December 8, 2015

Benefits of Small Medical Device Manufacturers

In the “Small vs. Big” competition in Medical Device manufacturing, “small” appears to be winning!
Avatar Rick Gallisa

The medical device manufacturing industry is driven by innovation to find new cures or approaches to help people live better lives. This drive for innovation, however, extends beyond what products to make – it also applies in the context of safety and compliance. It’s all about getting the right product to the right market, in a safe and effective way.

Given the investment in time, labor and resources involved with New Product Introduction, one might infer that big, established manufacturers have all the advantages. In fact, this is not always the case. In several ways, smaller, more nimble companies can do better than the big players.

Here are five ways smaller medical device manufacturers have an advantage of their larger peers:

Achieving regulatory compliance

Size can be a hindrance when it comes to things like tracking processes, genealogy and reporting. Specifically, broad spectrum changes to adhere to new compliance policy updates, or the regulatory approvals associated with a change of product or new improvement can be quite substantial within your existing “legacy” IT structures. The larger a company, the more complex and difficult it is to document and comply with all the related changes of a process improvement.

Adopting new technologies

An important transformation impacting the entire manufacturing industry is the adoption of paperless processes. Medical device manufacturers are a bit different in that they lag other industries, predominantly due to additional regulatory hurdles and associated costs. This conversion can be a major challenge for the big companies, with their long and deep investment in legacy IT ecosystems. It can be a lot easier for smaller, newer manufacturers that are fundamentally starting from a blank slate. “How should we design for and incorporate IT technologies into our manufacturing – right from the get-go?”

Paperless manufacturing can cover paperless processes in all aspects of “make”: production, logistics, quality, maintenance and labor activities. The benefits to a medical device company are many, and include instantly verifiable compliance, better tracking and containment, faster responsiveness, ability to identify and readily share best practices, and a plethora of data that quality, design, and industrial engineers can analyze for continuous process improvement.

Digitization of how business gets done

Going paperless is actually just a first step in what process innovations are in store for the manufacturing industry. Sometimes referred to as “paper on glass,” simply taking an existing process and introducing a paperless component is really not that revolutionary. Sure, it is a great first step. It may save some paper printing costs … but the real opportunity is to reinvent how business gets done. New digitization strategies offer different make and distribution models, crowd-sourced product development and innovation as well as new service-based business model opportunities that simply can’t exist in an analog world. Visualize the revolution of possibilities that are coming with Additive Manufacturing alone! <note:  a LOT more coming on this subject

Smaller, more agile medical device manufacturers that have not yet finalized their business plans might have a first-mover advantage to innovate faster – and not be constrained with legacy thinking along the lines of “this is how we have always gone to market.”

Viewing manufacturing as a strategic enabler

Big medical device companies simply aren’t used to thinking this way. In the traditional view, manufacturing is a costly requirement of getting to market; almost a necessary evil. For small med device firms, however, manufacturing innovation is not just a means to build products or meet regulatory requirements – it is a potential source for competitive advantage. Smaller companies now recognize that manufacturing can be a point of differentiation, perhaps even the key to winning new business in their respective target markets, particularly with shifting supply chains and co-competition alliances

Hiring new employees

Being an early adopter of new technologies, business processes or go-to-market strategies has a far wider impact on your business than the efficiency, performance or operational excellence achievements that are made possible. Communicate your strategies and “willingness” to be a leader, and you might become a sought after company for new graduates and other highly desirable and skilled employees. Of course, both large and smaller med device manufacturers could embrace this strategy, however, smaller companies seem to be making better progress in this area, at least so far.

The concepts presented above are not new. We can see the power of this kind of thinking in another industry—telecommunications. In the Latin American market of Chile, the telecom industry didn’t follow the typical maturation path of starting with hard wired lines for many reasons, notably prohibitive costs across a large geographical country.  Instead, they largely skipped land lines and invested directly in mobile communications. The result was an instant transformation and a bastion move in this industry.

That’s what is happening in the medical device industry, as smaller companies are racing ahead of the big ones in terms of manufacturing innovation. They are jumping straight to the latest and best technologies.

The medical device industry is driven by innovation. Now, small companies are proving that manufacturing innovation can be just as important and transformative as product innovation. The question is will this cycle be broken? Will larger companies find ways to catch up?  We have seen a relatively high number of mergers and acquisitions over the past 24-30 months, yet putting corporate “parts” together can only go so far for the large players.  Moving right along, we are also seeing a few visible – and highly political – “inversion mergers” to increase investor value through creative treatment of many years’ worth of pent up, and now newly repatriated earnings, as well as improved basic tax structures!

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