As we discussed in a previous post, medtech companies are increasingly using M&A to accelerate growth, complement product portfolios and add talented personnel. In addition to the traditional role of business development as the execution arm of upstream strategy, we’ve seen some of the best business development groups take on a broader mandate, which extends their impact further upstream and coordinates more closely with traditional marketing functions. With that vision, the business development group obtains a solid grasp of market trends, unmet customer needs and emerging companies of interest. To do so, the business development group should work closely with commercial leaders to align on objectives, strategy and opportunity identification. Additionally, the group needs to coordinate with R&D leadership to align on investments and initiatives which complement potential external opportunities.
Although these concepts may sound straightforward, the execution can vary dramatically. Here’s what separates successful business development groups from those that are merely average, in terms of their upstream capabilities:
- Aligning strategic mandates with the C-suite. Top business development groups have a strategic mandate, which will vary based on their overall corporate strategy. As one head of business development told us, “We have a focus on growth and innovation within our product categories. That’s why our group reports directly to the CEO.” The strategy is often geared toward strengthening the portfolio with new technology via an acquisition. In other cases, though, the strategy is related to opening access to new customers, new distribution channels and new markets. In those cases, the financial link is less important than the commercial one. Reporting to the CEO is not right for all organizations, though. For firms which act as holding companies, the ideal strategy tends to be a reporting line through the CFO instead.
- Identifying unmet customer needs, market trends and competitive activity. Working closely with the marketing function, top business development groups act as an extension of marketing itself, developing a clear point of view on unmet customer needs and market trends to identify new opportunities. For a medtech firm, this could include broad themes such as robotics or site of care reimbursement as well as more company-specific items such as relevant emerging technology. Similarly, top business development groups keep a finger on the pulse of the competitive environment and even run competitive wargaming workshops, elevating themselves to a status well beyond back-office financial support and much more of a strategic partner. This is also why corporate strategy and business development are increasingly combined into the same team.
- Investigating potential external collaborators and acquisition targets. All business development groups are tasked with analyzing potential targets, but the exceptional ones have deep enough market knowledge to focus on high-priority targets quickly and eliminate wasted energy on others. The best functioning business development groups can cast a wide net, yet efficiently hone in on only high-yield targets for further evaluation. This is especially important when the potential target landscape is broad and complex, since leads come from a variety of sources, including outbound efforts with industry trade groups and academic collaborators as well as inbound inquiries from a variety of interested parties. When done well, this creates unique business opportunities and makes the company a magnet for innovators via both formal and informal/word-of-mouth channels, similar to a venture capital model. The fundamental processes can then scale as necessary to handle small-to-medium tuck-in acquisitions as well as more significant game-changers.
- Becoming the focal point of communication, not just analytics. Since the fast pace of M&A activities can leave the door open for breakdowns in communication, best-in-class business development groups designate specific communication channels, topics and stakeholders for multiple business units or geographies, taking into account existing internal power structures and ways of working. Since centralized business development groups are often quite lean, doing this well requires forethought and discipline, as well as close coordination with divisional partners. For example, divisions or geographies could be responsible for feeding the central team with localized information, while the central team is responsible for establishing frameworks and executing consistent processes across the organization. “Market research processes, financial hurdles and cross-company priorities are all examples of elements that we centralize, while we have an extended team in the local businesses executing on their specific needs,” said a business development leader.
- Orchestrating the right mix of external and internal personnel. “We utilize a variety of consultants, bankers and internal experts for our M&A work,” said one business development leader. “At times, we can have nearly 100 people conducting parallel activities, and we need to coordinate all of them.” Top firms use rigorous project management office techniques to track activities, assess and mitigate risks and ensure high performance. Core business development roles require experience, and it’s important to keep people in the role for enough time to gain and demonstrate that expertise. This is generally not the type of role for a short-term rotational assignment or internship. Best-in-class strategy and business development groups define roles within the team such as market landscape assessment, customer needs, competitive activity, communications, financial analysis, and project management, each of which manages a focused team and set of activities.
Successfully expanding the traditional role of the business development function requires strategic thinking, plus a combination of agility, resourcefulness and thoroughness, all supported by clear processes, specific roles and deliberate communication strategies. Getting these aspects right will help leaders identify and analyze potential opportunities, reduce risks and obtain a competitive advantage.