Competing in medtech’s digital era: The 3 forces reshaping how companies will win

Medtech’s analog-only era is over. Hardware will always be part of the industry, but it’s no longer enough to win on its own.

The companies defining the next decade of medtech aren’t just making better devices. They’re engineering data, automation, and clinical intelligence into their products, and the market is responding: innovation-led companies are commanding enterprise value-to-revenue multiples of 10 or more versus the sector average of 6.6 by focusing on robotics and AI.

Safety, quality, and compliance, however, aren’t keeping up with this new environment. FDA approvals per billion dollars of R&D spend have been declining — according to McKinsey, roughly 9% annually over the past decade. There’s a fundamental mismatch between the speed of software development and regulated development, and it’s widening more each year.

Three forces are driving this inflection — and each one stress tests the exact same thing: the quality and compliance infrastructure that sits underneath every development decision medtech teams make.

1. Value is shifting from devices to platforms as intelligence becomes the product

The first force is that value in medtech is moving from the device itself to the platform it connects to. Over half of medtech leaders now view “as-a-service” models as their primary growth opportunity. Incumbents have placed their bets, with GE’s Edison, Siemens’ teamplay, and Philips’ HealthSuite. Meanwhile, the FDA’s AI-Enabled Medical Device List has more than doubled since the end of 2022, with clearances now reaching almost 1,500.

Intelligence-as-a-Service isn’t compatible with manual, end-of-sprint quality approvals. Software can be meaningfully updated every few weeks, but documentation changes are required for each. Many would argue that legacy compliance processes were already strained before software entered the picture. At the cadence of software, they break. Changes to AI components and their interactions also have wider “impact craters” — the total downstream business effects of any single change — than physical modifications ever did.

2. Competition is becoming more dense as digital-native startups and tech giants invade

The second force isn't about what's being built, but who's building it, which is changing in two directions at once.

Startups like Aidoc and Viz.ai aren’t built on legacy systems, so they’re free of technical debt. That allows them to iterate in weeks and capture niche markets in the time it takes incumbents to do a compliance review cycle.

Then there are tech giants like Apple, who have been steadily building their medtech footprints for years — from the Apple Watch ECG’s FDA clearance in 2018 to the AirPods Pro hearing aid feature’s in September 2024, which turned a consumer earphone into a regulated medical device. Tech giants have distribution at a scale no medtech incumbent can match, the most battle-tested software infrastructure on the planet, and the capital to weather any regulatory learning curve.

Manual quality management compounds both threats, but it isn't just a problem for incumbents. For startups, every hour spent on retrospective documentation is an hour not spent building, and a delayed approval cycle can be the difference between capturing a market and losing it. For incumbents, it doesn't just delay launches. It cedes ground to competitors who never had that burden.

3. Regulatory requirements are increasing as the industry moves toward continuous risk management

The third force is regulatory — not just more requirements, but new and different kinds.

Cybersecurity has moved from a secondary concern to a primary FDA clearance metric. By August 2026, manufacturers selling in Europe will face the double hurdle of both the EU MDR and the EU AI Act's high-risk provisions. Regulators on both sides of the Atlantic are now requiring Explainable AI (XAI) and Good Machine Learning Practices (GMLP), meaning companies have to demonstrate not just that their algorithm works, but precisely how it reaches clinical conclusions.

Longer term, programs like TEMPO and ACCESS are signaling where quality is headed: continuous, real-time risk management instead of snapshots stuck in time. Product telemetry, usage, and patient data — not post-market complaints — are becoming clinical safety and efficacy metrics accepted by the FDA. My bet is the industry soon converges on a global real-world data standard.

New competitive forces in action

The TruDi case illustrates what happens when all three of the above forces collide without the quality infrastructure to absorb them. In 2021, Acclarent, then a subsidiary of J&J, added AI to its TruDi sinus surgery system explicitly as a competitive differentiator, an update that a patient lawsuit alleges was pushed primarily as a marketing tool. According to court filings, the lawsuit further claims the company internally set an accuracy threshold of just 80% for some AI components before clearing FDA standards not designed to evaluate that kind of algorithm.

Before the AI update, the FDA had received only seven reports of malfunction and one injury. After it, the FDA has received at least 100 reports of malfunctions and adverse events, 10 injuries, and two cases alleging that patients suffered strokes from injuries to major arteries.

TruDi isn't an outlier. A research letter from authors at Johns Hopkins, Georgetown, and Yale reported that 43% of recalls for FDA-authorized AI devices occurred within a year of authorization, roughly double the rate of comparable non-AI devices.

Under a lagging safety model, by the time the signal is clear enough to act on, people have already been hurt.

The choice ahead

The product, market, and regulatory complexity of today have created a new baseline for the medtech industry. The human glue of manual documentation — the spreadsheets, the disconnected systems, the cross-functional fire drills — is already failing at the scale modern software-enabled products demand.

The companies that will lead medtech through the 2030s aren't necessarily the ones with the best products today. They're the ones that build quality and compliance into the DNA of how they operate — continuously, not at discrete points in time. The window to capitalize on that infrastructure is closing. For the companies that move now, it's an opening, not just in compliance, but competitively.