Medtech innovation often faces a paradox: balancing the need for groundbreaking technologies with the constraints of efficiency and profitability. This challenge was the focal point of Duke Rohlen’s keynote, The Middle Path to Innovation, presented at LSI Europe ’24. Drawing from his thesis published in the Harvard Business Review, Rohlen, the Founder, CEO, and Chairman of Ajax Health, introduced the growth driver framework—a strategy for developing high-growth medtech products within slow-growth companies. Alongside Mano Iyer of Sofinnova Partners, Rohlen outlined a transformative approach for medtech entrepreneurs and investors navigating an increasingly complex landscape.

Harnessing the Growth Driver Framework

At the core of Rohlen’s keynote was the growth driver framework, a model designed to eliminate key risks in medtech development—capital, market, and operational—while focusing solely on technical risks. By leveraging corporate infrastructure and addressing portfolio deficiencies, the growth driver model creates a streamlined path to innovation. Rohlen illustrated its success through Ajax Health’s acquisition and revitalization of Cordis, a division of Cardinal Health.

Cordis—once a $700 million company with stagnant growth and low profitability—was transformed into a double-digit growth enterprise with over $1 billion in annual sales. This transformation was powered by a $300 million innovation engine, dubbed Cordis-X, that developed new technologies to address strategic gaps in the company’s portfolio.

Lessons from the Middle Path

1) Learn from Diverse Industries

Rohlen’s journey into medtech was unconventional. He began his career in the restaurant industry, where he scaled and sold a chain of restaurants before pivoting to medtech. This background instilled a focus on operational efficiency and customer-centric thinking—key principles he applied to his first medtech role at Lumen and later at companies like Fox Hollow and CV Ingenuity.

“I realized we needed a better way to balance capital efficiency and technological ambition,” Rohlen explained. This realization became the foundation for his iterative approach to medtech innovation.

2) Rethink Venture and R&D Models

The Growth Driver Model challenges traditional venture capital and R&D approaches by addressing inefficiencies in innovation pipelines. Rohlen categorized medtech development into three types of technologies:

Rohlen’s model blends these categories, creating a balanced pipeline of innovations that mitigate risk while driving significant growth. For example, by developing transformative technologies alongside synergistic and incremental updates, Cordis can maintain momentum without over-relying on any single breakthrough.

A Model for Capital Efficiency

1) Strategic Budgeting

Rohlen emphasized the importance of disciplined budgeting, especially in the early stages of development. “You can spend $1-2 million to test an idea and have it not work,” he said. “But if you spend $15-100 million on a failed concept, that’s career-ending.”

Ajax Health’s focus on cost management has allowed them to compress development timelines dramatically. By leveraging specialized teams and focusing resources on critical inflection points, they’ve reduced typical medtech development cycles from eight years to three and a half.

2) Empowering Talent

One of the most innovative aspects of the Cordis-X model is its approach to talent. Rohlen likened his strategy to an “App Store” model, where independent developers (engineers and entrepreneurs) work on specific projects within a defined budget. They are incentivized with a share of the returns, creating alignment between the developers’ success and Cordis’s growth.

“We take away the distractions of raising capital and managing market risks,” Rohlen explained. “This allows engineers to focus on what they do best: building transformative technologies.”

Collaborating with Strategics

The evolving medtech landscape has prompted greater collaboration between startups and large corporations. Rohlen noted that major medtech players now recognize the need for external innovation, driven by challenges in scaling in-house R&D and pressures to maintain profitability.

Ajax’s model extends beyond Cordis—they’ve partnered with several multibillion-dollar corporations to create similar growth engines tailored to those companies’ needs. This approach not only accelerates innovation but also ensures alignment between the startups’ outputs and the strategics’ market goals.

The Global Perspective: Innovation for a Cost-Conscious World

While the United States remains a dominant market for medtech, Rohlen stressed the importance of designing products with global scalability. Cordis’s international sales—spanning Europe, China, and beyond—highlight the need for technologies that balance innovation with cost efficiency. “Reimbursement models vary globally,” Rohlen noted. “Designing for cost-conscious markets like Europe forces greater discipline, which ultimately benefits all markets.”

Shaping the Future of Medtech with Growth Drivers

Rohlen’s growth driver framework offers a roadmap for medtech companies seeking to thrive in today’s challenging landscape. By aligning innovation with efficiency, empowering entrepreneurial talent, and fostering strategic partnerships, the growth driver approach transforms medtech from a historically risky asset class into a powerhouse of sustainable growth.

“This is an incredibly exciting time for medtech,” Rohlen concluded. “With strategic alignment and the right growth drivers, we can reshape the industry and unlock its full potential.”

The full recording of the panel can be found in LSI’s resource hub at the link below:

• The Middle Path to Innovation