Wild transformations are underway for a swath of industries. Automotive . . . consumer electronics . . . architecture . . . even fashion.
Those industries are increasingly impacted by the accelerating pace of change thanks to new advancements in robotics, materials science, 3D printing, rapid prototyping, software/hardware convergence, software democratization, big data, and cloud computing.
But according to Katy George, McKinsey’s expert in its operations practice and pharmaceutical and medical products, there’s another important industry that’s being shaped as well—medical devices.
Medical devices are invasive by nature—they probe in and around the human body. They look around, they cut away disease, they repair damage. Others remain inside the body—a replaced hip, a stented artery, a new valve, a pacemaker.
So combining the highest-of-standard design and performance characteristics for such important medical devices, the incredibly complicated business model of health care itself, and stiff regulatory requirements make for the one of the most complex and demanding of any manufactured products.
Because of this complexity, George believes the medical-device industry is being forced to look at the entirety of its business model to embrace change in ways that other industries don’t. That said, she also believes that the lessons learned will ultimately benefit all industries.
Here are three medical-device industry trends she believes are embracing and contributing to the dynamic change that is taking place in both design and manufacturing.
1. Design, Manufacturing, and Sales Functions Will Converge in a Quest for Value. George believes that the acceleration of design and manufacturing capabilities are feeding off the challenges embedded in the medical-device industry and are productively disrupting business models.
“What we see the industry increasingly pivoting toward is what we would call a design-for-value orientation and much more cross-functional integration of the marketing or commercial functions,” George says. She believes the old paradigm of engineers coming up with ideas alone in a lab, then passing on the creations to the marketing department to commercialize them, probably “has to be flipped on its head.”
“It’s not just about cost reduction,” George says. “It’s actually about continuing to evolve the product design the right way. It’s very difficult in this industry compared to some others for a couple of reasons. One is that you have multiple customers: You are designing for the patient, for the physician, for the procurement officer of the hospital, for the payor, for the regulator. So it’s very different from doing a market-research study with consumers on what you care about in your hair dryer.”
George believes that the medical-device industry has already been in transition toward a more integrated approach to design, manufacturing, and marketing, but current trends toward integrating design and business functions are making it easier to understand and respond to exact usage conditions and what needs of patients and physicians are truly worth paying for. In other words, designing innovation for value.
2. 3D Printing Has the Potential to Be a Highly Disruptive Force. George is also excited about the potential of 3D printing. “The promise is big, but it hasn’t been realized yet,” she says. “It’s still kind of playing at the edges. But it’s already pretty core in some medical-product spaces,” such as dental implants and other noninvasive devices like prosthetic limbs.
George sees tremendous runway left for change and the ability of 3D printing to add value to innovation. Armed with increasingly sophisticated and accessible design tools, this kind of democratized additive manufacturing can fit new products to both the surgeon and the patient in terms of preferences or dimensions. It also appeals to the business demands of hospitals by shortening the supply chain for quicker responsiveness or lower costs. “3D printing could totally revolutionize a lot of these categories,” she says.
Consider orthopedic implants: “Take knees, for example. Right now, [companies] make them in a ton of different sizes,” George says. “[They] bring a kit of all these different tools and sizes to the hospital to choose which one is used in surgery, and then you have to return the whole kit and replenish it, and sterilize it. Meanwhile, lots of other kits, very expensive inventories, are sitting everywhere in the whole supply chain. Imagine a 3D-printed knee, which is exactly fit to somebody’s size that was just delivered, maybe even printed out at a regional lab, and is delivered immediately into the surgery. So you have better outcomes, you have a better product, and you have a completely different supply chain, and maybe a different business model even as to what the role of a manufacturer is versus the role of a distributor, versus the role of the hospital.”
George’s take on the medical-device industry trends and 3D printing is already playing out. In 2011, the FDA approved the first 3D-printed knee. In December 2014, The Washington Post highlighted the first physician to use the fully customized implant. While critics argue that it is no better than traditional replacements, what is clear is that the medical-device industry is embracing the possibilities and evolving toward them.
3. Eliminate Waste in the Health-Care Supply Chain. George sees vast opportunities for the partnership of great design and advanced manufacturing developments to significantly shorten and tighten up waste in the supply chain.
This capability has significant implications in a cost-pressured industry like medical devices, and for emerging markets that demand healthcare but cannot afford any waste.
George believes the increased alliance between the design and manufacturing functions enables consideration with the healthcare system in its entirety and in ways not possible before. And, as such, the alliance has the potential to ensure that the market (patients, payors, physicians) “has the right device design for the right use [and] that it’s used the right way so that you get both effectiveness and maximum efficacy, as well as absolute safety and quality, but without functionality that you don’t need,” she says.
George highlights the fact that there is tons of expensive inventory sitting unused at different stages in the supply chain—in hospitals, in distribution centers, in manufacturers’ warehouses. She anticipates ongoing innovation around eliminating waste in the supply chain while at the same time improving innovation in the actual devices.
She admits that eliminating supply-chain waste is “not very sexy” when compared to robotics or materials science. But, in resource-poor or cost-pressured environments, the opportunity is vast.