Posted By Everette Phillips, February 23, 2012 at 7:16 AM, in Category: The Adaptive Organization
As I talk with manufacturers about attractive markets for the future, I am hearing two distinct themes: medical devices and biotechnology. For example, friends in aerospace and defense will mention medical devices and/or biotechnology as a future direction for their companies, because they are already seeing the impact of Department of Defense budget redirections on their current markets. They see parallels between the medical device market and A&D in that both require the ability to adapt cutting-edge technology into products through program management. And both involve plenty of government regulation and oversight.
Other friends, with experience in the transportation sector, cite medical devices and biotech as current areas of interest. They feel their experience of making technology available to a consumer market--while dealing with both government oversight and with the threat of consumer advocate action--will allow them to expand into these fields. Although the transportation sector is improving, the memories of the past couple of years are inspiring companies and communities to seek shelter in the perceived harbor and opportunity of medical devices and biotech.
I love biotechnology. In fact, it has been a passion since I graduated from the Biological and Environmental Engineering Department at Cornell University. I believe that we are just at the tip of the iceberg when it comes to new biotech innovations, technologies, and products. And I am not alone. The willingness of New York City and Cornell to throw nearly $400 million into a proposed new $2 billion campus dedicated to applied sciences has a heavy biotechnology bias. There is room for companies to do extremely well with the right products oriented toward the right markets at the right time.
Companies that bring passion and a plan to new markets such as medical devices and biotech do not concern me. They have a chance to succeed. However, companies driven to these markets seeking a safe harbor from global competition do concern me. It is true that methods, culture, and technology can allow a company to adapt itself and its technologies to new industries. There is, after all, some level of truth to the statement, "Computer chips, potato chips, what's the difference? They are all chips."
But, as is evident when you examine frequent acquisition failures, corporate processes and methods are not easily transferred in real life. At the same time, I am concerned that many companies looking to new markets such as medical devices and biotech have a false sense that they will be protected from offshore competition by government regulation. In particular, many seem to have the false idea that since the U.S. government makes and enforces regulations, U.S. companies are uniquely protected from foreign competition.
Although one can make the argument that U.S. firms have a competitive advantage in attempting to influence domestic policy and regulations--particularly since the Supreme Court has given U.S. companies freedom of speech in the form of unlimited election campaign contributions--the reality is that foreign entities are already entrenched in the U.S. biotechnology markets, either directly or through relationships.
The assumption that the FDA regulates products with a bias toward production in the U.S. may have been true a decade ago, but the FDA has since focused on protecting the American consumer no matter where the products are made. This has been true since at least 2007 when the FDA and the Department of Health and Human Services reached a memorandum of understanding with the State Food and Drug Administration of the People's Republic of China, which allowed the FDA to open offices in Beijing, Guangzhou, and Shanghai during 2008.
The FDA’s focus now is on making sure that standards for safety and manufacturing quality are met before products ship to the U.S. This allows U.S. firms to reduce costs through outsourcing, and it helps these firms create an environment where others should make a careful analysis before market entry. It also opens U.S. markets to further competition or innovation, depending on the side of the argument you want to take.
Have you booked your room at the Hotel Biotech? Do you have a plan that does not depend on trade barriers? If your plan allows you to compete in a global marketplace, you should make your reservation early. Otherwise, you may find a no-vacancy sign when you arrive with your new product.
Written by Everette Phillips
Everette's experience includes robotics, advanced manufacturing, supply chain management and international manufacturing. After a career path as a robotics engineer helping automate plants in North America, he became a manager of European Operations for Factory Automation & Robotics in Europe for SEIKO living an expat in Brussels then returning to the US as GM for Advanced Mfg Technologies in North America. Currently, as President of Global Mfg Network, he is involved in coordinating production of highly engineered parts, assemblies and products across a wide range of industries in manufacturing facilities located in Asia and North America and Europe. Everette is a regular speaker and panelist on topics related to manufacturing, international business and technologies such as robotics and advanced manufacturing. He has a BS Bioengineering from Cornell and an MBA from the UCLA Anderson School. Everette serves on the board of Cornell Engineering Alumni Association as a Regional VP and on the Advisory Board for Entrepreneurship@Cornell.