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The Game Has Changed

Posted by Brian Chapman on April 21, 2017



shutterstock_262762730.jpgPete Masloski co-wrote this blog post with Brian Chapman.

This post originally appeared on Medical Device & Diagnostic Industry’s blog, DeviceTalk.

The 1980s were a time of great innovation for the medical technology industry. In vitro diagnostics were exploding with amazingly relevant diagnostic tests coming out every month. Self-monitored blood glucose meters came out and changed how diabetics managed their diseases. Implantable cardioverter defibrillators dramatically reduced the risk of death from ventricular fibrillation. Angioplasty, pulse oximetry, mainstream use of laparoscopic procedures—the list of product innovation is staggering.

In those days, sales and marketing were really straightforward: A product was invented, approved and reimbursed. The key task of marketing was to set a price, create some nice communications material and focus on getting the word out. Salespeople got to focus on educating eager surgeons on the latest products and procedures. Companies sold products—based on their features and benefits—to clinicians who used them, one patient type at a time. Hospitals rushed to offer the latest innovation to their patients.

But a lot has changed for the industry since then. In 2017, a variety of older products that are less exciting still need to be maintained, and many incremental innovations have been launched as line extensions. The hospital faces choices that look like the bewildering options offered in the toothpaste aisle of the grocery store. Sales reps struggle to keep up with all of the things for which they are responsible. They are splintered in focus across these products and are challenged to communicate a value proposition beyond features and benefits. Hospitals have erected walls to slow down what they perceive to be needless innovation with increased price.

Hospitals have become sophisticated buying entities with strong organizational and managerial talent. They’ve consolidated and formed integrated networks that push the standard of care, negotiate with payers and may engage with patients before they come to the hospital, as well as assisting in their convalescence after their intervention. The environment has become tremendously complex.

Looking at the priorities of hospitals also shows a big shift: Perform better on quality metrics, minimize cost, increase throughput, reduce length of stay. There are way too many products on the shelves, offering way too much choice. Hospitals want to hear about how to achieve these objectives and are open to new services and partnership models: Train staff, reduce infections, mobilize patients, eliminate never-events, manage assets, etc. Hospitals still have walls, patients, nurses and doctors, but much has changed since the ′80s.  

Medtech companies have started to respond, but many have struggled to make transformative change. Marketing is often still organized around products. Products are still sold mostly on clinical features. Sales teams still frequently sell product features to surgeons one at a time.


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We see companies that are trying go beyond this model, but often it’s difficult because the organizational structure supports an insular product focus with few integrative roles looking at the value created across products, or brought on by offering additional services. The Medtronic/UnitedHealthcare insulin pump deal is a notable exception, with a strong outcomes-based element to what has been promised, interestingly, to the payers instead of the hospital. But this innovation in how the offering is priced, including outcomes-based contracting, risk sharing or capitation, is still rare. We do see interesting innovations in packaging and in pricing full procedures, but so often the products still stand alone.

Many sales teams still have a “one-size-fits-all” model even when there’s market heterogeneity because the complexity of developing a more flexible model seems daunting. Key account positions are growing in size as integrated delivery networks become larger and more powerful, but they struggle to move beyond constructing rebating deals to value-based discussions. Some companies make big bets on the capability, but they still desire to improve in skill and sophistication, as well as the empowerment to act independently.

Innovation and flexibility are coming, but it’s taking time to adapt the old commercial models to a new way of approaching regional heterogeneity. Incentive structures are often fairly rigid and may not empower collaboration across businesses and between roles. The data environment is changing dramatically, and many medtech companies struggle to manage all of this new data and use sophisticated analytics to drive their business. The ability to administer complex contracts is challenging for many commercial operations teams today. 

Here we are in 2017, and despite some good steps forward, medtech’s commercial model hasn’t changed dramatically from that of the ′80s. But the needs of 2017 are very different. The new environment requires value propositions that are oriented around the needs of the hospital. The sales force of the future needs to focus on selling outcomes, not products that are priced based on the achievement of those outcomes. Our focus should continue to shift toward B-to-B relationships that go across the entire medtech company and offer an approach that reduces the cost of doing business, creating partnerships of meaningful value. Additionally, the focus should continue to evolve toward larger buying entities that are making the decisions today, and the selling model should flex to the local environments. Ultimately, commercial operations will need to continue to evolve to be broader in scope, with substantial improvement in capability that’s designed to be in step with the needs of the commercial organization.

We all recognize the overall need for change but often struggle on the daily hamster wheel of meeting quarterly numbers to make the required investments. Transformations are hard and require significant investment and time to overcome organizational inertia and move the needle, but it’s worth it because, ultimately, getting our commercial model out of the ′80s will pay significant dividends for years to come.

 

Topics: sales, marketing, medtech, Brian Chapman, 80s selling model, Pete Masloski, commercial strategy, value proposition, features, benefits

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AUTHORS
Brian_Chapman_thumbnail
Brian Chapman
Principal,
ZS Associates
Tobi_Laczkowski_thumbnail
Tobi Laczkowski
Principal,
ZS Associates
Will_Randall_thumbnail
Will Randall
Manager,
ZS Associates
Matt-Scheitlin-London_thumbnail
Matt Scheitlin
Associate Principal,
ZS Associates
Andy-kach_thumbnail
Andy Kach
Associate Principal,
ZS Associates
Bhargav_Mantha_thumbnail
Bhargav Mantha
Associate Principal,
ZS Associates
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