Tagged: financialization

  • GE HealthCare, Siemens Healthineers, and Philips Healthcare entered the Chinese market in the 1980s and prospered
  • The once-booming era for Western MedTechs in China has slowed and become challenging
  • Latecomers to the Chinese MedTech market face geopolitical uncertainty, changing market dynamics, domestic competition, stringent regulations, IP risks, and healthcare reforms
  • Due to these obstacles and the Chinese’s economy slowing MedTechs are seeking international growth opportunities beyond China and Asia
  • Africa is emerging as the new frontier driven by its burgeoning population, growing middleclass, economic growth, abundant natural resources, and Beijing’s investement
  • MedTech pioneers in China, such as GE HealthCare, Siemens Healthineers, and Philips Healthcare, are early entrants in the African market
  • Prudential plc, an insurance giant, has made a vast strategic bet on Africa’s growth potential
  • Given insurers are healthcare payers, should MedTechs view Africa as the new Asia?
Is Africa the New Asia for Western MedTechs?


In the realm of international expansion for Western MedTech companies, Asia, particularly China, has historically been a key focus due to its vast size and rapid economic growth. However, the shifting global economic and geopolitical landscape suggests a re-evaluation. Is Africa positioned to emerge as the next hub of opportunity and growth for MedTech enterprises? China's remarkable economic ascent, initiated by reforms in 1978, accelerated it to the status of the world's second-largest economy, following the US. Western MedTechs that ventured into China's market in the 1980s prospered. Yet, those who hesitated due to concerns, including intellectual property (IP) theft, now face mounting challenges, which include geopolitical uncertainties, evolving Chinese attitudes towards Western corporations, a limited understanding of the Chinese market, and China's ambition to lead global technology by 2030. The recent deceleration in China's economic growth adds to the apprehensions of Western businesses. Moreover, China's rapid economic expansion has led to an aging population, characterized by declining birth rates, and increased life expectancy. By 2040, those aged ≥60 are projected to reach ~402m, constituting ~28% of the nation’s population. This demographic shift, with a shrinking workforce and a rising number of elderly consumers, is expected to exert downward pressure on China’s GDP growth, while straining public budgets with escalating healthcare and retirement costs. Given this evolving landscape, it becomes prudent to explore whether the once-promising prospects for Western companies in China and Asia are diminishing, prompting an examination of alternative international markets. While established MedTech players in China continue to provide essential healthcare products and services, they may benefit from contemplating strategic adjustments and, in many cases, restructuring their commercial operations to adapt to the changing dynamics of the Chinese market. Notably, some companies view Africa as a promising new frontier. Early entrants into the Asian medical device market, such as GE HealthCare, Siemens Healthineers, and Philips Healthcare, have already established footholds in Africa. Could Africa be on the verge of becoming the new frontier, reminiscent of what Asia once represented?
In this Commentary

This Commentary is divided into two sections. In Section 1, we briefly mention the early successes of prominent MedTech companies in the Chinese market during the 1980s. The section also notes that because geopolitical tensions between Beijing and Washington have increased, and recently China's economic growth has slowed, some Western MedTechs are seeking alternative growth regions to expand their international presence and reinvigorate their stagnant market values. Section 2 challenges popular perceptions by proposing that Africa could emerge as the new frontier for the MedTech industry. Despite Africa's enduring challenges, including political instability, corruption, poverty, and limited literacy, it seems to have potential. Albeit from a low start, Africa is projected to be the world's fastest-growing region in 2023, characterized by a youthful population, abundant natural resources crucial for renewable technologies, and an emerging middleclass. Decades ago, Beijing recognized Africa's potential, and more recently, a group of MedTechs, including early entrants to China, have established a presence in the African market. The section concludes by noting the strategic entry of a giant insurance company into the continent. Given the role insurers play in healthcare expansion and the demand for medical technology this maybe a positive omen for the MedTech industry, with Africa as its new frontier.

Part 1
MedTech pioneers in China

In the 1980s, as China underwent transformative economic reforms under President Deng Xiaoping, several Western MedTechs, including GE HealthCare, Siemens Healthineers, and Philips Healthcare, entered China, and capitalized on the nation's economic growth and modernization over the ensuing decades. GE HealthCare, equipped with medical imaging devices and healthcare solutions, forged relationships with Chinese hospitals and research institutions. Siemens Healthineers, a leader in imaging and laboratory diagnostics, followed suit in the late 1980s, emphasizing local R&D and strategic partnerships with Chinese healthcare providers. Philips Healthcare, with its diverse range of patient monitoring systems and diagnostic imaging equipment, also made its mark.

These companies showed their ability to adapt and succeed by adjusting their products to fit the needs of local customers and by encouraging new ideas through partnerships. Initially, they embraced expansion-type business models with multiply marketing and sales tiers, which emphasized rapid growth over stringent financial discipline. The plan worked well because China's medical technology sector was thriving, and experienced annual growth rates of ~10 to ~15% during the first two decades of the 21st century. However, since then, things have changed. Now, the focus is on making operations smoother and more efficient, which has meant reducing the number of marketing and sales layers between enterprises and their principal customers.
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Recent Western MedTech entrants, attracted by the vast Chinese market, faced heightened scrutiny and regulatory obstacles. Their limited knowledge of local markets and different administrations hindered their growth, which was compounded by concerns about safeguarding their IP. Meanwhile, Chinese MedTech firms rapidly advanced, increasing competition for Western latecomers. As of December 2022, the number of Chinese medical device companies amounted to 32,632. The once-lucrative "gold rush" in China for Western MedTechs has faded due to shifting sentiments, regulatory hurdles, and local competition. As China pursues global technological leadership by 2030, Western firms are likely to encounter mounting challenges. To sustain international expansion, they should consider exploring alternative global markets where they can leverage their expertise and resources more effectively. This suggests a turning point, highlighting the need for strategic diversification and adaptation to evolving global dynamics in the MedTech industry.
Headwinds for MedTechs expanding in China

Here we describe some of the headwinds facing Western MedTechs attempting to increase their footprints in the Chinese market.

Geopolitical Uncertainty
Ongoing geopolitical tensions, such the political status of Taiwan, which Beijing claims is a province of the People's Republic of China, whereas Taiwan’s current Tsai Ing-wen administration maintains it is an independent country, and South China Sea disputes, which involve conflicting island and maritime claims by China, Taiwan, Brunei, Malaysia, the Philippines, and Vietnam. These and other geopolitical uncertainties pose risks, particularly for late entrants to the Chinese market. However, despite these tensions, US-China trade remains strong, but doing business in China has become increasingly challenging.

Changed Market Dynamics
China's healthcare landscape has evolved driven by the largest middleclass cohort in the world. Beijing has increased healthcare spending, which has intensified competition in the MedTech sector. Trade conflicts between the US and China add complexity to market dynamics. Relationships between the two countries deteriorated in January 2018, when American President Donald Trump began setting tariffs and other trade barriers on China. The objective was to force Beijing to make changes to what the US says are longstanding unfair trade practices and IP theft. A recent example of such tensions occurred in September 2023, during a visit to China by US Secretary of Commerce Gina Raimondo, who oversees regulating technology. The Chinese tech giant Huawei chose this time to release its new smartphone, powered by an advanced chip. This shocked American industry experts who could not understand how Huawei could have obtained such an advanced chip following efforts by the US to restrict China’s access to foreign chip technology.

Domestic Competition
Chinese MedTech companies (>32,000) have rapidly gained market share, technical sophistication, and innovation capacity. They understand local customer needs and regulations better, posing increasing competition for Western counterparts. In 2021, China’s 134 listed MedTech companies generated US$44bn in revenues, a compound annual growth rate (CAGR) of 36% since 2019, ~3X the market’s overall rate of growth. More than five Chinese MedTechs have obtained the US Food and Drug Administration’s (FDA) breakthrough designation, with innovations like the VenusP-Valve, which has already been approved in >30 countries, and in April 2022, secured EU’s CE marking under its Medical Devices Regulation (MDR). This suggests that Western corporations will not only encounter heightened domestic competition but are likely to face increasing competition from Chinese MedTechs in the global arena.

Regulatory challenges
Regulatory hurdles in China pose challenges for Western MedTechs. Adherence to regulations, standards, and compliance measures, often different from Western counterparts, necessitates an in-depth understanding and adaptation. Central to China's regulatory framework is the National Medical Products Administration (NMPA), which is akin to the FDA. It prioritizes safety, efficacy, and quality in evaluating medical device registrations for market entry. While global acceptance of real-world evidence (RWE) in healthcare is rising, China is in the early stages of embracing the concept. Notably, a 2020 NMPA draft guideline hinted at the potential utilization of RWE from Boao Lecheng. Situated in Hainan, an island province in the nation’s southernmost point, Boao Lecheng has become a medical innovation hub, focusing on technology, high-quality healthcare, and medical tourism. It actively promotes advanced clinical research, housing globally recognized medical institutions like the Raffles Medical Group and Brigham and Women’s Hospital (BWH). The collaboration between Western MedTechs and initiatives like Boao Lecheng holds promise in tackling China's regulatory complexities.

Intellectual property (IP) risks
Protecting IP is a concern for Western MedTechs in China. Enforcing IP rights can be challenging due to factors like judicial protectionism, evidence gathering obstacles, modest damage awards, and perceived foreign bias. China follows a "first-to-file" principle for IP registration, granting ownership to the first registrant. Foreign companies also face pressure from government and state-owned enterprises to transfer technology for market access, investment opportunities, or approvals. Some are compelled to license technology at below-market rates. Despite China's efforts to enhance IP protection, concerns persist. Corporations need to balance IP protection with local engagement and government cooperation to navigate China's complex IP landscape effectively.

Healthcare reforms
China's healthcare system has undergone a significant transformation driven by various factors, including increasing incomes, heightened health awareness among its citizens, and a rapidly aging demographic. The government has placed substantial emphasis on healthcare, as evidenced by its ambitious goals outlined in the Healthy China 2030 plan. This plan envisions the nation's healthcare market reaching a value of ~RMB16trn (~US$2.4trn) by 2030. China's dedication to enhancing healthcare is underscored by the establishment of a comprehensive health insurance system that now provides coverage to ~96% of the population, benefiting >1.36bn individuals. According to a 2023 McKinsey Report, China's MedTech sector, which was valued at ~US$70bn in 2021, is poised to potentially double in size by 2030. Such growth would elevate China's MedTech market share to ~20% of the global market. To thrive in this burgeoning market, enterprises must be agile in adapting to changes, forge strategic partnerships, and effectively navigate the evolving healthcare landscape.

Navigating China’s Diversity
Succeeding in the Chinese market hinges on effective communication and a deep understanding of Chinese culture. China's administrative divisions include 23 provinces, five autonomous regions (Inner Mongolia, Guangxi, Tibet, Ningxia, and Xinjiang), four municipalities (Beijing, Tianjin, Shanghai, and Chongqing), and two Special Administrative Regions (Hong Kong and Macao). Furthermore, China boasts 129 dialects, with Mandarin as the standard and Chaoshan as predominant in the Guangdong region. Given this diversity, Western MedTech companies often grapple with cultural and linguistic barriers. Establishing vital connections within China's intricate administrative and business landscape can prove challenging. Therefore, crafting effective market entry and expansion strategies is imperative. Chinese consumers have preferences and expectations when it comes to medical technology. Western companies must be ready to adapt their offerings to align with these preferences, a critical factor in gaining market acceptance. Failing to do so can hinder market penetration and long-term success.
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China’s rising MedTech industry and the dilemma facing Western companies
Data Privacy and Security Concerns
Data privacy and security are concerns in China. Entrants must navigate stringent data protection regulations, which may differ significantly from Western standards. Building trust with healthcare providers and patients is essential to address these concerns. Failure to do so can lead to regulatory issues, damage brand reputation, and erode customer trust.
Reassessing global strategies amid China's economic slowdown

China, as the world's second-largest economy, has been a pivotal market for major Western MedTech companies. However, the current economic climate calls for a strategic re-evaluation. China's economy has recently experienced a slowdown, with repercussions felt not only in neighbouring nations but also globally. South Korea, a historical driver of global growth, faces its longest factory activity decline in nearly two decades. Other major Asian exporters are also dealing with sluggish demand, and Japan's manufacturing activity has declined, with Taiwan reporting contracting output and weakened foreign demand. In September 2023, concerns grew as China experienced deflation, raising questions about currency stability, challenges in the property sector, and high local government debt. China's decision to not stimulate its economy further exacerbated the situation, impacting key financial hubs like Hong Kong and Singapore, as well as satellite economies. This economic slowdown in China is expected to persist and likely have far-reaching global consequences. Businesses worldwide, including those in the US and Europe, heavily reliant on China for growth, should explore alternative regions for sustainable value and expansion. Western MedTech companies need to carefully assess the challenges and costs associated with further expansion in China.

An alternative strategy emerges; companies should consider complementing their Asian focus and explore the growing economies of Africa. Just as early MedTech pioneers capitalized on Asia's rapid expansion, companies today should contemplate laying the groundwork for a fresh international strategy in Africa. The continent has potential, and a proactive approach could yield sustainable growth opportunities, helping to mitigate the impact of China's economic challenges and slowdown on global ambitions.

Part 2
Africa's Ascendance

With a few notable exceptions, Western MedTech executives tend to overlook Africa due to its challenging socio-economic conditions, which include political instability, corruption, extreme poverty affecting ~50% of the population, limited access to necessities, and a high illiteracy rate of ~40%. Notwithstanding, China has long recognized Africa's potential, which mainly revolves around Africa's abundant natural resources, which constitute ~30% of the world's mineral reserves, including critical resources for renewable and low-carbon technologies. For instance, Zambia leads in unrefined copper exports, Guinea boasts the world's largest bauxite reserves, and South Africa contributes ~90% of the world’s platinum group metal reserves. Furthermore, Africa has the world's youngest population, with substantial projected growth.
Asia plays a pivotal role in Africa's trade dynamics, accounting for >42% of its exports and >45% of its imports, surpassing Europe in both cases. According to a 2023, Business Insider Report, Africa is poised to become the world's fastest-growing region, with six of the ten fastest-growing economies located on the continent, albeit starting from a relatively low economic base. In addition to its mineral wealth, the continent's path to economic success is partly based on developing an export-led manufacturing economy, akin to China's transformation in the 1980s. This, already in progress, has the potential to lift >0.5bn people out of poverty, create >100m jobs, and establish a substantial and rapidly growing middleclass that will demand improved services, including healthcare.
Currently, Africa's manufacturing sector contributes only ~9% to the continent's gross domestic product (GDP) and ~2% to global manufacturing output. However, the African Union has placed manufacturing at the forefront of its Agenda 2063, a strategic framework supported by all 55 African countries, aimed at achieving socio-economic transformation over the next 50 years. This commitment gains significance amid escalating trade tensions between the US and China, which have global economic implications. Africa has weathered recent shocks, including weakened external demand, global inflation, higher borrowing costs, and adverse weather events, which have hindered its post-pandemic recovery. Nonetheless, in the coming decades, the "Made in Africa" label may come to symbolize quality products, solidifying the continent's position as a prominent player in global manufacturing, akin to how "Made in China" became synonymous with quality two decades ago.
China’s impact on African manufacturing

China has been instrumental in the economic transformation of African nations, which partly stems from the Chinese strategy to relocate its low-level manufacturing operations to Africa. As China's domestic manufacturers have advanced technically, they have systematically shifted their basic manufacturing capabilities to African countries. This provides Africa with an opportunity to mirror China's journey from standard manufacturing to advanced production processes over several decades.
Chinese companies have made substantial investments in labour-intensive manufacturing facilities notably in Ethiopia. This has created jobs and fueled the growth of local manufacturing sectors. For instance, the Huajian Group, a leading Chinese footwear manufacturer, established plants in Ethiopia in 2012, employing >7,000 people and producing ~5m shoes annually. The Group’s partner in this project is the China-Africa Development Fund (CADFund), a private equity facility promoting Chinese investment in the continent. Huajian also invested in Ethiopia's Jimma industrial park, contributing US$100m to build shoe and coffee processing plants and a technical education centre.
As Chinese enterprises expanded in Africa, they provided training to local workforces, and transferred their manufacturing expertise. This collaborative effort is helping to develop a skilled labour pool important for sustaining manufacturing growth. Notably, Ethiopia's Eastern Industrial Zone, supported by Chinese investment, evolved into a thriving manufacturing hub, attracting both domestic and foreign investors. Additionally, Beijing's Belt and Road Initiative has led to significant infrastructure developments across Africa, including roads and ports, which further stimulate the continent's manufacturing sector. China’s investment in Africa stands out due to its tangible presence, in contrast to other nations whose involvement in the continent is characterized by distant and arms-length financial engagements. With the influx of such investments, technology transfers, and ongoing skill development, some African nations are positioned to follow China's path towards a manufacturing transformation. 
MedTech’s early entrants to the African market

For years, support for Africa’s healthcare tended to concentrate on education and malaria nets. In recent years however, as developed-world disorders, like cancer and heart disease, grew in Africa so medical technology companies increasingly found a market in supplying devices to private healthcare operators and investing in healthcare initiatives through partnerships with governments. US President George W. Bush recognised Africa’s strategic importance, emphasising investments for development and health initiatives, including the President’s Emergency Plan for AIDS Relief (PEPFAR), which, announced in 2003, reflected a commitment to fostering stability and wellbeing on the continent. Since then, American governments have not shown much interest in Africa. However, the MedTechs that entered the Chinese market ~4 decades ago and prospered, have established footprints in the African market by adapting their products and services to local needs, building partnerships with local healthcare providers, and addressing challenges such as infrastructure limitations and affordability. Their presence caters to Africa’s large and growing middleclass and has contributed to the improvement of healthcare standards in the region.
Philips Healthcare has made inroads into the African market and operates in several African countries, including South Africa, Kenya, and Nigeria. One of the advantages they offer is a wide range of medical devices and equipment tailored to different healthcare settings, from high-end hospitals to remote clinics. Their focus on technology that can operate efficiently even in areas with unreliable power grids has been instrumental in their success. GE HealthCare has a presence in countries like South Africa, Nigeria, and Egypt. Their commercial advantage is in their commitment to providing innovative medical technologies across various healthcare domains, from diagnostic imaging to healthcare IT solutions. The company collaborates with local healthcare providers and governments to build sustainable healthcare infrastructures. Siemens Healthineers is active in South Africa, Kenya, and Ghana. The company’s advantage stems from their portfolio of medical equipment, laboratory diagnostics, and digital health solutions. They often tailor their offerings to meet the specific needs and budgets of healthcare providers in Africa, contributing to improved patient care and diagnostic accuracy.
Unveiling MedTech opportunities: the impact of insurers

Large insurance firms wield significant influence in shaping the trajectory of the medical technology industry. They play a pivotal role in extending health insurance coverage to middle-class populations worldwide, not only bolstering healthcare systems but also driving the demand for medical technology. In essence, these insurance giants act as catalysts for the MedTech industry's growth.
A case in point is Prudential plc., a global insurance powerhouse with >23,000 employees and 2021 annual revenues of >US$70bn. The company holds dual listings on the London and Hong Kong Stock Exchanges and is a constituent of the FTSE 100 Index. It also maintains secondary listings on the New York Stock Exchange and the Singapore Exchange. In February 2023, shortly after Anil Wadhwani assumed the role of Prudential's new CEO, he publicly declared his intent to chart a new course and focus on Africa for growth. Wadhwani highlighted that the growth drivers in Africa today closely resemble the trends previously witnessed by the company in Asia: rapidly expanding middle-class populations with a growing appetite for insurance and enhanced services, including healthcare. He emphasized that Africa would complement Prudential's expanding Asian presence. IMF's 2023 reports indicate that countries such as South Africa, Ghana, Kenya, Ethiopia, Côte d'Ivoire, and Rwanda are prime candidates for substantial future growth. It is increasingly plausible that Africa could emerge as the next frontier for MedTech companies, thanks to the leadership of individuals like Anil Wadhwani, who steer insurance giants toward new horizons.

In recent years, Western MedTechs have witnessed a significant transformation in China's healthcare landscape, driven by changing demographics and an increased emphasis on technological self-reliance. Notably, industry giants such as GE HealthCare, Siemens Healthineers, and Philips Healthcare, which established a presence in China during the 1980s, are now extending their reach into Africa with hopes of replicating their prior successes. While some may view this expansion as unconventional due to factors like political instability, corruption, and poverty, the continent has potential. Africa's attraction for MedTechs includes some of its countries with significant economic growth potential, a burgeoning youthful population, a growing middleclass, and abundant natural resources that align with the evolving demands of a rapidly expanding global green economy. Much like the historical pattern of MedTech companies venturing into Asia, a similar trend is emerging in Africa among a select group of firms. Another critical point to consider is the emerging role of insurance companies as potential guides in this new journey. These insurers are participating in the continent’s healthcare expansion and innovation, and where they lead, MedTech companies should consider following. The growing middleclass, equipped with medical insurance, will eventually exert pressure on healthcare systems in the region to enhance access to quality care. This, in turn, will expand the market for medical devices. Despite the complexities and contradictions that Africa presents, it represents an opportunity that warrants consideration. The question of whether Africa will become the new Asia suggests the need for MedTechs to embrace a new era where innovation and progress thrive on the courage to venture beyond the familiar. By doing so, corporations can discover a promising landscape for growth and innovation, tapping into Africa’s underserved opportunities and playing a role in enhancing global healthcare.
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  • MedTechs have experienced significant transformation through mergers and acquisition (M&A) to achieve steady growth, diverting resources from innovative research and development (R&D) initiatives
  • The industry’s M&A activities were fueled by a prolonged period of low interest rates and easy access to capital
  • Consequently, R&D efforts focussed on incremental improvements rather than breakthrough innovations
  • This financial-centric business model led to risk-averse bureaucracies among many MedTechs, resulting in a strategic deadlock with limited growth prospects
  • Adding to the challenges, the current era witness’s debt and asset prices surpassing productivity and economic output
  • For many MedTechs, these macro-economic conditions potentially pose funding constraints, reduced market demand, tightening regulatory challenges, cost pressures, and market volatility, further hindering their ability to overcome the deadlock
  • To address these issues and help MedTechs break free from their strategic deadlocks and create long-term value we propose seven strategic initiatives
The Financialization Dilemma of MedTechs
In the 1990s and 2000s, medical technology companies received praise for their rapid growth. However, they currently find themselves at a crucial juncture, facing challenges of low and stagnant growth rates. Additionally, an uncertain long-term outlook looms over them due to the expansion of global balance sheets surpassing GDP, as well as debt and asset prices outpacing productivity and economic output. This Commentary aims to shed light on how many MedTechs reached this strategic deadlock. It also proposes strategies that these companies can pursue to break free from this predicament, which have the potential to significantly enhance growth rates, improve balance sheet health, and foster value creation.
An era of low interest rates and cheap capital

The financialization of MedTechs has played a significant role in their current strategic deadlock, and the most viable solution lies in accelerating productivity. This financialization was facilitated by a prolonged period of low interest rates and easy access to inexpensive capital. Over the span of four decades, starting from the 1980s to the early 2020s, interest rates steadily declined across most industrialized nations. In the aftermath of the 2008-09 financial crisis, many countries adopted a low interest rate environment to stimulate economic recovery and restore liquidity in their banking systems. For example, the US Federal Reserve Board (Fed) lowered short-term interest rates from 4.25% in December 2007 to nearly zero by December 2008, registering the lowest rate in the Fed's history.
During the era of persistently low interest rates and readily available capital, MedTechs experienced a surge in merger and acquisition (M&A) activities, primarily targeting companies in near-adjacent sectors to capitalize on low-risk opportunities for incremental growth. This trend fostered a culture of consolidation, driven by the desire to access new technologies and broaden product portfolios. While M&A activities bolstered short-term profits and shareholder value, they often led to a neglect of research and development (R&D) initiatives. Acquisitions were perceived as a less risky and quicker avenues for expanding product lines, overshadowing investments in R&D. Consequently, many MedTechs adopted a risk-averse approach, channeling their R&D efforts towards incremental improvements of existing products rather than pursuing ground-breaking innovations that could significantly improve patient outcomes and disrupt the industry. Moreover, the increasingly stringent regulatory environment for medical devices, particularly in Europe, further discouraged companies from investing in R&D due to longer development timelines and escalated costs.
Over the years, these policies resulted in the consolidation of power and resources among a few large players, leading to the emergence of market oligopolies and the decline in industry diversity. This scenario posed challenges for smaller companies with innovative ideas, as they struggled to compete with established enterprises, thereby impeding both innovation and healthy competition. Moreover, established MedTechs benefited from the significant and rapidly growing healthcare demands in affluent Western markets, particularly North America and Europe, which account for ~65% of the global medical device market. In these markets, compensation was often tied to medical and surgical procedures rather than focussing on patient outcomes, further favouring the established industry players. While M&A can be an effective growth strategy, it is important for companies to strike a balance and prioritize innovation alongside their consolidation efforts to ensure sustainable success and drive meaningful advancements in the industry.
An era of surging prices and low productivity

We have now entered a distinct era that differs significantly from the previous era characterized by low interest rates, and easily accessible funds. Starting from March 2022, the Fed has implemented 10 consecutive rate hikes, bringing its benchmark rate to 5.25%. These increases, coupled with high leverage in the corporate sector, escalating geopolitical tensions and  instability in the banking world triggered by the Silicon Valley Bank (SVB) collapse in March 2023, compounds the challenges faced by MedTechs. Furthermore, global balance sheets have expanded at a much faster pace than Gross Domestic Product (GDP). Debt and asset prices have surged far more rapidly than productivity and economic output. This trend is underscored by a report published in May 2023 by the McKinsey Global Institute, which reveals that the past two decades have resulted in the creation of US$160trn in paper wealth but have been marked by sluggish growth and the rise of inequality. According to the report, every US$1 invested has generated US$1.9 in debt.
Strategic initiatives to adapt and thrive

When global balance sheets expand at a faster rate than GDP and debt and asset prices outpace productivity, it becomes a concerning sign for MedTechs who find themselves trapped in a strategic deadlock characterized by sluggish growth and a fading belief in long term value creation. Under these conditions, companies should expect to encounter funding limitations, decreased market demand, stricter regulatory obstacles, cost pressures, and increased market volatility. In such a testing business environment, it is important for MedTechs to adopt bold adaptive strategies and navigate wisely to ensure continuous growth and enhanced value. We suggest seven such initiatives that are likely to help MedTechs break free from their strategic cul-de-sacs. By implementing these with vigour, companies can position themselves for success in an ever-changing and demanding economic and geopolitical landscape.
1. Revamp R&D
In recent times, costs associated with MedTech R&D have escalated. A study published in the September 2022 edition of the Journal of the American Medical Association (JAMA), and carried out by the US government’s Office of Science and Technology Policy, found that the development cost for a complex therapeutic medical device, from proof of concept through post approval stages, is US$522m. Significantly, the nonclinical development stage accounted for 85% of this cost, whereas the US Food and Drug Administration (FDA) submission, review and approval stage comprised 0.5%.
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Re-imagining healthcare
Thus, MedTechs have the potential to optimize their R&D processes, enabling them to develop more swiftly and economically ground-breaking devices that result in enhanced patient outcomes and expanded market share. To achieve this, companies may consider the following strategies to improve their R&D processes: (i) Integrating artificial intelligence (AI), machine learning, and big data techniques into their R&D endeavours and harnessing the power of these advanced technologies. (ii) Collaborating with academic institutions and start-ups to gain access to novel innovations and expertise. This collaboration can involve joint development and co-creation of innovative offerings. To tap into a diverse pool of expertise and resources, companies should consider a platform-based approach to R&D, which potentially improves the capacity to drive breakthrough advancements that improve patient care. (iii) Implementing agile methodologies to accelerate the R&D process, which involves breaking projects into smaller, more manageable segments and swiftly iterating based on stakeholder feedback. (iv) Engaging patients in the design process to ensure that newly developed offerings cater specifically to their needs, ultimately enhancing patient satisfaction.
2. Emphasize patient-centric care
Enhancing patient-centric care to improve outcomes is a crucial factor in the future of healthcare provision. There is a growing body of evidence indicating that patient choices will have an increased influence on the provision of healthcare over the next decade. With patients having more options and autonomy, MedTechs can leverage patient-centric strategies to better understand and address their needs, ultimately leading to improved market share. To achieve this, companies must prioritize effective communication, product education, and support services to build stronger relationships with patients. This requires increased utilization of electronic health records, advanced AI, data analytics capabilities, active engagement with patient communities, leveraging social media platforms, establishing patient advisory boards, and forging partnerships with payers and providers.
Further, embracing value-based care models is important for MedTechs. By prioritizing positive patient outcomes over quantity, companies can contribute to the development of sustainable care. As global healthcare systems transition toward value-based care, MedTech companies should align their offerings accordingly. Emphasizing solutions that enhance patient outcomes, reduce healthcare costs, and provide overall value positions, MedTechs become indispensable partners in the evolving healthcare landscape. This also may involve developing outcome-based pricing models, implementing remote monitoring solutions, and demonstrating real-world evidence of product effectiveness.
3. Revitalize organizational and operating models
Revitalizing organizational and operating models is essential for MedTechs to boost their growth rates and adapt to a rapidly evolving market. While companies experienced significant growth in the past, recent trends have shown a shift towards risk-averse bureaucracies, accepting modest annual growth rates as the "new normal". To overcome this stagnation and meet evolving customer demands, traditional MedTechs should consider embracing agile and flexible structures.
By flattening hierarchies and fostering cross-functional teams, organizations can facilitate faster decision-making processes. Implementing lean manufacturing and optimizing operational processes can reduce waste, enhance productivity, accelerate time to market, and lower costs. Leveraging AI-driven data analytics enables the extraction of valuable insights from vast datasets, empowering MedTechs to anticipate customer needs and market trends.

4. Harness the power of digital, AI and big data
Digital transformation has become a necessity rather than a choice. Although companies like Stryker and Siemens have championed digitalization, widespread implementation still remains a challenge. Indeed, Siemens’ suggests digitalization is “something that is often talked about but not fully implemented”. Previous Commentaries have shown how MedTechs can employ digital technologies to improve products, streamline operations, enhance customer experiences, and reduce costs. Streamlining operations and optimizing costs without compromising quality is crucial in the face of escalating economic pressures. This may involve re-evaluating supply chains, improving manufacturing processes, and adopting digital solutions.
In today's rapidly evolving digital age, investing in digital and analytics capabilities has become indispensable for companies as they shape their R&D, hone their processes and shift to a customer-centric stance. The seamless integration of digital and AI-driven techniques, along with data-driven decision processes, has emerged as a crucial factor in maintaining and improving competitiveness. For MedTechs, it is imperative to cultivate a culture of innovation that encourages and rewards experimentation and risk-taking. By doing so, organizations create an environment where employees are empowered to explore ideas, learn from failures, and ultimately drive meaningful innovations.  Therefore, actively seeking external partnerships with technology companies, start-ups and academic institutions is a strategic move for MedTechs to access cutting-edge technologies and expertise in digital and analytics. By embracing these capabilities as core rather than adjunct components of their strategies, fostering an innovation-centric culture, and investing in talent development and retention, corporations position themselves optimally to leverage the transformative potential of digital and analytical technologies. This, in turn enables them to thrive in an increasingly interconnected and data-driven healthcare ecosystem.

5. Talent acquisition and retention
The rapidly changing landscape of globalization, the increasing influence of AI techniques, and the demands of a new generation of consumers seeking personalized experiences have compelled MedTechs to reassess their approach to talent acquisition and retention. To keep up with the pace of change, it is crucial for these companies to attract and retain highly skilled professionals with expertise in technology, healthcare, and business. A talented workforce plays a vital role in driving innovation, ensuring efficient and safe processes, navigating complex market dynamics, and effectively executing growth strategies. To achieve this, companies should invest in the development of their employees, foster a culture of innovation, and offer competitive compensation packages to attract and retain top performers.
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According to a study published by the Harvard Business Review in January 2020, retaining top talent has become increasingly challenging for employers. The study revealed that in 2018, 25% of employed Americans left their jobs, with approximately 33% of this turnover attributed to unsupportive management and a lack of development opportunities. MedTech companies are not exempt from this trend, and to acquire and retain talent, they must strategically revamp their value propositions to align with the evolving needs and expectations of the modern workforce.
A crucial step in this direction is fostering a purpose-driven culture that highlights the significant impact medical technology companies have on improving people's lives. By instilling a sense of purpose, employees are more likely to develop a strong connection to the company's mission, inspiring them to consistently deliver their best work. Furthermore, providing ample career development opportunities is essential in empowering employees to enhance their skills and progress in their professional journeys. This can be achieved through training programmes, mentoring initiatives, and leadership development schemes.
Recognizing the importance of work-life balance is also critical. MedTechs can prioritize flexible working hours, a 4-day week, remote work options, generous vacation policies, allowing employees to effectively balance their personal and professional lives. By creating a supportive environment that promotes overall well-being and job satisfaction, companies can foster employee loyalty.
Competitive compensation and benefit packages are essential. Additionally, a commitment to diversity and inclusion is pivotal for MedTechs aspiring to become employers of choice. By emphasizing diversity in hiring practices and cultivating an inclusive work environment where every individual feels valued and respected, corporations can attract and retain a diverse array of talent. This, in turn, creates an environment conducive to enhanced innovation, creativity, and problem-solving.
Despite best efforts, there may be instances where companies are unable to attract and retain individuals with the necessary capabilities. In such cases, strategic partnerships, joint ventures, licensing agreements, and co-development initiatives allow MedTechs to tap into external expertise and resources, which can be employed to enhance product portfolios and gain access to new markets.

6. Realize global opportunities
MedTechs, traditionally reliant on most of their revenues from affluent US and European markets, now have the chance to expand their horizons and explore the untapped potential of the rapidly growing markets in Asia, Middle East and Africa, and Latin America. These regions boast transitioning demographics, with aging populations and a surge in chronic diseases. Additionally, their large and expanding middle-class populations demand advanced care, prompting governments to increase their healthcare expenditures significantly. By venturing into and expanding their footprints in these markets, Western MedTechs can diversify their revenue streams and leverage the growth opportunities stemming from the escalating demand for cutting-edge medical technologies and services.
Expanding into emerging markets not only provides a means to mitigate risks associated with economic volatility and changing regulatory environments but also necessitates acquiring new capabilities, fostering a change in executive mindsets, and embracing flexible pricing models. By adapting to the unique demands and challenges of these markets, MedTechs can position themselves strategically to tap into the vast potential they offer. This expansion serves as a catalyst for sustained growth and allows companies to seize opportunities that would otherwise remain untapped, thus bolstering their long-term success.

7. Align with rising ESG standards
To fully leverage their capabilities and resources and meet rising standards in ESG (Environmental, Social, and Governance), MedTechs might consider taking bold actions that: (i) embrace sustainable manufacturing practices to minimize their environmental impact, which entail reducing waste, water, and energy consumption, as well as transitioning to renewable energy sources. Such practices contribute to environmental conservation and mitigate a company’s carbon footprint, (ii) adopt circular economy principles, which involve designing products with a focus on reusability and recyclability. Additionally, establishing take-back programmes for end-of-life products, which ensure responsible disposal and encourage the reuse of valuable materials, thereby reducing waste and promoting sustainability, (iii) develop products that improve patient health, safety, and overall quality of life. This requires a patient-centric mindset, discussed above, that emphasizes the social impact and positive contributions MedTechs can make to society, (iv) produce offerings that are accessible and affordable to all segments of society. By addressing underserved communities and partnering with them to provide better healthcare solutions, companies can contribute to reducing healthcare disparities and promote equitable access to quality care, (v) enhance transparency and accountability, which includes setting clear targets, regularly measuring and reporting progress, and disclosing ESG performance, and (vi) engage with stakeholders, such as investors, customers, payers, employees, and patients, to better understand their expectations and concerns regarding ESG issues. Such a bold proactive approach to ESG issues contributes to a more sustainable and equitable world, strengthens a company’s reputation, and fosters its long-term success.
In today's rapidly evolving and technology-driven world, a successful pivot for MedTechs, which have been financialized and now find themselves in a strategic cul-de-sac, requires a simultaneous introduction of the suggested strategic initiatives, rather than a sequential approach. To regain high growth rates and create long-term value, MedTechs must:
  1. Revamp R&D efforts to develop innovative solutions and services that address evolving market needs, prioritizing cost-effectiveness, and improved patient outcomes as primary drivers of value creation.
  2. Prioritize patient-centric care by delivering solutions and services that significantly enhance outcomes, establishing a reputation for consistent value provision.
  3. Revitalize outdated organizational and operating models through increased collaboration with industry stakeholders, enabling accelerated technology development and adoption. This ensures alignment with patient needs and facilitates swift market entry.
  4. Harness the transformative power of digital technologies, AI, and big data to unlock new possibilities for innovation, efficiency, and personalized healthcare experiences.
  5. Attract, retain, and develop talent equipped with 21st-century capabilities while fostering a purpose-driven culture that fuels innovation and drives organizational success.
  6. Recognize and capitalize on the vast and rapidly expanding opportunities present in emerging markets, approaching them with a strategic mindset.
  7. Align with ascending ESG standards, demonstrating a commitment to sustainability, ethical practices, and social responsibility, which reinforces the credibility and long-term viability of MedTechs.
By embracing these strategies simultaneously, corporations position themselves to navigate policy shifts, overcome global uncertainties, and take advantage of evolving technologies, which stand them in good stead to enhance their growth rates, and significantly improve their value.
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