For years MedTech companies have enjoyed strong gross margins and top-line growth. However as a recent report by the Boston Consulting Group (BCG) notes the strategy for generating those outcomes is no longer sustainable. BCG suggests changes will be required throughout the value chain.
For example, the authors note: “Companies in all segments of the sector will need to produce high-quality goods at lower cost. Zimmer, for example, has holistically restructured its cost base by reducing the size of its workforce, optimizing its supply chain, and transforming its production facilities.”
The BCG report goes on to suggest that MedTech companies must also invest in reinventing their sales team to reflect the shifts in the buying process. Let’s explore that recommendation starting by examining the nature of the shift in the buying process and then exploring some suggested changes for the sales process.
Buying Process. As the future unfolds, the Affordable Care Act and other social and economic changes will significantly reduce hospital reimbursements. This reduction will drive the need for substantial cost reduction initiatives for everything that hospitals purchase including medical technology.
Specifically, regarding, the medical technology market, the BCG report emphasizes – “MedTech companies, like all health-care operators, will be assessed on their ability to deliver value to patients and providers, rather than just superior technology. In the past Medtech companies were able to raise price based on incremental innovations that will no longer be the case.”
The bottom line is due to the drive to reduce costs and improve quality what hospitals buy, how they buy, and what they are willing to pay for it will all change and a sales team will need to adapt to these changes.
Sales Process. The implication from a sales capability perspective: a sales team will not only need to be able to sell a competitive advantage; they will need to be a competitive advantage. They will need the skill sets to sell the technological, clinical and economic value of their products – with an increasing emphasis on the economic value. All sales, to all buyers, will be viewed through an economic lens.
Some specific performance assumptions that will need to become a reality are:
- Consulting skills. Success will require the ability to develop new insights and creative ideas about how to reduce end-to-end supply chain costs while simultaneously improving quality.
- Elite selling. A greater capability to sell at the senior executive level.
- Larger and more diverse buying organizations. The ability to navigate more complex and diverse organizations such as large IDNs and alternative care models.
- Team selling. Awareness and political savvy to marshal and manage all of their company’s resources – sell as a team versus the lone wolf.
- Buying process. Greater understanding of the entire business chain: user-purchaser-organization-payer-industry.
- Metrics. Ability to align product to a new set of metrics and stakeholders.
A final note about the sales process from the BCG report: Today, since the top 10 percent of customers in MedTech can represent up to 50% of the sales in a given product category, successful key account management is critical. These customers are often early adopters of innovation—and their experience and sophistication can significantly reduce the sales, training, and support effort required, rendering them less expensive to serve relative to their size.
Summary. Due to the transformational changes in the healthcare industry, there will be a new set of winners and losers among MedTech companies. A piece of the puzzle for being among the former is building a superior sales team.
