In orthopedics, intense competition is almost seen as a badge of honor. Many startups rush into an ultra-competitive space, eager to develop the next groundbreaking device or technology that will revolutionize orthopedics.
However, what if we told you that competing might actually be a strategy for losing, not winning?
The philosophy championed by Peter Thiel—an entrepreneur and venture capitalist best known for founding PayPal and investing in companies like Palantir—says that “competition is for losers“. Thiel argues that aspiring companies should aim for monopoly, not for sharing the market with countless competitors.
Applying this philosophy to orthopedic and spine medical device startups might seem counterintuitive at first. But it provides crucial insights for building sustainable, valuable companies. Let’s explore why orthopedic and spine startups should heed Thiel’s advice, and how focusing on monopoly strategies can lead to greater success in this competitive industry.
The Problem with Competition
The orthopedic market alone is worth billions of dollars annually, but it’s also home to numerous players, from the Big 5 Orthos to a few mid-sized Orthos to a thousand small Orthos.
On paper, this sounds like a robust competitive market, but in practice, intense competition means lower profit margins, constant pressure to innovate, and very little room to stand out. In the end, many startups fail to capture significant market share or become absorbed into larger companies without making a lasting impact.
This principle applies to startups in the orthopedics: competition often forces them to fight over small scraps of the market, making it difficult to scale, differentiate, or succeed in the long run.
How Orthopedic Startups Can Build a Monopoly
The key to avoiding this fate is to aim for monopoly from the outset, just as Thiel suggests. Startups need to carve out a niche so specific that they become the dominant player—if not the only one—in their market. This requires focusing on a specific problem or patient population that larger companies or other startups have overlooked. Consider how Peter Thiel explains that monopolies often start by capturing a small market and then expanding from there.
Here’s how orthopedic and spine device startups can use this strategy:
- Focus on Underserved Areas: Large companies tend to focus on the most profitable or widespread problems. Startups can find success by focusing on overlooked small niches.
- Develop Proprietary Technology: A monopoly can be created by developing a product that is so innovative and different, it leaves the competition far behind. In ortho, this might mean creating a product that significantly reduces surgery time, reduces hospital staff, offers better long-term outcomes, or gives the surgeon or ASC a new revenue stream.
Examples:
+ Kyphon (kyphoplasty)
+ MAKO (MAKOplasty, the first useable TJR robot)
+ SpineTech (the first cage)
+ Ossio (the first non-metal fixation that works)
+ Ellipse Technologies (remote control implants like MAGEC)
+ Active Implants (total meniscus replacement to delay TKA)
+ Green Sun Medical (smart scoli brace with continuous correction that kids actual wear)
+ Trice Medical (dynamic joint diagnosis in Drs office)
+ Active Protective (smart airbag belt to prevent hip FXs)
+ OrthoSpace (biodegradable balloon protects cuff tears)
+ Treace Medical Concepts (niche monopoly in bunions called Lapiplasty) - Network Effects: Although network effects are commonly associated with software, they can be harnessed in ortho healthcare as well. Imagine a device that not only helps surgeons perform a better operation but also collects valuable data that can be used to inform future surgeries. As more surgeons use the device, the data becomes more comprehensive, making the product even more valuable. A startup that successfully implements such a strategy can build a natural monopoly over time.
- High Switching Costs: In orthopedics, once hospitals or ASC systems adopt a particular technology, the costs of switching to another product can be prohibitively high. Startups should aim to create devices that are deeply integrated into the surgical process, making it difficult for hospitals to switch to a competitor’s product. Building loyalty through unique, high-quality products or through integration with other healthcare systems creates a barrier to entry for competitors.
- Branding and Differentiation: While branding alone isn’t enough to sustain a monopoly, it’s critical in the medical device industry where trust and reputation are paramount. A startup that can establish itself as the go-to solution for a specific orthopedic or spine-related problem can create an unassailable position in the minds of surgeons and hospital administrators. If your product becomes synonymous with a particular type of surgery or outcome, it will be incredibly hard for competitors to displace you.
Avoid the Pitfalls of “Big Market” Thinking
Many startups make the mistake of targeting broad, lucrative markets from day one. In orthopedics, this might mean going after common procedures like knee or hip replacements. However, these large markets are often filled with well-established competitors, making it incredibly difficult to gain a foothold. Thiel argues that this approach is flawed because it leads to over-saturation and brutal competition.
Instead, orthopedic and spine startups should focus on smaller, niche markets with high growth potential. By dominating these niche markets, they can eventually expand into adjacent areas. This approach not only reduces competition but also allows the company to grow at a more sustainable pace.
Long-Term Thinking and Durability
Another key aspect of Thiel’s philosophy is that successful companies think long-term. This is particularly important in healthcare, where regulations, clinical trials, and adoption rates make fast growth challenging. Orthopedic startups must not only aim for monopoly but also ensure that their monopoly is durable. That means investing in research and development, continuously improving products, and staying ahead of potential competitors by innovating at a rapid pace.
Durability also involves creating barriers to entry, such as acquiring patents, building relationships with key opinion leaders (KOLs), and ensuring that your device is deeply embedded within hospital systems. A successful orthopedic startup will not only capture a niche market but will also have a strategy in place to maintain its monopoly for decades to come.
Conclusion: Competition vs. Monopoly in Orthopedics
In the high-stakes world of orthopedic and spine medical devices, competition can seem like an unavoidable part of doing business. But as Peter Thiel argues, “competition is for losers.” Startups in this space should take a different approach, one that prioritizes building a monopoly in a niche market, developing proprietary technology, and thinking long-term.
By doing so, orthopedic startups can avoid the traps of overcrowded markets, reduce competition, and build sustainable, profitable businesses that create lasting value for both patients and investors. After all, the true winners are those who don’t compete—they dominate.