging or deliver drug treatments such as gene therapy to specific areas of the body. After being injected into the body, ultrasound is used as the mechanism to pop the bubbles at their desired locations.
To accelerate research into this promising technology, GE has created the Ultrasound Innovation Circle, an initiative that gives scientists and other independent researchers access to the company’s vast knowledge base and expertise to integrate, test and validate their ideas. “Through the Ultrasound Innovation Circle, we are seeking to connect with this community and collaborate with them to enhance development of these technologies,” Idelchik said.
GE is one of a growing number of medical device companies turning to open innovation to foster new ideas and meet the global demand for healthcare services. Organizations that employ this strategy openly partner with various knowledge pools—universities, laboratories, individuals and other entities well outside their usual sphere of influence—to develop new product concepts.
Boston Scientific dove into one of these pools roughly two years ago to evaluate the use of galectin-3 as a screening tool for cardiac resynchronization therapy (high galectin-3 protein levels have previously been linked to heart failure). The Natick, Mass.-based device behemoth teamed up with cardiovascular diagnostics developer BG Medicine Inc. (in neighboring Waltham), using data from the 1,800-patient MADIT-CRT study for its analysis.
Medtronic Inc. tested the open innovation waters that same year, launching an online idea portal that allows people to submit product proposals to the company through its website. Executives hatched the portal concept while brainstorming ways to drive innovation at the company.
“This industry is driven by physicians,” said Mike Hess, Medtronic’s vice president of Innovative Excellence. “A good percentage of ideas come from inventor physicians. We realized we didn’t have a way for people to engage with us.”
Conveying an idea to the company had, in fact, become so difficult (impossible, really) that one inventor submitted his product proposal on a form reserved for website error reporting.
Such drastic measures are extreme. But the move nevertheless epitomizes the typical reclusive approach to medtech research. The industry historically has invested heavily in R&D (the sector’s top five revenue-generators spent $12.8 billion chasing innovation in FY2011) but mostly has done so behind closed doors. Over the last decade or so, however, that door has slowly been opening to new research models as longer lifespans, pricing pressures, new diseases and emerging markets drive the need for speed and efficiency in new product development.
Sharing resources and soliciting ideas through open innovation and/or collaboration enables device companies to leverage the knowledge, creativity and investments that exist within the industry and expand their own internal capabilities. By tapping into the planet’s collective intellect, medtech organizations can innovate both faster and cheaper, industry experts claim.
Those kinds of benefits could help explain the abundance of new swimmers at the OI pool these days—from groups like the International Society for the Advancement of Spine Surgery (the group operates an online idea portal for orthopedic clinicians and physicians called scrubstorm.com) and the California Healthcare Foundation (an OI contest the agency funded in 2011 spawned nearly 100 new concepts for diabetes-related devices) to midsize firms such as West Chester, Ohio-based AtriCure Inc., which has partnered with OI provider NineSigma Inc. to advance its cardiac surgical ablation technology.
“Medical device companies that understand the benefits of leveraging the expertise of others and balance all the sources of innovation are the most successful,” noted Bob Evans, business development/marketing manager for KMC Systems Inc., a Merrimack, N.H.-based supplier of contract design, manufacturing and field support services for the medical and biotechnology instrument markets. “The best new product development and manufacturing programs are with companies that understand their core competencies well and are willing to seek assistance from competent, experienced outsourced partners for areas outside their expertise.”
KMC is one of those partners. The company helps customers develop diagnostic instruments through a combination of internal R&D, collaboration and off the shelf (OTS) purchasing, Evans told Medical
Product Outsourcing.
Companies usually will handle the first step of the product development process themselves, creating assay chemistries in their own R&D laboratories using conventional methods for proof of principle. KMC gets involved at the next step, when customers need help automating the assay process. Evans said the company works with clients to clearly define functional interface requirements between the disposable and the instrument. Once a design is agreed upon, KMC will evaluate and manage the potential new product’s features, functions and risk through simulation.
While purchasing R&D might initially seem counterproductive—particularly in an industry that faces enormous pressure to reduce manufacturing and development costs—the use of OTS products actually can save companies money in the long run. KMC, for instance, has developed a family of scalable, flexible diagnostic instrument modules with various footprints and configurations. The modules, according to the company, include all major elements needed to build a complete platform: Positioning/motion control/robots, drive and control electronics, control/data processing/graphical user interface software, liquid handling, and precision fluidic control and dispense.
“The real value of utilizing KMC’s off-the-shelf solutions is that these designs are proven and verified, not only reducing custom development costs but also the subsequent module test and integration costs, which shortens the development schedule,” Evans said. “We have seen this leveraging of expertise and various sources of innovation for a product development program to be very successful. So indeed, innovation should encompass all three sources—in-house, collaborative partner, and purchased [research].”
The recipe for top-notch innovation ideally should be that simple. But the medical device realm is a complicated beast—it is an industry governed by confusing and at times, conflicting regulations, where risk and reward are equal partners, and quality often triumphs over cost. It is an industry driven by profit margins and speed to market, where intellectual property is cloaked in Vatican-style secrecy and the technology is constantly evolving.
Any one of these elements can impact a company’s innovation strategy. Firms without experience developing a certain type of technology, for example, obviously should seek outside help with it; likewise, companies that want to retain control of a proprietary invention are better off conducting their own R&D.
Defining the type of research involved also can help companies figure out the appropriate R&D pathway. At College Park, Ga.-based Vernay, innovation is divided into three categories—new product engineering, the research of new, non-existent technology, and the application of existing development work.
“It’s important to define what kind of R&D you’re talking about. The interpretation of R&D can be a gray area in a lot of companies. R&D can really span quite a range of what people are talking about—it’s not always so black and white,” explained Bob Ferguson, vice president of Global R&D at the fluid control solutions provider. “There are different ways we assess whether a project is best suited for research and development, just research alone or if the project would better align with the development of existing technologies. Some of the parameters we look at to make this determination are the types of innovation that can be realized from the research and development—these types include incremental, radical or disruptive innovation.”
“Another parameter is the cost to develop that type of innovation, whether or not you want to pay someone externally to do it or do you want to absorb the cost internally,” he continued. “Time is another parameter. The time to develop a disruptive technology would be exponentially more than what it would take to develop an incremental type of innovation, so you have to balance that time of resource absorption and compare it back to how the innovation would benefit the market—how fast is the market moving? You could spend maybe two years developing a technology but if it’s intended for a specific type of market where typically you have advances coming out every year or maybe twice a year, you’re going to be behind the times already. Technology lifecycle has a lot to do with it as well—how long could the technology benefit the company before it is substituted by another technology.”
Talent also should be considered. Kenneth A. Fine, president and co-founder of Mansfield, Mass.-based Proven Process Medical Devices Inc., believes the secret to successful innovation lies not in the source of the idea, but in the people ultimately developing the technology.
“The real conversation is how to best manage innovation,” he contends. “If you look at the population of people in high-tech development/innovation, in any organization you tend to have some people who are considered innovators and early adopters of technology and you have others who are better at taking something that’s already been thought of and either refining it or engineering it to a finished product. The key is to identify who those people are in each of those categories and properly manage them.”
“The issue is not where does it come from—is it through collaboration or through purchase or developing it in-house—it’s really a function of how is management set up to recognize who the innovators and early adopters are versus who the sustaining engineers are and using them correctly. If an organization doesn’t have innovators, then naturally they need to go outside if they want to innovate. Or conversely, if they don’t have people who can take the innovation and turn it into products then they need to go out and collaborate or find partners to get that balance of personnel.”
Finding a Match
Peter von Dyck is a matchmaker of sorts. Four years ago, he created an online meeting place for medtech inventors, developers, OEMs and financiers—a match.com so to speak, for the medical device community. von Dyck describes his Web-based interface (dubbed e-Zassi) as a “collaboration and networking” tool for the medical device ecosystem: “You need to have a tremendous amount of partnerships and partners as you go along,” he explained to Medsider.com, “and building that network is very time-consuming, very expensive, and part serendipity and not very organized because our market is so fractured.”
Finding partners and building relationships is challenging in any industry, but it particularly is difficult in the patent-centric device sector, where confidentiality and intellectual property disclosure can discourage interactions. Quality control, risk, core competency/experience level and regulatory knowledge are other factors that can complicate a company’s search for its manufacturing or product development soulmate.
Though serendipity may always play a role in the medtech dating game, device firms are the true masters of their fate.
Industry experts recommend that companies follow several best practices when searching for a research teammate or outsourcing cohort:
- Seek partners with relevant experience in the technology being developed. (A full-service outsourcing firm that can provide product development expertise as well as manufacturing often are the best choice);
- Understand the pricing models that will be used for the finished good cost of the product. Design to cost philosophies should be employed during the product development process;
- Assess the quality system of the outsourced partner; and
- Evaluate the communication system that will be used to provide updates and regular progress reports during the product development process.
“After researching all the advantages and disadvantages of outsourcing and a rigorous selection process for partners, remember that R&D has a very human face,” noted Jahnavi Lokre, vice president of strategy and director of software engineering for Aubrey Group Inc., a contract manufacturer and product development firm based in Irvine, Calif. “It will not succeed without effective communication and relationship management with your outsourced partners. Communication keeps you informed of the progress and risks involved, allows you to take timely action and reduces any surprises along the way. Relationship management is key because it is always easier to work with people that you trust, respect and like and can get along with.”
* * *
Over the last half century, medical technology has helped humanity conquer disease and overcome the body’s physical limitations. Pacemakers, for example, regulate irregular heartbeats; balloon catheters open up clogged arteries and blood vessels that cause heart attacks or strokes; CT (computed tomography) scans can diagnose specific body parts; artificial skin replaces burned or diseased flesh; and experimental bionic devices are helping the blind to see and the crippled to walk. The companies responsible for these cutting-edge technologies traditionally have developed them in secret to keep ahead of the competition.
But surging healthcare demand, longer lifespans, cost pressures and increased competition from emerging markets is forcing medical device manufacturers to ditch their traditional “closed-door” research and development models for alternatives such as open innovation (the process by which companies openly reach out to various pools of knowledge), corporate portals and crowdsourcing. In practice, these new R&D models encourage companies to use both internal and external ideas and paths to market in order to advance technology. Open innovation goes beyond traditional outsourcing by arming the company with resources that are available outside its own laboratory. Yet it still cannot completely replace outsourcing.
Observes Maura Leahy, marketing manager for Creganna-Tactx Medical, an outsourcing provider based in Galway, Ireland: “As R&D budgets are increasingly under the microscope, every dollar spent must really count. In that context, the value of a proven and experienced outsourcing partner is more attractive than ever. From the perspective of a medical device company, R&D efficiency is imperative to meet the challenges of the evolving medtech landscape; efficiency is also the by-line on which an outsourcing partner delivers, therefore both are well aligned for the challenges of the future.”