At the heart of business success lies a clear growth strategy, one that aligns short-term actions with long-term goals to drive profitability. Inorganic growth – achieved through mergers, acquisitions, strategic partnerships, joint ventures, or targeted investments – is often essential for strengthening a company’s market position and diversifying its offerings. This is especially true in the MedTech and HealthTech sectors, where accelerating digital transformation, intensifying competition, shifting regulatory and reimbursement landscapes, and evolving clinical and patient needs pressure companies to innovate and scale quickly.
One form of inorganic growth involves expanding into adjacent markets, defined as markets outside a company’s core business. Adjacent markets, or simply adjacencies, can unlock access to new technologies, customer segments, and revenue streams, enabling companies to stay ahead of disruption, broaden their product portfolio, build brand equity, and deliver greater value across the continuum of care.
However, identifying the right adjacent market is an inherently complex endeavor. It demands a disciplined, systematic approach that begins with a cross-functional evaluation of a company’s strategic priorities, growth drivers, and risk tolerance, while also considering the potential for technological and operational synergies. Close adjacencies (defined as being in the immediate proximity of a company’s core business) often provide faster, lower-risk paths to expansion, but more distant adjacencies may represent substantially larger, longer-term market opportunities.
So, a central question for any MedTech or HealthTech company exploring adjacent growth options is: How can we identify and pursue compelling adjacencies that balance strategic fit and acceptable risk, while creating long-term value and without eroding our existing business?
Each adjacency presents distinct challenges and opportunities. The closer an adjacency is to the core business (e.g., in terms of product features, clinical indications, regulatory and reimbursement pathways, or distribution channels), the more companies can lean on their internal technological and operational strengths, as well as existing talent and infrastructure. This minimizes execution risk. For example, entering a new geography with an existing product to expand a company’s global footprint may involve logistical and regulatory hurdles, and pricing strategies may need to be adjusted. However, if the core value proposition remains largely the same, companies can rely on proven value messaging and established marketing strategies, reducing both costs and time to market.
In contrast, applying a product or technology to a new clinical indication or entering an entirely different vertical introduces significantly greater uncertainty and necessitates more rigorous cross-functional alignment and analysis. For instance, it may require generating additional clinical and/or economic evidence, navigating new reimbursement pathways, engaging different buyer personas, and developing a revised market entry strategy. In this case, it will be critical to determine which existing competencies and capabilities (e.g., market access know-how, manufacturing processes, sales infrastructure) are transferable and which ones should be outsourced, optimized, or built anew. Regardless, the scale of the investment is likely to be larger, the time to market longer, and the risk higher.
Identifying potentially suitable adjacencies, whether close or distant, is only half the challenge. To determine the most effective path forward, implementation options must be carefully evaluated. Is a strategic partnership better than a bolt-on acquisition to mitigate risk? Is it more advantageous to partner with an emerging player or an established one? What criteria should guide investment decisions? Can some capabilities or specialized expertise be developed internally to retain greater operational control and reduce costs over time?Companies routinely face these questions when building a market expansion roadmap. For example, if a diagnostic imaging company is looking to enter the digital health market to offera more integrated platform and tap into remote monitoring, what steps should it take and in what sequence?
Given the wide range of potential options, companies need a structured framework to identify and prioritize adjacent market opportunities that align with their long-term vision, financial objectives, and risk profile. This framework should also generate actionable, data-driven insights to guide the development of an implementation blueprint.
A crucial step in building a framework for adjacency identification and prioritization is clearly defining the types of adjacencies to be explored. Generally, adjacencies fall into seven main categories that span customer, offering, and operational expansion, with some overlap among them: (1) Geographic expansion; (2) product repositioning; (3) channel expansion; (4) capability enhancement; (5) product diversification; (6) technology repurposing; and (7) value chain expansion. The seven categories are defined in Table 1.
Table 1: Adjacencies can be grouped into seven main categories
|
Adjacency Category |
Definition |
Implications |
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|
Geographic Expansion |
Entering new regions with existing products or services to access new customer base |
Requires in-depth understanding of local competitive dynamics, regulations, preferences, and payment models; may involve new distribution agreements |
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|
Product Repositioning |
Applying existing products to new clinical indications or targeting different patient populations |
May require additional clinical validation, regulatory approvals, and tailored messaging to address different clinical and/or patient needs |
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|
Channel Expansion |
Reaching customers through new sales or distribution channels |
May require reorganization of sales force and operations; updated or new value messaging may be necessary |
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|
Capability Enhancement |
Introducing features or services that enhance functionality or user experience of existing products; may involve new business models |
May deepen patient engagement, improve compliance, and enhance differentiation |
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|
Product Diversification |
Developing new products or modifying existing ones to target novel clinical uses or unmet needs |
Requires higher R&D investment, strategic repositioning, and clear product-market fit; may require acquisition or partnership |
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|
Technology Repurposing |
Repurposing proprietary technologies from other industries for medical applications |
Requires significant investment and risk tolerance, but can unlock significant growth if aligned with unmet needs; may require acquisition or partnership |
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|
Value Chain Expansion |
Expanding upstream or downstream to gain control over sourcing, manufacturing, or distribution |
May require significant investment and operational restructuring; may involve a degree of product redesign to improve efficiency |
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A clear understanding of the key advantages, drawbacks, and implications of each type of adjacency is a critical stepping stone to evaluating expansion opportunities. The adjacency evaluation process should be customized to ensure that its rigor and scope align with both the company’s strategic priorities and the level of proximity to its core business (see Figure 1).
Developing new product features or entirely new products, in particular, may require substantial investment and new clinical and/or economic evidence, as well as revised market-entry and value messaging strategies. In this context, a strategic partnership, joint venture, or acquisition may ease the path to market by offering benefits such as an existing customer base, talent, infrastructure, and distribution channels. However, these approaches also introduce integration hurdles, requiring careful pre- and post-integration planning. Selecting the right investment and partnership targets and understanding the implications of each approach require careful evaluation and analysis. We plan to explore this topic in greater depth in a future article.
Figure 1: High-level Map of Adjacency Categories Relative to Core Business
Selecting best-fit adjacencies starts with systematically mapping potential opportunities based on their level of complementarity to a company’s existing products and services, organizational and technical capabilities, tangible and intangible assets, and operational infrastructure. This analysis should go beyond surface-level synergies and incorporate a rigorous assessment of how well each opportunity integrates with a company’s core competencies and supports its strategic ambitions to accelerate growth.
Key evaluation criteria for prioritizing opportunities include market attractiveness, competitive density and intensity, regulatory and market access barriers, execution complexity (both technical and organizational), and alignment with a company’s long-term vision. A well-structured approach ensures focus on opportunities with the highest potential for sustainable growth, long-term value creation, and strategic fit.
The key steps in this prioritization process are outlined below.
1. PRELIMINARY LISTAfter aligning internally on the main strategic objectives and the types of adjacencies to be explored, a preliminary list of options is developed. These options represent potential adjacencies that meet predefined search criteria and serve as the foundation for deeper analysis.
2. DOWNSELECTIONNext, filtering criteria (e.g., market size, competitive density, operational synergies) are applied to narrow the list to the most promising opportunities.
3.BENCHMARKINGShortlisted options are systematically evaluated and benchmarked against key dimensions (e.g., revenue potential, required investment, capability alignment, competitive landscape) to identify opportunities that combine strong strategic alignment and a viable path to market. A scoring matrix can be used to rank opportunities.
At this stage, assessing scalability is critical to ensure the chosen path supports long-term growth and does not create operational bottlenecks. This includes, for example, the ability to integrate new capabilities across geographies, adapt to evolving clinical and patient needs, and maintain cost efficiency as the business scales. This assessment is important to maximize operational efficiencies and minimize execution risk.
4. SCENARIO ANALYSISWhat-if scenarios, considering both market pull and technology push, are applied to all shortlisted options or only the top-ranked ones, depending on the scope of the analysis. The main goal is to analyze impact and feasibility, as well as outline implementation pathways.
5. GO/NO-GO DECISIONLeveraging insights from the previous steps, decision matrices are developed to guide go/no-go decisions, incorporating factors such as synergy potential, financial feasibility, and execution risk. This step includes a decision on the implementation pathway and mitigation plans for identified risks.
By strategically expanding into adjacent markets, MedTech and HealthTech companies can accelerate innovation, diversify their offerings, capture market share, and stay ahead of industry trends and market shifts. While individual companies face unique challenges, adjacencies represent a compelling opportunity to strengthen competitive positioning and drive profitable growth.
Successful expansion into adjacencies requires a careful balance between leveraging core competencies, identifying the most efficient implementation pathway – whether through acquisition, partnership, in-house development, or a combination – and avoiding overextension. It is important to maintain focus on the core business and thoroughly analyze the potential downstream effects of each decision. For example, introducing a new product may cannibalize existing offerings or disrupt current partnerships and agreements with companies in adjacent spaces. These risks are often overlooked but must be carefully evaluated to prevent unintended consequences.
We partner with companies across the MedTech and HealthTech spectrum to craft growth strategies that deliver measurable results and create long-term value. Our team combines deep industry expertise with strategic insights to help clients capture new opportunities and accelerate innovation, both organically and inorganically. By integrating primary and secondary research methodologies with advanced analytics, we provide actionable insights into risks and opportunities. This empowers our clients to make confident, data-driven decisions, identify high-potential investment opportunities, anticipate and adapt to market shifts, and unlock growth through strategic investments. Contact us today to develop a growth roadmap tailored to your unique goals and vision.
About the author:
Cinzia Metallo, PhD, is Director in the Commercial Strategy and Market Access practice, specializing in Strategy and Innovation.Dr. Metallo leverages her scientific and entrepreneurial background to help companies of all sizes develop go-to-market strategies and commercial roadmaps, evaluate emerging market opportunities, conduct unmet need assessments, identify potential partners and investment targets, perform due diligence, and build robust forecasting models. She specializes in designing growth strategies around whitespace opportunities and guiding businesses in expanding their market presence through both organic and inorganic approaches. Her experience spans medical devices, digital technologies, software, and diagnostics across therapeutic areas such as oncology, immunology, neurology, cardiovascular, gastroenterology, and dermatology. She holds a Ph.D. in Neuroscience and a M.Sc. in Physics.