Doug Beveridge: Medical device companies are facing budget pressures, which means they have fewer resources to work with. This complicates things when it comes to winning deals. It’s important to prioritize and focus on areas where there is the highest likelihood of success.
Announcer: Welcome to another episode of the Alexander Group Revenue Growth Model Podcast.
Mike White: Hello, I’m Mike White. I’m joined by my colleague Doug Beveridge. We lead the Healthcare practice at the Alexander Group. Today, we’re discussing how the competitive landscape in the medtech industry is changing. The pandemic, supply chain shortages, inflation and nursing staff shortages are some of the factors causing this shift. According to a recent provider briefing, 43% of healthcare providers are using alternative vendors due to medical device shortages and 31% plan to continue doing so in the long term. Doug, can you share your thoughts on how medical device companies can navigate this challenge as they plan for the future?
Doug: Thanks, Mike. It’s great to be talking with you. When it comes to this issue, there are a few different ways to look at it. On one hand, if you’re the primary vendor supplying a hospital, for example, you may see this as a risk if the hospital suddenly starts talking about using alternative vendors for products or supplies. In that case, you need to think about defending your position. Now more than ever, it’s important to have conversations with C-level executives to make sure they understand the value of your partnership and the value you bring to the organization. This can help fend off secondary or tertiary vendors. Another thing medtech companies need to think about is their own supply chain. People will come to you and ask, “What does your supply chain look like? I’m worried you won’t be able to provide what you’ve contracted to provide.” So, explain how you’ve diversified your supply chain so that you don’t run out of components, parts, or chips. Additionally, there is an opportunity here. If accounts that you thought were locked up with primary vendors are now open, you may want to revisit those providers and say, “We’re here to help. We have supply. We know you’re trying to diversify. Take another look at what we have to offer.” So, it’s a number of different things to consider, Mike, but something that needs to be thought about at the highest level.
Mike: Yes, it certainly has to be taken into account in your go-to-market strategy in the near term. Different strategies are required depending on whether you’re facing the alternative vendor concern or the broader issue of operating income decline of hospitals. From our recent research, 43% of hospitals said their operating income has declined. This year, we did additional research on the top 15 hospitals in the US and found that operating margins declined from 7% to 3% so far this year compared to last year. This is a significant cut in margin or income for companies that are effectively the customers of medtech companies. What does this mean for the competitive landscape and what should medtech companies be thinking about in the coming year and beyond related to margin compression challenges of their customers?
Doug: It’s a good question. When there are fewer dollars to be spent, competition increases. In this current environment of increased competition and fewer dollars, it’s important to have a rigorous approach to accounts, targeting, and account management. This includes understanding where you have the best chance to win, keeping track of contracts that are coming up for renewal, and having a comprehensive approach to the buyer journey and communicating with customers. It’s not the time for an ad-hoc approach to selling or retaining business. Additionally, it’s important to reevaluate your pricing model to see if there is room for improvement or changes. Lastly, having strong relationships with C-level executives is crucial, as they are the ones deciding where to allocate dollars.
Mike: I agree, Doug. I think it’s important to be disciplined and focused in our segmentation and targeting, as the market is not growing and we need to ensure that we yield the right results.
Doug: Yes, and it’s worth noting that medical device companies themselves may be under pressure for their own budgets, which means they will also have fewer resources to put towards winning deals. It’s important to prioritize and focus on the areas where you have the highest likelihood of winning.
Mike: Absolutely. Thanks for joining me here today, Doug. To learn more about our healthcare research or any other information on the Alexander group, please visit agiinsightsexp.wpengine.com.
