How to create a competitive advantage in medtech during economic instability – Med-Tech Innovation

Isabella Schmitt, MBA, RAC, director of regulatory affairs, Proxima Clinical Research and principal, M1 MedTech advises how to navigate turbulent economic times.

Economic instability is expected to continue throughout 2022 and 2023. Major impacts to the supply chain, caused by various factors, are increasing expenses across the board. Recurring costs for goods and services, such as electronics supplies and parts, plastics, composite materials, fuel for product delivery, utilities, office space, and supplies, are rising. Business taxes are expected to climb, and salary demands will continue to increase to keep up with inflation. During an inflationary period, such as this, maintaining profitability and keeping up with demand can be a challenge. The market will likely slow until global supply chains stabilise, and manufacturers get the materials and resources they need.

During inflation, companies focused on cost leadership strategies will likely struggle from increased expenses. On the other hand, companies that focus on differentiation will likely fare better because true differentiation results in more price inelasticity, meaning the demand for the product will remain regardless of pricing. Companies with truly novel and necessary products will weather the storm a bit better by pushing costs to buyers.

However, during a recession, investment in R&D, the very mechanism for creating innovation and differentiation, is often stifled by companies needing to maintain profits in a rough market and investors being more gun-shy as their dollar doesn’t go as far. One advantage medtech companies have had historically is the focus on revenues over profits, meaning shareholders are often accepting of companies re-investing in growth strategies to create more products to sell versus focusing intensely on the bottom-line. If this trend remains during this recession, investing in truly disruptive technologies would be beneficial for medtech investors and strategics alike, as they are more likely to invest in technologies with a moveable pricing scale.

Many analysts concur that medtech can weather the storm but is not completely immune to the recession. Companies can do a few things to stay ahead during challenging economic times, most of which they should be doing anyway. 

While economic instability feels unpleasant for everyone, it doesn’t have to mean the end of your company. There is a potential silver lining for outstanding companies. Companies with a solid business infrastructure, strong procedures, significant foresight, and stellar teams, will stand out. Times like these are Darwinian and companies with the fittest DNA will survive and ultimately thrive when they outlast their competitors.