1. Medical Technologies in the West Midlands Skills and the prospects for growing new medical technology businesses in the region

2. Medical Technologies in the West Midlands A study carried out by: Institute for Employment Research, University of Warwick Warwick Manufacturing Group, University of Warwick Medilink West Midlands Funded by: the European Social Fund & the Learning and Skills Council: Coventry and Warwickshire

3. Aims and Objectives To identify: Characteristics of companies that have diversified into medical technologies The skills needs that arise out of diversification Characteristics of potential diversifiers The skill needs that potential diversifiers will need to succeed

4. Sources of Evidence A review of the literature (international/national/regional) A questionnaire survey of companies that have diversified or have the potential to diversify A survey of Medilink West Midlands members A series of company case studies to identify further skill needs related to diversification

5. Why Diversify? The West Midlands economy is facing a number of challenges Highly uncertain future of the manufacturing base that has served the economy well in the past Need to identify new high value, high skill, high wage employment for the future ► Medical technologies fits the bill

6. How to identify diversifiers The Kompass database identifies a variety of outputs produced by businesses If medical technologies mentioned along with outputs = a diversifier Where companies otherwise have the same characteristics as diversifiers but do not produce medical technologies = potential diversifier

7. Schematic representation of the medical technologies cluster Producers of Medical Technologies (services and manufacture) Supply of professional services (e.g. accountancy, marketing) Final consumer Supply of scientific services (e.g. laboratory testing) Other services (e.g. training, design) Suppliers of intermediate products Distributors

8. Findings from the study Findings from the study are presented in four sections: The state of medical technologies in the West Midlands Employment in medical technologies and skill needs The diversification process The potential to diversify

9. The State of Medical Technologies in the West Midlands I There are many areas of the world where the medical technologies industry is well established (e.g. Baden- Württemberg, Massachusetts) Many areas where it is in an embryonic form with considerable potential (e.g. Medicon Valley in Denmark-Sweden) In the former there are a mix of large dominant players (e.g. Siemens) but many small firms In the latter it is principally smaller firms

10. The State of Medical Technologies in the West Midlands II How does the West Midlands compare? No major, dominant players No evidence of a world-class niche developing Tends to do a little bit of everything… …but has a strong engineering basis Evidence that many firms have dabbled in the production of medical technologies

11. The State of Medical Technologies in the West Midlands III The global message: A long way to go with considerable potential to go far But a better sense of direction may be required at a strategic level in the region If the region is to catch up with areas of the world with world class producers, it needs to act quickly

12. The State of Medical Technologies in the West Midlands IV Business conditions buoyant: Diversifiers tending to better than non-diversifiers Strong sense that the medical market will remain strong over the next five years Diversifiers are looking to move into higher value added markets in the future (57 per cent) Message: diversification pays

13. Employment and skill needs in Medical Technologies I Employment tends to be concentrated in smaller workplaces 42 per with fewer than 10 employees 82 per cent with fewer than 50 employees On average, the medical side of the business was modest: Accounting for 16 per cent of turnover… … and 32 per cent of employment

14. Employment and skill needs in Medical Technologies II - Just under half of companies that had diversified into medical technologies designed their own products - 6 per cent produced goods under licence - 82 per cent with fewer than 50 employees - 17 reported that medical technologies were their main output - 35 per cent reported that general engineering was their main output

15. Employment and skill needs in Medical Technologies III Types of medical activity in which workplaces engaged Base: All workplaces engaged in medical technologies Source: LSC/ESF Medical Technologies Skills Survey 2005 (IER/IFF)

16. Employment and skill needs in Medical Technologies IV Principal customers for medical products: 44 per cent NHS But where the main output was medical: 76 per cent said NHS was main customer; and More likely to be dealing with private medical practices and directly with patients

17. Employment and skill needs in Medical Technologies V Main markets are national ones: Base:All workplaces engaged in medical technologies Source:LSC/ESF Medical Technologies Skills Survey 2005 (IER/IFF) Main activity of workplaces producing medical goods/services

18. Employment and skill needs in Medical Technologies VI Skill needs: - 13 per cent of employers experienced recruitment problems over last two years - Where medical products were the main output recruitment problems more common – 32 per cent of employers -The main reasons are skill related - Not just technical skills, but softer skills too

19. Employment and skill needs in Medical Technologies VII Recruitment problems and skill shortages can have dramatic consequences: Impact of recruitment difficulties Base:All workplaces engaged in medical technologies Source: LSC/ESF Medical Technologies Skills Survey 2005 (IER/IFF)

20. The Process of Diversification I At the point companies diversify this requires investment in skills: – hiring more R&D people – investing more people with medical related skills – hiring people with regulatory knowledge

21. The Process of Diversification II Why diversify? - Existing markets in decline (24 per cent of diversifiers) - Developed customer base with a demand for these types of product (51 per cent) - Approached by customers (61 per cent) - Medical market a source of growth (44 per cent)

22. The Process of Diversification III Does the availability of skills limit diversification? Base:All workplaces diversifying into medical technologies Source:LSC/ESF Medical Technologies Skills Survey 2005 (IER/IFF) Problems encountered upon diversification

23. The Process of Diversification IV The future of the medical market – Most companies confident market will be strong over next five years (64 per cent) – Medical outputs will increase a percentage of total output for most companies (61 per cent) – NHS procurement is a disincentive for a substantial minority of those who have diversified (31 per cent) – A shortage of skills will limit development for a quarter of diversifiers (26 per cent)

24. The Process of Diversification V Future critical skill needs Critical skill needs in relation to medical applications and markets Base:All workplaces engaged in medical technologies Source:LSC/ESF Medical Technologies Skills Survey 2005 (IER/IFF)

25. The Process of Diversification VI Actions taken to acquire critical skills: – Training (43 per cent) – Recruitment (25 per cent) – Nothing (34 per cent) Training most commonly provided by private training providers (40 per cent) Main message: skill availability is limiting the development of the cluster, but this is not the only barrier

26. The potential to diversify I Potential diversifiers had the following characteristics: - Around 2,500 employers have the potential to diversify - 10 per cent of the sample said they had considered diversifying into medical technologies - 77 per cent had never considered doing so

27. The potential to diversify II - Around a fifth of the sample of employers thought their products had a potential medical application but had not pursued it - 14 per cent said NHS procurement was a barrier - Most not looking to diversify because existing markets were strong - Tended to be cautious about diversification

28. The potential to diversify III - Those with the potential to diversify have tended to experience recruitment problems over the past two years (around a third) - This suggests that diversification into medical technologies may further exacerbate recruitment problems and skill shortages - These recruitment problems were impeding the current business

29. Conclusions I There is considerable scope for employers in the region to enter the medical technologies market Skill is a limit on the diversification process… …but only at the point of diversification The main barrier is the decision to diversify into medical technologies in the first instance

30. Conclusions II Diversification relies upon a level of creativity in the business at a senior level But once the decision to diversify is made, then skill problems will arise… …and these will limit business development Encouragement to diversify needs to be simultaneous with skills development

31. Conclusions III At a strategic, regional level there is a need to broadly identify where the region has potential This is not about picking winners… …but about identifying where scarce resources can be optimally expended At the moment the cluster is inchoate and possibly lacks a clear identity given the various activities in which current medical producers are engaged