The annual Consumer Electronics Show (CES) has long been a bellwether of technological advancement. In its 58-year history, the event has introduced the world to many innovations, including the videocassette recorder (VCR; 1970), laser disc player (1974), digital satellite system (1994), internet gaming (2001), Blu-ray DVD and HDTV DVR (2003), and Android 4.0 tablets (2012). 

This year’s event exposed the masses to such futuristic creations as smart lipstick (a robot arm applies the cosmetic), a self-refilling coffee maker (it uses air-to-water technology), a memory-boosting smartwatch, hearing aid eyewear, and device-controlling earbuds. Health-related wonders included a needle-free injection system, vision-restoring smart glasses (for those with macular degeneration), an artificial intelligence (AI)-powered sleep headband, and AI-powered smart mirror that provides comprehensive health screening via advanced sensor tech. 

So what does all this have to do with orthopedics?  

Well, for starters, some of the most advanced industry research for medical solutions has evolved from technology that was developed for consumer products. We learned this lesson relatively early in our interactions with leading orthopedic strategics, and Stryker Corp. was one of our best teachers.

We noticed that a number of advanced medtech engineers (and sometimes even the highest level R&D leaders) were attending non-medical industry events like CES. We didn’t understand it at the time—30 years ago, solutions like robotics and wearables existed only in fiction. Some of the key advancements back then were in visualization (i.e., endoscopy), though “state-of-the-art” was really anything but at the time, as long development timelines, stringent regulations, and high quality standards kept the medical industry from fully benefiting from the latest consumer-type technologies. Consequently, smart thought leaders would attend consumer shows to better understand the technologies that could be integrated into future products. Companies that successfully poached consumer-oriented tech for their solutions gained market leadership. 

In any industry, there is both organic and inorganic innovation. Some of the most successful market leaders across business segments have deployed inorganic strategies in R&D to enhance their eventual organic successes. Case in point: For 10 years (2000-2010), Proctor & Gamble CEO A.G. Lafley implemented a research strategy known as “Connect + Develop.” His goal was to source 50% of his company’s innovations from external collaboration rather than rely solely on internal R&D. Under Lafley’s leadership, P&G transformed its traditional insular R&D model into one that actively sought outside ideas, technologies, and products. In doing so, P&G leveraged external expertise and resources to accelerate innovation, reduce time to market, and better meet consumer needs. The “Connect + Develop” initiative ultimately led to several successful product launches and enhancements that significantly contributed to P&G’s growth during Lafley’s tenure. By embracing external innovations, the company expanded its product portfolio and maintained a competitive edge in the consumer goods industry.

There has been a similar shift in mindset among the orthopedic industry’s major players. While Stryker has been aggressive in both organic and inorganic growth for decades (evident in its impressive gain in market leadership and stakeholder value over the years), many of its competitors have practiced the “not invented here” syndrome. Various Harvard Business Review case studies have shown the difficulties associated with corporate self-disruption. Stryker has long understood this challenge and has found a successful formula to overcome it. 

Arthrex is also an interesting case study in outside innovation, though it has traditionally not been as aggressive as Stryker on larger M&A deals. Arthrex tends to find the strategic fits for its portfolio from smaller players and then obtains the rights through either licensing or acquisition (or both). Usually, it’s a relatively small size initial deal but it can sometimes pay large dividends for both Arthrex and the stakeholders selling the niche technology. 

Other key orthopedic firms that could not disrupt themselves historically have had to rely on large M&A to maintain their market position. Several examples of growth through inorganic innovation follow.

Zimmer Holdings Inc., and Biomet Inc., 2015: While not perfectly executed, this was a critical combination that allows the current Zimmer Biomet to effectively compete in today’s competitive environment.

Johnson & Johnson (J&J) acquired DePuy in 1998 to enter the orthopedic sector. Fourteen years later, the healthcare behemoth obtained Synthes, creating the now-familiar DePuy Synthes (part of the J&J MedTech business group). The combination of DePuy and Synthes gave Johnson & Johnson MedTech a substantial market position, which the company has struggled to maintain against its more aggressive competitors (Stryker, for example, dominates the global knee replacement market).

Smith+Nephew (S+N) established itself as a foundational player in sports medicine with its $1.7 billion acquisition of Arthrocare in 2014. I believe independent orthopedic industry analysts would agree that S&N’s strength currently lies in its Sports Medicine & ENT franchise, since it faces fierce competition in its Orthopaedics and Advanced Wound Management units.

Similar to J&J MedTech, Medtronic obtained its base position in Spine through the 1999 acquisition of Sofamor Danek. The company then expanded its leadership position two years later by purchasing Kyphon for $4.2 billion.

Contrarily, Arthrex followed P&G’s strategy by purchasing a smaller California-based endoscopy company in 2005 (PC Medical), thereby gaining the expertise necessary to grow faster and become more competitive in both endoscopy and sports medicine.

Consumer Tradeshows and Their Relevance to Orthopedics

The orthopedic industry is in significant transition. To be successful, key players must move beyond “metals and plastics” into enabling technologies like robotics, software (artificial intelligence/machine learning), and wearables.

Since the “backbone” (pun intended) of most of these companies is engineering based on legacy products, the only sensible way forward is strategic partnerships and acquisitions of advanced technologies that will make a difference in both procedural economics and patient outcomes.

The orthopedic industry has given itself a fighting chance to organically enhance its understanding of advanced/enabling technology, but the major players are not Apple, Google, Nvidia, ChatGpt, Amazon, or Microsoft. Accordingly, the procurement (mostly in the last decade) of robotic technology like Mako (Stryker), Mazor (Medtronic), ROSA (Zimmer Biomet), Orthotaxy (DePuy Synthes), and Blue Belt (Smith+Nephew) has given each of the largest firms a “robotic-assisted” platform (and talent) with which to harness and grow for market leadership.

Interestingly, the future is not going to be based on the footprint of any one new robot or “new and improved” joint. Rather, it will be based on companies’ success in implementing advanced technologies to improve their competitiveness in the ASC (ambulatory surgery center)—the present and future battleground for market share.

Given the rapidly changing pace of such technology advancements such as software, wearables, and AI/ML, it is unlikely that any one new startup will disrupt the industry. It’s probably going to take a series of smaller partnerships or acquisitions to develop strategies that will make a lasting, dynamic market change. A great example of a company that understands this opportunity is Think Surgical. Led by CEO Stuart Simpson (formerly of Stryker), Think is forging dynamic industry partnerships with Medacta, ZB, and others to create a channel for its innovative solutions to enter the market. 

Ten years ago, finding orthopedic companies at CES was quite a surprise. Now, it’s more shocking to discover who’s missing.

MORE FROM THESE AUTHORS: M&A, Strategic Partnerships Shaped the Orthopedic Industry in 2024

Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com

Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com