Creating Win-Win Strategic Growth Partnerships

Device manufacturers face numerous challenges and uncertainties in the current healthcare environment. Broad shifts in regulatory oversight, downward pressure on costs, aging patient demographics and sun-setting intellectual property are all high-level concerns. However, at the end of the day, companies still need compelling new products to support growth—or perhaps even survival—in these changing times. Simply organizing a discrete market research project, setting a relevant clinical outcome target, authoring device specifications, tactically executing development and gaining supportive clinical data for regulatory submission (wash, rinse, repeat) doesn’t cut it. Creating compelling, comprehensive health system solutions that demonstrate measurable, clinical and economic benefit is a must. These solutions require a cross-functional understanding as well as a combination of market and technical competencies not seen before by most organizations.

Companies have undertaken major efforts to get lean since the financial crisis in 2008. They have optimized efficiencies around a core competency focused on delivering incrementally improved devices with discrete clinical endpoints. This optimization strategy runs counter to the diversity required to meet the needs of the above-mentioned comprehensive system solutions. If the new strategic imperative for device companies is to provide value beyond slim, incremental improvement, they must face the need for external expertise and abilities in order to create meaningful innovations. 
There are several approaches companies are taking to overcome this challenge that are worth further elaboration: knowing and focusing on an organization’s own strengths; proactively mapping and sourcing outside partners identified across an opportunity topology; and strategically investing in relationships well in advance of their tactical impact. These activities, once combined, have tremendous influence on the success of overcoming the challenge of creating meaningful innovation in today’s healthcare environment.

Know Thyself
To construct a strategic model for innovative growth, the first step is an ancient one based on the proverb “Know Thyself.” Although the creative inspiration for the next great product or valuable comprehensive solution and service may come from within, a company’s ability to transform this idea into reality may be limited. For example, a company that has developed a new assay to diagnose drug-resistant tuberculosis obviously has core expertise in biochemistry. But, it may not have the competency to effectively develop a full point-of-care diagnostic solution. This company may need the help of partners who can provide such expertise as market analysis for entry, disposable cartridge design and reagent packaging, instrumentation development and manufacturing, and/or conduct clinical studies. 

In short, a broad knowledge base and diverse expertise is needed to develop and launch such transformative products and services. It is human nature to extrapolate one’s own mastery of a domain into other areas of limited knowledge or skill. I’ve done it plenty! (Sure, I can do my own brakes. After all, I’m an experienced engineer!) The resulting ride could be, literally, white knuckle and end with a crash. So when exploring a new medical market opportunity—probably one of the most complicated undertakings in the professional world—you need an extremely frank understanding of how your company’s core competency does and does not contribute. Granted, there may be complimentary areas worth investing in that have critical strategic importance. However, caution is advised. The full talent spectrum needed to address this new class of innovation is rarely found under one roof—pick and choose carefully where you invest hard-won capital or run the risk of burning up critical time. Companies that try to do it all run the risk of falling into the trap of many failed initiatives.

Map Opportunity Topology
Once one’s own competency has been honestly identified and refined, it then needs to be mapped out alongside other expertise needed to address the identified opportunity. To understand the entire continuum, it is useful to explore different scenarios on how the opportunity might unfold over time. This exploration can take the form of a sensitivity analysis that includes the primary theory about the opportunity, and several situational shifts that might occur given future regulatory conditions, feedback from market experimentation or incorrect assumptions about the opportunity. For instance, a cardiac rhythm management (CRM) company might want to enable a pharmaceutical companion solution that addresses chronic heart failure patients prior to passing an adverse threshold requiring the implantation of its Class III device. This solution space might require the development or modification of a device that is Class II or more like a consumer electronic product with an Internet interface, or even a social media aspect. Each step further away from this company’s core focus on Class III implantable devices expands the expertise needs and associated partnering relationships required. 

Mapping competencies to opportunities helps strategically identify and rank body-of-knowledge, experience and skill attributes outsides one’s own domain as well as the timing of their contribution. These attributes and rankings become the foundation for initiating a wide range of partnering discussions with key opinion leaders, customers, patients, clinicians, physicians, administrators, regulatory contacts, device developers, manufacturers, distributors and service organizations to name a select few. When approaching these comprehensive, system-wide opportunities, it is rare to find an individual or multiple “one stop shops” for all the needs that would fit a traditional procurement model. With such complexity, it is more common to have a dozen or more partnerships—many with distinct geographic localization—with some overlapping expertise. Therefore, this mapping and expertise identification activity requires true strategic thought and intent to address the comprehensive nature of a system solution. 

Thoughtful Investments
As we all know, long-term relationships take mutual investment in time and resources. It may seem obvious that it is important to perpetually evaluate and invest in your partnering relationships; and as the identified market opportunity reveals itself or as a business matures, these decisions become clear. If the opportunity has been mapped out, as in the above activity, there should be a clear understanding of the different types of expertise needed to discover, experiment, nurture and deliver on a meaningful solution as envisioned. The biggest difference today is that the speed and efficiency at which this is being done is actually accelerating and is much more iterative. Constant, forward-looking planning and broad investments are required in order to ensure the right partners are involved at the right time to provide a valuable contribution. 

However, an investment in partnering activities where their primary contribution is many months off and the role is ambiguous at best is difficult. Specifically, justifying near-term return on these investments in financial terms is impossible. In actuality, as the final system solution materializes, some of the thoughtfully considered value expected will not materialize when a particular partner’s expertise is not needed. This is a gamble worth taking. Not making these investments in advance is much worse, because a poorly timed partner contribution or a missed chance at discovery can negatively impact a truly meaningful offering. 

Small resource investments with multiple partners throughout the development life cycle will build knowledge, confidence and visibility on the partner side. The effect of this is that the partner itself can then make better informed decisions that are beneficial to the viability of the market solution. It might trigger a well-timed capital investment, the hiring of additional expertise, or the introduction of a potential strategic business relationship by that partner. For example, a firm that typically makes low-volume, silkscreen sensors has been working with a consumer health and wellness customer on early process development. Knowing when this customer’s roadmap specifies high-volume production helps them make an informed capital expense decision that they have been weighing for some time. The resulting investment in an automated high-throughput lamination machine benefits that customer at the right time, without any additional investment, but also benefits the manufacturer’s other customers who have indicated they too would like this capacity.

Small, up-front investments help to socialize partners to the specifics of your market segment, regulatory environment and go-to-market business model. All of this adds to the partner’s body of knowledge and ability for better problem solving when needed. Such engagements provide the opportunity to ensure all partner business values and objectives are aligned before taking the relationship to the next level. Mistrust based on misunderstood or misaligned values can 
derail a relationship and become especially difficult once significant resources are invested by both sides. 

Additionally, continuing to engage partners beyond their primary contribution is important to enable access and mindshare for issues that may arise in clinical trials or on-market distribution. These issues could range from a supplier process falling out of specified tolerances, to end-of-life component identification needing immediate design mitigation, to further localization of the solution in multiple geographic regions. In all cases, the competency to managing these relationships throughout the development life cycle for the benefit of creating a comprehensive system solution is critical. The benefits of investing resources in these partnerships continuously far outweigh transactional sourcing at the time of primary contribution.

Putting It Together
Companies able to develop the capability to put these three strategic activities together well beyond any traditional outsource model will innovate better, faster and cheaper than their competitive peers. By knowing their own strengths and focusing on the capability to orchestrate partnership identification and investment, these companies will concentrate their capital on their own valuable contribution. Understanding how different partners provide best-in-class expertise in their domain of competency toward the envisioned system solution unlocks the potential for the highest benefit to their customer and patient’s quality of life. Take the time and create the thought space to adopt these activities. It could mean the difference to millions of people and to the future vitality of your organization as well.