EMDT_European Medical Device Technology

European Medical Device Technology, Spring 2014

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newstrendsanalysis 8 | Spring 2014 European Medical Device Technology emdt.co.uk What MedTech Manufacturers Need to Copy from Chinese and Indian Companies In order to compete with local medical device manufacturers in emerging markets, global medtech companies will need to adapt their product development approach. Rather than foisting high-tech, expensive, and complex devices on developing mar- kets, for example, companies need to offer low-cost, portable products that suit the unique needs of each population. Over the last two decades, global eco- nomic growth has been largely driven by emerging markets. The middle class in some developing countries has begun to prosper and, in turn, demanded better healthcare. For Western medical device companies, this trend meant new markets for their existing products. But this segment has already become fairly saturated, accord- ing to Jaideep Prabhu, professor at the Cambridge Centre for India and Global Business. For Prabhu, the real growth opportuni- ties in those countries are at the middle of the pyramid. "People who are currently left out of the growth story, like the urban poor or inhabitants of smaller towns and rural areas, will be part of the development in the next 10 to 20 years," he says. There are more than four-billion people living on less than $9 per day, according to the World Resource Institute. But to successfully target this group, medtech companies will have to take a strategic approach to each market. Gone are the days when European or U.S. manufacturers would simply take prod- ucts designed for use in high-end markets, reduce the features and make them cheaper. This kind of minor adaption is not going to work anymore, accord- ing to Prabhu. Instead, companies need to rethink their products with the local conditions in mind. In rural areas of India, for example, hospitals can't afford expensive medical devices. So, doctors travel to the countryside to do checkups. Devices for these environ- ments need to be cheap, but they also must be robust, portable, and, ideally, bat- tery powered. Chinese and Indian firms have been capitalizing on these opportuni- ties for the last 10 years or so, building "good-enough" solutions for down to 10% of the cost of Western products. This frugal innovation approach simply limits a product to essential features and the use of off-the-shelf components when possible. Rather than pushing a technology to the market, companies need to work back- wards from the market, producing only devices the customers are able to pay for. If Western companies want to seize a growth opportunity and not be trounced by domestic competition, they should copy this model. Progressive companies like Sie- mens and GE already have set up a number of local R&D facilities to develop accord- ing to local needs. Between 2003 and 2007, multinational companies established more than 1100 R&D centers in India and China, investing a total of $24 billion. And this tactic is paying off. GE's John H. Welch Technology Center in Bangalore, for instance, developed an ECG device for the local market costing less than a tenth of a similar device in developed countries. "Traditionally, they would build it in-house, develop all the technology from scratch with high quality standards. Instead, they copied domestic competitors using off-the-shelf components," Prabhu says. The device needed a printer, for example, so researchers used a bus ticket printer. For the keypad, they used a compo- nent from a telephone. But the benefit doesn't end with the emerging market, thanks to reverse innova- tion. After being developed for India, the device now has FDA approval and is used in the U.S. for emergency applications. "There are not yet too many products that are developed in emerging markets that are flooding western markets," Prabhu explains. "However, the ideas and the mind- set and the approach to innovating frugally in emerging markets will come to the West." —Thomas Klein Medtech companies adapt their product development approach. Source: GE ES430950_EMDT1405_008.pgs 04.29.2014 03:39 UBM black yellow magenta cyan

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