How would you react if you found out that your main competitor had discovered a new commercial model that is two to three times more effective, enables better outcomes for patients, and delivers greater overall value in health care? Let this sink in.
In the medical technology industry, a next-generation commercial model—one that capitalizes on digital and omnichannel interactions—can lead to a twofold or threefold increase in the productivity of sales representatives, as measured in revenue. These are the results that early pioneers of next-generation commercial models have achieved in medtech. But to get there, they had to completely rethink their old commercial models. They had to design a target future customer journey (rather than optimizing existing processes); put marketing in the pole position to generate, nurture, and qualify leads; build a bionic sales force with performance-enhancing technologies; and expand their focus beyond selling to actually making customers successful. These leaders also took an agile, use-case-centered design approach along the customer journey to experiment and learn one step at a time, build the required digital enablers on the way, and ensure strong change management.
The beauty of this new model is that it goes beyond improving commercial effectiveness. It also enables a closer partnership between medtech companies and health care providers to deliver better patient outcomes at lower costs, thus contributing to a more sustainable health care system. Digital marketing, self-service portals, and virtual-engagement models provide physicians and hospitals access to a richer reservoir of knowledge and expertise that is needed in the delivery of care. And taking the customer journey all the way to customer success management makes it easier to do business while at the same time moving beyond selling products to providing solutions that unlock better value in health care.
We have completed our third “milkman” study, again with broad participation from across the sector. We surveyed more than 8,500 employees in commercial functions at medtech companies and conducted over 200 interviews with senior leaders across the US, Europe, Japan, and the BRIC countries. We also extended our financial and organizational benchmarking database to 150 medtech businesses worldwide—including nine of the ten largest companies in the industry. The benchmarked businesses collectively represent more than $85 billion in annual revenue. (For details on earlier publications in this series, see “The Evidence Continues to Build.”)
As with previous surveys, the new results illustrate the value that firms can unlock by redesigning their commercial models. Overall, the industry has still made little progress, but those organizations that have taken the steps we recommended are vastly outperforming their peers. And in the past year, the coronavirus pandemic has opened eyes at many medtech companies. Because commercial teams were forced to find new ways to interact remotely with their customers, they saw the potential in building a next-generation, omnichannel commercial model.
That was a kind of forced experiment for the industry, but medtech companies cannot—and should not—try to revert to their old ways after the pandemic has passed. Instead, they should follow in the steps of leading players. In this report, we lay out our view on how companies can design the next-generation commercial model and realize its potential.
Until the advent of COVID-19, the medtech industry had only made slow progress in fixing its traditional, high-cost commercial model since our previous studies in 2013 and 2017. On average, medtech companies are still spending two to three times more on selling, general, and administrative (SG&A) expenses (as a percent of the costs of goods sold) than the typical technology or industrial company. Our analyses had originally identified three selling-model archetypes: selling primarily to clinicians, primarily to administrative decision makers, or a hybrid approach targeting both groups. For all three models, the productivity of sales reps has remained roughly the same over the past decade.
The pandemic is changing this. Before COVID-19, a few pioneers had started to experiment with a next-generation commercial model. But the challenge to connect remotely with customers during the crisis has unleashed dramatic change in commercial model design—with highly promising results. As illustrated in Exhibit 1, the commercial productivity of remote sales reps can be double or even triple that of traditional field reps when embedded in a well-oiled, omnichannel model.
This has led to revolutionary insights for a few early movers that are already shifting massively to this new way of working. (See “A Company Unlocks $5 Billion with a New Commercial Model.”)
As with previous surveys, we asked respondents to rate their companies’ commercial capabilities in five key functional disciplines: sales; key account and distributor management; marketing; market access and pricing; and services. Respondents ranked their capabilities as intermediate across most areas (as was largely the case in previous studies). In two critical areas—leveraging next-generation channels as well as IT and digital enablers—respondents gave their companies only a basic rating. (See Exhibit 2.)
To explore these ratings in critical areas further, we asked detailed questions about the medtech industry’s readiness to reimagine its go-to-market model in the wake of COVID-19. The results leave no doubt about the opportunity: there is a massive gap between companies’ current capabilities and aspirations. Most do not yet have the capabilities in place to develop and implement a next-generation, omnichannel commercial model—but they have become fully aware of its potential.
In our last milkman study, we analyzed how companies can generate shareholder value by transforming their commercial models. We have continued to track that impact. Again, we started measuring total shareholder return from six months after the kickoff of such programs for a period of five years. Exhibit 3 highlights the industry’s continued bifurcation. Those companies that are innovating their commercial models and improving their capabilities are winning in the market, while those that have not yet acted face an increasingly urgent need for change.
The transformative actions we recommended in our first milkman publication eight years ago are still highly valid. A successful commercial model transformation needs to be rooted in an actionable growth strategy—one that prioritizes the right market segments, determines how to win in those targeted segments, and helps company leaders tailor the commercial model accordingly. And the foundational requirements remain the same. Companies must build best-in-class commercial capabilities by reinventing clinical selling; partnering better with key accounts; building real marketing muscle that drives home the value of products; investing in market access and pricing capabilities; and making service a differentiator and source of revenue.
But now, we’re building on our original recommendations with six next-generation design pivots that will turn your commercial model on its head.
Start by designing the desired future customer journey. The first pivot is to become more customer-centric by designing the ideal future customer journey, even before thinking about how to set up internally. Companies can use an end-to-end, digitally enabled omnichannel approach to help customers discover and successfully use their products and solutions. The approach tailors differentiated value propositions by customer segments based on their needs and potential. (See “Bringing a Next-Generation, Omnichannel Commercial Model to Life.”)
Redesigning the customer journey in this way requires deep insights. We have found ethnographic research—conducted by shadowing customers in their daily work—to be particularly valuable in this phase. Many medtech companies will find that their customers are already informing themselves online about products and solutions before discussing options with field forces. Company websites and peer-to-peer exchanges on social media are key sources for this information.
Companies are also often surprised by the extent of pain points and frustrations along the customer journey. As a result, commercial leaders may question whether the traditional go-to-market model—in which products and services are pushed through the sales force—is the optimal approach for finding and delighting customers.
Put marketing in the pole position. Just as an engine needs fuel, an omnichannel commercial model needs customer leads to succeed. Cold calling only works in limited cases. The underlying idea here is to identify new business prospects more efficiently. By capturing customer demand at the right point in time—through personalized, data-driven, and digital marketing methods—companies can source, nurture, and qualify concrete leads for a seamless handover to the sales force. Marketing automation and self-service portals can make this new approach scalable. We have found digital marketing use cases highly impactful, with 30-fold increases to a company’s search engine visibility and up to 90% of the opportunity pipeline value fueled through performance marketing.
Build a bionic sales force. Bionic sales reps, who effectively augment their human capabilities with machines, are fast becoming a new reality in medtech. The important unlock comes from the success of remote sales teams composed of sales reps without cars. Because remote sales teams don’t meet customers in person, they instead depend on the flow of leads from marketing, along with technologies such as data analytics, next-best-action nudges, self-dialers, virtual-demonstration kits, automated call reporting, AI-supported coaching tools, and other similar solutions. When set up well, remote-selling use cases vastly accelerate growth. The same can be said about blended selling teams, on which remote and field reps work in tandem. The combination of relevance (through marketing’s qualified lead engine) and increased productivity (stemming from no travel or waiting time) unleashes an unbeatable power. And, counterintuitively, more-advanced products and solutions tend to be easier to sell remotely. Commoditized products, in contrast, provide less of a differentiation angle to talk about.
We have found remote-selling use cases to be highly impactful, as they increase sales rep productivity by two to three times. Moreover, this approach unleashes innovation that benefits field forces. For example, it can turn a CRM system from a perceived administrative burden to a powerful support tool—the equivalent of a jet cockpit with all the right flight instruments, navigation support, and even an autopilot.
Make customers successful. Customer loyalty has a huge impact on longer-term profitability. Reducing customer churn tends to be much cheaper than acquiring new customers. Yet a large disconnect still exists in many medtech companies between marketing, sales, and customer success management. In terms of improved outcomes for patients and lower costs of delivering these outcomes, medtech companies can play a huge role in helping hospitals and health systems deliver better value in health care. The recent forays in Europe into value-based procurement are opening the doors widely for such partnerships.
But it is often the day-to-day customer processes—which tend to be siloed in customer service teams, supply chain organizations, and accounts receivable functions—that are creating the most severe pain points for customers (and often distract sales reps from selling to solve burning issues such as back orders and invoice disputes). We have seen programs that are geared toward making it easier for customers to work with a medtech company—by redesigning and automating customer operations processes end-to-end from offer to cash—improve sales and unlock efficiencies.
Apply an agile, use-case-oriented design approach. We recommend taking an agile design approach. Prioritize specific use cases with high business value as lighthouse projects—such as a digital-marketing-based lead engine and a remote-selling capability—and deliver them in successive sprints along the future customer journey. Instead of aiming for the perfect solution, which will require significant time and capital to develop and risks missing the mark, the idea is to develop minimally viable solutions within weeks. Experiment and learn, celebrate early successes (or fail fast), and continuously refine based on customer feedback—all while developing internal capabilities.
This sounds easy in concept but represents a massive shift for many companies. However, once companies have experienced this kind of agile approach, they do not want to return to old ways of working. In our experience, it is advantageous to start with sales-oriented use cases, such as building a remote-selling capability for a specific customer segment. This allows a company to test and learn as well as generate measurable top-line impact right from the beginning. In that way, companies can build a foundation to test the impact of additional use cases like digital marketing or sales analytics, and thus build momentum for a broader transformation.
Build required digital enablers along the way. The sixth pivot is to define the required digital enablers—in terms of the new skills, sales and marketing technologies, and data and digital platforms—in parallel to implementing the first lighthouse use cases. While an upfront assessment of available digital tools and capabilities naturally makes sense at the start of a next-generation commercial model program, it is much more practical to educate the digital enablers through use cases rather than delaying the onset of such an initiative by trying to fix the foundations beforehand. For that reason, we recommend relying on pragmatic off-the-shelf tools initially.
When it comes to required skills, a crucial aspect is not to outsource next-generation commercial capabilities, which are core drivers of future success. Rather, we recommend upskilling the organization and building internal experience while acquiring digital talent (such as marketing-automation specialists, data engineers, and data scientists) to accelerate progress. A build-operate-transfer partnership with external experts can be an effective approach to ensure a fast and successful start, with the clear objective of sharing the required know-how and enabling the organization accordingly.
Getting all six pivots right requires careful change management, which is essential as the silos between sales, marketing, and other functions need to fall; capabilities need to be centralized to achieve synergies and scale across businesses and countries; and new ways of working are established. Start off by designating a high-performing team, identifying and embracing new behaviors, and constantly iterating on the approach and design with senior leaders (whose visible support of the effort is crucial). As a second step, establish an inclusive approach—and cocreate change with your commercial organization—to ensure full buy-in in the transformation. You can never win by forcing the sales force to change. But if you capture their hearts and minds, there is no stopping them.
The COVID-19 crisis has changed the game. The challenge to connect with customers remotely has shed new light on the potential of a next-generation, omnichannel commercial model. Our research has shown the high aspirations—and low starting point—medtech companies have in building the related capabilities. There is a substantial gap that needs to be filled. Early pioneers have seen highly promising results and are already shifting massively to this new way of working.
The transition to a next-generation model isn’t easy. By following the six pragmatic design pivots discussed above, companies can position themselves to capitalize on the new era of marketing and sales in medtech. The time to act is now. And those that get it right stand to be rewarded for their underlying business model innovation. They will be creating better value in health care.
The authors are grateful to their current and former BCG colleagues Erik Adams, Stéphane Cairole, Victor Corzo, Torben Danger, Christophe Durand, Anders Fæste, Tammer Farid, Colm Foley, Stuart Gander, Erik Gilbertson, Benjamin Grosch, Dan Grossman, Henri Hagenmüller, Charles Hendren, Sultan Hochweiss, Jason Jager, Hrvoje Jenkač, Frank Jia, Nicolas Kachaner, Meg Kedrowski, Torsten Kurth, Bob Lavoie, Sam Karita, Wyatt MacKenzie, Brad Martens, Shogo Nishida, Johan Öberg, Barry Rosenberg, Daniel Schroer, Christoph Schweizer, Carla Spörle, Vaidyanathan Srikant, Johannes Thoms, Sahil Sanghvi, Mills Schenck, Simon Völler, and Gerd Wübbels for sharing their medtech expertise during the development of this report, conducting senior-management interviews, and helping us engage with their clients.
The authors are especially grateful to their current and former BCG colleagues Anna Heikkurinen, Clara Beck, Laure-Anne Deltort, Gian Gallati, Laura Hansmann, Angela Kaiser, Fabrice Kalmbacher, Patrick Kessel, Lorenz Kunze, Nikola Lampe, Naomi Meertens, Malavika Raju, Cristina Rolandi, Mikaela Sörman, Linda Spahiu, Beate Steen, Maxime Ueberschlag, Ville Vilkuna, and Karin Zhu for their contributions to the research and analyses contained within this report.