2022 was a rollercoaster year for medtech innovation, with a dramatic slow-down of venture funding, multi-national corporations (MNCs) hitting inflationary, recessionary, and geo-political headwinds, new emerging technologies, and the sprinkling of game-changing M&A. What on earth could happen this year? I share my musings and predictions on Medtech’s Innovation outlook for 2023:
Key take-aways:
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2023 will be a watershed year that separates innovators from laggards. In a cautious market environment, executive commitment to transformational innovation will separate market-defining organizations from those with a conservative game plan to ride out uncertainty.
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Winning medtech organizations will accelerate integrating their portfolios toward more holistic offerings to tackle the world’s toughest healthcare challenges.
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Forging a digital strategy is already table-stakes. The harder work begins now. A vision-led, needs-driven, systems engineering approach is critical to architecting and building high value digital ecosystems.
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The reckoning of venture funding in 2022 was necessary for re-focusing medtech innovation funding in 2023 on what matters most…value creation.
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2023 will set the stage for a multi-year trend in unconventional innovation partnerships to leverage rapidly emerging enabling technologies.
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The re-emergence of APAC economies and the re-opening of China entices a long-term tailwind for medtech growth, with a tidal change in the pace and impact of APAC medtech innovation.
Innovation ambition
There is no doubt this year will throw its fair share of challenges at medtech companies. We’ve all seen the economic forecasts, heard earning calls and attended major conferences over the past few months. Despite the medtech industry’s conservative outlook, there remains a question of ambition for executives as we navigate through 2023:
How will your organization play now to win the future?
In my view, 2023 will be a watershed year that separates innovators from laggards. Executive commitment to ambition and transformational innovation will be the deciding factor distinguishing truly innovative, category-leading, market-defining medtech companies from those with a conservative game plan to ride out uncertainty.
That ambition starts with a commitment to tackling the world’s toughest healthcare challenges. That ambition will inspire organizations to prioritize investment to deliver transformational innovation. That ambition will encourage integration of products, services and technology into high value ecosystems. And that ambition will inform unique innovation partnerships, deploy emerging technologies into their innovation pipelines and tap into global growth.
Tackling complex diseases
Clinical practice has long embraced an integrated approach to medical care. Integrated cancer centers have been the norm in hospitals for several decades. Cardiovascular disease centers combine advanced imaging, electrophysiology, peripheral vascular and structural heart specialists into holistic patient centers. Yet most medtech organization offerings historically relied on a family of single products: implants, instruments or platforms focused on episodic intervention. Over the past five years, those offerings evolved into adding intelligence via sensing, analytics, and connectivity – generating petabytes of data.
A larger game is now in play. How can medtech companies holistically tackle complex diseases?
2023 will see an acceleration in integrated offerings by medtech organizations with an emphasis on building digitally-enabled ecosystems that help tackle the world’s toughest healthcare challenges. Johnson & Johnson’s lung cancer initiative, Boston Scientific’s pain management offerings and Medtronic’s spine surgery platforms are all good examples of multinational corporations (MNCs) making compelling shifts toward integrated offerings, and I anticipate this trend to continue over the next few years.
High value digital ecosystems
Forging a digital strategy is now table stakes for medtech companies. Practically every executive team has sponsored a ‘digital journey’ initiative to evolve their organization toward a digital future. This is foundational to success, but much harder work begins now! Winning companies must focus on four core areas to build digital ecosystems that deliver high value impact:
1. Clear value proposition
No surprise here – but defining a clear value proposition is no small feat. It takes months of effort to envision future scenarios and comprehensively map stakeholder needs. It takes a multifunctional leadership team to craft a compelling ecosystem vision that is also desirable, usable, feasible and viable. Validating a value proposition through evidence-based stakeholder feedback helps minimize costly mis-steps downstream.
2. Well-defined ecosystem architecture
A systems engineering approach drives organizational clarity. Medtech companies must comprehensively map a future ecosystem and constituent platforms, products, and data and insight flows. An executive team must address simple but critical questions: What is in, what is out? How does the ecosystem align to the core value proposition? How are stakeholders’ needs addressed? Are internal teams and external partners aligned to this ecosystem? How will this ecosystem transform your business? Many sectors of the medtech industry are in the early innings of architecting complex ecosystems. Smart implants, digital surgery and critical care are just a few example areas ripe for this approach.
3. Sophisticated system models
It takes many years to build a high value ecosystem, and there will be variants along the way. Developing sophisticated system engineering models to explore ecosystem variants and weigh trade-offs in functional allocation enables medtech executives to prioritize which ecosystem elements to build now.
4. Robust execution roadmaps
Any high value ecosystem needs the right system architecture team and governance. Banding together representatives from sub teams can seem an easy solution, but risks diluting your ecosystem value. A dedicated system leadership team is essential to informing R&D pipeline investment priorities and technology roadmaps. It also helps medtech executives prioritize the right external partnerships to accelerate progress.
Funding medtech innovation
2021 saw a record year of medtech venture funding, only to be followed by a sharp drop-off in the second quarter of 2022, with inflationary onset. This rippled throughout the medtech industry, forcing venture firms to curtail new investments, refocus on existing portfolio companies and decrease valuations of innovative startups seeking early capital. Interestingly, multinational venture arms, backed with strong balance sheets, benefited from a deal flow increase three times more than historic norms.
This reckoning of venture funding in 2022 was necessary, perhaps even healthy, for refocusing medtech innovation funding on what matters most… value creation. The days of less-than-rigorous diligence and the infamous SPAC’s are gone (thank goodness!). While it will take time for the valuation pendulum to swing back to the middle, I anticipate 2023 will begin an 18 to 24-month recovery cycle for venture funding with renewed focus on value creation.
There is already evidence of innovation ecosystems evolving toward healthcare value creation. For example, long-standing venture firms with historically impressive returns are birthing more agile, mission-oriented funds with deep clinical and technology insights. There is increasing impact of innovation accelerators such as MedTech Innovator and investment forums like LSI. Leading research hospitals like Mass General Brigham, Cleveland Clinic and Texas Medical Center have developed impressive innovation centers making industry impact, all aimed at advancing the standard of medical care.
Capitalizing on emerging technologies
Despite the cautious industry outlook, medtech companies will need a winning playbook for investing in and integrating emerging technologies. Artificial Intelligence is now mainstream – if a medtech organization isn’t yet building an AI capability internally or externally, it risks lagging the field. But it isn’t too late to leapfrog with next-generation AI approaches, such as those being explored in advanced visualization for surgical robotics.
Photonics and quantum sensing are translational research areas that enable detection of incredibly low signals in dense noise… literally ‘sensing the impossible’. Brain-Computer Interface (BCI) has the promise of restoring quality of life via novel smart implants, bionics and neuroprosthetics, with exciting progress from visionary start-ups like Precision Neuroscience, Blackrock Neurotech and Axoft. Human-Machine Understanding (HMU) is an emerging multidisciplinary field blending psychology, deep learning, multi-modal sensing and digital design to create technology that comprehends human behavior. Bioinnovation is an entire industry dedicated to engineering cells, molecules, even DNA for novel applications.
The challenge, of course, is how medtech executives guide R&D portfolios to bet on the right technologies at the right scale to create healthcare value and impact. That requires a deep understanding of emerging technologies, their capabilities and limitations, and integration pathways into short, mid, and long-term R&D pipelines.
More than ever, creative innovation partnerships will be essential to access and capitalize on scientific progress in emerging technologies. We’ve embraced this ourselves, forging an innovation partnership with MIT’s The Engine, a visionary venture ecosystem tackling the worlds’ toughest technology challenges.
The APAC medtech opportunity
The re-emergence of APAC economies and the re-opening of China entices a long-term tailwind for medtech growth. There is a rapid rise of high-tech, dynamic medtech start-ups emerging across APAC. In China, large investment tranches from global venture firms like Sequoia Capital are fueling innovative start-ups across healthcare. But post-COVID, APAC-based MNCs are more nimbly navigating regional healthcare policy shifts, and US-based and EU-based MNCs may struggle to catch up.
Our business has spent nearly a decade driving ambitious innovation for leading organizations in APAC. Through that time, we’ve led highly successful medtech developments in Singapore, Korea, India, Australia, and New Zealand, and have worked with over 50 companies in Japan alone. It is safe to say we are witnessing a tidal change in the pace and impact of medtech innovation in APAC regions. This presents truly exciting opportunities for advancing global healthcare. The APAC opportunity will no doubt require short-term pivots in strategy, but offers a winnable future for medtech companies that adapt to an evolving global market.
To conclude, I am bullish on the opportunity for transformative innovation in 2023. In a cautious market environment, with a conservative outlook across the medtech industry, there has never been a more opportune time for leading organizations to be ambitious and play to win the future. If you’d like to exchange insights on the future of medtech innovation, debate strategies on architecting digital ecosystems, or simply swap crystal balls, please drop me a line.
