Medtech companies can achieve above-market growth and margin expansion by enhancing their 'Commercial Quotient', a concept highlighted in a report by McKinsey. This involves investing in key areas such as basic, omnichannel, and ecosystem selling capabilities. Since 2020, the medtech industry faced challenges with lower growth rates compared to previous years. However, in 2023, growth returned to pre-pandemic levels.
Based on research involving over 60 medtech companies, McKinsey's analysis indicates that commercial capabilities are a strong predictor of growth. Companies with the most advanced commercial capabilities experienced a Compound Annual Growth Rate (CAGR) 1.4 times higher than those with average commercial capabilities. Conversely, companies with less developed capabilities underperformed market growth segments.
The report emphasizes why commercial capabilities are crucial in today's medtech landscape, influenced by changing market factors such as commoditization, high growth categories seeing new entrants, and evolving health system dynamics. These changes have led to shifting sites of care, capital constraints, profit-and-loss (P&L) issues, and labor shortages in healthcare, impacting medtech commercial models.
McKinsey's Commercial Quotient framework evaluates companies across three main areas: basic commercial capabilities, advanced omnichannel capabilities, and next-generation ecosystem selling. This framework assesses over 40 commercial practices across these areas. The report highlights that there is significant room for improvement in these areas, with opportunities to enhance performance.
Key practices identified as predictors of growth include:
- Implementing well-functioning alternate sales channels to optimize resource allocation.
- Investing in customer relationship management engines for data-driven insights and recommendations.
- Adhering to pricing processes to drive profitability.
- Focusing on digital marketing excellence to cater to healthcare professionals' preferences.
- Running orchestrated omnichannel 'plays' to improve sales coordination.
These practices, when implemented effectively, can help medtech companies capture more customers, accelerate profitable growth, and outperform the market. By addressing these areas, medtech companies can enhance their commercial capabilities and position themselves for success in the evolving industry landscape.
