Florence Joffroy-Black and Dave Sheppard, MedWorld Advisors02.03.21
Every year, there’s a lot of discussion about healthcare’s constantly changing dynamics. In 2021, market opportunities like the growth in digital health, robotics, artificial intelligence, and telemedicine are sure to be among the top trends. We undoubtedly will be expanding on these topics throughout the year.
The same matters took center stage in 2020, with certain market opportunities actually enhanced by the health crisis (telemedicine and digital health, most notably). These particular segments will experience significant growth this year as COVID-19 continues to force a physical divide between doctors and patients.
Although a “new normal” has emerged in medtech—the virus will certainly loom large over the industry for quite some time—many of the usual C-Suite management topics that are key to organizational success will remain the same this year, though they’ll have to be regularly fine-tuned. Priorities are likely to include “organic” functional disciplines (i.e., sales and marketing, supply chain, regulatory, manufacturing, and employee engagement) as well as inorganic strategies for properly timing potential M&A deals.
Let’s examine the organic topics in further detail.
Sales
Medical technology companies that sell directly to hospitals will continue to grapple with the immediate challenge of customer access. Put simply: It’s going to be difficult at best for sales teams to physically meet with customers as long as the virus is still a threat. Large firms are mostly embracing the restrictions barring sales representatives from hospitals for three main reasons. The first involves “leverage and bundling,” a process by which these entities leverage their market share and bundle their products to make it easy for hospitals to continue using their products. The second is directly related to finances.
Since the pandemic began, many large companies have reduced the size of their sales force and saved significant money on travel since there have been no in-person customer visits or industry events.
Finally, large organizations have quickly pivoted to create digital customer engagement experiences, thanks largely to their investment funding (this will also lower sales costs for the foreseeable future). Such a strategy makes it more difficult for small and medium-sized companies to compete and gain market share.
Medtech manufacturers and suppliers that sell to OEMs have less arduous sales challenges, as their business-to-business outreach can be conducted remotely for the time being. However, gaining new business and establishing new relationships through phone calls and video conferencing can be quite tricky.
Marketing
Certainly, marketing teams will have to improve their “digital reach” this year as live events continue to fall victim to the virus in the near future. While some exposure in the short-term can be maintained by advertising, it’s going to be imperative that medtech companies hone their digital marketing skill sets through social media, personalized emails, and customer reviews, among other strategies. Clients—for the most part—are still working remotely so reaching them safely online will be key to driving successful marketing campaigns.
Manufacturing
Medtech companies’ priorities in 2021 will be to keep production teams healthy and manufacturing lines operating uninterrupted. Employee safety has become an even higher concern now for obvious reasons. When future planning most years, the manufacturing discussion has often been about location and/or automation strategy. But other than reshoring initiatives (a separate topic in itself), there likely will be little dialogue this year about global production transitions because COVID-19 is preventing businesses and workers from moving about freely. If possible, however, companies should expedite efforts to incorporate automation in the final or sub-assembly of finished products. Taking the human factor out of manufacturing has always made sense economically and functionally, as it yields quality products. With COVID-19 now in play, it is even more essential because it also helps to remove some production risks.
Supply Chain
Typically the lifeblood of any manufacturing operation, the supply chain is usually reviewed regularly for various reasons. Not only can supply chains help save money, they also can produce significant revenue for some organizations. Such diversity necessitates flexibility among suppliers, since objectives can change quickly depending on a company’s strategic goal. Supply chain professionals are consistently increasing the productivity of existing suppliers and finding new providers to facilitate less costly manufacturing that produces better quality medical products. This kind of supply chain management usually requires global travel but COVID-19 is preventing the kind of interpersonal relations needed for supplier improvement. While the virus will not completely make the influx of new suppliers impossible, it will create some interesting challenges (and time delays) regarding validation.
Regulatory
Incredible as it seems, the global pandemic has been a blessing of sorts for companies conducting business in Europe, as the European Union was forced to delay implementation of its MDR system until May this year. Many medtech companies had hoped for a delay once it became clear the 2020 deadline would wipe a number of products off the market. Anxiety over the MDR is sure to return as the deadline approaches (May 26) but hopefully regulatory teams have used the extra year to prepare for this highly burdensome set of rules. Regardless of a company’s readiness for MDR compliance, however, the new set of rules will require continued C-Suite oversight because they impact both new products and those already on the market.
Employee Engagement/Human Resources
Many C-Suite executives might actually prioritize this item over those previously listed. And for good reason: Medtech professionals should never underestimate or undervalue the importance of the human factor. It should be noted that businesses with the best employee engagement initiatives often have the best continuous growth in terms of organizational value (revenue, profits, etc.). During COVID-19, most C-Suite executives presumably have prioritized the health and safety of their staff. When the pandemic hit, businesses became more than indifferent conglomerations of workers and managers—they became families, with brothers and sisters universally impacted by the virus. No leader wants to lose anyone on his or her team. With COVID-19, the definition of “losing someone on the team” became expanded to being more real than anyone could have ever imagined. Perhaps this “bond of humanity” created by the pandemic will extend the goodwill and familial relationships C-Suite executives have forged with their teams. Human resource departments should be proactive about transitioning employee engagement from “COVID-19 normal” to the post-pandemic world, which hopefully will arrive sooner rather than later.
Regardless of when the post-pandemic world arrives, it’s important for companies to consider their planned inorganic (M&A activity) this year. There has definitely been an increase in M&A deal activity during the pandemic and it seems to have become an integral part of companies’ overall growth strategies. Historically, inorganic growth during times of market disruption can be extraordinarily rewarding for future returns. With that said, its important that M&A strategies be well-considered and in-line with companies’ overall future growth strategies. History also has shown that “M&A for the sake of M&A” is rarely a good idea. Medtech organizations that decide to pursue deals in 2021 should expect valuations to be on par with 2019, though companies in financial distress will likely garner significantly less value. Since most medtech companies are in reasonably good financial shape, they must create a winning tactical execution plan for any M&A action to ensure they are truly creating long-term value. Once completing the acquisition, the management disciplines previously outlined in this column will help companies integrate their new addition’s culture and corporate structure.
Whether companies continue their growth in 2021 organically or inorganically, there will be challenges to overcome—financially, statutorily, and administratively. But the rewards will surely be well worth the effort.
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 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 focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.
The same matters took center stage in 2020, with certain market opportunities actually enhanced by the health crisis (telemedicine and digital health, most notably). These particular segments will experience significant growth this year as COVID-19 continues to force a physical divide between doctors and patients.
Although a “new normal” has emerged in medtech—the virus will certainly loom large over the industry for quite some time—many of the usual C-Suite management topics that are key to organizational success will remain the same this year, though they’ll have to be regularly fine-tuned. Priorities are likely to include “organic” functional disciplines (i.e., sales and marketing, supply chain, regulatory, manufacturing, and employee engagement) as well as inorganic strategies for properly timing potential M&A deals.
Let’s examine the organic topics in further detail.
Sales
Medical technology companies that sell directly to hospitals will continue to grapple with the immediate challenge of customer access. Put simply: It’s going to be difficult at best for sales teams to physically meet with customers as long as the virus is still a threat. Large firms are mostly embracing the restrictions barring sales representatives from hospitals for three main reasons. The first involves “leverage and bundling,” a process by which these entities leverage their market share and bundle their products to make it easy for hospitals to continue using their products. The second is directly related to finances.
Since the pandemic began, many large companies have reduced the size of their sales force and saved significant money on travel since there have been no in-person customer visits or industry events.
Finally, large organizations have quickly pivoted to create digital customer engagement experiences, thanks largely to their investment funding (this will also lower sales costs for the foreseeable future). Such a strategy makes it more difficult for small and medium-sized companies to compete and gain market share.
Medtech manufacturers and suppliers that sell to OEMs have less arduous sales challenges, as their business-to-business outreach can be conducted remotely for the time being. However, gaining new business and establishing new relationships through phone calls and video conferencing can be quite tricky.
Marketing
Certainly, marketing teams will have to improve their “digital reach” this year as live events continue to fall victim to the virus in the near future. While some exposure in the short-term can be maintained by advertising, it’s going to be imperative that medtech companies hone their digital marketing skill sets through social media, personalized emails, and customer reviews, among other strategies. Clients—for the most part—are still working remotely so reaching them safely online will be key to driving successful marketing campaigns.
Manufacturing
Medtech companies’ priorities in 2021 will be to keep production teams healthy and manufacturing lines operating uninterrupted. Employee safety has become an even higher concern now for obvious reasons. When future planning most years, the manufacturing discussion has often been about location and/or automation strategy. But other than reshoring initiatives (a separate topic in itself), there likely will be little dialogue this year about global production transitions because COVID-19 is preventing businesses and workers from moving about freely. If possible, however, companies should expedite efforts to incorporate automation in the final or sub-assembly of finished products. Taking the human factor out of manufacturing has always made sense economically and functionally, as it yields quality products. With COVID-19 now in play, it is even more essential because it also helps to remove some production risks.
Supply Chain
Typically the lifeblood of any manufacturing operation, the supply chain is usually reviewed regularly for various reasons. Not only can supply chains help save money, they also can produce significant revenue for some organizations. Such diversity necessitates flexibility among suppliers, since objectives can change quickly depending on a company’s strategic goal. Supply chain professionals are consistently increasing the productivity of existing suppliers and finding new providers to facilitate less costly manufacturing that produces better quality medical products. This kind of supply chain management usually requires global travel but COVID-19 is preventing the kind of interpersonal relations needed for supplier improvement. While the virus will not completely make the influx of new suppliers impossible, it will create some interesting challenges (and time delays) regarding validation.
Regulatory
Incredible as it seems, the global pandemic has been a blessing of sorts for companies conducting business in Europe, as the European Union was forced to delay implementation of its MDR system until May this year. Many medtech companies had hoped for a delay once it became clear the 2020 deadline would wipe a number of products off the market. Anxiety over the MDR is sure to return as the deadline approaches (May 26) but hopefully regulatory teams have used the extra year to prepare for this highly burdensome set of rules. Regardless of a company’s readiness for MDR compliance, however, the new set of rules will require continued C-Suite oversight because they impact both new products and those already on the market.
Employee Engagement/Human Resources
Many C-Suite executives might actually prioritize this item over those previously listed. And for good reason: Medtech professionals should never underestimate or undervalue the importance of the human factor. It should be noted that businesses with the best employee engagement initiatives often have the best continuous growth in terms of organizational value (revenue, profits, etc.). During COVID-19, most C-Suite executives presumably have prioritized the health and safety of their staff. When the pandemic hit, businesses became more than indifferent conglomerations of workers and managers—they became families, with brothers and sisters universally impacted by the virus. No leader wants to lose anyone on his or her team. With COVID-19, the definition of “losing someone on the team” became expanded to being more real than anyone could have ever imagined. Perhaps this “bond of humanity” created by the pandemic will extend the goodwill and familial relationships C-Suite executives have forged with their teams. Human resource departments should be proactive about transitioning employee engagement from “COVID-19 normal” to the post-pandemic world, which hopefully will arrive sooner rather than later.
Regardless of when the post-pandemic world arrives, it’s important for companies to consider their planned inorganic (M&A activity) this year. There has definitely been an increase in M&A deal activity during the pandemic and it seems to have become an integral part of companies’ overall growth strategies. Historically, inorganic growth during times of market disruption can be extraordinarily rewarding for future returns. With that said, its important that M&A strategies be well-considered and in-line with companies’ overall future growth strategies. History also has shown that “M&A for the sake of M&A” is rarely a good idea. Medtech organizations that decide to pursue deals in 2021 should expect valuations to be on par with 2019, though companies in financial distress will likely garner significantly less value. Since most medtech companies are in reasonably good financial shape, they must create a winning tactical execution plan for any M&A action to ensure they are truly creating long-term value. Once completing the acquisition, the management disciplines previously outlined in this column will help companies integrate their new addition’s culture and corporate structure.
Whether companies continue their growth in 2021 organically or inorganically, there will be challenges to overcome—financially, statutorily, and administratively. But the rewards will surely be well worth the effort.
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 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 focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.
