Russell Reynolds Associates: Medtech: Joining The Digital Party

From big data and social media to wearable tech and the Internet of Things, the digital revolution undoubtedly is causing huge changes in the interaction of customers and patients with healthcare.

However, Russell Reynolds Associates’ research suggests that capitalizing on digital transformation may not be sufficiently high on the priority list for the medical technology (medtech) industry, compared with both the wider healthcare sector and other industries. Medtech companies would clearly benefit from more widespread adoption of digital internally, as well as in serving customers.

This report examines the barriers to digital transformation within the medtech industry and the key issues that medtech companies need to address.

Digital disruption in healthcare—the new normal

It’s estimated that around 4.9 billion Internet-connected devices currently are in use. This is expected to reach 25 billion by 2020.1 The disruptive impact of digital innovation will be felt more and more across all industries and will threaten existing business models that have yet to embrace it.

In the healthcare sector, the explosion of connected devices is opening up new forms of interaction among healthcare providers, payers and patients. Patientsturned-consumers expect an increasingly digital experience in all facets of life—healthcare included. Compounded by healthcare reforms, rising cost-consciousness and easier access to health information, digital presents unique opportunities and challenges for the industry.

For example, big data is creating opportunities for new markets, revenue streams and entirely new business models for treatment and diagnosis. Many of these already are well within the capabilities of medtech companies, provided they can structure an appropriate payment model.

Potential cost savings is another key driver of digital adoption. According to research by Goldman Sachs, the United States alone could save $305 billion in healthcare spending through digital health technologies that eliminate unnecessary or repetitive care. Chronic disease management represents two-thirds of the total savings opportunity.

APPETITE FOR CHANGE

Conversations with physicians, major hospital networks, payers and the startup community reveal a general willingness to explore digital health as a viable component in daily healthcare practice.

It’s clear that digital health technology is starting to find a place in larger health systems and will percolate throughout the healthcare sector in the future. For example, a number of large, integrated delivery networks are using remote monitoring and telemedicine to drive patient compliance, track developing conditions and adjust treatment regimens.

Medtech chasing the pack

Compared with the healthcare sector as a whole, however, Russell Reynolds Associates' research shows that, with the exception of a handful of early innovators, the medtech industry appears less convinced that it is in the midst of a digital transformation (see box at bottom of page).

They conducted a survey of more than 2,000 executives across a range of industries, revealing that only 33% of medtech companies foresee digital technologies as a major disruptor of their business over the next year. In comparison, 57% of businesses across all industries expect to see major disruption.

To further understand how medtech compares with other sectors, thus research covered several key aspects of successful digital transformation: a clear strategy, the appropriate organizational structure, ownership of digital within the organization and leadership from the right people. The results for each of these areas are discussed below. This is complemented by an analysis of healthcare companies in the Fortune 500 and FT 500 and the extent to which they have a prominent digital leader.

To read the full report, click here.