Medtech companies are facing a challenging landscape, where achieving profitable growth requires a bold transformation of their operating models. As the sector faces increasing pressure to drive value creation while overcoming operational inefficiencies, companies are evolving their strategies to adapt. By redefining their approach to growth and operational excellence, medtech leaders are unlocking new opportunities and driving performance in the face of industry challenges.
Current Challenges Facing the Medtech Sector
In recent years, the medtech industry has encountered several obstacles that hinder its ability to deliver sustained growth and profitability. Despite initial gains, the sector has seen slowed growth and a decline in margins.
Growth and Margin Struggles
Revenue growth has slowed across the medtech landscape, with industry margins shrinking. This trend reflects an underlying challenge for many companies, with labor and raw material costs rising, along with a slower growth trajectory that squeezes profitability. Only a select group of medtech companies—those in the top quartile are achieving above-average growth and profitability, while others face a significant margin gap.
Innovation Slowing Down
The pace of innovation has also slowed, partly due to rising research and development (R&D) costs and the growing complexity of clinical evidence requirements. With the increased difficulty in identifying breakthrough innovations, companies are seeing the rise of new competitors, particularly from emerging markets such as China and India.
Supply Chain and Global Market Challenges
The pandemic’s legacy continues to affect the medtech sector, particularly in areas like supply chain disruptions and labor shortages. Raw material costs remain volatile, and production delays continue to impact the industry. Additionally, navigating complex global markets requires agile strategies, particularly with evolving regulatory landscapes and considerations surrounding infrastructure investment in nearshoring and localization.
Why Medtech Needs a Bold Transformation
To address these complex challenges and create sustainable value, medtech companies must adopt bold transformation strategies. The industry requires new operating models that can drive efficiencies across functions, accelerate innovation, and improve margins.
Complexity Across Functions
Value creation in the medtech sector often involves interconnected functions. For instance, improving manufacturing efficiency requires alignment between product portfolio management, R&D, supply chain optimization, and commercial functions. However, without effective cross-functional collaboration, these initiatives may struggle to deliver meaningful and lasting improvements.
Capturing Efficiencies
While many companies have undertaken one-off cost reduction measures, they have not fully unlocked the potential for long-term efficiency gains. The complexity of operational models and decision-making silos often hampers the realization of full value. A more comprehensive approach, which includes optimizing portfolios, simplifying network design, and reallocating resources strategically, is essential to drive sustained growth.
Siloed Operating Models
Traditional operating models in medtech are often siloed, with different functions managing their respective areas without sufficient coordination. This structure can hinder speed and decision-making. To overcome this, successful transformations involve breaking down these silos, streamlining processes, and establishing clear accountability across the organization. Companies that reintegrate supply chain, R&D, and business units often see improvements in agility and performance.
How Medtech Companies Can Transform for Success
Transformations in the medtech sector begins with a clear vision from top leadership, focusing on the company’s unique challenges and goals. This vision should center on driving sustainable growth while tackling the primary obstacles that stand in the way of margin expansion. The transformation framework must involve cross-functional collaboration to ensure alignment and manage dependencies across the business.
Targeted Transformation Objectives
Successful transformations typically have one or two primary objectives that address specific challenges for end-market customers, resulting in significant shareholder value. These objectives should guide the transformation framework, which includes activities designed to resolve interdependencies across functions.
A Cross-Functional Approach
Medtech transformations require collaboration across all functions—commercial, R&D, supply chain, and manufacturing. This approach enables companies to execute strategic initiatives and unlock efficiencies across the entire value chain, ensuring that all aspects of the business are aligned to drive growth.
Transform Your Medtech Company with BioBoston Consulting
In an era where speed, innovation, and efficiency are critical, medtech companies need a partner who can guide them through successful transformations. BioBoston Consulting offers expert advisory services to help you navigate the complex landscape of the medtech sector. We specialize in designing and executing bold transformation strategies that unlock sustainable growth, improve operational efficiency, and drive profitability.
Contact BioBoston Consulting today to discover how we can help you achieve your transformation goals and create lasting value for your business. Together, we can shape the future of medtech.
At BioBoston Consulting, we understand the unique challenges medtech companies face. Let us help you turn challenges into opportunities.