Some key trends are sweeping the medtech industry, forcing it to undergo a fundamental shift in its commercial model. The U.S. healthcare system is becoming more consolidated. Medtech also is moving to a value-based care model with a focus on outcomes, and its purchasing practices are becoming more sophisticated in an attempt to drive down price and reduce the number of suppliers. All of this puts pressure on medtech companies to ensure that they will survive (and thrive) amid these changes.
The commercial operations function—with an aim of not just being “sales operations”—can enable this transformation by evolving from an execution-focused function merely supporting the sales organization to a true business partner enabling the commercial teams take these challenges head-on.
In order to address these challenges and stay relevant, the commercial operations function must first determine how mature it is as an organization and should continually strive to grow in capabilities to prevent itself from being marginalized. By doing so, the commercial operations team is able to drive significant sales productivity gains and reduce operational costs, and thus contribute significantly to top-line and bottom-line revenues.
Strong commercial operations groups that are truly driving growth possess five key traits:
- They have a well-defined strategy and vision. A high-performing commercial operations team has a strategy and vision for the organization that’s well-aligned with the company’s commercial strategy and priorities, and then converts those priorities into KPIs to determine how well they are performing against these objectives. The function is headed by a strong leader who not only has the operational chops to be the “COO” of the commercial organization, but also is a strategic thinker who aspires to earn a seat at the executive table by running commercial operations as a profit center. The group’s guiding principles center on a learning mindset: being current on domain, analytical and technology expertise; possessing an agile and consultative culture that challenges the status quo of the commercial team; and focusing on continuous, process-driven improvement. More importantly, they are driven by the vision to unburden the sales force from administrative tasks and reduce any non-selling time, thus accelerating the sales process and improving customer experience.
- They are data- and analytics-driven. Leading commercial operations organizations invest far more than the laggards in the right data sources and in building a strong analytics foundation. They believe that analytics is a key value driver in both top-line and bottom-line growth, and they firmly believe in garnering a high ROI from analytics. They harness advanced analytics and act as an insights hub for the commercial teams, leading to better decision-making, improved targeting and more meaningful customer engagement. They leverage analytical models to drive better contract design and identify ways to stem revenue leakage. They understand that analytics goes beyond just reporting and that there’s a value chain associated with driving value from analytics—from data to analysis to insights to decisions—and invest in strengthening the linkages to ensure that value is being delivered at each stage of the chain (most importantly at the decisions stage).
- They continually improve commercial processes. Strong commercial operations teams fully comprehend various commercial processes—be it forecasting, territory and quota management, account planning or sales compensation administration—and the interdependency between them. They also are aware that these processes can’t be designed or executed in a disconnected fashion. As a result, they work with the commercial teams to design, plan and execute processes in a more integrated manner. They strive to standardize, automate and, where possible, outsource the processes leading to significant optimization, accuracy and cost reduction. They invest in several process improvement and streamlining initiatives throughout the year to identify areas of inefficiency. They build a business case for improvement, and they work with commercial leadership to implement the improvements and ensure that they have a positive impact on sales productivity and morale.
- They invest in hiring and nurturing the right talent. High-performing commercial operations leaders are fully aware of the role that talent plays in making commercial operations a trust advisor and a change agent. They hire the right mix of domain experts, business analysts and technologists, and provide them with a clear path to grow in their roles. Instead of letting their teams slog and get burnt out supporting the sales teams, leading organizations equip their teams with the training, analytical tools and technology required to do their jobs effectively and efficiently. Entry-level members may start with working on report building or programming, but over time, they graduate to solving more complex business problems and working on more strategic issues, while the routine work is either automated or outsourced. Leading companies also encourage role rotation between headquarters and the field to foster collaboration, empathy and innovation across the commercial organization.
- They make purposeful investments in technology. There’s no doubt that technology is needed for commercial operations to be successful in driving growth, as it makes both commercial operations and the sales force more effective, thereby improving productivity and business growth. However, the technology investments—be it in a CRM application, a business intelligence tool or a contract management solution—should be purposeful and anchored around some guiding principles of improving effectiveness. We’ve seen that leading commercial operations organizations ask some hard, probing questions before they invest in a technology. Can this technology improve sales rep productivity by 15%? Can it drive more meaningful customer engagement? Can it help identify new revenue generation opportunities? What should the change management plan be so that the field teams adopt this technology?
ARTICLE: From Cost Center to Profit Center
The leaders work with their commercial counterparts to develop a strong business case for technology, gain executive buy-in, lay down the vision, build a change management strategy and set clear expectations that technology alone can’t drive change. It has to be ably supported by the four other traits in order to be successfully adopted.
In our experience, commercial organizations that have a strong charter for their commercial operations function have seen a 5 to 8% revenue improvement and 10 to 15% reduction in commercial costs. There are exciting times for the industry ahead to reinvent the commercial model, and commercial operations has a critical role to play in this transformation.