October 11, 2020//-Building a new business requires disruption, but what do you do when a worldwide pandemic threatens the health of millions, shuts down activities for months, and shakes up the global economy?
If you’re a leader, you innovate, responding to unexpected customer needs at unprecedented speeds, leaving the competition far behind.
During a recent virtual discussion, Gayane Gyurjyan, a partner in McKinsey’s London office, explored the business-building imperative in the medtech industry with Benoit Clinchamps, president of MicroPort CRM; Anton Kittelberger, CEO of mySugr; Florian Nickels-Teske, director of Helios Health Institute; and Hartmut Schaper, CEO and general manager of Security & Safety Things.
Joining the discussion were Ralf Dreischmeier, senior partner and the global leader of Leap by McKinsey, our business-building practice, and Chris Llewellyn, a senior partner in the London office. What follows is an edited transcript of their conversation.
The time to act is now
Gayane Gyurjyan: Ralf, could you share some of your observations on new-business building, particularly in today’s environment?
Ralf Dreischmeier: First, business building means taking a disruptive idea, building a business from scratch, and then scaling it. What’s important is bringing all the good things that a start-up environment gives you in terms of speed and leveraging existing assets from the incumbent, whether that’s customers, infrastructure, or intellectual property. This combination creates an advantage we believe makes a huge difference in business building.
Even before the crisis, we observed trends like corporate longevity reaching an all-time low. Increasing numbers of companies need to find new ways to grow, and the traditional ways of transforming themselves are often no longer good enough. So what do they do during a crisis?
The interesting thing is that previous economic crises have always been opportunities to create new businesses. Airbnb and Uber were created during the 2008–09 financial crisis. Microsoft and Dell were created during the oil crisis of the 1970s, and Disney was built during the Great Depression. There’s no question that the current crisis will result in the emergence of new unicorns.
We are also seeing paradigm shifts that will fundamentally disrupt new and existing sectors and create opportunities to build new businesses. Those opportunities will include different ways of using data, new ways of collaborating via platforms, and a fundamental shift to a total remote service provision we believed would never happen or at least take many years—and ended up taking only weeks or months.
Responding to unforeseen needs with unimaginable speed
Gayane Gyurjyan: Speaking of disruption, Hartmut, could you discuss the platform-based approach you put in place with Security & Safety Things? How do you see this approach playing out now in the time of post-COVID-19 next normal?
Hartmut Schaper: First, the platform brings together a lot of players that are used to competing. We have several camera manufacturers that used to compete and app developers that used to work for specific camera manufacturers, because this is a very vertically integrated industry.
We are in the middle of revolutionizing the industry, although we are not completely there yet. But I think it’s changing the way people interact.
We also founded an industry association together with key partners to provide a neutral forum where competitors could talk to each other in a reasonable way, and we’re trying to convince them it’s better to work together, because none of them has the necessary scale for fast software innovation.
It’s a highly fragmented industry, and if you’re only a small player, it’s very hard to get software, scale, and speed for your part of the platform.
And this leads to the current situation, which happened much faster than people thought possible. In a matter of weeks, our partners developed new apps for face-mask adherence, social-distancing measurement, and automatically alerting users about the number of people and any unsafe clustering in retail stores.
No one had developed apps for the average distancing of people before COVID-19 emerged, so our partners could react very, very fast. And having an ecosystem with an open platform proved itself to be much faster than the vertically integrated industry model.
Also, our camera operating system is multipurpose, so you have the flexibility to deploy future software for applications that were never imagined and run them concurrently with other applications. So the platform model has shown an increased flexibility and a huge increase in speed, because none of the integrated vendors could ever have acted as fast.
Gayane Gyurjyan: Having previously spent several years in the medtech industry, I’m very curious to hear your learnings for the industry, particularly with this platform-based approach.
Hartmut Schaper: When we started, a lot of people told us, “There’s a reason why this industry is so vertically integrated, and you cannot do it, because it’s never been done this way.”
But if something has worked in another industry, like decoupling hardware and software, I think it’s worthwhile taking a good look at it to see if it wouldn’t also work in your industry. And the best thing you can do is turn something that used to be a strength of your competition into a weakness, like having them cling to this fully integrated stack and experiencing increasing difficulties.
Gayane Gyurjyan: Benoit, MicroPort is a relatively small player in the cardiac-rhythm-management space. How are you thinking about business-model innovation, and what do you regard as key success factors?
Benoit Clinchamps: We are operating in a very large, very mature, very open, and very competitive market, and we are the smallest player. So we are used to seeing things differently and trying to define new business models.
You can approach a business model from different angles, but I want to share two approaches. The first one is the customer-supplier relationship, and the second is technology innovation.
We develop complex life-sustaining devices and traditionally offered an intensive service to physicians and hospitals to help them implant these devices. But we are trying to change this model and do things in a different way.
So we’re introducing deeper training of physicians and cardiologists to better understand the products and make it easier for them to implant these devices. Transferring this type of service to hospitals and other parties allows us to do things with fewer people than our competition.
Technology innovation is another way to disrupt the way we do business, and remote monitoring of connected devices implanted in patients’ bodies is key for us.
We’ve developed devices with Bluetooth technology that enable us to connect implanted devices with different hardware to provide various services for patients, physicians, and hospitals.
Gayane Gyurjyan: Do you see any large shifts or changes now, given the post-COVID-19 next normal?
Benoit Clinchamps: Yes, and I think that COVID-19 has only strengthened the remote-monitoring need. We must avoid overcrowding in hospitals and waiting rooms, as well as unnecessary trips to the doctor. So remote monitoring is very important now, far more important than it was before.
Ralf Dreischmeier: I think it’s important to recognize that speed has taken on a completely different dimension. Although we talked about speed and moving fast before the crisis, the rate at which new businesses are being built today is extraordinary. And you hear it everywhere now—how two years of digital transformation is now happening in two months.
