Medical device companies are fighting the wrong battle. While engineering teams pour resources into next-generation features and product specifications, customers are making loyalty decisions based on something entirely different: service quality.
A major diabetes device manufacturer discovered this the hard way. Despite offering cutting-edge continuous glucose monitors (CGMs) and insulin pumps with superior technical specs, they faced increasing commoditization pressure. In fact, the only thing that made them demonstrably different from competitors offering devices for a fraction of the cost was their free phone support for patient onboarding.
Desperate for differentiation and new revenue, but hesitant to invest in services that were typically low margin at best, the company kicked off a patient-centered/solution-agnostic research initiative. The goal was to develop a holistic understanding of people living with diabetes throughout their lives.
The result was a portfolio of solutions that generated over $100 million in new recurring revenue.
Lesson 1: People Before Products
The insight that unlocked this growth had nothing to do with their devices and everything to do with understanding what actually drives customer retention (see Table 1).
The diabetes device company already had a clue about service quality’s importance. Patients who engaged with their free phone support when starting to use CGMs and insulin pumps showed significantly higher loyalty than those who only used written materials.
The first breakthrough came when they shifted from a device-centric approach to research to a patient-centered one. Using the Jobs to be Done methodology, they interviewed a diverse group of patients, creating detailed personas and journey maps that captured the complete patient experience, not just device usage moments. This research revealed critical intervention points where patients were most likely to become noncompliant, for example, leaving for college, starting to date, or receiving a new diagnosis.
These weren’t moments where a new device was needed. They were invisible gaps in lives lived with diabetes, when patients need support and advice and made compliance decisions that could, in some cases be life altering. By identifying these critical intervention points and brainstorming solutions alongside patients, the company created a portfolio of new service ideas that would address real needs at precisely the moments when patients needed support most.
But ideas were the easy part.
Lesson 2: Prepare Your C-Suite for New Economics
Here’s where most medical device companies’ service ambitions die: the first financial review.
Medical device executives expect gross margins of 60–80 percent. They measure business health with real-time metrics like units sold, average selling price, and R&D as a percentage of revenue. Service businesses operate in an entirely different financial universe. Gross margins of 40–60 percent are considered strong, constrained as they are by labor costs. Business health gets measured by customer lifetime value, recurring revenue, and churn rates.
These aren’t minor accounting differences. They represent fundamentally different business models operating with different economics, different metrics, and different timelines for profitability.
The company’s successful onboarding service offering was free, and the company was committed to keeping it that way. However, that commitment brought with it a belief that all services should be free or, at least, break even.
The idea that services should be revenue generating and profit accretive, even at lower margins than devices, was anathema to senior leadership. Even when initial pilots succeeded, proving that patients were willing to pay for services at the critical intervention points they’d identified, finance struggled to reconcile device-based metrics and models with service-based ones.
The second breakthrough — integrating service and device metrics and financials — took months to achieve and ultimately delayed the launch of several services by a year or more.
A faster path to success required treating the operational and financial implications as a transformation project from day one, not as an add-on to the existing product business.
Lesson 3: Leverage Existing Services to Build and Scale New Ones
Most device companies already deliver services. Yet they erroneously believe they need to start from scratch when developing new ones.
The diabetes device company had already invested in clinical support staff, phone systems, patient databases, and protocols to support device sales. When they mapped critical intervention points in the patient journey, they realized that this infrastructure could be redeployed to deliver new services. The clinical expertise built for device troubleshooting helped patients navigate leaving for college or receiving new diagnoses. The phone support infrastructure scaled to handle expanded service offerings.
The cultural commitment to patient support made this transformation possible. Because the organization already valued customer service, resistance to the different operational and financial requirements of a service business model was overcome with time, data, and persistence. By building from existing capabilities rather than starting from scratch, they created a multi-hundred-million-dollar opportunity.
What This Means for Medical Device Companies
Product features alone no longer command premium prices or defend against commoditization. The path to differentiation and margin protection now runs through service quality and customer relationships.
The diabetes device company’s experience offers three clear lessons. First, prioritize people over product understanding, developing a holistic view of your customers’ lives, needs, and aspirations. Second, start preparing your executive team and finance function for the fundamentally different economics of service businesses on day one. Third, leverage capabilities and infrastructure from existing services to pilot, launch, and scale new services quickly and profitably.
The companies that successfully make this transition won’t be adding services to their product business. They’ll be transforming into providers of intelligent devices with integrated service offerings that address customer needs across the entire journey. The financial models are genuinely different. The organizational changes are real. But so are the loyalty, revenue, and profits.
This article was written by Robyn Bolton, Founder and Chief Navigator at MileZero, a consultancy helping medical device and healthcare companies turn uncertainty into competitive advantage. She was previously a Partner at Innosight and on the team that launched Swiffer at Procter & Gamble. Her book, Unlocking Innovation: A Leader’s Guide for Turning Bold Ideas Into Tangible Results, is available now. For more information, contact Bolton at
