Michael Barbella , Managing Editor02.14.14
Introverts are a woefully misunderstood bunch. To their outgoing, light-hearted opposites, the wallflower can seem painfully shy, rude and a bit aloof. Introverts, however, are insulted by such broad-brush branding. None of the labels are fair, they argue, nor are they accurate: Shyness, for example, is a radically different behavior than introversion, though the two are often stereotypically linked. Introverts prefer solitary activities while shy folk (who may be extroverts at heart) are petrified of social encounters.
Likewise, introverts are not rude. They can be blunt, somewhat impatient and bored with social pleasantries, all of which makes them seem rude. But they’re not a deliberately disrespectful lot.
Introverts also are not snobby or aloof. Their affinity for inner reflection and keen observation/listening skills can give others (extroverts, mostly) the false impression of indifference. Introverts are not the haughty or hard-hearted loners they’re often made out to be; on the contrary, they are thoughtful, imaginative creatures who like to work independently and think outside the box. In her 2002 book “The Introvert Advantage—How to Thrive in an Extrovert World,” psychotherapist, researcher and self-proclaimed introversion authority Marti Olsen Laney, Psy.D., claims introverts draw energy from their “internal world” of ideas, emotions and impressions. They are easily over-stimulated by the external world and must balance their alone time with “outside time” to preserve their perspectives and connections. “Introverted people who balance their energy have perseverance and the ability to think independently, focus deeply and work creatively,” she notes.
Such inner harmony undoubtedly contributed to the success of introverts like naturalist Charles Darwin, whose daily strolls helped him postulate his controversial evolutionary theory.
Microsoft founder Bill Gates made the most of his alone time as well, thinking long and hard and “out on the edge” of conventional wisdom before launching his multibillion-dollar software/personal computer company in 1975. And, businessman/inventor Thomas Alva Edison turned his years of solitary study into a launching pad for more than 1,000 inventions, most notably the phonograph, light bulb and motion picture camera.
Like most introverts, Edison hatched some of his best ideas in isolation. But he seldom, if ever, developed them on his own. The clichéd image of Edison toiling fervently alone in a makeshift laboratory is pure Hollywood fantasy. As a businessman, Edison recognized the importance of collaboration in the innovation process and worked with teams from the very start of his career.
“Edison’s dedication to collaboration crystallizes what we are capable of at our best,” the inventor’s great grandniece Sarah Miller Caldicott writes in the introduction to her 2012 book, “Midnight Lunch: The 4 Phases of Team Collaboration Success from Thomas Edison’s Lab.” “[He] viewed collaboration as the beating heart of his laboratories, a sustaining resource that fueled the knowledge assets of his sprawling innovation empire.”
Edison’s empire encompassed more than 200 domestic and international companies, many of which were formed to unite investors, engineers, sales reps—collaborators, really—with a common mission. The largest and most successful of those firms, General Electric, remains faithful to its founder’s vision with a global network of research and development (R&D) centers and new methods of collaboration.
For decades, GE approached innovation traditionally, using in-house resources and technical wisdom to develop new products. The model worked brilliantly, spawning such wonders as spectral imaging computed tomography technology and titanium aluminide (TiAl), a lightweight chemical compound used in Boeing’s 747 and 787 Dreamliner jet engines. Though both innovations spent years in development (TiAl was patented in 1989), they nonetheless boosted GE’s market position in its core businesses.
Clearly, quality is something that cannot—and should not—be rushed, especially in healthcare. But a rapidly changing global market, pricing pressures, reimbursement challenges and a focus on evidence-based medicine is forcing many companies in the medtech space to rethink their R&D strategies. These new game plans, experts contend, must take a patient-centric approach to medicine, incorporating innovations that improve diagnostics, increase operating room efficiency, minimize hospitalization and capitalize on the growing demand for mobile health products and services.
“The approach to research and development has to be different now. With the consumerization of healthcare and all the [regulatory] uncertainty out there, companies have to provide products that are meaningful and address an outcome-based health economy with a more comprehensive solution,” noted Sean MacLeod, president of Stratos Product Development LLC, a Seattle, Wash.-based product development, design and strategy consultancy specializing in medical and consumer electronic product design and development. “The traditional R&D model had a device at the center of it. Now you have to take a look at the whole continuum of care. The solution is not necessarily a technical device that is put in the marketplace—the solution may involve a device but it also involves a variety of different inputs into IT infrastructure, more data, more stakeholders, and ultimately, the people affected by it. You have to have a whole variety of other voices at the table to execute on R&D because it starts to become more cross-functional outside the borders of traditional R&D expertise. You have to take a more comprehensive approach.”
Stratos recently bolstered its approach to R&D by adding voices in product strategy, optics, material science and biochemistry to its research roundtable. MacLeod said the new additions were necessary to meet customer demand new and unique product capabilities.
“We hired a variety of people to develop core science and technology for our client base because we are getting more involved in the commercialization of basic science,” he told Medical Product Outsourcing. “We’ve moved further up in the [product development] process, which has changed. Traditionally, that kind of R&D was conducted internally by a lot of our customers in their own labs. But now they’re going outside for that R&D for various reasons—maybe they’ve cut back their [R&D] budget or they want to enter a market in which they don’t have expertise and they need help broadening their technological capabilities. We’re being approached by companies with very strong core competencies that are moving into areas in which they traditionally haven’t had much experience.”
Stratos isn’t the only medtech company to entertain such offers. With profits stalling (or barely growing), insurance compensations dwindling, and expenses climbing, medtech firms have been hesitant in recent years to boost their R&D spending. Many have devoted either little or no money to research while others have scaled back considerably. Medtronic Inc., for instance, increased its R&D budget by $18 million in 2012—a considerable decline from the $48 million in additional research funding it set aside the previous year, the company’s annual report indicates. Stryker Corp. was fiscally conservative as well, adding only $9 million to its 2012 R&D account after sweetening the pot by $68 million in 2011. Boston Scientific Corp., St. Jude Medical Inc., Wright Medical Group Inc. and Zimmer Holdings Corp. all curtailed research funding in 2012, with St. Jude making the largest cut, shaving $29 million off its 2012 spending plan, the firms’ respective annual reports show.
Such contractions certainly have convinced dozens of medtech firms to seek outside help in developing non-core competency expertise. Yet quite a few holdouts remain. A survey released last summer from global professional services firm KPMG LLC found that more than one-third of medical device and healthcare service providers keep their research in-house. Twenty-nine percent of the survey’s 94 respondents reported the function is either outsourced or in the process of being outsourced, and 19 percent have been outsourcing R&D for more than two years.
Non-conformist companies are not without hope, though. A number of medtech firms that innovate behind closed doors nevertheless have broadened their technological horizons in recent years through acquisition. GE Healthcare—in a move that would have made its founder proud—became an instant expert in cancer diagnostics and molecular testing with its $580 million purchase of Clarient Inc. in October 2010. Aliso Viejo, Calif.-based Clarient developed proprietary biomarkers and tests for profiling breast, prostate, colon and blood-based cancers; 10 months before its purchase, the company acquired Applied Genomics Inc., a molecular diagnostics firm that was developing the Mammostrat breast cancer recurrence test that Clarient had planned to launch as a laboratory-based assay. That test, along with Clarient’s taxane predictive product line of analyses for lung, ovarian and breast cancers, gave GE immediate proficiency in cancer profiling and a golden ticket to the $47 billion global cancer diagnostic market.
GE repeated the strategy in April 2011 to become adept at 3-D magnetic resonance imaging (MRI). The firm bought promising technology from the University of Minnesota’s Center for Magnetic Resonance Research (through its licensee, Steady State Imaging LLC) that detects tendons, ligaments and other tissues normally obscured in conventional scans. The SWIFT method (SWeep Imaging with Fourier Transform) sends a series of radio frequency pulses that switch back and forth from transmit to receive, allowing bone, tendon and cartilage to appear in an MRI. Typical MRI scans send all frequencies at once, concealing some tissues. The SWIFT method has gained interest among MRI researchers for its potential to look at areas near the lungs and other organs where conventional MRIs typically are ineffective.
Stryker and MicroPort Medical also enriched their knowledge bases in a flash through acquisition. Kalamazoo, Mich.-headquartered Stryker added neurovascular technology to its corporate cognition more than three years ago, courtesy of Boston Scientific (and a hefty $1.5 billion check), while cardiovascular device-focused MicroPort quickly absorbed hip and knee implant technology last summer from Wright.
“Medtech companies have been on a technology maturity curve for quite a while,” MacLeod said. “They’ve become adept at making solid incremental changes to their innovations, but to keep growing, they often have to go to a new platform and that can involve a radical shift to a completely new technology class. So they’re reaching out to R&D partners to help them accomplish that.”
Matchmaking and Midnight Lunches
The professional life of a genius is neither simple nor glamorous. It’s a life best suited for introverts—deep thinkers with a partiality to intense study and a preference for monotony (extroverts are too easily bored by the tedium of repeated tasks, psychoanalysts claim).
The innovation process, of course, is far from boring. The creativity, the experiments, the prototypes, the teamwork—all make for unique, stimulating days. To be truly successful, however, the process must incorporate two concepts Edison fostered masterfully in his research laboratories: collaboration and camaraderie.
As with most introverts, Edison constantly strived to achieve a balance between seclusion and socialization. He’d often leave his Menlo Park, N.J., laboratory around 5 p.m. to have a family dinner, then return to his “office” around 7 p.m. to monitor the status of his experiments on nights his workers stayed late. According to his great grandniece, Edison would speak personally with the dozen or so employees, encouraging them to share insights with each other and learn from the diverse expertise each person brought to their projects. Workers from all specialties mingled together and engaged in casual, unstructured conversations that often yielded profoundly creative solutions to problems.
At 9 p.m., Edison would order food from a local tavern for his crew. For the next hour or so, the workers would relax, tell stories, sing songs and even play music together before returning to their various experiments. Employees affectionately referred to those late-night dinners as the “midnight lunch,” and they came to cherish them as much for the camaraderie as for the food.
“They connected socially, and created a deeper understanding of each other as people and not just workers,” Caldicott explained in a 2013 interview with Innovation Excellence, the online portal of the global innovation community. “This process of midnight lunch transformed employees into colleagues. It served as the foundation for collaboration in all of Edison’s labs.”
Collaboration is still an essential component of commercial R&D but it has become infinitely more complicated since the days of Edison’s relationship-building communal meals. Profits and productivity have taken precedence over workplace bromances; moreover, globalization and the World Wide Web have made partnering as quick and as easy as the click of a mouse.
Not all partnerships are true collaborations, though. Those without trust—the ones that lack a personal connection and sense of collegiality between its members—are nothing more than superficial pairings. In Edison’s lab, suggesting an idea was a low-risk situation; employees’ random notions routinely were transformed into experiments.
“[R&D] relationships need to be invested in, nurtured and fed,” Stratos’ MacLeod said. “It doesn’t always mean a dollar investment—it often means a set mindshare and mutual respect. There really ought to be a chief relationship officer who has a good understanding of the present and future needs of the organization growing and maintaining these relationships because the resources needed to develop solutions do not exist under one roof anymore.”
Those resources don’t always share the same zip code or time zone, either. GE has a network of business development scouts who work with innovation clusters worldwide (Israel, Japan, Russia, India, China, the United States) to foster R&D collaborations. The company also is one of a growing number of global firms using open innovation to find R&D soulmates. Introduced to the corporate world 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 R&D approach that relies mainly on internal resources and knowledge.
GE has used OI to develop new breast cancer detection and diagnostic technologies as well as ultrasound imaging applications. More recently, the company partnered with the National Football League to improve the diagnosis and treatment of traumatic brain injuries, awarding $300,000 each to 16 winners of its $20 million “Head Health Challenge.” The award winners—which include universities, medical schools and Semora N.C.-based startup Cortical Metrics LLC—were chosen from a pool of 400 entrants in 27 countries. “We launched the Challenge as a call to action to fast-track advancement in head health,” said Sue Siegel, CEO of GE Ventures and healthymagination. “The Challenge has shown us a remarkable number of breakthrough ideas that deserve attention, investment and further research.”
CareFusion Corp. and Edwards Lifesciences Corp. are hoping to find their fair share of breakthroughs and R&D kindred spirits with an online matchmaking service conceived by Indiana University’s Pervasive Technology Institute, the Indiana Clinical and Translational Sciences Institute, and Cook Medical. The trio created i2i, a free online database of medical companies searchable by disease categories or keywords; the cyber catalog is designed for use by inventors and technology transfer offices looking for suitable partners to commercialize their discoveries.
Startup ScrubStorm LLC acts as a similar go-between for companies, offering an online platform that connects healthcare providers with problem-solvers, collaborators, inventors, contractors and investors. Meanwhile, crowdsourcing platforms like Innocentive have helped Medtronic, Cleveland Clinic and other medtech institutions find their research darlings. Medtronic is a loyal devotee of Innocentive, having used the online tool for several years now in conjunction with its own online idea submission portals.
“We have several thousands of people involved, from Siberia, Africa, and Eastern Europe—places where we don’t have a substantial interaction with the technical community,” Mike Hess, a vice president of R&D within Medtronic’s CRDM division, said of Innocentive’s reach. “It’s an invigorating process to see ideas coming in from people outside the medical device community and in other parts of the world.”
Vernay Laboratories Inc. casts a more narrow topographical net, preferring to court prospective R&D partners from local research universities. The College Park, Ga.-based custom fluid control solutions provider has partnered with schools within an hour’s drive from its facilities in Yellow Springs, Ohio; Asti, Italy; and Oldenzaal, the Netherlands. Even though global research partnerships are part of their portfolio, Vernay executives find that close proximity and hands-on experimentation with local research partners is highly beneficial.
“We made a commitment to ourselves to expand our technological toolbelt. In order to do that we had to change our perspective towards applied research,” said Bob Ferguson, Vernay’s vice president of global research and development. “We have solid expertise in formulations, product development and fluid control systems, but in order to rapidly and significantly expand our technical offerings, we needed additional research avenues. We recognized that internally we don’t have all the resources available to us that higher education institutions have—they have some of the world’s most advanced research laboratories. It was a good move on our behalf … we’ve learned a lot by working with our local universities.”
The R&D Dating Game
Finding the right research partner is a lot like dating: Not all prospective love interests are good fits. The same logic applies to corporate pairings—potential partners without similar philosophies, experiences and goals as their beaus cannot possibly compete with rivals sharing mutual interests.
Not without a good idea, anyway.
But even the best ideas are sometimes not worth the trouble of a relationship that lacks a spirit of cooperation, mutual respect and, perhaps most importantly, trust. “You have to have a strong relationship and well defined agreements with your R&D partner. You can’t have that without trust and knowing their capabilities,” Ferguson noted. “Trusting your partner is key to the [research] relationship.”
Trust is particularly important to companies with extensive intellectual property (IP) portfolios of revolutionary technology. IP protection can be a tricky process, however, easily spawning resentment and divisiveness among collaborators. GE Healthcare encountered such an atmosphere during the in-house development of hypopolarized C13, a carbon 13 isotope for in-vivo metabolic imaging technology. Researchers hoped the new technology would lead to a new imaging modality combining the best parts of PET and MRI to scan for metabolic-related diseases, but the innovation’s novelty and unknown risks required it to undergo at least five years of pre-clinical research involving animal testing. While the project generated positive clinical results, researchers felt GE was “too controlling” of IP and limited external opportunities some team members wanted to pursue. GE responded by creating the Research Circle, which offers more flexible IP as well as terms and conditions to allow R&D partners to share and debate concepts, results and new opportunities. Executives claim the Circle has strengthened the company’s relationships with its collaborators and has opened the door to new ideas.
The R&D dating game also has been complicated in recent years by a change in business models. To thrive in a market with increasing regulatory hurdles, rising quality standards and falling prices, medtech companies must closely align their innovation with customers’ inclination to pay. To achieve such a feat, device firms must follow the lead of their pharmaceutical counterparts and develop products with greater value. Incremental innovation no longer is rewarded as quickly and handsomely as technology that offers superior clinical efficacy, safety and cost-effectiveness.
“The days of technology for technology’s sake are gone,” said Richard P. Meyst, president and CEO of Fallbrook Engineering Inc., an Escondido, Calif.-based product development, management and engineering services consulting firm. “The economics of it have become an overriding factor. We have doctors or people associated with startups come to us with great ideas born out of an identified need in the market—a doctor may invent something, for example, because he can’t find a good product to help him do his job. For those kinds of ideas to be successful, there has to be a reimbursement path that ultimately will allow the product to be funded. People don’t think of that. You have to consider how [health] insurance companies are going to look at the innovation. And you have to have a [business] model that allows people to make money selling it. The medical device business five to 15 years ago was a target-rich environment. There was a lot of opportunity…there were many things that could be turned into successful products to benefit the patient. But a lot of the low-hanging fruit has been picked, and a lot of that has to do with reimbursement.”
To reach the treetop fruit, Classic Industries Inc. has revised its hiring strategies and expanded its core competencies. The Latrobe, Pa.-based provider of contract design, manufacturing, assembly, packaging and logistics services for medical device and healthcare providers added expertise in design for manufacturing, materials selection, product testing, moldflow, failure effect analysis and predictive engineering services to its cache of customer offerings.
“Medical [device] OEMs have been reducing their headcount and internal investment in R&D,” explained Jay Smith, the company’s vice president of business development. “They are not interested in carrying the overhead, finding consultants and do not want the added risk of staffing for development times that may take two to four years. Our customers were asking themselves the following question: ‘Why risk developing a new product when you can subcontract the work to a one-stop-shop molder who will own the full development and manufacturing process?’ The ability to add any quantity of resources rapidly can be used by the development project manager to reduce lead times for any step during the process. This permits a parallel path for many activities that follow a serial progression in the traditional R&D model.”
Outsourcing R&D not only can help defray product development costs, it also enables OEMs to funnel their limited resources into the core, high value-added technology sought by consumers, government regulators and insurance carriers.
“Increasingly, medical device OEMs are focusing their resources on the core, high value-added technology and work with suppliers that maintain an expertise in supporting subsystems and services,” said Randall Sword, CEO of AdvancedCath, a developer of advanced catheter systems with operations in California, Minnesota, Massachusetts and Costa Rica. “One example is an OEM developing a transcatheter heart valve system. The OEM may keep the development of the implant in-house and partner with AdvancedCath to develop and manufacture the delivery system and supporting catheters. Since AdvancedCath focuses exclusively on catheter systems, there is no learning curve and development time, cost, as well as capital investments are reduced.”
* * *
Medtech companies have given the world breakthrough lifesaving devices. For years, they conducted R&D behind closed doors. But globalization and a changing market are forcing companies to look outside their lab walls for help. Such a shift in research models has prompted many companies to turn to non-traditional methods to find suitable partners.
Finding the perfect comrade can be difficult, however, as medtech firms struggle to protect their IP portfolios, reduce costs and embrace the concept of evidence-based medicine. It’s not impossible, though. With the right blend of voices at the R&D table, companies can produce the kind of game-changing innovation that will drive future growth.
Likewise, introverts are not rude. They can be blunt, somewhat impatient and bored with social pleasantries, all of which makes them seem rude. But they’re not a deliberately disrespectful lot.
Introverts also are not snobby or aloof. Their affinity for inner reflection and keen observation/listening skills can give others (extroverts, mostly) the false impression of indifference. Introverts are not the haughty or hard-hearted loners they’re often made out to be; on the contrary, they are thoughtful, imaginative creatures who like to work independently and think outside the box. In her 2002 book “The Introvert Advantage—How to Thrive in an Extrovert World,” psychotherapist, researcher and self-proclaimed introversion authority Marti Olsen Laney, Psy.D., claims introverts draw energy from their “internal world” of ideas, emotions and impressions. They are easily over-stimulated by the external world and must balance their alone time with “outside time” to preserve their perspectives and connections. “Introverted people who balance their energy have perseverance and the ability to think independently, focus deeply and work creatively,” she notes.
Such inner harmony undoubtedly contributed to the success of introverts like naturalist Charles Darwin, whose daily strolls helped him postulate his controversial evolutionary theory.
Microsoft founder Bill Gates made the most of his alone time as well, thinking long and hard and “out on the edge” of conventional wisdom before launching his multibillion-dollar software/personal computer company in 1975. And, businessman/inventor Thomas Alva Edison turned his years of solitary study into a launching pad for more than 1,000 inventions, most notably the phonograph, light bulb and motion picture camera.
Like most introverts, Edison hatched some of his best ideas in isolation. But he seldom, if ever, developed them on his own. The clichéd image of Edison toiling fervently alone in a makeshift laboratory is pure Hollywood fantasy. As a businessman, Edison recognized the importance of collaboration in the innovation process and worked with teams from the very start of his career.
“Edison’s dedication to collaboration crystallizes what we are capable of at our best,” the inventor’s great grandniece Sarah Miller Caldicott writes in the introduction to her 2012 book, “Midnight Lunch: The 4 Phases of Team Collaboration Success from Thomas Edison’s Lab.” “[He] viewed collaboration as the beating heart of his laboratories, a sustaining resource that fueled the knowledge assets of his sprawling innovation empire.”
Edison’s empire encompassed more than 200 domestic and international companies, many of which were formed to unite investors, engineers, sales reps—collaborators, really—with a common mission. The largest and most successful of those firms, General Electric, remains faithful to its founder’s vision with a global network of research and development (R&D) centers and new methods of collaboration.
For decades, GE approached innovation traditionally, using in-house resources and technical wisdom to develop new products. The model worked brilliantly, spawning such wonders as spectral imaging computed tomography technology and titanium aluminide (TiAl), a lightweight chemical compound used in Boeing’s 747 and 787 Dreamliner jet engines. Though both innovations spent years in development (TiAl was patented in 1989), they nonetheless boosted GE’s market position in its core businesses.
Clearly, quality is something that cannot—and should not—be rushed, especially in healthcare. But a rapidly changing global market, pricing pressures, reimbursement challenges and a focus on evidence-based medicine is forcing many companies in the medtech space to rethink their R&D strategies. These new game plans, experts contend, must take a patient-centric approach to medicine, incorporating innovations that improve diagnostics, increase operating room efficiency, minimize hospitalization and capitalize on the growing demand for mobile health products and services.
“The approach to research and development has to be different now. With the consumerization of healthcare and all the [regulatory] uncertainty out there, companies have to provide products that are meaningful and address an outcome-based health economy with a more comprehensive solution,” noted Sean MacLeod, president of Stratos Product Development LLC, a Seattle, Wash.-based product development, design and strategy consultancy specializing in medical and consumer electronic product design and development. “The traditional R&D model had a device at the center of it. Now you have to take a look at the whole continuum of care. The solution is not necessarily a technical device that is put in the marketplace—the solution may involve a device but it also involves a variety of different inputs into IT infrastructure, more data, more stakeholders, and ultimately, the people affected by it. You have to have a whole variety of other voices at the table to execute on R&D because it starts to become more cross-functional outside the borders of traditional R&D expertise. You have to take a more comprehensive approach.”
Stratos recently bolstered its approach to R&D by adding voices in product strategy, optics, material science and biochemistry to its research roundtable. MacLeod said the new additions were necessary to meet customer demand new and unique product capabilities.
“We hired a variety of people to develop core science and technology for our client base because we are getting more involved in the commercialization of basic science,” he told Medical Product Outsourcing. “We’ve moved further up in the [product development] process, which has changed. Traditionally, that kind of R&D was conducted internally by a lot of our customers in their own labs. But now they’re going outside for that R&D for various reasons—maybe they’ve cut back their [R&D] budget or they want to enter a market in which they don’t have expertise and they need help broadening their technological capabilities. We’re being approached by companies with very strong core competencies that are moving into areas in which they traditionally haven’t had much experience.”
Stratos isn’t the only medtech company to entertain such offers. With profits stalling (or barely growing), insurance compensations dwindling, and expenses climbing, medtech firms have been hesitant in recent years to boost their R&D spending. Many have devoted either little or no money to research while others have scaled back considerably. Medtronic Inc., for instance, increased its R&D budget by $18 million in 2012—a considerable decline from the $48 million in additional research funding it set aside the previous year, the company’s annual report indicates. Stryker Corp. was fiscally conservative as well, adding only $9 million to its 2012 R&D account after sweetening the pot by $68 million in 2011. Boston Scientific Corp., St. Jude Medical Inc., Wright Medical Group Inc. and Zimmer Holdings Corp. all curtailed research funding in 2012, with St. Jude making the largest cut, shaving $29 million off its 2012 spending plan, the firms’ respective annual reports show.
Such contractions certainly have convinced dozens of medtech firms to seek outside help in developing non-core competency expertise. Yet quite a few holdouts remain. A survey released last summer from global professional services firm KPMG LLC found that more than one-third of medical device and healthcare service providers keep their research in-house. Twenty-nine percent of the survey’s 94 respondents reported the function is either outsourced or in the process of being outsourced, and 19 percent have been outsourcing R&D for more than two years.
Non-conformist companies are not without hope, though. A number of medtech firms that innovate behind closed doors nevertheless have broadened their technological horizons in recent years through acquisition. GE Healthcare—in a move that would have made its founder proud—became an instant expert in cancer diagnostics and molecular testing with its $580 million purchase of Clarient Inc. in October 2010. Aliso Viejo, Calif.-based Clarient developed proprietary biomarkers and tests for profiling breast, prostate, colon and blood-based cancers; 10 months before its purchase, the company acquired Applied Genomics Inc., a molecular diagnostics firm that was developing the Mammostrat breast cancer recurrence test that Clarient had planned to launch as a laboratory-based assay. That test, along with Clarient’s taxane predictive product line of analyses for lung, ovarian and breast cancers, gave GE immediate proficiency in cancer profiling and a golden ticket to the $47 billion global cancer diagnostic market.
GE repeated the strategy in April 2011 to become adept at 3-D magnetic resonance imaging (MRI). The firm bought promising technology from the University of Minnesota’s Center for Magnetic Resonance Research (through its licensee, Steady State Imaging LLC) that detects tendons, ligaments and other tissues normally obscured in conventional scans. The SWIFT method (SWeep Imaging with Fourier Transform) sends a series of radio frequency pulses that switch back and forth from transmit to receive, allowing bone, tendon and cartilage to appear in an MRI. Typical MRI scans send all frequencies at once, concealing some tissues. The SWIFT method has gained interest among MRI researchers for its potential to look at areas near the lungs and other organs where conventional MRIs typically are ineffective.
Stryker and MicroPort Medical also enriched their knowledge bases in a flash through acquisition. Kalamazoo, Mich.-headquartered Stryker added neurovascular technology to its corporate cognition more than three years ago, courtesy of Boston Scientific (and a hefty $1.5 billion check), while cardiovascular device-focused MicroPort quickly absorbed hip and knee implant technology last summer from Wright.
“Medtech companies have been on a technology maturity curve for quite a while,” MacLeod said. “They’ve become adept at making solid incremental changes to their innovations, but to keep growing, they often have to go to a new platform and that can involve a radical shift to a completely new technology class. So they’re reaching out to R&D partners to help them accomplish that.”
Matchmaking and Midnight Lunches
The professional life of a genius is neither simple nor glamorous. It’s a life best suited for introverts—deep thinkers with a partiality to intense study and a preference for monotony (extroverts are too easily bored by the tedium of repeated tasks, psychoanalysts claim).
The innovation process, of course, is far from boring. The creativity, the experiments, the prototypes, the teamwork—all make for unique, stimulating days. To be truly successful, however, the process must incorporate two concepts Edison fostered masterfully in his research laboratories: collaboration and camaraderie.
As with most introverts, Edison constantly strived to achieve a balance between seclusion and socialization. He’d often leave his Menlo Park, N.J., laboratory around 5 p.m. to have a family dinner, then return to his “office” around 7 p.m. to monitor the status of his experiments on nights his workers stayed late. According to his great grandniece, Edison would speak personally with the dozen or so employees, encouraging them to share insights with each other and learn from the diverse expertise each person brought to their projects. Workers from all specialties mingled together and engaged in casual, unstructured conversations that often yielded profoundly creative solutions to problems.
At 9 p.m., Edison would order food from a local tavern for his crew. For the next hour or so, the workers would relax, tell stories, sing songs and even play music together before returning to their various experiments. Employees affectionately referred to those late-night dinners as the “midnight lunch,” and they came to cherish them as much for the camaraderie as for the food.
“They connected socially, and created a deeper understanding of each other as people and not just workers,” Caldicott explained in a 2013 interview with Innovation Excellence, the online portal of the global innovation community. “This process of midnight lunch transformed employees into colleagues. It served as the foundation for collaboration in all of Edison’s labs.”
Collaboration is still an essential component of commercial R&D but it has become infinitely more complicated since the days of Edison’s relationship-building communal meals. Profits and productivity have taken precedence over workplace bromances; moreover, globalization and the World Wide Web have made partnering as quick and as easy as the click of a mouse.
Not all partnerships are true collaborations, though. Those without trust—the ones that lack a personal connection and sense of collegiality between its members—are nothing more than superficial pairings. In Edison’s lab, suggesting an idea was a low-risk situation; employees’ random notions routinely were transformed into experiments.
“[R&D] relationships need to be invested in, nurtured and fed,” Stratos’ MacLeod said. “It doesn’t always mean a dollar investment—it often means a set mindshare and mutual respect. There really ought to be a chief relationship officer who has a good understanding of the present and future needs of the organization growing and maintaining these relationships because the resources needed to develop solutions do not exist under one roof anymore.”
Those resources don’t always share the same zip code or time zone, either. GE has a network of business development scouts who work with innovation clusters worldwide (Israel, Japan, Russia, India, China, the United States) to foster R&D collaborations. The company also is one of a growing number of global firms using open innovation to find R&D soulmates. Introduced to the corporate world 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 R&D approach that relies mainly on internal resources and knowledge.
GE has used OI to develop new breast cancer detection and diagnostic technologies as well as ultrasound imaging applications. More recently, the company partnered with the National Football League to improve the diagnosis and treatment of traumatic brain injuries, awarding $300,000 each to 16 winners of its $20 million “Head Health Challenge.” The award winners—which include universities, medical schools and Semora N.C.-based startup Cortical Metrics LLC—were chosen from a pool of 400 entrants in 27 countries. “We launched the Challenge as a call to action to fast-track advancement in head health,” said Sue Siegel, CEO of GE Ventures and healthymagination. “The Challenge has shown us a remarkable number of breakthrough ideas that deserve attention, investment and further research.”
CareFusion Corp. and Edwards Lifesciences Corp. are hoping to find their fair share of breakthroughs and R&D kindred spirits with an online matchmaking service conceived by Indiana University’s Pervasive Technology Institute, the Indiana Clinical and Translational Sciences Institute, and Cook Medical. The trio created i2i, a free online database of medical companies searchable by disease categories or keywords; the cyber catalog is designed for use by inventors and technology transfer offices looking for suitable partners to commercialize their discoveries.
Startup ScrubStorm LLC acts as a similar go-between for companies, offering an online platform that connects healthcare providers with problem-solvers, collaborators, inventors, contractors and investors. Meanwhile, crowdsourcing platforms like Innocentive have helped Medtronic, Cleveland Clinic and other medtech institutions find their research darlings. Medtronic is a loyal devotee of Innocentive, having used the online tool for several years now in conjunction with its own online idea submission portals.
“We have several thousands of people involved, from Siberia, Africa, and Eastern Europe—places where we don’t have a substantial interaction with the technical community,” Mike Hess, a vice president of R&D within Medtronic’s CRDM division, said of Innocentive’s reach. “It’s an invigorating process to see ideas coming in from people outside the medical device community and in other parts of the world.”
Vernay Laboratories Inc. casts a more narrow topographical net, preferring to court prospective R&D partners from local research universities. The College Park, Ga.-based custom fluid control solutions provider has partnered with schools within an hour’s drive from its facilities in Yellow Springs, Ohio; Asti, Italy; and Oldenzaal, the Netherlands. Even though global research partnerships are part of their portfolio, Vernay executives find that close proximity and hands-on experimentation with local research partners is highly beneficial.
“We made a commitment to ourselves to expand our technological toolbelt. In order to do that we had to change our perspective towards applied research,” said Bob Ferguson, Vernay’s vice president of global research and development. “We have solid expertise in formulations, product development and fluid control systems, but in order to rapidly and significantly expand our technical offerings, we needed additional research avenues. We recognized that internally we don’t have all the resources available to us that higher education institutions have—they have some of the world’s most advanced research laboratories. It was a good move on our behalf … we’ve learned a lot by working with our local universities.”
The R&D Dating Game
Finding the right research partner is a lot like dating: Not all prospective love interests are good fits. The same logic applies to corporate pairings—potential partners without similar philosophies, experiences and goals as their beaus cannot possibly compete with rivals sharing mutual interests.
Not without a good idea, anyway.
But even the best ideas are sometimes not worth the trouble of a relationship that lacks a spirit of cooperation, mutual respect and, perhaps most importantly, trust. “You have to have a strong relationship and well defined agreements with your R&D partner. You can’t have that without trust and knowing their capabilities,” Ferguson noted. “Trusting your partner is key to the [research] relationship.”
Trust is particularly important to companies with extensive intellectual property (IP) portfolios of revolutionary technology. IP protection can be a tricky process, however, easily spawning resentment and divisiveness among collaborators. GE Healthcare encountered such an atmosphere during the in-house development of hypopolarized C13, a carbon 13 isotope for in-vivo metabolic imaging technology. Researchers hoped the new technology would lead to a new imaging modality combining the best parts of PET and MRI to scan for metabolic-related diseases, but the innovation’s novelty and unknown risks required it to undergo at least five years of pre-clinical research involving animal testing. While the project generated positive clinical results, researchers felt GE was “too controlling” of IP and limited external opportunities some team members wanted to pursue. GE responded by creating the Research Circle, which offers more flexible IP as well as terms and conditions to allow R&D partners to share and debate concepts, results and new opportunities. Executives claim the Circle has strengthened the company’s relationships with its collaborators and has opened the door to new ideas.
The R&D dating game also has been complicated in recent years by a change in business models. To thrive in a market with increasing regulatory hurdles, rising quality standards and falling prices, medtech companies must closely align their innovation with customers’ inclination to pay. To achieve such a feat, device firms must follow the lead of their pharmaceutical counterparts and develop products with greater value. Incremental innovation no longer is rewarded as quickly and handsomely as technology that offers superior clinical efficacy, safety and cost-effectiveness.
“The days of technology for technology’s sake are gone,” said Richard P. Meyst, president and CEO of Fallbrook Engineering Inc., an Escondido, Calif.-based product development, management and engineering services consulting firm. “The economics of it have become an overriding factor. We have doctors or people associated with startups come to us with great ideas born out of an identified need in the market—a doctor may invent something, for example, because he can’t find a good product to help him do his job. For those kinds of ideas to be successful, there has to be a reimbursement path that ultimately will allow the product to be funded. People don’t think of that. You have to consider how [health] insurance companies are going to look at the innovation. And you have to have a [business] model that allows people to make money selling it. The medical device business five to 15 years ago was a target-rich environment. There was a lot of opportunity…there were many things that could be turned into successful products to benefit the patient. But a lot of the low-hanging fruit has been picked, and a lot of that has to do with reimbursement.”
To reach the treetop fruit, Classic Industries Inc. has revised its hiring strategies and expanded its core competencies. The Latrobe, Pa.-based provider of contract design, manufacturing, assembly, packaging and logistics services for medical device and healthcare providers added expertise in design for manufacturing, materials selection, product testing, moldflow, failure effect analysis and predictive engineering services to its cache of customer offerings.
“Medical [device] OEMs have been reducing their headcount and internal investment in R&D,” explained Jay Smith, the company’s vice president of business development. “They are not interested in carrying the overhead, finding consultants and do not want the added risk of staffing for development times that may take two to four years. Our customers were asking themselves the following question: ‘Why risk developing a new product when you can subcontract the work to a one-stop-shop molder who will own the full development and manufacturing process?’ The ability to add any quantity of resources rapidly can be used by the development project manager to reduce lead times for any step during the process. This permits a parallel path for many activities that follow a serial progression in the traditional R&D model.”
Outsourcing R&D not only can help defray product development costs, it also enables OEMs to funnel their limited resources into the core, high value-added technology sought by consumers, government regulators and insurance carriers.
“Increasingly, medical device OEMs are focusing their resources on the core, high value-added technology and work with suppliers that maintain an expertise in supporting subsystems and services,” said Randall Sword, CEO of AdvancedCath, a developer of advanced catheter systems with operations in California, Minnesota, Massachusetts and Costa Rica. “One example is an OEM developing a transcatheter heart valve system. The OEM may keep the development of the implant in-house and partner with AdvancedCath to develop and manufacture the delivery system and supporting catheters. Since AdvancedCath focuses exclusively on catheter systems, there is no learning curve and development time, cost, as well as capital investments are reduced.”
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Medtech companies have given the world breakthrough lifesaving devices. For years, they conducted R&D behind closed doors. But globalization and a changing market are forcing companies to look outside their lab walls for help. Such a shift in research models has prompted many companies to turn to non-traditional methods to find suitable partners.
Finding the perfect comrade can be difficult, however, as medtech firms struggle to protect their IP portfolios, reduce costs and embrace the concept of evidence-based medicine. It’s not impossible, though. With the right blend of voices at the R&D table, companies can produce the kind of game-changing innovation that will drive future growth.