AI meets healthcare: why management matters more than technology

Artificial Intelligence (AI) is revolutionising our world at breakneck speed, promising to reshape industries, boost economies, and change how we live our daily lives.

Recognising this potential, the UK government has created an action plan to make the most of AI opportunities. But here is the interesting part - they are not just focusing on the technology itself. The plan acknowledges that success requires a diverse mix of actors: nimble startups with innovative ideas, venture capitalists ready to invest, and established companies with valuable capabilities and resources.

This emphasis on organisations as the driving force behind AI innovation reveals an often-overlooked truth: the real challenge is not just about developing the technology - it is about managing and organising for innovation. Yet policymakers frequently miss this crucial point.

AI's potential in healthcare is remarkable - it can help doctors diagnose conditions earlier, monitor patients more closely, predict health outcomes, and make better treatment decisions. However, companies face numerous organisational hurdles when commercialising cutting-edge technologies like AI. With both the market and the technology itself uncertain, they need to bring together experts from different fields to explore opportunities. They must coordinate with a wide network of partners, from small startups to major corporations, universities, regulators, and government bodies. Perhaps most importantly, they also need to communicate the benefits of these new technologies to customers in ways that make sense.

This helps explain why many ambitious technology initiatives fall short - not because the technology does not work, but because organisations struggle to manage the innovation process and organise their efforts around new technologies.

Challenges beyond technology: overcoming organisational and regulatory barriers

We recently hosted an Ideas in Practice event to help shed light on how companies are tackling AI innovation in healthcare. We brought together a diverse group of experts to hear about their insights and experiences, including: entrepreneurs developing new AI solutions, NHS doctors working on the frontline, investors funding innovation, regulatory specialists, executives from major healthcare and BigTech companies (the largest and most influential technology companies in AI), and researchers studying how organisations strategically innovate in this new frontier of AI-powered medical devices.

Our discussions with experts at the event reinforced a key insight: the biggest hurdles in developing and launching AI medical devices are not just technical - they are managerial. Entrepreneurs shared how they struggle to balance limited resources between navigating complex regulations and understanding the intricacies of national healthcare systems.

Any AI medical device needs to clear regulatory approval before it can be used with patients. Healthcare regulators like the Food and Drug Administration (FDA) in the USA, the Medicines and Healthcare products Regulatory Agency (MHRA) in the UK, and the European Medicines Agency (EMA) in the EU, play a crucial role in deciding which technologies make it to hospitals and clinics. This creates a significant challenge for startups in medical AI. They cannot just focus on building great technology or understanding what doctors and patients need, they also need to learn how to navigate complex regulatory requirements.

Clinicians, who will ultimately use these technologies, stressed something critical - new AI tools must fit seamlessly into existing medical processes and workflows. This highlighted that successful adoption requires healthcare providers themselves to innovate in how they work. Hence, entrepreneurs are not just creating new technology - they are helping their customers transform their own practices.

Leaders from large companies brought another perspective to the table. They explained that innovation goes beyond solving immediate problems. It is about creating and shaping entirely new markets. This demands creative thinking to develop compelling value propositions that change how people think about healthcare delivery, along with new business models that reshape how different players in the healthcare market interact. These larger companies are fostering business model innovation by creating data platforms that help startups reach their customers.

Bringing AI-enabled medical devices to market is therefore a complex, collective effort involving many different actors. And as the need for collaboration grows, so does the challenge of managing the innovation process.

Research findings

At the event, our research team (Krsto Pandza, Hutan Ashrafian, Serena Pugliese, Youngbin Yoo and Haoyu Zhang) shared insights from our study of AI in medical devices. Looking at FDA records, we found that by 2024, 330 companies had successfully received regulatory approval for their AI medical devices. The landscape of innovation is particularly interesting as startups make up about 60% of these approved companies, showing how new players are driving innovation in this field.

While established medical technology companies make up most of the remaining approvals, tech giants like Microsoft and Apple are also making their way into healthcare.

The funding patterns tell an equally interesting story. About half of the startups have secured backing from venture capital firms or corporate investors. Major players from both the tech world (Google, Microsoft, Nvidia) and traditional healthcare (Medtronic, Johnson & Johnson, GE Health) are investing in these innovations through their corporate venture funds. This pattern of investment suggests we are witnessing a convergence of digital technology and medical industries.

Our research reveals that success in AI-enabled medical devices demands more than just technical excellence. Startups need to develop organisational capabilities to blend three distinct areas of expertise: medical knowledge, regulatory understanding, and digital innovation. This integration is not just about having the right people - it requires building an organisational culture where these different perspectives can work together effectively.

For entrepreneurs entering the medical technology space, mastering the regulatory language proves particularly crucial. This regulatory expertise extends beyond mere compliance; it fundamentally shapes how companies communicate their innovation in the market.

When presenting their innovations to healthcare providers and investors, companies must carefully craft their message using precise medical terminology while clearly demonstrating what makes their solution unique. This delicate balance of speaking the language of healthcare while highlighting technological distinctiveness has emerged as a key factor in market success.

Our research is dedicated to continuing our investigation into the emerging field of AI-enabled medical devices, as it promises new insights into the strategic management of emergent technology. We also advocate that innovation is not only a technological or commercialisation challenge, but predominantly a managerial one.

Policymakers supporting AI innovation, as well as managers, must understand that innovation does not miraculously happen just because enough money is invested in technology. It requires managerial talent, innovative processes, and structures that enable collective market creation.