Open innovation in medical technology - Frank Topper2 December 2011
The old days of medical device manufacturers nurturing research and development in secret are gone and a new era of open innovation and sharing suggestions has arrived, argues Frank Tropper of NineSigma, which promotes the practice.
Open innovation is the formal discipline and practice of engaging the world outside to help drive innovation, rapidly and creatively problem-solve and add value. This is not really something new in any industry, including medical devices. After all, surgeons borrowed the bone saw from carpenters, and the scalpel and knife share a common evolution from a primitive cutting stone to tempered steel.
Some of the great medical technology breakthroughs in history - from a bone injector drill to laser surgery to magnetic resonance imaging - come from applying other technologies to healthcare. Humbler innovations such as the electric toothbrush have also borrowed from other industries. But open innovation in the context of today's medical device industry does mark a departure. This high-margin business has traditionally invested heavily in research and development, but relied on a small network of insiders to develop innovations in secret.
For a variety of reasons, that paradigm doesn't work anymore. The demand for healthcare is exploding around the world, as emerging economies with growing levels of prosperity try to keep up with their rapidly growing markets. People are living longer, further increasing the need for better and more sophisticated medical technology. Even the most established medical device companies in the most developed markets have to acknowledge today that they don't have all the answers. Nor is the world willing to wait for these companies to develop the answers from their internal resources alone. This is where open innovation comes in. With this strategy, companies openly reach out to various pools of innovation - universities, laboratories, other companies well outside their usual sphere of influence - to network for new ideas.
Leveraging the knowledge, creativity and investments of others will not only add value to internal efforts but inspire new direction and challenge current thinking while accelerating the innovation process. Especially in an industry like medical technology, these networks must span the globe and include diverse scientific and engineering areas. Secrecy remains important to successful product development plans. Done correctly, open innovation can effectively protect crucial information and strategic directions while sourcing technical breakthroughs openly. Keys to doing so include clever needs articulation, and crowdsourcing strategies and models that benefit and protect both seeker and solver. Agreements can be concluded to protect intellectual property and allow for a free exchange of information as needed.
Open innovation offers companies a much more efficient framework for identifying and finding solutions and reinventing fewer wheels. By getting a new outside perspective, an organisation may even find a solution for a problem it didn't know it had. Open innovation enables a company to reach out and access innovation resources that expand internal capabilities. The best part is that these innovations then become an asset for the company. In the past, companies at the most have relied on outside parties for basic research. Now, with open innovation, external collaboration can include the acquisition and licensing of core and enabling technologies.
The range of possible innovations is virtually limitless. Recent successes through open innovation include a Philips product for hair removal, development of disposable products when plastic proved not strong enough for repeated sterilisation, improvements in endoscopic surgery - the list goes on. Biomimicry, for instance, is a promising source of innovation in many fields. Research on the Venus flytrap has helped improve resealable packaging and scientists have developed carbon nanotubes that imitate the adhesiveness of gecko feet.
One medical technology emerging from open innovation is bone glue, designed to replace screws in reconstructive surgery. This adhesive innovation draws on research of the underwater glue manufactured by mussels. Research on the coating of butterfly wings has helped develop different types of reflective materials. Innovations can come from other surprising sources, as well. Researchers at the University of Pennsylvania recently reported considerable success in using an algorithm developed by the US Office of Naval Research to find underwater mines in tracking tumour cells in kidney cancer. These examples demonstrate the type of unexpected cross-fertilisation fostered by open innovation.
In the medical device industry, this collaborative type of innovation started tentatively with interdisciplinary teams that were big in the 1990s. Now companies have moved on and are using tools like corporate portals, crowdsourcing, consortia and grand challenges as well.
General Electric, for instance, along with Germany's Siemens, is one of the biggest makers of medical devices in the world. But if it wants to mount a challenge to breast cancer in the 21st century, even GE with all its resources cannot do it alone.
And so this year, GE launched the first challenge under its healthymagination initiative with an open call to oncology researchers, businesses, students, and healthcare innovators to submit ideas that will accelerate innovation in combating breast cancer. GE and several venture capital partners pledged up to $100 million to fund these breakthrough ideas that advance early detection, more accurate diagnoses and targeted treatment of breast cancer. Winners will be announced in the first quarter of 2012 and will be offered the opportunity to develop a commercial relationship with GE and the VC partners. One of the goals of the healthymagination initiative, begun in 2009, is to invest $3 billion in research and development to produce at least 100 innovations that will help deliver better care to more people at lower cost.
Collective brains trust
Medical device companies must innovate faster and cheaper. Reaching outside and adapting the collective ideas and technologies from the crowd is a great way to achieve this. Consider that roughly two-thirds of new medical technologies come from small entities such as physicians, start-ups/SMEs and university spinoffs. Add to that the collective technology and brains trust from other technical areas that could be tapped into to help accelerate medical device innovation, and a great case for open innovation can be made. The medical device industry expects the rate of open innovation adoption to increase. This is indeed a trend that NineSigma has witnessed as it continues to help clients identify new diagnostic systems, new materials, new manufacturing approaches, coatings, sensors, IT and other enabling technologies for creating new or improved medical devices.
Among the roles of companies like ours is to function as a matchmaker, to help companies scout out potential partners for networking and to make the arrangements for them to share ideas fairly. Oftentimes, the best partners can be research institutions and companies in completely different industries that it might be difficult for a specialised company to find. Beyond the practical ability to find and rapidly reach thousands of widely distributed people globally, a key enabler to identifying non-obvious sources of innovation lies in articulating the need in a way that can be understood by technical people across a wide range of disciplines.
Open innovation can only work if a company maintains an active programme of technology scouting, concluding agreements on intellectual property rights with research networks ahead of any actual innovation. This streamlines the adoption of a new technology when the manufacturer's needs match research available in any one of these networks.
This is quite a change from the way the industry has traditionally operated but competitive pressures are pushing medical device manufacturers in this direction. With the global economy just barely coming out of a recession, with landmark legislation in the US mandating healthcare reform and with the cost of providing healthcare skyrocketing around the world, medical device companies are being forced to think about new products while having to cut costs and provide better performance.
Combating new pressures
These economic pressures will no doubt become a major force driving innovation in the medical devices industry, a sector where higher-cost, higher-quality products have traditionally been accepted without question. Competition from lower cost operations in emerging markets is also exerting pressure on the industry as consumers demand more value for their healthcare spend and companies seek more value for their product development investments.
A recent PricewaterhouseCoopers report compared industry influence factors in nine important markets and concluded that innovators are most often going to market first in Europe and will begin moving to emerging markets by 2020. This presents a huge challenge to the US medical device industry, which historically has dominated the sector. Among other things, the US industry faces regulatory obstacles that slow down the pace of innovation. The US Food and Drug Administration (FDA) embarked on a Medical Device Innovation Initiative in recent years to expedite innovative product approval.
But a recent report from the US President's Council on Jobs and Competitiveness warns that progress may not be fast enough on that front. "Our medical innovation ecosystem is in jeopardy," the report said. "Investment in the life sciences area is declining at an alarming rate because of the escalating cost, time and risk of developing new drugs and devices. While many factors have contributed to this decline...an important factor is the uncertain FDA regulatory environment."
Progress drives additional needs
But manufacturers in all countries face the challenge of getting products to market faster. Longer life spans, new diseases, and a growing healthcare market all increase the need for speed in innovation. There is a general need across the board to provide high-quality devices at lower prices or provide products with more features or improved designs that will reduce procedure times, increase compliance and deliver better outcomes and shorter recovery times. In addition, sectors like diagnostics and self-monitoring continue to grow in popularity as new product targets. Home or self-care health systems will no doubt become more important, too, as people are forced to take more control of their own care. In fact, the FDA's Center for Devices and Radiological Health (CDRH), which regulates medical devices, calls home-care systems and integrated patient medical information systems, so called e-health technologies, "the fastest growing segments of the medical device industry."
One simply has to consider the incredible growth of smartphone medical app offerings, which increased by nearly 80% in the second half of 2010 alone. Smartphones are changing healthcare both for consumers and providers and even creating a new crowd-based medical services marketplace. And now iPads can be used for neuro-surgery. For hospitals, IT and wireless capabilities will continue to be a big focus.
Innovate or die
What will the next iteration of open innovation look like in the medical sector? Will it be open innovation platforms and services that can effectively integrate companies, small innovators, health care providers, patients and regulators? Will all who have a stake, or participate to advance innovation, gain or be rewarded by the experience? We will have to wait and see. But for the medical device industry, as for many other global industries, the watchword increasingly is "innovate or die."
Open innovation is a way to facilitate that process and leverage the reach that companies must have in today's global economy. Each of these companies assembles a global brains trust and the very existence of that network fosters an innovation culture throughout the company, creating a positive feedback loop. And that is the only way the medical technology industry will be able to keep up with the explosive growth in healthcare demand.
This article was first published in our sister publication Medical Device Developments.