Once a mobile phone leader, BlackBerry will pass from irrelevancy to bankruptcy absent an outside purchaser. Medtronic will wisely avoid this fate if it transforms its culture and business models following its recent acquisition of disease management and patient monitoring company CardioCom.
Whereas BlackBerry missed the technology shift that required phones to provide mobile photography, music, and computing —not just calls and emails — Medtronic appears to understand it’s engine needs rebuilding. By further exploiting all the data collected by its chronic care devices (such as pacemakers and insulin pumps) and serving the chronically ill before they need devices, Medtronic can do more to improve health and lower its costs. Indeed, the medical device leader’s recent creation of a business model innovation center in Singapore demonstrates that the company knows that devices alone can no longer fuel its growth.
Much as Caterpillar earth moving equipment levels hills to create easy-to-drive highways, competitive forces commoditize or level out the playing field as markets mature. The only salvation for competitors that lack the lowest cost business model is to find new problems their capabilities – alone or combined with new ones through acquisitions like CardioCom – can solve. That is how they can retain attractive profits. In this sense, value “migrates” from commoditized markets to new markets. Leaders who miss value migration often have a hard time catching up, as we’ve seen with Blackberry.
I’ve watched the rapid value migration in healthcare from my perch in San Diego where the digital healthcare industry is clustered. Often I wondered why Medtronic – the leading provider of devices for the treatment of chronic diseases and the first device company to make patient data from its devices available to physicians – was absent from the scene. Would it be like Kodak, who made the original investments in digital cameras but had the hubris to believe it could wait for instead of lead the migration from film to digital? Medtronic’s recent news suggests otherwise.
Whether CardioCom was the right specific acquisition remains to be seen. But Medtronic’s entry into the digital healthcare market space through acquisition is to be commended for multiple reasons.
- Medtronic will learn via firsthand experience what users in this space want, which will enhance its success in picking and integrating future acquisitions or developing digital healthcare solutions internally.
- Medtronic remains true to its purpose of improving healthcare, thereby enhancing the authenticity of its brand.
- It signals to digital healthcare innovators that Medtronic could be an option in their exit strategy.
- Serving patients other than those with its devices enables Medtronic to solve a new set of healthcare problems and strengthen provider loyalty. It also opens up opportunities to sell services to insurers.
- Medtronic gains strategic agility – being able to move slowly or rapidly into the digital healthcare space as changes in insurer, patient and provider behaviors redefine the size of the opportunity.
I advise Medtronic leaders move rapidly, e.g., through acquisition of digital health niche segment leaders. Each digital healthcare acquisition – e.g., Telcare in diabetes – would add value to earlier ones and preclude Boston Scientific or other competitors from acquiring the best properties on the Monopoly board.
Rapid movement into digital healthcare devices will also create a needed cultural shift for Medtronic managers. The entire digital healthcare market is focused on improving care while lowering its cost by empowering patients, which is not what drove Medtronic’s innovation in decades past. Traditional medical device company leaders will be shocked when they witness how rapidly Obamacare will transform purchasing decisions, a change that digital healthcare innovators fully understand and thrive within. Adding these new leaders to the Medtronic team will change legacy managers’ mindsets sooner rather than later – from a focus on selling differentiated devices to physicians to a focus on improving health and lowering the cost of care by empowering patients. The new mindset will ensure Medtronic avoids its own Kodak moment.
As for BlackBerry leaders, they have the hubris to believe their company can exist as a niche. They clearly missed the larger message of the company’s downfall – its niche collapsed as its former customers sought more holistic solutions from Apple and Samsung. To survive, it should sell out to Motorola Solutions or Lenovo (which would value Blackberry’s data network and data security assets) or to Microsoft as it moves away from a largely software centric business model. The lagging giant would value Blackberry’s enterprise business and help Microsoft build needed hardware buying scale.
What technology or market shift are you missing?