Talent, Tech, and Team: The Formula for Medtech R&D Success

_{This article is a collaborative effort by David Krahe, Nick Henderson, and Sarah Flören of Russell Reynolds Associates, and Chris Eakins, Julia Samorezov, and Peter Pfeiffer, representing views from McKinsey’s Medical Technology Practice.}

Medical technology companies’ R&D functions are contending with ever-increasing costs and complexity: R&D spending is increasing at 10 percent a year, the average time to market is now more than four years, and after a busy 2024 for industry M&As, 2025 is off to an even busier start, according to McKinsey analysis.

Meanwhile, digital technology—for new products and for accelerating product development—has become essential, even for companies with little track record of digital innovation. Equally important is a robust value story that supports market access and reimbursement. Innovation is still critical to medtech; McKinsey research shows that companies with top-quartile innovation scores have 40 percent higher revenue growth and twice the total shareholder return of their peers in the other three quartiles.

To understand how medtech leaders are tackling the challenges of meeting their companies’ R&D expectations, McKinsey and Russell Reynolds Associates interviewed more than a dozen heads of R&D at the industry’s leading companies. Our interviewees shone a bright light on the challenges they’re facing and explained how they plan to maintain and accelerate the pace of innovation. High on their priority list is how to recruit, retain, and motivate the new kinds of talent they need and how best to partner and work with early-stage innovators.

The anonymized quotes in this article are from the medtech R&D leaders we interviewed for this study.

Key trends in medtech R&D

R&D leaders were most likely to refer to three trends: the technological shift to digital and AI, reliance on cross-functional teamwork, and a greater role for strategic alliances.

Technology shift

Medtech companies have been slow to adopt digital, in part because of their hardware-centric legacy. However, many industry disruptors are digital natives with several years’ lead over incumbents, and medtech leaders tell us they are now incorporating digital technology into, for instance, software-enabled devices and products for surgical planning and navigation.

Medtech companies are increasingly utilizing AI for analysis and insight generation, a trend clearly demonstrated by the rapid rise in FDA approvals for AI-enabled or machine learning devices—from 221 in 2023 to nearly 1,000 by mid-2024.¹ Some companies are using AI-enhanced digital tools to mine external databases, which helps them identify and prioritize new product features. Others are deploying these tools to analyze the growing volume of digital real-world data, which allows them to more cost-effectively support product value propositions both before and after launch.

Medtechs are prioritizing cultivating and recruiting the digital talent they need for these new capabilities. Although their digital capabilities still need to be better integrated with other functions, they say they are making organizational changes to improve cooperation.

Cross-functional teamwork

Gone are the days when R&D departments could develop a new product and present it to the business. One reason, R&D leaders say, is that successful product launches today typically need a value story that will ensure reimbursement. This requires R&D leaders to work with colleagues in other functions—for example, commercial teams, which can better understand customer needs; legal teams, which can advise what may be done with different data sources; and health economics and reimbursement experts, who can help determine clinical end points to support the value story. Companies can bridge the gap between technical and business-focused roles by giving them shared goals, and by giving them rotational assignments in other functions. R&D leaders who have worked in different functions of the organization have a better understanding of the business when returning to R&D, and are found to be most successful.

R&D leaders need to either spend time in another function, or company leadership needs to focus their efforts on shared goals and collaboration.”

Strategic alliances

Interviewees acknowledge that legacy medical technology companies often struggle to compete with new entrants and start-ups. Big companies are challenged to combine innovation with commercial excellence, as well as to reserve funds for innovation without starving existing products of the funds needed for maintenance. Therefore, large companies are sourcing some of their most innovative products from smaller companies while determining how to deploy them and manage the overall portfolio. However, to attract innovators with the best technology—first as partners and then, perhaps, as acquisitions—medtech R&D must offer attractive incentives and effective ways of collaborating. Even as they partner for innovation, large medtechs must remain sharp at allocating resources between new and existing products and finding cost-effective ways, such as automation, to support their established portfolios.

Historically, large medtech companies have had a hard time innovating, so they revert to buying technologies and scaling them up commercially.”

Medtech’s new ways of working

To address these challenges, medtech leaders are changing their talent models, organizational designs, and cultures. Here’s what our interviewees say worked best for their organizations.

Cultivating next-generation talent and leadership

Leading medtech companies strive to attract talent from the technology industry, which they perceive as more innovative and agile. These new hires can bring fresh perspectives and skills to medtech, especially in digital and software development. As one R&D leader mentions, “Distinguished engineers and senior principal engineers are no longer our main recruitment target; early talent is crucial now.”

However, because of regulatory complexities and deliberate decision-making, medtech moves slower than the broader tech industry, which can cause frustration among new hires and make retention difficult. For example, one R&D leader remarked, “New hires from technology firms talk with regulatory and quality and leave wondering how we ever bring anything to market here.”

To address this, many organizations are centralizing their innovation teams, which allows them to leverage the efforts put into hardware and software across multiple product portfolios. Others have streamlined their processes to sustain momentum and excitement among their new colleagues. Still others use different processes for various types of development. For instance, they may use an established process to develop firmware, ensuring reliability and compliance, while creating a mobile app with a faster, iterative approach.

It is one thing to bring someone in from the tech industry, but the true challenge is assimilating them to the culture and pace of medtech.”

Respondents tell us that medtech R&D professionals need a broader skill set than traditional technical expertise. For instance, they must understand hospital workflows, patient needs, and how to integrate digital tools. Some companies are addressing this by hiring data scientists to work with real-world data and designers for patient journeys, integrating them into existing teams. To help data scientists make the transition to digital, many are hiring from industries with strong digital talent, including consumer electronics, automotive, and telecommunications, in addition to high tech. To maintain and nurture institutional knowledge, companies are ensuring they have strong in-house knowledge management systems. Furthermore, to support the growth of younger talent into leadership roles, they recognize the importance of having effective succession plans.

Companies are also exploring changes to their incentive structures. R&D team members have traditionally been compensated with a base salary plus a bonus or stock awards, depending on the company’s overall performance. Some firms are creating more individualized incentive plans that reward innovation and creative problem-solving to help align talent with organizational goals. Some—applying the idea that treating project teams as commercial entities can foster a sense of ownership and promote innovation—are incentivizing teams to bring products to market faster than they normally would.

The organization is only as good as its people. You need to be clear about what’s valued. If the team is aligned on the importance of innovation, innovation will become the new norm that drives commercial value.”

Organizing for innovation

To overcome internal organizational boundaries and enhance collaboration and innovation, some companies are consolidating digital, cloud, and engineering functions under a single umbrella. Some are establishing platforms on which engineers with similar skills can work together across product families. Others are establishing centers of excellence (COEs) for disciplines such as AI and robotics. Platforms and COEs help ensure that expertise is not bound to specific business units but can be leveraged across multiple units and projects.

Several R&D leaders say they should have a strategic role in the company, ideally with a seat at the executive table. Innovation goals are often longer-term than commercial ones, so putting R&D under the commercial banner creates tension: It’s easier to align goals if the teams are equals, but this requires R&D leaders to develop the business understanding to collaborate effectively with commercial teams. Some companies bridge the gap between technical and business roles by encouraging role rotation, including into strategic partnerships, to help employees gain full exposure to the business and enhance their decision-making and leadership capabilities. Some set common goals for technical and business staff.

Leaders identify the merits of centralized and decentralized R&D models. Centralized models can better foster synergies and talent development, while decentralized models can better cultivate specialization and speed. Companies can choose between them based on their innovation priorities and market demands.

Nurturing an adaptive culture

Some medtech R&D leaders say their organizations are undergoing subtle cultural shifts. As technical roles evolve, these leaders and their teams are changing how they work to require earlier interaction and more collaboration. And leaders are placing more value on employees with high emotional intelligence who can manage relationships and foster collaboration between teams and with customers. They believe that organizations seeking to align the corporate culture with strategic goals need to articulate clearly what they value, including responsiveness to customer needs, digital transformation, and connectivity.

Authors

David Krahe leads the Global Medical Technology Practice for Russell Reynolds Associates, where Nick Henderson leads the Medical Technology R&D Practice and Sarah Flören leads the Global Healthcare Knowledge team.

Chris Eakins is a partner in McKinsey’s Miami office, Julia Samorezov is a partner in the Boston office, and Peter Pfeiffer is a senior partner in the New Jersey office.

Footnotes

_{¹ Daniel Windecker et al., “Generalizability of FDA-approved AI-enabled medical devices for clinical use,” JAMA Network Open, 2025, Volume 8, Number 4.}