Understanding how to measure success is extremely important to run a successful business, especially with medical device development. Return on Investment and Net Present Value are tangible measurements to evaluate whether a project is worth pursuing. They quantify risk and reward, showing whether a device is worth the investment today.
However, financial models are only a part of the story since a medical device might not have an immediate ROI, but the long-term ROI could be enormous. An example of this would be robotic surgeries, as many physicians and patients were wary of them early on, but eventually they all adapted, and surgery has become so much better. Thus, financial models are not the only decision-maker, and several risks are involved in ensuring innovation brings profit as well as better outcomes to the population.
How do you think companies should balance short-term financial goals with long-term investments and extremely innovative technologies? How do you think financial models can evolve for medical device development? What other factors should be looked at when making a decision to release a product?
Evaluating financial ratios can determine if a company is capable of investing for returns that come later. A balance between short term financial goals versus long term investment can depend on the product line which can evolve over time with sales. Releasing new products that correlate with their current product(s) is common for many companies which may consist of disposables, software, or services.
Income statements which include the effects of previous investments, interest, and stock or asset losses can support or delay future investments. Additionally, the company’s current inventory and resources have a role in aiding new technological capabilities. Companies that only manufacture products that belong to a lower FDA classification may not have the motives or resources to fund complex technology. However, they can invest in new equipment or space that fits their needs.
Furthermore, a company that is able to gradually develop their supply chain management can see a greater impact on their finances. The ability to decrease cost overruns, maintain safety stock, and find alternative suppliers can especially benefit gross profit margin by decreasing the cost of sales.
I agree with your point that ROI and NPV are valuable, but they don’t tell the whole story, especially in the medical device industry. Some of the most transformative innovations, like robotic surgery or implantable technologies, took years before they became profitable. If companies only focused on short-term ROI, many of these breakthroughs might never have reached the market.
I think the key is finding a balance between short-term stability and long-term vision. Companies could have a mix of projects, some focused on quick returns to keep revenue flowing, and others that are more innovative and long-term, even if the payoff takes years. Financial models could also evolve by factoring in potential market growth, patient outcomes, regulatory changes, and healthcare trends instead of just immediate revenue.
Other factors worth considering include clinical impact, competitive advantage, patient demand, and alignment with future healthcare needs. In some cases, the social and clinical value of a device might outweigh short-term profit, and that’s where strategic thinking becomes crucial.
One critical factor which could be overlooked with "extremely" innovative technologies would be the payback period. Payback period is the length of time estimated to break even from the development of a project. Tracking this period of time is important because it can help make it more clear when a return on investment is expected. With new technologies, it is difficult to estimate if it will stick with physicians and the patients right as it enters the market. As it was mentioned already, robotic surgery was not appreciated as much as it is now. More specifically, if a device is really that novel, insurance companies might not have the correct code for the treatment, which can make billing difficult, leading to less availability in general. Speaking more broadly, the payback period is important because it can influence business decisions. In the payback period, a company can expect to not see any profits, which can determine whether new projects should be pursued. For smaller companies, this is important because it allows them to coordinate their finances to make sure they don't end up bankrupt.
