Digital technologies are fundamentally changing the medical device industry. But not all manufacturers are aware that, to keep up, they don’t just have to develop devices that can keep pace with advances in digitization, their company also has to go through a digital transformation.
A digital transformation affects every area of a business: from the technologies used to the management style through to the company's basic self-image.
A digital transformation is a major undertaking that fails all too often. To help you succeed, this article will explain:
Digital transformation describes a process of transformation within a company based on the use of digital technologies. However, it doesn't just affect aspects such as the range of services offered or communication between employees, it affects all areas of a business.
In this respect, the digital transformation of a company is very different from its digitization.
Digital transformation primarily affects the following levels:
The pace of the digital transformation has increased in recent years. This is not just due to the coronavirus crisis, which led to increased remote working and made quickly analyzable data indispensable.
In recent years, technical progress has ensured that more and more industries have “become digital”: Computing speed, network speed or the availability of AI and the associated automation of a lot of processes, for example, make new technologies attractive. Only the people who make the change are able to keep up with the competition.
Manufacturers of medical devices in particular should prepare for the digital transformation and the transformation of their own companies. Because one thing is clear: The current challenges are imposing, and the competition is not sleeping.
In other countries, digitization has been going on for several years. However, Germany is one of the industrialized nations lagging behind. According to the EU’s Digital Economy and Society Index (DESI), Germany is underperforming with regard to the integration of digital tools.
However, medical device manufacturers’ competition doesn’t just come from other countries, it also comes from other industries. Companies with access to enormous data sets, such as:
However, it isn’t just this competition that is causing difficulties for the medtech industry. The shortage of skilled workers and regulatory upheavals, such as EU Regulation 2017/745 on Medical Devices (MDR) or EU Regulation 2017/746 on In Vitro Diagnostic Medical Devices (IVDR), are also taking up resources.
A digital transformation of a company can help remedy the situation: Digitization saves costs and personnel and brings innovations. This means it can help ensure that manufacturers remain competitive despite challenges.
Even if you disregard the above, you can still see that the entire healthcare sector is in a state of flux. Politicians and regulatory authorities, particularly notified bodies, are also adapting to the digital age.
New technologies offer enormous potential in these areas as well: If the majority of data and documents are available in digital form, they can be analyzed and used completely differently.
It could, for example, lead to better laws (if problems are identified, particularly using regulatory science), to better healthcare (for example, through more effective resource management) or safer medical devices (as, for example, clinical data become available).
The authorization process will also be transformed by the digital transformation and be made simpler and faster. For example, the Johner Institute is already working with TÜV Süd on a digital solution for the conformity assessment procedure.(German)
In the future, medical practices and clinics will increasingly rely on digital technologies. Digitization can help solve several of their problems: from the shortage of personnel to the constantly aging society.
This means that manufacturers who miss out on the digital transformation run the risk of losing out in their own sector.
It is almost impossible for manufacturers to get out of digitally transforming their own companies. But this transformation has to be well thought out and well planned: A study by McKinsey (albeit from 2018) found that even in tech-savvy sectors, such as the high-tech and media industries, a good 75% of digital transformation projects fail. In traditional industries, such as the pharmaceutical industry, as many as 89-96% of projects fail.
After the major cuts resulting from the coronavirus pandemic, these numbers may well be lower. Nevertheless: anyone who stumbles blindly into a transformation should expect to waste resources unnecessarily and miss out on huge opportunities.
One of the biggest hurdles in corporate digital transformations is the development of a viable concept. It is not enough to look at individual business units. A digital transformation must be a holistic process that fundamentally changes a company at all levels.
Therefore, the approach to this kind of transformation has to be adapted to “digital thinking”:
Companies that prepare well for their digital transformation have a good chance of success despite all the hurdles. The effort and costs pay off, because it opens up new business opportunities and offers excellent prospects for the future.
The biggest mistake surely is not even considering a digital transformation in the first place. Sooner or later, the market will leave these companies behind.
The most important factors for the success of corporate digital transformations are ultimately the same as for other transformation processes: good management, (acquisition of) know-how, the correct (digital) tools, a change in corporate culture and togetherness, and good communication.
“leadership, capability building, empowering workers, upgrading tools, and communication”
The digital transformation should first take place at the management level, first and foremost in the minds. If the management team takes a half-hearted approach to the digital transformation, the workforce is likely to have the same attitude.
Moreover, the transformation process cannot be outsourced to consultants. It is true that consultants can help scout trends and technologies, assess markets and risks, and design processes and structures. But the transformation itself must take place within the company.
Senior management must support or even initiate this transformation. Creating various “nuclei” is recommended as a first step:
Management brings an innovator into the company to identify opportunities and suitable comrades-in-arms. Together with this team, they develop an ever-expanding division within the company that embodies the post-transformation model.
With the accelerator, the company creates a division within the company that is allowed to operate independently. Employees and students should and are allowed to try out new ideas within this division. An infrastructure ensures that the founders can fully focus on their internal startup.
Like the accelerator, fenced startups are given the freedom to develop and implement new ideas quickly. Without this freedom, new ideas are often suffocated in a company's paralyzing structures and processes.
To avoid regulatory problems, these startups are regularly spun off as subsidiaries. Unlike incubators, fenced startups are created with a specific idea in mind, which means they come into play at a later stage of development than the ideas in an incubator.
You should also consider appointing a chief digital officer (CDO), a person or team solely responsible for the transformation process.
The chief digital officer (CDO) is responsible for planning and managing a company's digital transformation. They are responsible for the overall strategic alignment needed to successfully survive the digital transformation. This includes both market positioning and internal processes and infrastructure. As a result, the position of CDO is generally a board or executive management level position.
A digital transformation will not succeed without the required know-how. Having the best tools is no use if employees don't use them because they don't know how to. Agile product development will fail if no one understands how the process works.
This means you should:
Naturally, a digital transformation also needs digital tools. But be careful:
For your digital transformation to be successful, you may have to change the entire corporate culture. Digital thinking does not mix well with traditional management structures and skeptical attitudes towards technology.
Communication is one of the basic but also most important factors for a successful transformation process.
You can use the following five steps as a guide to ensuring that the digital transformation of your company is successful. They summarize the points already made above.
The first step is to work out the potentials a digital transformation offers for your company.
The classic SWOT analysis will help you identify potentials. But you should go further:
Work out the necessary consequences of your analysis, e.g., the development of new products or business models.
Work out the required preconditions and requirements for the digital transformation process at your company: what does the digital transformation mean for purchasing, production, sales?
Take feedback and suggestions and incorporate them into your project. Establish a platform for this.
Even when you have succeeded in making the transformation, your work is not complete. Technologies and management systems are constantly evolving. That's why a digital transformation is never finished.
A digital transformation not only offers enormous opportunities, it is increasingly becoming a necessity. If you want to survive in the face of international competition and not be left behind in your sector, you can’t avoid the digital transformation.
A digital transformation is a process that fundamentally changes companies in the long-term. Manufacturers should not underestimate the risks and hurdles involved. Lots of transformation processes fail as a result of half-hearted approaches or a lack of planning.
Review the potentials, opportunities and risks of a digital transformation at your company and approach this major task carefully.
We sincerely thank Dr. Apel for his help writing this article.