Michael Barbella, Managing Editor01.29.18
It began with the best of intentions.
A handful of years ago, nanotechnology engineering students Derek Jouppi, Andrew Martinko, and Chad Sweeting, now 25, dreamed of effecting societal change. The trio envisioned creating a lasting, meaningful legacy—something that truly would make the world a better place.
But where to start?
Inspiration struck the threesome during a fourth-year design project at the University of Waterloo (Ontario, Canada). “Cancer has affected all of our families in some form, and while skin cancer wasn’t particularly prevalent, it is one of the few forms of cancer that is preventable,” Jouppi told Forbes last fall. “We thought, why not at least try to stop the one we can control and potentially solve?”
A lofty, but nevertheless noble goal, certainly.
Despite their naiveté (or perhaps because of it) and lack of business/product development work experience, the students dove head-first into their joint venture, inventing technology to measure sunscreen absorption into the skin. The team’s simple yet resourceful innovation attempts to combat one of the most challenging aspects of sun protection: Determining exactly when to reapply sunscreen.
Realizing the enormous potential of their ingenuity, the Waterloo triad quit their jobs and launched an Ontario-based firm (Suncayr) to develop and market their idea. The students spent two years working on a pen that detected sunscreen absorption levels through color-changing ink, but parental safety concerns led to the product’s eventual downfall. Forced to start from scratch, the team subsequently developed an adhesive skin patch (SPOT) that analyzes sunscreen potency through color.
The patches, made from ultraviolet (UV)-sensitive dyes, turn from clear to purple during inadequate sunscreen protection, and then back to clear when the lotion is doing its job. Reapplication frequency can vary depending on such factors as brand SPF, activity (swimmers need to reapply more often than sunbathers, for example), daily UV levels, amount of sunblock used, and sunscreen drying time.
Conceptually, SPOT seemed spot-on for commercial success: It was simple, easy to use, and could possibly save thousands, if not millions, of lives. It most surely appeared to be a winning concept.
SPOT would have remained a concept, too, had it not been for the students’ affiliation with JLABS, a “capital efficient and flexible” incubator system hatched by Johnson & Johnson in 2012 to identify and nurture early-stage innovation at academic institutions, medtech startups, and venture capital firms. Strategically located in seven North American cities (an eighth is opening this year in Manhattan’s Soho neighborhood), JLABS gives emerging companies access to big-league resources (singular benchtops, wet labs, office space, etc.) with no strings attached. Resident enterprises have access to J&J’s global network of dealmakers, investors, and scientists, as well as input from R&D (research and development) and commercialization experts. They retain their intellectual property and owe J&J nothing in return for the multinational’s services, sans a nominal monthly license fee.
JLABS has built quite an impressive resume in its relatively short existence: Three hundred twelve startups have been admitted to the incubator network since its inception, and 80 percent of those companies are still in business, according to a five-year progress report released last fall by J&J. In addition to laboratory space, JLABS has hosted 1,260 investor meetings and provided nearly 850 networking and educational events, including technical training, mentoring sessions, and “how-to” workshops. Also, 71 startups have signed deals with the Johnson & Johnson Family of Companies, and seven resident firms have collaborated with each other.
“JLABS is by far the most ambitious initiative to energize biomedical innovation to the benefit of all,” Bernard Munos, senior fellow at FasterCures (a center of the Milken Institute) and Forbes contributor, writes in the incubator’s progress report. “It supports hundreds of entrepreneurs working to turn breakthrough science into new ways to prevent or treat diseases. Without it, much of this would languish in the ‘valley of death.’ It turns it instead into the valley of life and hopes...”
Suncayr avoided the valley of death via one of nearly two dozen QuickFire Challenges JLABS has held over the past five years to foster “game-changing, early-stage innovation” in the therapeutics, consumer, health technologies, and medical device sectors. Martinko credits JLABS with helping his team focus and establish product testing channels in Australia, which has one of the world’s highest skin cancer rates.
“Experienced mentors in the consumer packaged-goods space helped us focus. We were able to discard bad ideas faster and hone in on key channels for us to test SPOT,” Martinko said in a J&J feature on the incubator network. “Australia has some of the strongest sun in the world and they’re doing a lot of research about how to teach consumers sun awareness. Because of JLABS, we were able to start the conversation and test the product to the highest grade.”
Equally as valuable to the Suncayr team was the R&D assistance offered by the incubator network. Martinko estimates JLABS saved the firm at least six months of development time and helped expedite production of the patch. Had the same resources been available to Sunacyr earlier in its evolution, perhaps the company could have avoided the misfortune of its failed first design.
“We’ve probably saved six months [of development time] using the JLABS facilities, which in the startup world, is a lot of time,” Martinko noted. “JLABS has definitely helped us accelerate the production and research needed for SPOT faster than we could have done on our own.”
Such R&D proficiency has become a key ingredient of medtech product development in recent years as the industry grapples with rising regulatory hurdles, shrinking profit margins, a broken U.S. healthcare system, and (most currently) a reinstated excise tax once dubbed a “job and innovation killer.” Intense competition and pricing pressures also are cluttering the path toward R&D efficiency, forcing device manufacturers to re-examine growth strategies and assume new business models that accommodate the rapidly evolving and globalized marketplace.
One of the newer approaches to long-term growth and streamlined R&D involves collaboration and partnerships, much like the kind being fostered through the JLABS initiative. Alliances, of course, have multiple benefits, but their ability to enhance R&D operations through expanded expertise and various best practices is conceivably most important to companies attempting to refine their innovation strategies.
“Collaborations/partnerships have always been important to the R&D process and will continue to be critical in the evolving business environment,” noted Andrew Senn, vice president of product solutions, Cardio & Vascular, at Integer Holdings Corporation, a medical device outsource manufacturer with nine research, design, and development centers worldwide. “The concept of open innovation has proven to be successful in other industries and we see some medical device companies becoming more comfortable with this approach. Basically, what this means is that medical device companies establish where they are ‘best in class’ and, correspondingly, where they need to rely on external resources for expertise and innovation. Those external resources may involve partnerships with academic institutions and technology incubators or outsourcing partners like Integer that have unique design and manufacturing capabilities.”
Indeed, open innovation (OI) can infuse fresh ideas into the design and ideation process, creating truly disruptive products. Some of society’s more remarkable ingenuities, in fact, have been born of this method: OI pioneer Procter & Gamble, for example, sought outside help to source and develop blockbusters like Olay Regenerist and the Oral-B Pulsonic toothbrush. Through platforms such as NineSigma, InnoCentive, YourEncore, and its own model (Connect + Develop), P&G estimates it has doubled its success rates and accessed the creative prowess of 1.5 million individuals.
OI is held in such high regard at Google that the concept is enshrined in the search giant’s corporate culture (“Default to Open”) and is used regularly to tap into external programming prowess. Netflix and LEGO are faithful OI followers, too—the former has petitioned the public for movie distribution ideas, while the latter routinely works with fans to co-develop and refine products (some toys are even labeled “created by LEGO fans”).
Adopting an OI-based R&D model requires both a mindset change and receptivity toward leveraging online crowd ideation. The traditional approach to research and development—internal and centralized—has become obsolete, effectively forcing companies to step outside their comfort zone and embrace the collective public genius. “The increasingly digital marketplace demands new solutions at faster rates than before,” claims Peter M. von Dyck, former founder, CEO, and board chairman of eZassi LLC, an OI management software developer. “Sitting back and relying on internal product development is a risk and a competitive disadvantage in today’s connected world.”
Healthcare has historically been a bit more willing to take that risk, though in recent years the industry has been warming to the idea of non-traditional R&D models. 3M, Boston Scientific Corp., General Electric (GE), and Medtronic plc have embraced the OI platform to varying degrees of success. Boston Scientific ventured into the collective creativity cosmos in 2015 with an open innovation contest that solicited new ideas for digital health devices. The winning concept was an all-in-one watch (wellness check, phone, GPS) designed to improve medication compliance and prolong independent living (if possible) among senior citizens. The watch combined voice and display instructions to help seniors comply with their medication regimens without the use of a smartphone or app; it also featured real-time tracking and caregiver alerts, emergency calling, daily activity reminders, and predictive system tracking.
Medtronic has dabbled in OI for nearly a decade, using an open innovation network called Innocentive that allows companies to anonymously outline specific challenges or technical problems they want solved, and anyone on the planet to submit solutions.
The company, however, took open innovation to the next level in 2015 by partnering with IBM’s Watson Health unit on diabetes care management solutions. The two companies are developing a cognitive mobile personal assistant app, Sugar.IQ, designed to provide real-time actionable glucose insights and predictions for diabetics, and they also are exploring ways to mimic healthy pancreatic function through better closed loop algorithms.
“We are building a secure, open innovation platform that could change the face of diabetes management,” John E. Kelly III, senior vice president of Cognitive Solutions and IBM Research, said in announcing the collaboration.
GE is targeting the same goal in traumatic brain injury (TBI) treatment. The multinational jumped on the OI bandwagon in 2013 by partnering with the NFL and launching a four-year, $60 million collaboration (Head Health Initiative) to accelerate diagnosis and improve TBI treatment. The Initiative was comprised of two components: A four-year, $40 million R&D program focused on a whole-brain approach to mild TBI diagnosis and treatment; and three open innovation challenges aimed at finding “disruptive advancements” for the condition.
The challenges spawned a host of impressive technologies, including blood-based biomarkers, an impact-absorbing football helmet, a synthetic turf field underlayer, materials that optimize energy absorption and repel both linear and rotational impacts, and a handheld, non-invasive tool for early brain injury detection. The latter innovation received U.S. Food and Drug Administration clearance in September 2016.
“To add value, R&D will need a ‘Renaissance’ of sorts—a dramatic realization that R&D cannot be executed in the same manner as it has been,” said Susie Faries, CEO of SciMed Partners Inc., a Silicon Valley-based consulting firm to the medical device, diagnostics, pharmaceutical, and healthcare technologies industries. “This will include closing the gap between medtech and the actual provider-side of healthcare. The days of ‘producing it and they will come’ is over. Health systems have now created their own venture funds and are investing to solve problems critical to their survival; other systems are sharing strategic initiatives with medtech to co-develop solutions. In addition, R&D must shift to a market-driven mindset that includes comprehensive market knowledge up front and from the customer’s perspective. Companies need to move away from engineering-based R&D to a model in which decisions are made based on market demands, healthcare issues, and health economics.”
That kind of model is already in place at many medtech firms, particularly multinationals looking to offset slow or stagnating growth domestically. Becton Dickinson and Company (BD) was the first to recognize the value of market-driven R&D, establishing a manufacturing and research facility in Suzhou, China, in 1995. Since then, about a half-dozen of BD’s rivals have set up shop in the city, including Abbott Laboratories, Baxter International, Boston Scientific, J&J, Royal Philips N.V., and Siemens AG. Some of those companies have also ventured to other Middle Kingdom cities—Boston Scientific, for instance, also conducts research at hubs in Beijing, Guangzhou, and Shanghai, while Siemens spreads its R&D out among seven other centers in Beijing, Nanjing, Qindao, Shanghai, Tianjin, Wuhan, and Wuxi. J&J, meanwhile, is bolstering its R&D capacity in Shanghai with the addition of a 4,400-square-meter JLABS facility in the city’s Zhangjiang Hi-Tech Park. The center is expected to open next spring.
Like BD, Medtronic has experienced significant longevity in China (more than 20 years), but has only bolstered its R&D presence in the last decade. The company partnered with Shangdong Weigao Group Co. Ltd. in 2011 to develop orthopedic technologies for the local market, and opened a research and development facility in Shanghai the following summer.
Medtronic’s market-driven R&D strategy extends well beyond China, however. The medtech giant has secured quite a substantial foothold in India, where it operates two engineering research and development centers in Bangalore and Hyderabad. The 26,000-square-foot Bangalore facility develops renal care technologies, with a specific focus on a hemodialysis system that incorporates features such as portability, reduced water consumption, and a cutting-edge graphical user interface.
Medtronic’s next stop may be Israel. CEO Omar Ishrak reportedly met with government officials there last fall to discuss locating two new R&D centers in Jerusalem and Yokneam. “We see life sciences and medical equipment as a sector with large potential that is important for us to promote,” Israel Innovation Authority Director Aharon Aharon told the Tel Aviv daily newspaper Yediot Aharonot last fall. “We hope that Medtronic will be a key player in this developing field. Our strategy is to promote an innovative development environment that does not yet exist in Israel [but] in which we are interested in developing.”
Certainly, the Israeli market is an enormous opportunity for Medtronic, as it effectively enables the company to build an R&D strategy from scratch. Determining the specific ingredients of that strategy, however, could be tricky and will largely be dependent on factors like unmet customer needs, market dynamics, product ergonomics, and the overall healthcare ecosystem.
“Sustained innovation requires a continuous commitment by the organization to always be out in the field watching and listening to end users,” noted Bryce Rutter, Ph.D., founder and CEO of Metaphase Design Group, a St. Louis, Mo.-based firm specializing in ergonomic product research and design. “In many cases, this front-end ergonomic and design research will not be focused on any particular set of pre-defined issues and instead should be charged with the responsibility of identifying pain points in usability, workflow, and human factors that in some way impact the product category the client is focused on and look at the entire ecosystem in which the client’s product lives to discover how well it integrates with the overall clinical environment and to identify new product opportunities that bridge between products that are typically treated independently. It’s very easy for an organization to believe everything they see and hear themselves. To combat this navel grazing, it is essential that companies conduct routine ergonomic and design research explorations using outside resources who are unconstrained by legacy factors that typically bridle R&D teams.”
Ergonomics clearly plays a central role in product research conducted by Metaphase. In the early part of the millennium, the company spent an entire summer traveling between U.S. and European cities to gather data on clinical expectations for a bedside stroke treatment test then under development by Bayer AG’s pharmaceutical division. Metaphase spoke to countless emergency and intensive care nurses, laboratory managers, doctors, and stroke specialists to determine form, fit, and function predispositions. The research also revealed important cultural nuances that would eventually impact market share. European hospitals, for example, preferred compact and easily stored products due to space constraints, whereas consumers favored devices with reusable (recyclable) pieces. Other interesting facts: Oval shapes were popular with Germans, while black was detested in Japan.
“Traditional R&D strategies have revolved around engineering products as opposed to designing user experiences,” Rutter told Medical Product Outsourcing. “R&D teams must move beyond ‘wrapping’ the technology in the most cost-effective design that considers only the materials, manufacturing processes, and supply chain logistics to include human factors and usability. For many medtech manufacturers, they do not develop enough products in any one year to build out a full-functioning industrial design and human factors team internally and as a result seek these services out from consultants.”
Outsourcing certain aspects of product research and/or development is a logical step for companies lacking specific technological expertise because it can help control costs and expedite time to market. Contracting R&D services also allows the commissioning party to remain focused on its core competencies.
R&D requires a high front-end investment and therefore a longer period of negative cash flow. There are also intangible costs involved in acquiring technology—the license agreements may have restrictive geographic or application clauses, and other businesses may have access to the same technology and compete with lower prices or stronger marketing. Finally, the licensee is dependent upon the licensor for technological advances, or even for keeping up to date, and this could be dangerous.
“The benefits of outsourcing [include] moving cost out of the large company, removing some liability to the outsourced party, speed of development, and hiring specific expertise that the larger company may not possess,” explained Michael Kallelis, vice president of business development at KMC Systems Inc., a medical contract manufacturer and engineering firm in Merrimack, N.H. “Instead of carrying large R&D costs, it makes sense to retain core competencies in strategic areas and then outsource R&D support for specific tasks. A possible pitfall is building too much reliance upon the outsourced partner. Good program management and involvement by the OEM is essential to a well-managed, outsourced R&D program.”
A good partner is equally as essential. Companies that need help with research and development should consider a number of factors when contracting out the work, including:
“An effective R&D team requires the right balance of agility and structure or process relevant to the stage of the R&D process and is closely aligned to the business strategy. In the concept feasibility or ‘research’ stage, the team needs to be at its innovative best, ready to fail fast and reduce the technical (and business) risks in the product,” said Jahnavi Lokre, general manager, Irvine Design Center, at Sparton Corporation, a diversified contract manufacturer and designer of complex electro-mechnanical systems based in Shaumburg, Ill. “In later stages of development, the process needs to become more structured, with appropriate levels of design control required to develop a device that is ready for production.”
Perhaps more important than structured processes, design control, trust, and respect is an outsourcing partner’s ability to become an extension of its customers’ business, “no matter how big or small,” as one industry expert plainly stated. “Creating that partnership is critical in establishing a mutually beneficial relationship that provides a fast track for an R&D team’s work,” asserted Derek McConnell, who engages in design assistance, estimating, and sales at Cook Spring Company Inc., a Sarasota, Fla.-based manufacturer of precision springs and wire forms. “As needs change, we change.”
That kind of flexibility will certainly come in handy as companies revamp their R&D models to better align with the evolving healthcare industry. As SciMed Faries predicts, “In light of the massive changes on the provider side of healthcare, I believe that the entire R&D process is ripe for revision and innovation—no longer can processes and procedures that existed for decades serve the new healthcare or medtech environment. Medtech should adopt new in-depth strategies such as market knowledge and intelligence but also a determination to close the gap between the supplier side and the provider side by greater collaborative strategies.”
A handful of years ago, nanotechnology engineering students Derek Jouppi, Andrew Martinko, and Chad Sweeting, now 25, dreamed of effecting societal change. The trio envisioned creating a lasting, meaningful legacy—something that truly would make the world a better place.
But where to start?
Inspiration struck the threesome during a fourth-year design project at the University of Waterloo (Ontario, Canada). “Cancer has affected all of our families in some form, and while skin cancer wasn’t particularly prevalent, it is one of the few forms of cancer that is preventable,” Jouppi told Forbes last fall. “We thought, why not at least try to stop the one we can control and potentially solve?”
A lofty, but nevertheless noble goal, certainly.
Despite their naiveté (or perhaps because of it) and lack of business/product development work experience, the students dove head-first into their joint venture, inventing technology to measure sunscreen absorption into the skin. The team’s simple yet resourceful innovation attempts to combat one of the most challenging aspects of sun protection: Determining exactly when to reapply sunscreen.
Realizing the enormous potential of their ingenuity, the Waterloo triad quit their jobs and launched an Ontario-based firm (Suncayr) to develop and market their idea. The students spent two years working on a pen that detected sunscreen absorption levels through color-changing ink, but parental safety concerns led to the product’s eventual downfall. Forced to start from scratch, the team subsequently developed an adhesive skin patch (SPOT) that analyzes sunscreen potency through color.
The patches, made from ultraviolet (UV)-sensitive dyes, turn from clear to purple during inadequate sunscreen protection, and then back to clear when the lotion is doing its job. Reapplication frequency can vary depending on such factors as brand SPF, activity (swimmers need to reapply more often than sunbathers, for example), daily UV levels, amount of sunblock used, and sunscreen drying time.
Conceptually, SPOT seemed spot-on for commercial success: It was simple, easy to use, and could possibly save thousands, if not millions, of lives. It most surely appeared to be a winning concept.
SPOT would have remained a concept, too, had it not been for the students’ affiliation with JLABS, a “capital efficient and flexible” incubator system hatched by Johnson & Johnson in 2012 to identify and nurture early-stage innovation at academic institutions, medtech startups, and venture capital firms. Strategically located in seven North American cities (an eighth is opening this year in Manhattan’s Soho neighborhood), JLABS gives emerging companies access to big-league resources (singular benchtops, wet labs, office space, etc.) with no strings attached. Resident enterprises have access to J&J’s global network of dealmakers, investors, and scientists, as well as input from R&D (research and development) and commercialization experts. They retain their intellectual property and owe J&J nothing in return for the multinational’s services, sans a nominal monthly license fee.
JLABS has built quite an impressive resume in its relatively short existence: Three hundred twelve startups have been admitted to the incubator network since its inception, and 80 percent of those companies are still in business, according to a five-year progress report released last fall by J&J. In addition to laboratory space, JLABS has hosted 1,260 investor meetings and provided nearly 850 networking and educational events, including technical training, mentoring sessions, and “how-to” workshops. Also, 71 startups have signed deals with the Johnson & Johnson Family of Companies, and seven resident firms have collaborated with each other.
“JLABS is by far the most ambitious initiative to energize biomedical innovation to the benefit of all,” Bernard Munos, senior fellow at FasterCures (a center of the Milken Institute) and Forbes contributor, writes in the incubator’s progress report. “It supports hundreds of entrepreneurs working to turn breakthrough science into new ways to prevent or treat diseases. Without it, much of this would languish in the ‘valley of death.’ It turns it instead into the valley of life and hopes...”
Suncayr avoided the valley of death via one of nearly two dozen QuickFire Challenges JLABS has held over the past five years to foster “game-changing, early-stage innovation” in the therapeutics, consumer, health technologies, and medical device sectors. Martinko credits JLABS with helping his team focus and establish product testing channels in Australia, which has one of the world’s highest skin cancer rates.
“Experienced mentors in the consumer packaged-goods space helped us focus. We were able to discard bad ideas faster and hone in on key channels for us to test SPOT,” Martinko said in a J&J feature on the incubator network. “Australia has some of the strongest sun in the world and they’re doing a lot of research about how to teach consumers sun awareness. Because of JLABS, we were able to start the conversation and test the product to the highest grade.”
Equally as valuable to the Suncayr team was the R&D assistance offered by the incubator network. Martinko estimates JLABS saved the firm at least six months of development time and helped expedite production of the patch. Had the same resources been available to Sunacyr earlier in its evolution, perhaps the company could have avoided the misfortune of its failed first design.
“We’ve probably saved six months [of development time] using the JLABS facilities, which in the startup world, is a lot of time,” Martinko noted. “JLABS has definitely helped us accelerate the production and research needed for SPOT faster than we could have done on our own.”
Such R&D proficiency has become a key ingredient of medtech product development in recent years as the industry grapples with rising regulatory hurdles, shrinking profit margins, a broken U.S. healthcare system, and (most currently) a reinstated excise tax once dubbed a “job and innovation killer.” Intense competition and pricing pressures also are cluttering the path toward R&D efficiency, forcing device manufacturers to re-examine growth strategies and assume new business models that accommodate the rapidly evolving and globalized marketplace.
One of the newer approaches to long-term growth and streamlined R&D involves collaboration and partnerships, much like the kind being fostered through the JLABS initiative. Alliances, of course, have multiple benefits, but their ability to enhance R&D operations through expanded expertise and various best practices is conceivably most important to companies attempting to refine their innovation strategies.
“Collaborations/partnerships have always been important to the R&D process and will continue to be critical in the evolving business environment,” noted Andrew Senn, vice president of product solutions, Cardio & Vascular, at Integer Holdings Corporation, a medical device outsource manufacturer with nine research, design, and development centers worldwide. “The concept of open innovation has proven to be successful in other industries and we see some medical device companies becoming more comfortable with this approach. Basically, what this means is that medical device companies establish where they are ‘best in class’ and, correspondingly, where they need to rely on external resources for expertise and innovation. Those external resources may involve partnerships with academic institutions and technology incubators or outsourcing partners like Integer that have unique design and manufacturing capabilities.”
Indeed, open innovation (OI) can infuse fresh ideas into the design and ideation process, creating truly disruptive products. Some of society’s more remarkable ingenuities, in fact, have been born of this method: OI pioneer Procter & Gamble, for example, sought outside help to source and develop blockbusters like Olay Regenerist and the Oral-B Pulsonic toothbrush. Through platforms such as NineSigma, InnoCentive, YourEncore, and its own model (Connect + Develop), P&G estimates it has doubled its success rates and accessed the creative prowess of 1.5 million individuals.
OI is held in such high regard at Google that the concept is enshrined in the search giant’s corporate culture (“Default to Open”) and is used regularly to tap into external programming prowess. Netflix and LEGO are faithful OI followers, too—the former has petitioned the public for movie distribution ideas, while the latter routinely works with fans to co-develop and refine products (some toys are even labeled “created by LEGO fans”).
Adopting an OI-based R&D model requires both a mindset change and receptivity toward leveraging online crowd ideation. The traditional approach to research and development—internal and centralized—has become obsolete, effectively forcing companies to step outside their comfort zone and embrace the collective public genius. “The increasingly digital marketplace demands new solutions at faster rates than before,” claims Peter M. von Dyck, former founder, CEO, and board chairman of eZassi LLC, an OI management software developer. “Sitting back and relying on internal product development is a risk and a competitive disadvantage in today’s connected world.”
Healthcare has historically been a bit more willing to take that risk, though in recent years the industry has been warming to the idea of non-traditional R&D models. 3M, Boston Scientific Corp., General Electric (GE), and Medtronic plc have embraced the OI platform to varying degrees of success. Boston Scientific ventured into the collective creativity cosmos in 2015 with an open innovation contest that solicited new ideas for digital health devices. The winning concept was an all-in-one watch (wellness check, phone, GPS) designed to improve medication compliance and prolong independent living (if possible) among senior citizens. The watch combined voice and display instructions to help seniors comply with their medication regimens without the use of a smartphone or app; it also featured real-time tracking and caregiver alerts, emergency calling, daily activity reminders, and predictive system tracking.
Medtronic has dabbled in OI for nearly a decade, using an open innovation network called Innocentive that allows companies to anonymously outline specific challenges or technical problems they want solved, and anyone on the planet to submit solutions.
The company, however, took open innovation to the next level in 2015 by partnering with IBM’s Watson Health unit on diabetes care management solutions. The two companies are developing a cognitive mobile personal assistant app, Sugar.IQ, designed to provide real-time actionable glucose insights and predictions for diabetics, and they also are exploring ways to mimic healthy pancreatic function through better closed loop algorithms.
“We are building a secure, open innovation platform that could change the face of diabetes management,” John E. Kelly III, senior vice president of Cognitive Solutions and IBM Research, said in announcing the collaboration.
GE is targeting the same goal in traumatic brain injury (TBI) treatment. The multinational jumped on the OI bandwagon in 2013 by partnering with the NFL and launching a four-year, $60 million collaboration (Head Health Initiative) to accelerate diagnosis and improve TBI treatment. The Initiative was comprised of two components: A four-year, $40 million R&D program focused on a whole-brain approach to mild TBI diagnosis and treatment; and three open innovation challenges aimed at finding “disruptive advancements” for the condition.
The challenges spawned a host of impressive technologies, including blood-based biomarkers, an impact-absorbing football helmet, a synthetic turf field underlayer, materials that optimize energy absorption and repel both linear and rotational impacts, and a handheld, non-invasive tool for early brain injury detection. The latter innovation received U.S. Food and Drug Administration clearance in September 2016.
“To add value, R&D will need a ‘Renaissance’ of sorts—a dramatic realization that R&D cannot be executed in the same manner as it has been,” said Susie Faries, CEO of SciMed Partners Inc., a Silicon Valley-based consulting firm to the medical device, diagnostics, pharmaceutical, and healthcare technologies industries. “This will include closing the gap between medtech and the actual provider-side of healthcare. The days of ‘producing it and they will come’ is over. Health systems have now created their own venture funds and are investing to solve problems critical to their survival; other systems are sharing strategic initiatives with medtech to co-develop solutions. In addition, R&D must shift to a market-driven mindset that includes comprehensive market knowledge up front and from the customer’s perspective. Companies need to move away from engineering-based R&D to a model in which decisions are made based on market demands, healthcare issues, and health economics.”
That kind of model is already in place at many medtech firms, particularly multinationals looking to offset slow or stagnating growth domestically. Becton Dickinson and Company (BD) was the first to recognize the value of market-driven R&D, establishing a manufacturing and research facility in Suzhou, China, in 1995. Since then, about a half-dozen of BD’s rivals have set up shop in the city, including Abbott Laboratories, Baxter International, Boston Scientific, J&J, Royal Philips N.V., and Siemens AG. Some of those companies have also ventured to other Middle Kingdom cities—Boston Scientific, for instance, also conducts research at hubs in Beijing, Guangzhou, and Shanghai, while Siemens spreads its R&D out among seven other centers in Beijing, Nanjing, Qindao, Shanghai, Tianjin, Wuhan, and Wuxi. J&J, meanwhile, is bolstering its R&D capacity in Shanghai with the addition of a 4,400-square-meter JLABS facility in the city’s Zhangjiang Hi-Tech Park. The center is expected to open next spring.
Like BD, Medtronic has experienced significant longevity in China (more than 20 years), but has only bolstered its R&D presence in the last decade. The company partnered with Shangdong Weigao Group Co. Ltd. in 2011 to develop orthopedic technologies for the local market, and opened a research and development facility in Shanghai the following summer.
Medtronic’s market-driven R&D strategy extends well beyond China, however. The medtech giant has secured quite a substantial foothold in India, where it operates two engineering research and development centers in Bangalore and Hyderabad. The 26,000-square-foot Bangalore facility develops renal care technologies, with a specific focus on a hemodialysis system that incorporates features such as portability, reduced water consumption, and a cutting-edge graphical user interface.
Medtronic’s next stop may be Israel. CEO Omar Ishrak reportedly met with government officials there last fall to discuss locating two new R&D centers in Jerusalem and Yokneam. “We see life sciences and medical equipment as a sector with large potential that is important for us to promote,” Israel Innovation Authority Director Aharon Aharon told the Tel Aviv daily newspaper Yediot Aharonot last fall. “We hope that Medtronic will be a key player in this developing field. Our strategy is to promote an innovative development environment that does not yet exist in Israel [but] in which we are interested in developing.”
Certainly, the Israeli market is an enormous opportunity for Medtronic, as it effectively enables the company to build an R&D strategy from scratch. Determining the specific ingredients of that strategy, however, could be tricky and will largely be dependent on factors like unmet customer needs, market dynamics, product ergonomics, and the overall healthcare ecosystem.
“Sustained innovation requires a continuous commitment by the organization to always be out in the field watching and listening to end users,” noted Bryce Rutter, Ph.D., founder and CEO of Metaphase Design Group, a St. Louis, Mo.-based firm specializing in ergonomic product research and design. “In many cases, this front-end ergonomic and design research will not be focused on any particular set of pre-defined issues and instead should be charged with the responsibility of identifying pain points in usability, workflow, and human factors that in some way impact the product category the client is focused on and look at the entire ecosystem in which the client’s product lives to discover how well it integrates with the overall clinical environment and to identify new product opportunities that bridge between products that are typically treated independently. It’s very easy for an organization to believe everything they see and hear themselves. To combat this navel grazing, it is essential that companies conduct routine ergonomic and design research explorations using outside resources who are unconstrained by legacy factors that typically bridle R&D teams.”
Ergonomics clearly plays a central role in product research conducted by Metaphase. In the early part of the millennium, the company spent an entire summer traveling between U.S. and European cities to gather data on clinical expectations for a bedside stroke treatment test then under development by Bayer AG’s pharmaceutical division. Metaphase spoke to countless emergency and intensive care nurses, laboratory managers, doctors, and stroke specialists to determine form, fit, and function predispositions. The research also revealed important cultural nuances that would eventually impact market share. European hospitals, for example, preferred compact and easily stored products due to space constraints, whereas consumers favored devices with reusable (recyclable) pieces. Other interesting facts: Oval shapes were popular with Germans, while black was detested in Japan.
“Traditional R&D strategies have revolved around engineering products as opposed to designing user experiences,” Rutter told Medical Product Outsourcing. “R&D teams must move beyond ‘wrapping’ the technology in the most cost-effective design that considers only the materials, manufacturing processes, and supply chain logistics to include human factors and usability. For many medtech manufacturers, they do not develop enough products in any one year to build out a full-functioning industrial design and human factors team internally and as a result seek these services out from consultants.”
Outsourcing certain aspects of product research and/or development is a logical step for companies lacking specific technological expertise because it can help control costs and expedite time to market. Contracting R&D services also allows the commissioning party to remain focused on its core competencies.
R&D requires a high front-end investment and therefore a longer period of negative cash flow. There are also intangible costs involved in acquiring technology—the license agreements may have restrictive geographic or application clauses, and other businesses may have access to the same technology and compete with lower prices or stronger marketing. Finally, the licensee is dependent upon the licensor for technological advances, or even for keeping up to date, and this could be dangerous.
“The benefits of outsourcing [include] moving cost out of the large company, removing some liability to the outsourced party, speed of development, and hiring specific expertise that the larger company may not possess,” explained Michael Kallelis, vice president of business development at KMC Systems Inc., a medical contract manufacturer and engineering firm in Merrimack, N.H. “Instead of carrying large R&D costs, it makes sense to retain core competencies in strategic areas and then outsource R&D support for specific tasks. A possible pitfall is building too much reliance upon the outsourced partner. Good program management and involvement by the OEM is essential to a well-managed, outsourced R&D program.”
A good partner is equally as essential. Companies that need help with research and development should consider a number of factors when contracting out the work, including:
- Building a product roadmap
- Understanding customer needs
- Creating processes that deliver a differentiated product while optimizing time, cost, and product quality
- Providing adequate project resources and infrastructure
- Instituting a culture of continuous improvement
- A focus on the patient (to help ensure that user requirements are being met and effectively verified and validated)
- A strong program manger
- Engineering rigor. A fundamental understanding of the clinical need, design, and processes leads to data-driven, risk-based decision-making that enhances the predictability of the development process.
“An effective R&D team requires the right balance of agility and structure or process relevant to the stage of the R&D process and is closely aligned to the business strategy. In the concept feasibility or ‘research’ stage, the team needs to be at its innovative best, ready to fail fast and reduce the technical (and business) risks in the product,” said Jahnavi Lokre, general manager, Irvine Design Center, at Sparton Corporation, a diversified contract manufacturer and designer of complex electro-mechnanical systems based in Shaumburg, Ill. “In later stages of development, the process needs to become more structured, with appropriate levels of design control required to develop a device that is ready for production.”
Perhaps more important than structured processes, design control, trust, and respect is an outsourcing partner’s ability to become an extension of its customers’ business, “no matter how big or small,” as one industry expert plainly stated. “Creating that partnership is critical in establishing a mutually beneficial relationship that provides a fast track for an R&D team’s work,” asserted Derek McConnell, who engages in design assistance, estimating, and sales at Cook Spring Company Inc., a Sarasota, Fla.-based manufacturer of precision springs and wire forms. “As needs change, we change.”
That kind of flexibility will certainly come in handy as companies revamp their R&D models to better align with the evolving healthcare industry. As SciMed Faries predicts, “In light of the massive changes on the provider side of healthcare, I believe that the entire R&D process is ripe for revision and innovation—no longer can processes and procedures that existed for decades serve the new healthcare or medtech environment. Medtech should adopt new in-depth strategies such as market knowledge and intelligence but also a determination to close the gap between the supplier side and the provider side by greater collaborative strategies.”
