This piece also appeared on November 6, 2012 in PE Hub.
In the world of medical devices, innovation has traditionally been defined as the invention of a new device or a new technology that can be packaged into a device, expanding the number of possible medical procedures or at least replacing old ones with those that are new, improved and lemon-scented. For the past several decades, a parade of medical device entrepreneurs has led a drumbeat of new product development, accompanied by a chorus of venture capitalists saying, “Hey look, a new thingamajig! You’re playing my song!”
In today’s healthcare economy, those same entrepreneurs and venture capitalists are spending far more time facing the music than dancing to it. We have reached the point where those that pay for healthcare are more than willing to turn down the volume on innovation that does anything other than reduce medical procedures and costs. The medical device industry has felt the repercussions of this changing tune in a big way.
Last week I attended my 2nd and the Cleveland Clinic’s 10th Annual Innovation Summit and it was very interesting to see how medical device manufacturers have evolved their thinking around “innovation” to appeal to the much-changed audience to whom they are now playing. Webster’s Dictionary defines innovation as “a new idea, method, or device,” and it was clear at in Cleveland that the nation’s largest medical device players have decided to shift their attention from the “new device” part of the definition to the “new method” part.
Dr. Mark Froimson, President of Euclid Hospital and of the Cleveland Clinic Professional Staff, made perhaps the clearest statement elucidating this evolved thinking. He said, “Innovation has had too narrow a focus on product. It should be about the relationship between patient and surgeon and the entire episode of care and all the variables that impact the outcome of a case.” Speaking alongside Dr. Froimson, on a panel about the state of Joint Replacement therapies, Dr. William Petty, Chairman and CEO of medical device company Exactech, added, “The greatest opportunity for innovation is to take away the silos that separate doctors, hospitals patients and manufacturers.”
Wow, that is a very different song than the one traditionally heard in the corridors of Medtronic, Stryker, and their medical device colleagues, but even these companies were humming a very similar refrain. Kevin Lobo, the newly installed CEO of Stryker, spoke to a dinner crowd about how their greatest innovations are taking place in how they market their existing products to new customers. He spoke at length about how one of the company’s 7-year-old products is their biggest seller and that they are using a healthy portion of their innovation dollars to establish consumer branding for this and other established products so consumers ask for them by name. Lobo reported that Stryker is spending a commensurate amount of money on healthcare economics, reporting that the company now has health economists on each and every innovation team; these health economists are are charged with thinking about who will pay for innovations and how much—something Lobo freely admits would not have happened five years ago.
Medtronic’s CEO, Omar Ishrak, made very similar statements. Rather than discuss emerging technologies or future products, he spent the bulk of his keynote speech saying that the company’s primary objective at this time is to institutionalize the concept of an “economic value imperative” worldwide and that a substantial portion of the company’s energy is being utilized to move from developing clinical return-on-investment proof statements to establishing evidence of financial return on investment for customers using MDT products. Only at the very end of his half hour or so of remarks did he mention some of the company’s up-and-coming product R&D efforts, noting that they “are working on those too.”
It was eye-opening, not just because every single discussion at the conference started with some discussion of how healthcare costs must be reduced as if that was the manufacturers’ and physicians’ own original idea, but because the vast majority of conferences about medical innovation have historically focused heavily on where technology is going, not how to rein it in. In fact, the only session where entrepreneurs with new products spoke was during a closed-session venture capital luncheon where two Cleveland Clinic-affiliated enterprises spoke about new technologies in development (one orthopedic, one cardiology) and another spoke about a Dublin, Ireland-based incubator focused on emerging medical technologies. But for the rest of the crowd in attendance, largely undaunted by Hurricane Sandy, the speakers, while often quite brilliant, did not represent entrepreneurship in the traditional sense of the word.
I was struck by a funny coincidence when I attended the Cleveland Clinic’s party at the Rock and Roll Hall of Fame Museum on the Summit’s 2nd night: a large number of the musicians represented in the museum are “old school” superstars who have been repackaged and reinvented in a way that they are still incredibly popular decades after their original entry onto the music scene. Bruce Springsteen, Bonnie Raitt, U2, Bob Marley, the Beatles, the Grateful Dead (and offshoots), Aretha Franklin, the Rolling Stones and many others have been among the most popular artists year after year, decade after decade. While there is great innovation in music and new acts all the time, their success typically pales in comparison to these stalwart artists who find ways of innovating inside their own skin, adding a hip hop beat or a new school sound to their old school rhythm.
This is precisely the echo of the message that emanated out of the Cleveland Clinic Innovation Summit: how do we, the medical and medical device fields, refocus our innovation efforts from discovering the next new thing to taking the massive amount of medical know-how we already have and re-purposing it for a world more sensitive to cost, more conscious of consumer engagement, more worried about outcome than income (at least for the moment). In musical parlance, it’s about the remix, not the latest act; the greatest hits album, not the new release. A very interesting interlude indeed.