Medtronic: Adding an “M” to “IoT”

The Internet of Things is so important to the medical industry that its acronym adopted an additional letter. The Internet of Medical Things, or IoMT, has the potential to touch nearly all aspects of patient care. Analysts estimate IoMT to grow at 37% CAGR and achieve a market value of $156B by 2020, drawing attention from investors, technology firms, and medical device companies [1]. Both leading and benefiting from this momentum is Medtronic, a $20B+ international medical device company [2]. Having a broad existing portfolio of medical device technology and facing a broad opportunity to make devices “smart”, Medtronic must react efficiently to realize maximum value from the digitization of healthcare.

 

Show me the money.

So where precisely can Medtronic capture tangible value in this space? Much of the answer comes down to IoMT’s promise to measure, transfer, and analyze medical information more efficiently and accurately than existing nondigital means. In considering potential impact on Medtronic’s business model, it is helpful to consider the Information Value Loop developed by Deloitte University Press (Exhibit 1) [3].

 

Exhibit 1. Information Value Loop

The outer loop describes a flow of information beginning with an action and ending with an augmented behavior. Each step in the information loop relies on digital technology with examples including sensors, network communication, data aggregation, and data analysis. The amount of value created is driven by the magnitude, risk, and time of information flow (pictured in the core of the figure) [3]. At a high level, this framework facilitates understanding of how Medtronic thinks about IoMT opportunities – it must develop technologies that take patient actions as inputs and manipulate them into health-promoting behavioral responses. Ideally, this would occur quickly on a large scale with managed risk.

 

IoT-charged business models.

Considering the Information Loop model, two primary IoMT-based business models emerge: provide solutions for an entire information loop for a single medical application or master one aspect of the information loop that is translatable across many medical applications. Medtronic is acting on both fronts. Examples include Medtronic’s present project to develop a continuous glucose monitor for sufferers of type 2 diabetes, addressing the dosing and monitoring cycle of diabetics [4]. Medtronic’s current solution segments products between doctors and patients, requiring a patient to wear a monitoring device whose results are downloaded and interpreted by a doctor at a later date [5]. The new device will transmit glucose readings via a tiny implantable electrode in real time to the physician, allowing for both the patient and doctor to have immediate access to the patient’s health information, adding value in time savings, data aggregation efficiency, and network efficiency.

Medtronic also appears to be pursuing the broader, platform-based business strategy. In 2013, Medtronic acquired Cardiocom, a patient-monitoring firm with various provider-facing telehealth technologies [6]. As opposed to resulting in an immediate device innovation, this acquisition provided Medtronic with wireless monitoring capability that can be developed into a platform for healthcare provider-patient communication [7]. With this supplementary strategy, it becomes possible for Medtronic to sell value at the network level and not just the device level.

 

Medtronic making moves.

By moving in these directions, Medtronic is essentially moving up the chain from a product company to a specialized healthcare service provider [8]. Rather than sell expensive standalone medical devices to increasingly price-sensitive customers, Medtronic is developing capabilities to deliver more value over the cycle of patient care. With increasing accountability placed on health outcomes, Medtronic is attempting to move beyond just the device and into higher-value service relationships with its clients.

Medtronic has advanced by supplementing its existing technology through acquisitions and partnerships. Medtronic partnered with Qualcomm, relying on them for the wireless technology necessary for their new glucose system [9]. Medtronic acquired Cardiocom, bringing its technologies within the fold of Medtronic’s product offering and opening opportunities in remote patient monitoring for the company. Further, Medtronic recently partnered with LHC Group, a home health and post-acute healthcare services company, in a deal that effectively rolls out Medtronic’s telehealth devices as a home monitoring platform [10]. With this deal, Medtronic now has four of the five largest home health care providers as clients. It is no longer accurate to call Medtronic purely a device company.

 

What Next?

In the digital age, Medtronic must concern itself with issues related to data management and privacy. Medtronic must continue to work closely with its clients and external regulators to make sure it is designing products and platforms that will achieve compliance. There are many questions related to ownership of information as well as the delineation between patient and doctor information [7]. Medtronic should continue to lean on partners in the technology space to aid in digitization and network development; it is likely too large an undertaking for Medtronic to tackle on its own.

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Exhibit Source:

(1) Castillo-Hi, T., Cousin, M., & Snyder, Glenn. (Sep 11, 2015). Devices and diseases: How the IoT is transforming medtech. Retrieved from https://dupress.deloitte.com/dup-us-en/focus/internet-of-things/iot-in-medical-devices-industry.html

 

Citation:

[1] Shelke, Yogesh. (2016). Internet of Medical Things [PDF]. Retrieved from http://context.aranca.com/hubfs/Aranca_Reports/Internet_of_Medical_Things_IoMT_Aranca_Special_Report.pdf

[2] Medtronic Facts and Statistics. (2016). Retrieved from http://www.medtronic.com/us-en/about/facts-stats.html

[3] Castillo-Hi, T., Cousin, M., & Snyder, Glenn. (Sep 11, 2015). Devices and diseases: How the IoT is transforming medtech. Retrieved from https://dupress.deloitte.com/dup-us-en/focus/internet-of-things/iot-in-medical-devices-industry.html

[4] Henkel, S. (2016). Qualcomm, medtronic tackle type 2 diabetes. San Diego Business Journal, 37(26), 14. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1803180486?accountid=11311

[5] iPro 2 Professional CGM. (2016). Retrieved from http://www.professional.medtronicdiabetes.com/ipro2-professional-cgm

[6] Comstock, Jonah. (Aug 12, 2013). Medtronic increases focus on home health with $200M Cardiocom buy. Retrieved from http://www.mobihealthnews.com/24603/medtronic-increases-focus-on-home-health-with-200m-cardiocom-buy

[7] Graham, John. (Aug 24, 2013). Medtronic is Changing Its Business. Will The System Let It? Retrieved from http://www.forbes.com/sites/theapothecary/2013/08/24/medtronic-is-changing-its-business-will-the-system-let-it/#724d508336da

[8] Shaywitz, David. (Aug 12, 2013). Medtronic Buys Cardiocom: Are Medical Product Companies Finally Serious About Business Model Evolution? Retrieved from http://www.forbes.com/sites/davidshaywitz/2013/08/12/medtronic-buys-cardiocom-are-medical-product-companies-finally-serious-about-business-model-evolution/#4cb4e02259e1

[9] Henkel, S. (2016). Qualcomm, medtronic tackle type 2 diabetes. San Diego Business Journal, 37(26), 14. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1803180486?accountid=11311

[10] Cardiocom, Medtronic’s Patient Monitoring Services Business, Announces Partnerships with Home Health Care Companies. (Feb 2, 2015). Retrieved from http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&ID=2012595