Upgrading medtech commercial operations in China
Five levers for transforming the medtech commercial model in China
Multinational and domestic medtech companies could consider reevaluating their commercial model to sustain or increase growth in China, focusing on five interlinked functions in operations:
- channel restructuring to prepare for the price-sensitive environment while expanding coverage to sustain the growth
- commercial resources reassessment to adapt to evolving strategic priorities and outperform the market
- omnichannel customer engagement to improve sales efficiency, broaden reach, and enhance customer experience
- ecosystem partnerships to develop new innovation engines and deliver integrated solutions to a broader customer base
- a focus on the basics to cope with margin pressure and the rise of local players
Which of these levers is most difficult to pull? Which one can be a source of competitive advantage even for companies that have already started channel reforms or partnership scouting? There isn’t a singular answer. The optimal response will vary by segments and companies. Business leaders will need to explore suitable approaches with appropriate levels of emphasis and execution.
In our view, complex channel restructuring is most urgent for companies that relied heavily on high-markup distributors and for those whose portfolios were most affected by the government-mandated price drop (reforms known as volume-based procurement [VBP]5). That said, VBP has created opportunities to serve broader markets. To tap into them, companies will also need effective ways to acquire new customers and retain existing ones via an omnichannel approach. Moreover, innovating through license-in and partnership agreements can help propel sustainable growth in the mid to long term. As VBP and trends in the macroeconomy ease the overall pace of revenue momentum in medtech, companies need to plan now to avoid having to continually put out fires in the near term.
Companies will also need to strengthen capabilities along the levers. For example, companies that have historically focused on consumables and that are now seeking to add equipment into their portfolio will need to recruit distributors with experience in engaging nonclinical stakeholders. They will also need to reassess their sales capabilities and resource allocation.
Great companies excel in this analysis. They can assess early the development needs for each lever, precisely identify the real source of advantage, efficiently transform commercial capabilities and models, and successfully outpace market growth.
Source: Jody Tian, Wei Wei, Kevin Y Wu, and Delphine Zurkiya (13 Mar 2023) 2018 © All Rights Reserved.