Medtech Take the Wheel: Navigating Your Growth Strategy

2023-09-11

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So, there I was, riding shotgun with my 15-year-old behind the wheel of an old Ford Taurus, white-knuckling the door handle with my right hand and reaching for the wheel with my left as my son swerved all over the intersection in the process of making a left turn – all while assuring me that he’s “got this.”

And did I mention this heart-pounding moment occurred only 300 feet from our driveway? Ah yes, the joys (and terrors) of parenthood.

Our next driving lesson went more smoothly as he began to get a feel for the weight of the car as he turned. I also coached him on looking further down the road as he progressed through each turn. In other words, I want him to focus less on where we’re at on the road and more on where we’re going.

I know it’s a bit cliché, but these early driving lessons do have some strong business parallels for companies in medtech and beyond. Like new drivers, startups often swerve a bit in the early days as they find their lane, so to speak.

ResMed is a prime example. In its early days, back when it was ResCare, the company floundered a bit. The turning point toward success came in 1995. That year, the company’s U.S. revenues grew 92% over the previous year, and its Europe business grew 62%. Business was good and the company had a strong product pipeline but was distracted by costly and potentially debilitating patent litigation and increased competitive noise from more established companies in the United States and Europe. The solution, according to the report, ResMed Origins, was to go international more aggressively. ResCare changed its name to ResMed to avoid confusion with a U.S.-based nursing care company already registered as ResCare. That same year, ResMed went public.

The company could have diversified over the years, but I suspect the key to success has been its focus. That strategy has paid off particularly well in the past two years as ResMed has navigated unprecedented demand created by the Philips recall, on top of pandemic-related challenges and the global supply chain crisis.

As CEO Mick Farrell told MD+DI late last year, ResMed’s guiding principle through it all has been to provide the “gift of breath” to as many people as possible, as quickly as possible, prioritizing those with highest acuity needs.

“This focus on the patient has been a true North Star for ResMedians, and all of our customers, as we navigate the perfect storm caused by these overlapping crises.”

It’s tempting for companies to want to diversify as they grow and mature. Sometimes diversification makes sense and is necessary, particularly in situations where the company is close to hitting its market cap. Other times, it feels like an abrupt lane change that can be jarring for those in the passenger seat (investors and customers).

Masimo, for example, made a rather abrupt lane change when it bought Sound United last year. Down the road, that $1.02 billion acquisition could prove to be the best decision the company ever made. But the Sound United deal was sharply questioned by Masimo investors and paved the way for Politan’s successful proxy battle in June, which could ultimately push founder and CEO Joe Kiani out of the driver’s seat.

As I told my son just this morning before letting him get behind the wheel on the way to school, you have to focus on the road ahead as you steer toward your final destination. And always – always – use your turn signal.

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