Signify Premium Insight: Philips’ Future Vision for Imaging: Digital Platforms, Service Line Efficiency & Long-Term Partnerships

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Medical imaging, along with the wider healthcare technology industry, is changing. There are a number of transformative changes afoot, ranging from technological transitions such as cloud adoption and AI integration, to a fundamental reimagining of medical imaging hardware, with modular modalities and ‘dumb’ systems reliant on advanced IT platforms all on the near horizon. Last week, at its annual analyst day, Philips detailed its strategic priorities for this period of transition and explained how it believes it can best create and capitalise on these changes.

The Signify View

There is a lot of nuance in Philips’ approach, but, in essence the vendor’s focus is on managing its transition to a digital future. At present, while it does bring in substantial service revenues and IT and informatics revenues, the vendor remains hardware-centric. This is a balance that looks set to be upended in the coming years as Philips fundamentally shifts from a company which manufactures medical equipment, to one which is primarily digital service-focused.

This was reflected in its analyst event. Instead of detailing a plan for making sales of a new imaging technology or explaining a path to improving ultrasound equipment sales in Latin America, for example, the event focused on better using the wealth of data Philips has access to. Then, through analytics and business intelligence tools, supporting providers in making their imaging departments more efficient. These priorities discussed at the event were unsurprising, given the vendor’s broader business strategy of increasingly shifting towards becoming a service provider within the world of medical imaging. That, even more so than merely focusing on software, rather than hardware, is, over the mid-term where Philips will look to derive a greater proportion of its revenues. These initiatives are beginning to be seen throughout the vendor’s offering, with the likes of remote technician support for imaging through the Remote Operation Command Centre (ROCC), and workflow tools, which support the management and movement of patients along their clinical pathways using Performance Bridge.

The Market’s Mandate

There are multiple reasons Philips is prioritising this transformation, with customers being among the factors driving the transition. Many healthcare providers are having to deal with more patients than ever before. Both longer-term issues such as the increasing prevalence of chronic illness and more incidence of conditions related to an aging population, as well as shorter-term struggles, such as the enormous backlog of interventional procedures in the wake of the Covid pandemic, are placing strain on existent hospital systems. To deal with these issues, healthcare providers will have to become more efficient, improving utilisation rates and making better use of the resources that they do have. To achieve these goals, providers will turn to vendors and be willing to pay for solutions that are able to help deliver them success in these regards.

As well as being a customer-driven development, Philips’ own priorities are also pushing these changes forward. The vendor is one of those that is most aggressively pushing for large managed service deals that include additional components such as professional services, customer support and consulting. This is important for the vendor as these types of business are particularly sticky, especially compared to transactional hardware sales, and help generate long-term recurring revenues. Philips’ prioritisation of this future is an acknowledgment that these parts of the business are where longer-term growth lies. The firm believes greater returns can be had from investing in comprehensive, fully-integrated platforms, which are ready for the latest generation of technologies such as AI and Cloud computing, than by making incremental upgrades to medical imaging hardware. This will be borne out in purchasing decisions. Software is becoming an increasingly important factor in the decision to go with one medical imaging vendor over another. This is set to continue, reaching an inflection point within a handful of years, at which point software, not hardware, will be the primary driver for vendor selection.

Execution, Execution, Execution

Having this conceptual vision is one thing, however, it will be for nothing if it cannot be realised by the vendor. As a large vendor spanning a huge range of product categories, with a disparate range of systems, this will be a difficult process. This is a challenge that must, however, be overcome, because any advantage Philips might have in being able to offer a breadth of capability on a unified platform will be negated if it is not actually accessible to doctors and departments utilising the systems. Philips has laid out where it intends to bolster capability, but at the moment many of these tools are only present on the development roadmap, or are at best nascent, with very limited adoption. Looking at solutions on the vendor’s HealthSuite platform, for instance, of the eight solutions mentioned, five are so far unavailable or in development. So, while there is the vision of a complete platform spanning various broad clinical categories, the vendor has not yet been able to piece it all together. This is understandable, getting hundreds of software applications to run on a common platform, alongside a plethora of devices is a huge undertaking, but it is a task that must be accomplished.

This is especially true given that Philips’ principal competitors, GE Healthcare and Siemens Healthineers, are also making inroads in this direction. GE has focused on its Edison platform, while Siemens is continuing to develop its Syngo Carbon platform, itself the subject of a previous Premium Insight. While none of these vendors have yet created a complete, fully integrated and finalised platform, the fact that these vendors all share similar visions and have started to make steps towards their realisation is significant, and differentiates them from the likes of Canon, Fujifilm and other medical imaging vendors, which, for the time being at least, remain squarely planted in hardware sales. This will become a bigger competitive differentiator in coming years, as the expectation of this broader, digital, platform approach becomes increasingly important to providers.

The Necessities of Integration

In order to realise this vision, Philips still has some way to go. One of the challenges is set to be integration. However, before the Dutch company can devote itself to integrating all the constituent parts of the digital future that it is heading towards, it must first complete the integration of Carestream. While the acquisition of that vendor was significant and incorporating it and leveraging its technology in the wider Philips portfolio is no small task, it is a deal that was completed more than two years ago. Progress is being made, but the vendor is slower to reap the rewards of the deal than many would have expected. What’s more, while ever the Carestream integration demands the company’s attention, it is preventing Philips from fully devoting itself to the realisation of its next digital vision.

There are also other pragmatic steps Philips can take to dramatically improve its offering. While AI is part of Philips’ vision, it’s potential has not yet been fully realised. One of the routes Philips can take to address this shortcoming is by forging more partnerships with AI developers to offer more tools to its customers. Relying primarily on in-house development would, for the most part, be too time-consuming, and leave the vendor with a limited range of solutions. Instead, the vendor should look to partner with companies offering AI tools which can add value for its customers, while focusing its own efforts on the last-mile challenges of delivery and integration.

Ultimately, Philips’ strategy is sound. Its focus on its digital future and the prioritisation of transitioning from a hardware vendor to a service provider will allow it to continue to grow and exploit the fastest growing and most lucrative parts of the medical imaging market. Shifting to a comprehensive, integrated digital platform will aid in this regard, giving the company a technical backbone which the disparate parts of its portfolio can utilise.

The vendor still has some time to complete these changes. For many providers on seven-to-ten-year platform deals, immediate updates at the vendor are not necessary. But, this margin will soon run out. Philips needs to rapidly demonstrate that these strategic points are more than just aspiration. If it cannot do this, and is unable to realise its vision, if it cannot offer the cohesive platform it promises and offer its customers the valuable tools they will expect, it risks falling behind.

The goals have been set, now it is time for action.

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here