Three Barriers to Medtech’s Analytics Success—and Why Companies Should Overcome Them Now

Ganesh Vedarajan

Data-driven decision making is fast becoming the norm for most industries in an effort to drive efficiencies, reduce costs, assess and predict customer behavior, improve customer service, increase personalization and more accurately plan for the future. For medical device manufacturers, that analytics-led evolution now has yet another impetus, thanks to the Affordable Care Act’s charge to accelerate hospitals’ focus on improving patient outcomes ( http://www.zs.com/publications/articles/hospitals-have-spoken-how-medtech-can-benefit-from-the-affordable-care-acts-focus-on-outcomes.aspx ) . Medtech firms need data-driven insights to better position themselves as hospitals’ partners in that effort—and to sell and cross-sell more effectively via compellingly bundled product and service offerings. 

However, despite the promise of sales and marketing analytics, many companies in medtech and across the marketplace are not yet capitalizing on the technology. With the help of the Economist Intelligence Unit, ZS recently completed a cross-industry study to assess the impact from companies’ analytics investments and found that the companies’ results have been underwhelming. Among 448 respondents, 70% rate sales and marketing analytics as “very” or “extremely” important to their competitive advantage, but just 2% report that they’ve managed to generate a “broad, positive impact” from their analytics investments thus far.

Ganesh Vedarajan, a managing principal at ZS and leader of the firm’s global medical products and services practice, talks about three barriers that companies in medtech and other industries often face and why it’s worth their effort to start working to overcome them now.

Q: The study found that the impact from companies’ sales and marketing analytics has been less than stellar. Does that line up with your experience in medtech?

A: Overall, they're probably in line. Only a small number of companies have figured out how to succeed with analytics, but medtech is a little different than other industries. It’s not that they’re struggling; they’re simply not doing much of it yet.

Companies are doing basic customer analytics, but there’s an opportunity to become much more sophisticated with segmentation and valuation. Most companies don’t have good systems for integrating across different business units, so the information required to effectively cross-sell is lacking. Pricing analytics is also a gap. Significant revenue leakage is occurring via poor pricing and contract performance, and robust analytics can help.

Q: Given that most industries—not just healthcare—are looking at some form of sales and marketing analytics, why isn’t medtech further along?

A: The traditional medtech selling model has been highly personal, based on one-on-one encounters. A lot of power rested with sales reps, meaning that it hasn’t been a necessity to use analytics to understand and influence the drivers of the selling process.

That’s changing, however. The traditional one-to-one relationship is giving way to more of a B-to-B sales model. Customers are now highly variable, and some of them are quite complex. Because of that shift, there’s a lot more value in using analytics, yet many medtech companies still have one foot in the past and one foot in the future.

Even when companies do recognize the value of analytics, they have to balance that with other “must invest” categories. For example, the government has mandatory reporting requirements on quality, and if I don’t yet have a capability to do that, I need to figure out how. So, in many cases, it’s not that they’re convinced that there’s no value in analytics; there are just a lot of other priorities.


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Q:
What are the main applications for medtech?

A: Externally, promising applications are to better understand customers, who are becoming quite complex due to consolidation and more advanced approaches to procurement. Analytics can help medtech firms understand their potential, their decision-making styles and how best to influence purchasing decisions. Analytics can also capture more detailed real-world evidence about the economic value of specific products.

Internally, selling, general and administrative expenses are still quite high, sales force costs are high and marketing costs are increasing. These are areas where analytics can pinpoint where to trim and reallocate resources to improve financial performance.

Q: What are the barriers that medtech companies need to overcome?

A: There are three main ones. The first is that the value of analytics has to become clear in the organization, and ROI to senior management is unproven. There’s still resistance and skepticism among some executives that analytics can create value. They’re still trying to operate in a world where sales reps have a lot of power, and they think that they can still win through one-on-one selling.

The second barrier is related to change management and embedding analytics systematically into the existing business model in areas like customer profiling and targeting, sales force design, and marketing effectiveness. Once leadership buys in, the rest of the company has to. There is still a lot of inertia to continue with the status quo. We must be clever in how we embed analytics into the business model and force analytics into the existing processes, involving stakeholders as early in the process as possible to garner their buy-in.

And the third barrier is to build a world-class analytics capability, one that achieves scale efficiencies and allows companies to use the latest data sources available. The good news is that many medtech companies have already made some good investments in technology, so they’re in a better place to add on to the IT stack than they were five years ago. Back then, they didn’t have a good understanding of many customer-facing activities because they didn’t have a solid CRM system. Now they do. Some companies have been frustrated that those investments haven’t paid off, but using analytics to improve customer intelligence is one way to increase the ROI.

Q: With a highly functional analytics capability, what can a company do now?

A: Let’s take a key account manager, “Bob.” The first thing that would be different with more robust analytics is that Bob would be able to truly understand his account. He could see the profitability levels of different departments within a hospital. Where are they performing well? Where are they not? Some of this data is available from the hospital, but it would be calibrated with econometric models.

Bob would also have access to better patient analytics. Where are opportunities to reduce infection rates? Is there an opportunity to reduce length of stay by minimizing procedure complications? This will help Bob truly understand the clinical and economic drivers within a hospital.

All of this will help Bob build a specific bundled service offering that is precisely targeted to help the hospital, at a price that optimizes profits. Bob will understand exactly where the opportunity is to better cross-sell across service lines to maximize the value that a hospital can get from his organization. This is a huge gap right now.

Bob also will be able to offer new programs and services to create a better partnership with his account. Analytics will help him build a strong business case to show the value of this partnership.

Moreover, Bob can more effectively synchronize selling activities. He will understand which channels his customers prefer, and he’ll know which reps are calling on which department. All of this information will help him coordinate across his company and create a better customer experience.

Q: Given that companies are struggling and analytics practices are evolving rapidly, is it understandable that some executives may want to hold off until they have a clear sense of the value that it can generate?

A: I don’t think so. Provided that companies can overcome a bit of organizational inertia, they will start making investments that pay for themselves over time. We think that the value is there, and it’s only going to grow for companies that start building the foundation. In the future, it will be impossible to survive as a medtech company without a strong analytics capability.


For more analysis and insights from the study, read “Broken links: Why analytics investments have yet to pay off ( /publications/articles/broken-links-why-analytics-investments-have-yet-to-pay-off.aspx ) .”


Download this Q&A. ( /-/media/files/publications/public/three-barriers-to-medtechs-analytics-success.pdf?la=en )


About the Expert




Ganesh Vedarajan is a managing principal based in ZS's San Mateo, Calif., office and the leader of the firm's global medical products and services practice. Ganesh advises clients across a range of issues, including brand marketing, marketing execution effectiveness, managed care marketing and contracting, sales strategy, and commercial analytics and operations.