Why the Big Orthos don’t need internal startups.
I recently saw that Stryker bought OrthoSpace for $200M.
This got me thinking.
Why didn’t Stryker just invent OrthoSpace themselves? Or for that matter, why can’t any Big Ortho company create a startup from inside the company?
After all, they have tons of money, thousands of people and customers. The have really smart people working at scale inside these Big Ortho monsters.
There are two good reasons why Big Ortho doesn’t require internal innovation. Both are grounded in “risk aversion”.
Reason #1 – Big Orthos cannot innovate from inside.
The Big Orthos are not built or designed for innovation. Innovation has been bred out of their DNA over time. They can’t challenge legacy products that drive revenue and earnings for the next 90 day cycle. People are rewarded for executing within the given systems and for not making mistakes. Nobody inside can take chances without jeopardizing his/her job. Like the Japanese proverb, “The nail that sticks out gets hammered down.”
Reason #2 – Big Orthos have the unique ability to cherry pick the innovation on the outside.
The Big Orthos have the luxury of sitting back and waiting for startups to emerge. They ultimately let the market predetermine the winners, then they pounce. Big Orthos are risk-averse and have the mountains of cash (eg: Stryker earned $3.5B in profits last year). So at the end of the day, it is simply easier to buy a winner than create a winner. This has become the default innovation strategy for the Big Orthos… and its 100% risk free.
They can buy the winning horse at the end of the race rather than breed a horse for years and try to get it right.
Read the history of Orthopedic acquisitions here – https://orthostreams.com/acq/