Business Development – Telecom vs. Medical Devices
By Alex Rudnicki
In the current world situation, the business development function is becoming critical in general, but with an unprecedented importance for small companies and start-ups. This article will compare between two of the most outstanding Israeli industries – telecom and medical devices.
Until two years ago, companies, in the telecom space, having an interesting product could open the doors of their prospective customers alone or with a local agent. Today, when we are in the middle of a very different economic situation, closing a deal with a new customer becomes almost “mission impossible”. The change in the economic sentiment has created a major change within the Modus Operandi of the Communications Service Providers (CSPs). The main business objective has changed from revenue’s increase to cost reductions.
This change in strategy has strengthened the large companies - operators, OEMs and System Integrators (SIs) vis-à-vis the small service providers. Operators are buying less and at lower prices; and OEMs and SIs are the main suppliers of the operators, hence becoming the preferred solution providers to keep the number of providers at the lowest possible level.
The new paradigm will require the new suppliers to be presented mainly as part of a larger portfolio of solutions under the umbrella of a larger partner that is already an established provider of the targeted operator.
The medical devices market has not changed drastically during the last crisis. However, this market has always been characterized by comparatively long time-to-market, regulatory barriers and more limited budgets. This market is more fragmented both geographically, politically and regulatory. Furthermore, the funds required for the development and commercialization of products are usually, much larger than in the telecom area.
Hence, in the medical devices market, the situation is even more complicated – there are many more players in the market, both in the supply chain, as well as in the demand side of the market. For example, if there are typically 3-4 main mobile operators per an average size country, the number of organizations that approve and purchase medical devices can range from one or very few (Department of Health, Public Health Insurance, or equivalent) in centralized public health system, to hundreds of customers in a the private or deregulated market.
Furthermore, the above-mentioned variance between countries demands a very different business model /strategy for each country, a challenge which in the telecom market does not exist. In the telecom market, most of the countries, in the same geographical area, have very similar characteristics. The market can be divided into 4-6 major areas – Europe, US, APAC, Japan, LATAM and Africa. For example, all countries in Europe will require CE accreditation, but the sales process in the UK and Sweden would be significantly different.
Table 1 – Market Characteristics Comparison
|
Characteristic
|
Telecom
|
Medical Devices
|
|
Funds
|
Few million
|
Significantly larger
|
|
TTM
|
Several months (usually less than 2 years)
|
Larger due to regulatory issues
|
|
Product buyers
|
Very few (usually less than 5)
|
Diversified (from 1 to tens)
|
|
Regulatory requirements
|
Low to Non-Existing
|
FDA, CE and others prolonged process
|
|
Channels
|
Direct or OEM
|
Almost no direct sales possible
|
|
Sales process
|
Up to 1 year
|
Depends on market and channel relationship
|
|
Geographical markets
|
4-6 major markets
|
~200 different markets
|
The different market characteristics create different sales and business development approaches. If, in the telecom industry, companies can still work directly or through very few global partners (such as Ericsson, Nokia, Accenture), in the medical devices market, this is not possible.
In the medical device market, there is, of course, the option of working with a major partner, such as Medtronic, DGO Group, etc. However, to stay independent, a company needs more than one distribution network in each country and in each market. The build-up of such networks is very expensive in time and resources to be invested. Hence, the importance of business development in this industry is significantly higher than in the telecom one. The business development function is required to build a large and diverse network of distributors and assist them to create sales in the respective countries.
Table 2 – Business Development Comparison
|
Characteristic
|
Telecom
|
Medical Devices
|
|
Global partners
|
Few
|
Very Few
|
|
Global networks
|
Not necessary
|
Possible, but extremely difficult to obtain
|
|
Local partners
|
Not necessary, but low number
|
Many possible local partners
|
|
Modus operandi
|
Similar in similar geographies
|
Very distinct between countries
|
|
Support
|
Similar to all
|
Different in each country and each language
|
|
Skill
|
Interpersonal, negotiation, presentation
|
Interpersonal, negotiation, presentation
|
As presented above, the needs and challenges in each industry from a business development perspective are very different. Furthermore, the importance of the business development function in the organization varies between the two. If, in the telecom market, it is mainly part of the sales processes, in the medical devices industry it is the most significant business function affecting the future of the company. However, the trades and skills required from the executive filling in the position are similar in both cases.
The writer is a senior partner at HiTechStrategies (www.HitechStrategies.com), which specialized in assisting small to medium hitech companies in their go-to-market and achieving significant sales and market share. Prior to that, he served in various sales and business development executive positions in like TTI Telecom, Trivnet, Unipier and Mobilitec. Alex also served in business development and strategy consulting positions in his company and in Shaldor. Alex earned his MBA from Rotterdam School of Management in The Netherlands and his B.A. in Economics and Computer Sciences from Bar-Ilan University.
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