Teams, Not Individuals, Will Rule the New Medtech SalesLandscape

Teams, Not
Individuals, Will Rule
the New Medtech
SalesLandscape
How Medtech Can Appeal to Multiple
Stakeholders and Build a Competitive
Sales Model
Brian Chapman, Matt Scheitlin
Teams, Not
Individuals, Will Rule
the New Medtech
Sales Landscape
How Medtech Can Appeal to
Multiple Stakeholders and Build
a Competitive Sales Model
Brian Chapman, Matt Scheitlin
The sales game in medtech is changing rapidly. Product differentiation has
narrowed. Budgets have shrunk. Most important, stakeholders like health
networks, administrators, payers, patients, purchasing departments and even
supply chain managers now have a major voice in deciding what to buy and how
much to pay for it.
How can medtech companies appeal to these stakeholders? Each has different
priorities and may veto a decision that was once solely the province of doctors.
The traditional selling model entailed hiring the best salespeople who could
cultivate strong relationships with clinicians. But today, the changes in the
market have emphasized a team approach of individuals with specialized roles.
This paper examines the selling approaches that appeal to each of these
stakeholders, and presents examples of how team-based selling strategies
have been effective.
Introduction
For years, medical device sales operations were like winning sports franchises:
Employing highly trained professionals, they delivered wins through superior
products, talent and performance.
Like a successful sports franchise based on paying top dollar for the best
athletes, the sales model for medtech was never cheap. The top salespeople
were superstars and paid accordingly: According to ZS research, the selling,
general and administrative (SG&A) expenses as a percentage of sales has been
about 29% for the largest 30 medtech companies the last decade1 (see Figure 1).
Historically, that’s a much higher percentage than in other industries.
Selling, General and Administrative (SG&A) Expenses as Percentage
of Sales for Largest Medical Device Companies
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2002
2004
Most expensive
2006
2008
2010
Average of 30 medical device companies
2012
2014
Least expensive
Source: Company 10-K and 20-F reports. Not all companies shown on chart.
Figure 1. Although sales expenses have vacillated across different companies in the medtech industry,
the average has remained steady—and high—for more than the past dozen years.
High SG&A expenses were fine when med device companies could rely on
innovative products, buyers eager for the latest and greatest, and a single type of
customer—the clinician—being the ultimate decision maker. Targeting doctors
was ideal as long as product margins were high and companies were able to
sustain clinical differentiation. As a result, medtech companies wanted the best
salespeople with strong affinity for cultivating relationships with clinicians.
But the sales game in medtech is changing rapidly. Product differentiation has
narrowed. Budgets have shrunk. Most important, stakeholders like health
networks, administrators, payers and patients now have a major voice in
deciding what to buy and how much a hospital or health system will pay for it.
And it’s not just clinical department heads and payers that medtech companies
need to account for, but also purchasing departments and even supply chain
managers for large providers.
1
ZS research based on companies’ 10-K and 20-F reports.
1
In fact, within three years hospital CFOs and finance departments will have as
much influence on purchasing decisions as doctors; procurement departments
and payers will also be far more influential 2. At some institutions this shift in
decision-making power has already happened. More than the clinical superiority
of a given product, these stakeholders are more concerned with the ultimate
value of the product and the services, programs and systems that accompany it.3
Despite this altered landscape, commercial models at many medical device
companies have been slow to change. They have become like once-storied
teams fallen on hard times, with a product or team that no longer stands out,
with an outsize payroll of superstars who underperform. Instead of making
changes, the team hopes that somehow, it can rekindle past glory using the
same outdated formula.
The emphasis for medical device companies has been on recruiting sales stars.
Companies wanted the equivalent of the tallest, fastest, strongest athletes, but
are now calling into question the wisdom of focusing on recruiting stars who
cannot fit into a system or team.4 The expense of the current approach is likely
to become unsustainable, as medtech companies may overpay for
underperformance while their margins shrink.
But instead, companies should staff their sales teams around the strength of
their value proposition rather than the strength of their salespeople. They can
find out what each stakeholder needs, build a value proposition that meets many
of these stakeholders’ needs and fill sales teams with role players—not onedimensional athletes who excel at a single thing—who have expertise in
reaching each one of these new types of decision makers.
How companies can appeal to new stakeholders
We have identified five types of stakeholders outside of physicians who can
influence purchasing decisions. Each has different priorities and may veto a
decision that was once solely the province of doctors—and in examining each
stakeholder below, we show encouraging evidence that strategies targeting
these stakeholders are effective.
Clinical department heads: Aligning clinical with financial interests
Closely associated with the physicians they supervise, clinical department heads
are a familiar group for medical device companies. They are primarily concerned
with maintaining quality, and are interested in devices for the same reasons that
motivate doctors, but have financial concerns that clinicians may not.
“Medical technology report 2014,” EY Pulse Hospital Survey.
“W hat’s It Worth to You? How Value-Based Innovation Improves Medtech Development,”
ZS Associates, January 2014.
4
“F ive Challenges to Building a Successful Key Account Management Team—and How to Overcome
Them,” ZS Associates, September 2013.
2
3
3
Medtech giant Stryker, whose product portfolio includes artificial hip and knee
implants, as well as related supplies for joint replacement surgery, developed a
program in concert with clinical department heads to appeal to those financial
concerns. Delivered as a team offering, Stryker’s Joint Pathways program
standardizes the surgical process—all surgeries are done on a particular day
and recovery milestones are synchronized—and provides patient education and
support.5 Joint Pathways has succeeded in reducing hospital stays, improving
health outcomes and streamlining hospital operations.
This type of program is specifically designed to appeal to clinical department
heads. Selling related devices as a package, priced per procedure, creates
alignment between how a department is measured and what a company sells.
The Joint Pathways program serves as a consulting service to clinical
department heads via teams that have hospital management experience and
workflow or process expertise. In doing so, Stryker now has another offering
and another team to sell to this essential customer base.
Purchasing departments: Offering the full suite of products
Historically, medtech sales teams have worked with purchasing departments,
but only when necessary. The relationship has often been adversarial as each
entity sees the other as an impediment to reaching its goals. Now that economic
constraints have greatly increased these departments’ role in the buying
process, medical device companies need to develop partnerships with
purchasing agents.
In Spain, where public health care is administered regionally, an in vitro
diagnostics (IVD) company demonstrated its value by offering the full suite of its
testing products—from high-volume equipment to esoteric tests used in
teaching hospitals. In addition to providing value to stakeholders across the
board, this kind of arrangement provides purchasing departments data on
pricing within integrated information systems.
In order to deliver this suite of products, the company had to build a sales team
that drew from all aspects of the company:
+ A regional key account manager to interact with regional stakeholders
+ Clinical experts who could ensure a full solution offering and appropriate
customer use
+ Finance personnel to do business modeling to make a compelling case
for the customer
+ Managers to implement the solution
5
4
Stryker promotional material (http://www.stryker.com/uk/Solutions/JointPathways/index.htm).
The IVD company had to acquire companies and license products and services
even before making the pitch. This type of offering may encourage companies to
build broad portfolios to fit the multiple needs of provider organizations.
Although consolidation and acquisition to broaden the portfolio is not a new
trend, we are seeing evidence that this kind of consolidation is accelerating: For
instance, witness internal consolidation at Johnson & Johnson6 and Medtronic’s
acquisition of Covidien.7
Payers: Getting alignment across stakeholders
It’s no secret that payers are now key stakeholders in the purchasing process.
Strategies like bundling, which appeal to purchasing departments, also speak to
payers, who want to maximize health outcomes and minimize costs.
In one well-known industry example, ConvaTec, a maker of wound-care
products, used this approach with a primary-care trust (PCT) in the United
Kingdom (PCTs have since been replaced by clinical commissioning groups8).
ConvaTec proposed a certain price per covered life to supply all wound-care
products needed in the PCT. Reference labs have taken a similar tack through
capitated plans offered to all lives covered by an insurer.
The proposal succeeded through a team concept: ConvaTec’s team collaborated
with the PCT in order to make the deal work. The team brought on nurses to
train PCT district nurses so that the right product would be used at the right
time, making full use of their skills.
The service component of these approaches has the added benefit of creating
partnerships with clinicians and driving alignment. These capitated approaches
are ambitious and best started as pilot projects; not all of them have delivered a
uniformly positive outcome, but still illustrate how med device companies are
trying innovative approaches with payers.
“J&J consolidates, rebrands Ethicon units,” Medical Marketing & Media, May 8, 2013 (http://www.
mmm-online.com/jj-consolidates-rebrands-ethicon-units/article/292544/).
7
“Medtronic to Buy Device Maker Covidien for $42.9 Billion,” Bloomberg, June 16, 2014 (http://www.
bloomberg.com/news/2014-06-16/medtronic-to-buy-device-maker-covidien-for-42-9-billion.html).
8 National Health Service (http://www.nhs.uk/nhsengland/thenhs/about/pages/nhsstructure.aspx).
6
5
Patients: Using choice to your advantage
Although patients may not have strong opinions about medical products, they have
become important voices in determining the approach, procedure, technology or
sometimes even the product brand. Medtech companies can use this to their
advantage by highlighting features with distinct patient appeal. For example,
Medtronic markets its MiniMed 530G to patients by featuring the insulin pump’s
continuous glucose monitoring system.9 Roche’s Accu-Chek Combo pump comes
with an offer to assist patients in gaining insurance coverage.10
In addition, Tandem Diabetes Care, a recent entry into the market, has a patientfriendly touch-screen interface for its insulin pump. And J&J’s Animas, also a
provider of insulin pumps, has perfected its patient approach in Canada through
social media, blogs and word of mouth.
Patients are more likely adhere to treatment and disease management if they
can use the device of their choice. As part of research ZS conducted last year, an
endocrinologist said that “while I may have a [brand] preference, the patient is
king. If they want something, I’ll give it to them because getting them happy and
engaged in managing their disease has a much bigger impact than minor
product differences.”11
Device companies whose products have particular appeal for patients (because
of convenience, associated services or other features) will need to develop the
right kinds of marketing to reach patients, either through direct-to-consumer
(DTC) advertising, social media or e-mail. Companies need to engage their
marketing operations—their marketing personnel, marketing agencies, socialmedial consultants and others—to coordinate with sales, thus maximizing the
effect of their patient campaigns.
The supply chain manager: Devising novel approaches
for a new stakeholder
A supply chain manager must coordinate a massive number of vendors and
ensure facilities have the right number and type of supplies. Though this is a
nascent area for sales and marketing, medtech companies that can provide that
manager with an integrated, automated supply chain could promise improved
pricing, convenience and safety.
Medtronic promotional material (http://www.medtronicdiabetes.com/treatment-andproducts/minimed-530g-diabetes-system-with-enlite).
10
Roche promotional material (https://www.accu-chek.com/microsites/combo/get-a-newpump.html?epromo=MDAKGM1109&gclid=CjwKEAjwzeihBRCQ84bhxrz_0w8SJAAohyh1rvogE1f
QbQPMOEjR8UeCAG5m_36b89BYryNejccqqxoClobw_wcB).
11
Verbatim from MD interview, ZS Associates research, 2014.
9
6
Imagine an offering that consists of a full surgical kit, sold as a bundle, each
piece of which is tracked via radio-frequency identification (RFID). Products
delivered through a gate are automatically inventoried using RFID; on the way
out, consumed products are documented for an insurance charge master and
slated for replenishment. Unused product is restocked for future use.
Although this approach is not widely offered today, we anticipate that a
technology provider or health-care organization will drive implementation within
the next few years. This also means if traditional manufacturers don’t step up to
the plate with innovation, they are ceding this space to the hospital distributors
whose own private-label products are already encroaching on traditional device
manufacturer space.
In order to make this approach viable, device manufacturers need to stretch the
idea of a sales team to include nontraditional members like IT personnel to
implement the solution and operations and supply chain managers to put RFID
tags on products. It even includes people who can reach out to other vendors
and include them in the solution: For a supply chain solution to work, all
products for a given provider need to be cataloged, whether the device
manufacturer sells them or not.
The endgame
How do medtech companies approach these different stakeholders, each with
different wants, needs and challenges to overcome? If you take a close look at
the examples above, each success was predicated upon appealing to different
stakeholders and meeting their different needs with the same product.
The endgame is no longer simply finding the best salespeople—the best
athletes, if you will—and hoping they’ll congeal into a strong team. Instead,
medtech companies need to design strong value propositions and build the sales
team around that value proposition, with members who have the right skills to
appeal to specific shareholders, each of whom has different needs. Companies
that build teams of strong role players, rather than a group of standalone
superstars, aren’t just going to be well-positioned to leverage the strengths of
their offering, but to pile up wins far into the future.
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About the Authors
Brian Chapman is a ZS Principal based in
Evanston, Ill. While at ZS, Brian has worked with
medical technology companies on numerous
sales and marketing issues, including
opportunity assessment, organizational design,
channel optimization and new-product launch
strategy. He has spent much of his career
working with global clients.
Matt Scheitlin, a ZS Manager based in London,
has worked primarily with medical technology
companies on a broad range of sales and
marketing issues, and is a leader in ZS’s product
launch area. He has led the creation and
development of many tools and frameworks
used by project teams. Matt has significant
experience in global organizational design and
market opportunity assessment.
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About ZS
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