Renew Your Focus on Product Quality to Drive Business Growth
Achieve a Strong Advantage through High Product Quality
Medical Device companies are facing two competing challenges as they seek new growth - how to grow their core product sales while also innovating to bring new products in adjacent or entirely new market segments.
Over the last few years, they have moved aggressively to reshape their portfolios by Mergers, Acquisitions and Divestures. Investors have rewarded this inorganic growth through higher valuations, but now this train is running out of steam according to a new report by McKinsey and Company. Further, the so-called high-growth market segments are already shrinking in future opportunity, and in most cases, already captured by the top players through consolidation.
More than 60% of the growth of the largest MedTech companies during 2011 – 2016 came from M&A net of divestures.
After so much investment, market expectations are high. Senior Executives are shifting focus to driving growth and efficiency from within. Expect renewed calls for rapid innovation, operational excellence and financial discipline throughout the organization.
Leaders in the Quality and Regulatory Functions have to think differently in this new business environment. They are known to be focused on achieving and sustaining a high degree of Regulatory Compliance at all times. After all, there can be no business if they miss on regulatory requirements. Now they must think of more than just pursuing excellence in Regulatory Compliance if we are to contribute our fair share to the overall business growth.
For the average top 30 company to grow at 6 percent per year, for example, it would have to generate around $3 billion of annual new revenue over the next five years.
Fortunately, they have access to another strong lever of business growth, and it calls for going back to basics.
How did your organization get to be the market leader in the first place? Sure, it started with an innovative product that solved an unmet need. But then, it needed to be transferred to manufacturing and gradually scaled-up to meet growing demand. Continuous improvement in both product and process allowed the organization to grow market share over time. Slowly, a family of products evolved around the original product, which further contributed to overall growth. As you look back, consider the important role your Quality and Regulatory functions have played during all stages of the product lifecycle.
Quality function is often the first point of contact for customers and stakeholders to share feedback about the product. As a result, you have the latest data on customer experience and product performance. You also have access to key internal metrics across R&D, Operations and Supply Chain which are reviewed by Senior Management on a regular basis. As a result, you have a deep understanding of factors driving the overall Customer Experience, including issues with Product Quality.
Why not leverage this information in a holistic way to lead with a new focus on Product Quality?
Improving customer experience is critical to maintaining your market leading position and helping your business achieve its growth targets. No matter how “innovative” your product may be, customers will move on if you cannot consistently deliver high Product Quality.
Revenue loss and market-cap impact related to non-routine quality failures, can reach $1 billion to $3 billion for a medium to large medical device company.
Although, Quality is often seen as a “cost”, there is enough reason to believe that it is now a strong competitive advantage in a mature Medical Device industry. Working on continuously improving Product Quality while sustaining a high degree of Regulatory Compliance is the new business paradigm for the Quality and Regulatory functions.
Sources: McKinsey Reports
The Growth Imperative for Medical Device Companies, Sep 2017
Capturing the Value of Good Quality in Medical Devices, Feb 2017