Many businesses and industries are in limbo as they comply with state and federal shutdown orders. Medtech firms have mostly been spared from this economic purgatory because they provide numerous devices needed to mitigate infections (ventilators, face masks, hospital gowns, diagnostic tests, etc.). The industry, however, is not impervious to the virus—a nosediving stock market is prompting device companies to rescind their financial guidance, and supply chain disruptions are causing shortages in laboratory supplies and reagents.
Medtech companies have taken various approaches to minimizing the financial, operational, and personal impacts of the global pandemic. Some strategies have worked better than others.
Regardless of the outbreak’s potential revenue/profit impacts, COVID-19 has created unique C-suite leadership challenges for the medtech industry. As the sector attempts to navigate these uncharted waters, it is important for executives to remember they must be accountable to all stakeholders, including employees/contractors, OEM or hospital customers, patients, clinicians, shareholders, lenders, and suppliers, among others.
Such accountability is a reflection on these executives’ leadership skills and their companies’ cultures. In a crisis like COVID-19, it is important for C-suite managers to respond to the needs of their stakeholders, adapt to unique circumstances, and prioritize effectively.
Clearly, C-suite executives prioritize differently in a crisis than they do in ordinary times. However, the common prioritization denominator for both crisis and non-crisis management is entrepreneurial survival. Subsistence of the corporate entity is essential to both stakeholders and the medical device industry as a whole.
Shifting Stakeholder Priorities
A crisis can quickly change stakeholder priorities. The table shows the changes in priorities for various stakeholders in light of the COVID-19 pandemic.
Stakeholders |
Employees |
Customers |
Patients |
Clinicians |
Shareholders |
Lenders |
Suppliers |
Normal Times |
Employee engagement |
Satisfaction |
Meet unmet clinical need |
Ease of use |
EBITDA |
Leverage for expansion as helpful |
Partnership to maximize value |
Covid-19 |
Employee safety |
Demand flexibility |
Ensure access to products |
Ease of Use and access to products |
Survive while flexing to address changing market demand |
Use to ensure liquidity for current business needs |
Leverage to meet ongoing demands |
Most medtech executives have already faced extraordinary challenges this year in shifting priorities due to the global coronavirus crisis. Examples of the kinds of prioritization changes for each stakeholder group follows.
Employees: In ordinary times, most companies strive for high levels of “employee engagement.” In other words, they want employees to participate in the corporate culture beyond simply showing up for work. They understand employees who are engaged in the company will be more productive and add more value to the organization.
But during the COVID-19 pandemic, the top priority for any company should be employee safety. Work from home directives should be implemented whenever possible to protect the health of non-essential staff. For critical workers (those who help get essential healthcare products to their end-use destination), companies should take all necessary measures to ensure their safety during their shifts. For many medtech firms, this has resulted in the restructuring of manufacturing lines to ensure “social distancing” as well as finding ways to continuously clean workspaces so employees are not exposed to the virus during their work days.
Customers: Although there are multiple ways of measuring it, customer satisfaction is the main focus of most business efforts involving sales. Satisfied customers lead to higher sales and eventually, increased business.
Certainly, demand flexibility is an important customer satisfaction metric. However, during this pandemic, demand flexibility is the customer metric. In this current environment, customers either need more product or less of it, depending on whether they provide COVID-19-related services or support elective procedures. For customers on the front lines of the coronavirus fight, demand is likely to outstrip supply; the opposite is true for those involved with elective procedures, as those surgeries have temporarily been put on hold. This customer group is now in “survival” mode and therefore unwilling to pay for something they don’t currently need. Accordingly, “demand flexibility” is necessary for customers at this time.
Patients: One of the medtech industry’s most redeeming aspects is its ability to positively impact patients’ lives. It does so by providing solutions that meet unmet clinical needs and thus, providing a unique value proposition.
The most important service the industry can provide to patients during the pandemic is ensuring access to products that will aid in their care and recovery—from monitoring devices and ventilators to diagnostic tests and applicable drugs that may impede the disease’s progress. To meet these various patient needs, companies must exhibit the demand flexibility previously discussed.
Clinicians: One of the highest priorities for clinicians in any moment of time is product “ease of use.” Experienced medtech manufacturers know the quickest path to product adoption (assuming efficacy and quality are up to par) is through simplicity, convenience, and user-friendliness. The easier a product is to use, the quicker it will be embraced by clinicians and gain valuable market share.
With the COVID-19 pandemic, “ease of use” is a high priority for a variety of reasons. It’s not really about market share now but rather the speed care can be provided to expedite a patient’s recovery, and the skills of the end user. The latter point is particularly important as less experienced caregivers join the battle against COVID-19 and increasingly deploy medical products (though to be fair, rapid deployment is necessary for all clinicians working with critically ill patients, regardless of experience). It is also important for clinicians to have access to all necessary products.
Shareholders: In ordinary times, the top stakeholder priority for C-suite executives is earnings. But with a highly contagious virus spreading like wildfire across the globe, earnings takes a back seat to a company’s overall survival and its commitment to patients. Staying afloat while waiting for elective surgeries to resume or ramping up production of much-needed supplies takes precedence over profits.
Lenders: This stakeholder group helps companies grow through cash flow, with the monies used mostly to foster business growth and manufacturing expansion or other growth-related projects. Lenders can be just as helpful in a crisis, though, as they can help organizations survive abnormal market volatility. Companies with the best chances of surviving this volatility are those that have developed a good relationship with their bankers during better times.
Suppliers: Indeed, suppliers are a critical partner to any medtech’s firm’s long-term success. One of the best ways to maximize margin opportunity and innovation pipeline possibilities is to strategically leverage the capabilities of vendors. Many of these vendors have excellent competencies that supplement their partners’ capabilities and add to the overall value proposition for customers.
During a crisis, the supplier relationship becomes more transactional in the short term as the core mission transitions to meeting the requirements of the demand variability (up or down). A good vendor relationship can either help companies increase production or stay afloat by withholding shipments for the short term to save on cash flow. Hopefully, these short-term transactions can also be conducted in the context of the long-term relationship. Regardless, it’s critical the supplier flexes to the needs of their partners to meet current needs.
There is no shortage of challenges for medtech companies in the COVID-19 pandemic. Some are racing to meet astronomical demand, while others are at an operational standstill due to a dropoff in orders or procedures. Thus, there will be short-term winners and losers for the duration of the crisis. Some of the more notable winners are respiratory technology-related companies like 3M, Vyaire Medical Inc., ResMed, GE, and even small companies such as Ventec Life Systems (partnership with GM), and Airon Corporation (partnership with Ford). Conversely, organizations living in limbo include Stryker Corp., Zimmer Biomet Holdings Inc., Storz, and their core suppliers.
Regardless of their lot during this crisis, medtech companies should remain flexible, humble, and most of all, accountable to all stakeholders in order to survive the pandemic, improve patients’ lives, and ensure a better future for healthcare.
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She is currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.