Great presentation highlighting opportunities for vertical market expansion into Healthcare.

1. GROWTH PROCESS OVERVIEW
2013
Vertical Market Expansion
Accelerating Growth through Principled Market Opportunity
Evaluation and Entry Strategy Development
Vertical Market Spotlight – Healthcare Technology

2. Why Vertical Market Expansion?
After cutting expenses to
CEOs are therefore
One path an organization
the bone in the recent
refocusing on growing the
might take to growing the
recession, most companies
top line.
top line is to take an existing
now recognize that they
product or service into a
can’t cut their way to
new market.
growth.
Three Critical & Gated Questions for Evaluating Vertical Markets:
1 – Is Vertical Market Expansion appropriate for your company and is the timing right?
2 – If the answer yes, which vertical markets are most appropriate/feasible to pursue?
3 – Finally, what is the optimal go-to-market strategy?
2

3. Vertical Market Expansion Risks
For every successful market entry, four fail.
95% of all vertical entries in the aerospace & defense industry
fail to take hold.
Winners and losers all look like winners at the outset – so why
do so many companies head down ill-advised paths?
Where Companies Go Wrong
Numerous pitfalls can derail even the most well-intentioned executive
•Assuming vertical market expansion will deliver expected growth
•Entering multiple vertical markets simultaneously
•Moving into markets not adjacent to your core
3

4. Vertical Market Expansion Best Practices
Key Principles:
Pursue only one or two verticals at a time
Vet all opportunities for strategic fit before committing to market entry
Understand that the better the assessment of market size, competitors,
market share, revenue, costs, and other factors, the better their odds of
making good vertical market entry decisions
4

5. The Opportunity in Vertical Market
Expansion into Medical
Technology

6. Who Will take the Lead in Advancing Healthcare
Technology this Century?
• Information technology?
• Robotic surgery?
• Virtual reality?
• Cryogenics?
• Genetic engineering?
• Artificial intelligence?
6

7. The Challenges and Opportunities in Healthcare are Too
Great for Any One Company or Industry to Address
Healthcare increasingly data driven and
customized
Increased leveraging of tech and nonphysicians
Healthcare more like other service
industries
More “generics” – technologies providing
same value at lower price, stripped down
feature sets
Globalized care delivery
New care models focused on
collaboration, information
exchange/awareness, achieving health
outcomes, especially with chronic
disease care
Increased development of standards of
care and incentives to adopt them
Personalization of treatment,
interaction, coverage
Increased patient engagement to
manage disease via remote monitoring
and mobile apps
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Increased use of analytics to define care
pathways

8. Unique Qualities of Healthcare Industry to Consider
When Assessing a Potential Expansion
• Strong U.S. manufacturing
base, net positive trade
surplus
• Strong demand, but strong
downward pricing pressure
as well
• Lower product volumes but
higher margins
• A service industry first,
technology second
• Highly diverse customer and
user population
8
Highly-regulated and datadriven = longer, more
expensive development
timelines
Life-and-death decisions =
high liability and risk
Privacy considerations
Complex distribution and
purchasing processes
Biocompatibility
considerations

9. Using a 360 Degree Perspective to Evaluating Vertical
Market Expansion Opportunities in Medical Technology
• Achieving major advances in
healthcare will require innovation
and resources from outside the
established industry players
• Frost & Sullivan’s CEO’s 360
Degree Visionary Perspective™
provides a framework to
understand how companies can
identify and evaluate
opportunities to grow in the
medical technology field
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10. Competitive Analysis
10

11. Healthcare Attracting New Competitors into the Market
but Business Models Will be Challenged
New Entrants into Healthcare
Materials, component and OEM
manufacturers
Finished goods manufacturers in
non-healthcare sectors
Service providers
What Value they Can Bring
• Develop or improve products
• Lower production costs and improve
operational efficiency
• Improve outcomes
• Synergies and co-promotion
opportunities
Information technology
companies
• Access to new distribution channels
Contract manufacturers
• Value chain efficiencies
Consumer goods companies
• Facilitating greater collaboration and
integration of care
Distributors and retailers
• Support in global expansion
Government contractors
• Financing in a market where venture
capital has grown tighter
Others
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• Access to new customers

12. New Companies Entering Healthcare Will Force
Existing Competitors to Respond
• Anticipate disruption in current
markets and creation of new
value pools, i.e. population
health management (PHM)
• Redefining “healthcare”
• New business models –
converting to a service/data
strategy
• Expanding into new customer
segments and getting a greater
share of wallet
• New distribution strategies
• Joint ventures, partnerships and
investments will matter more,
but will they work?
• Lots of trial and error on
business models, but big
rewards for first movers
12

13. Realities of the New Market
Fail Fast
Product and tactical sales strategies are being evaluated for
quick return, resource limitations constrain a company’s ability
to support lagging business models.
U.S. from
Exporter to
Importer of Med
Tech
Currently one of few the markets where the U.S. has a
significant trade surplus with the rest of world, shifts seen in
other industries could play out as low cost manufactured
products supplant products currently made in the United States.
Deemphasize the
Clinician
Purchase decisions are moving away from clinicians to hospitalbased administrators for bulk low grade technologies and high
end capital equipment, and more individual emphasis for
implants and other patient-centric products.
Deemphasize
Products
As products increasingly become commoditized and the tax
burden is placed on medical product sales, companies are
increasingly looking to build revenue mix from service, software,
enhanced support, and other offerings.
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14. Economic Analysis
14

15. Managing Costs of Chronic Disease Will Demand More
Emphasis on Prevention and Wellness
Early identification and prevention
Prevention/Wellness
Size of Impacted Population
Access to new forms of care delivery to improve patient
knowledge, self-help and health
Goal:
Keep
People
Healthy
Longer
Healthy/
“Worried Well”
Connection to benefits design to increase coverage for
those services which prevent disease and improve health
over long term
Reducing administrative and clinical waste
Goal:
Manage
or Mitigate
Risk
“At Risk”
Disease/Care
Management
Goal:
Diagnose
and
Reduce
Treatment
Delay
Undiagnosed
Goal:
Move to
More
Interaction
and SelfMgmt
Chronically Ill
Managed
Continuum of Care
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Goal:
Manage
Chronically Ill
Unmanaged
Goal:
Informed
Decisions
End
of Life

16. ROI and Clinical Outcomes Will be Critical to Technology Adoption
A recent Frost & Sullivan survey of
70 hospital executives found:
•
All but one respondent believed that
in the next five years it will be more
important to the economic health
of hospitals to deliver improved
clinical and financial outcomes than
in the past
•
49% believed it would be
significantly more important to
deliver outcomes better than what
they are presently offering
•
82% believed that in the next five
years, the U.S. healthcare system
would transition further away from
traditional fee-for-service billing to
more capitated, bundled payment
approaches
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“As bundled payments become more
prevalent, I believe that how providers
evaluate the ROI for medical technology
will change, with more pressure on
physician preference items and greater
interest in those that can improve
efficiency and outcomes. In addition, as
hospitals become part of accountable care
organizations (ACOs) there will be greater
demand for telehealth and other types of
technologies that can help keep patients
out of the hospital and prevent
readmission.”
- Edward Prunchunas, senior vice president and
CFO for Cedars-Sinai Medical Center

17. Volume
Value
The shift toward payments based on quality + cost over procedure-based
reimbursement will change the way medical technologies are evaluated and
purchased
Decision by committee
Slower adoption of new
technologies – especially large
capital purchases?
Revolution versus evolution?
Integration of information,
analytics driven by a more
holistic view of the patient
Cost of adoption, impact on
workflow
New pricing models, sharing of
risk
17

18. Technology Analysis
18

19. Integrated Industry Opportunities in Healthcare
• The medical technology industry has been described as a field built up by
enabling technologies often developed in other fields and then applied to
healthcare challenges
• The greatest advances in medical technology in coming decades will be driven
by the following enabling technologies:
•
•
•
•
•
•
•
•
Battery and power transmission technology
Sensing technology
Materials sciences – particularly polymers
and shape-memory alloys
Information technology and informatics
Wireless and mobile communications
technology
Nanotechnology
Technologies to enable drug-device
integration
Enabling technologies for minimally-invasive
or non-invasive technologies
•
•
•
•
•
•
•
•
•
•
Microelectronics
Lab-on-a-chip
Video games and digital media
Robotics and artificial intelligence
Biologics and tissue engineering;
regenerative medicine
Microbe detection, identification and
elimination; food safety
RFID
Display technologies and image processing
Optical technologies (NIRS, OCT, etc.)
Semiconductors
Companies with these core competencies have significant potential to expand
into healthcare applications
19

20. Portability Will be a Major Design Feature Requiring Support
from Across Many Players
In the future, more healthcare services will be provided outside of the hospital and located where the patient
is as opposed to where providers are. This will lead to a demand for new types of devices from monitors to
treatment tools to wearable sensors to enable that model of care delivery.
Home as the Hub:
The home and other local settings will grow significantly as a locale of
choice for care delivery. Delivery system will expand to include community
and family resources.
Integration:
Medical services are
integrated with wellness
activities to provide overall
care delivery
Customization:
At multiple levels (health plans, interaction with caregivers,
individual care pathways, communications, etc.)
Driven by patients

21. Information Technology Holds the Greatest Opportunity
for Vertical Market Expansion in Healthcare
Data Explosion Drives the Need for Powerful Analytics Leveraged
Across Disparate Data Sets
Huge volumes of data
…data about data (metadata)
…created more quickly
…from more sources
…in more formats
…both structured and unstructured data
…hard to combine using standard analytics tools
ANALYTICS
Pattern analysis
Holistic
Right brain approach
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NEW TOOLS
Artificial intelligence
Natural language processing
Predictive analytics
USES OF BIG DATA
• Clinical decision support
• Proactive intervention
• CER and outcomes research
• Customer micro-segmentation
• Clinical trial design
NEW
BUSINESS
MODELS

22. Customer Analysis
22

23. Healthcare Consumerism Driving Convergence Between
Medical and Consumer Technologies
Shift in Demographics
– Population composition, attitudes, affluence, education, disease states
Shift in Technology
– Smaller, wireless, Internet-enabled, information-gathering technologies
creating new opportunities to extend the reach of care
Shift in Care Settings
– Hospital based to non-hospital to home; inpatient to outpatient
Shift in Caregivers
– Using technology to move care to lower skilled caregivers and the
consumer; healthcare practitioners to patients, family or nonprofessionals; patients more informed on disease states and treatment
options thanks to the Internet
Shift in Care Practices
– More scientific, data driven, preventive, technology-intense form of
medicine than in the past; physicians more collaborative with patients;
greater fragmentation across healthcare system, and more defensive
medicine
Shift in Payment for Care
– More available technologies, but less willingness for insurers to pay
leaves patients to pick up more costs associated with their own care, if
they see value
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24. Leveraging Consumer Interactions from Other Industries to
Influence Behavior Change
Consumer experiences in other markets affecting expectations
from healthcare:
Retailing
& Finance
Customer service focus
Comparison shopping
Self-service, online shopping
Special offers
Consumers expect
real time info at pt
of consumption
Info comes to
consumer
Consumers expect
high levels of
interaction and
Q&A in face to
face encounters
Consumer
Expectations
Ability to control and customize use and
service features
Consumer controls interaction
Entertainment
& Media
Customized products
Home services
Manufacturing
& Distribution
Faster time to market
One stop shop
Anytime anywhere
care
24 / 7 / 365 support to
resolve questions,
One stop resolution, or
call back
Proactive outreach to
address issues
affecting consumer

25. Medical Technologies Have A lot to Learn from Other
Industries in Terms of Design for Human Factors
VS.
MJM Extra Wide Geri-Chair
Singapore Airlines –
Boeing 747 Business
Class
Good design for patient comfort and satisfaction makes a difference!
More designers entering healthcare, but a long way to go.
25

26. Integrated Industry Analysis
26

27. Widening Stakeholder Universe and More CrossInteractions Among Parties
Collaboration with
payers and providers
to drive technology
innovation
FAMILIES
INDUSTRY
Strongest center of
influence and behavioral
processes
COMMUNITIES
Expanding spheres
of influence and
changing
attitudes
Emphasis on
wellness
programs and
financial based
incentives
EMPLOYERS
PROVIDERS
PAYERS
New era of
collaboration and
communication
Data and information for
shared decision-making
Source: Frost & Sullivan analysis
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28. The Opportunity in Convergence
Healthcare consumerism leading to
convergence of professional medical
technology with consumer technology – taking
technologies and responsibilities formerly the
domain of healthcare professionals and putting
them in the hands of patients themselves
Examples: AEDs, Blood Glucose Monitors,
Insulin Pumps, Home Diagnostics, Remote
Patient Monitoring
Whole Market Segments Worth Billions
Opportunities for Products & Services
Who is in the Market Now?
Philips HeartStart
Home Defibrillator
28

29. Major Areas of Opportunity for Convergence
Combination Devices
Networked Devices
Consumer Devices
Home/ Self-Diagnostics – for identified conditions and “wellness
monitoring”
Remote Patient Monitoring
Test and Treatments for Chronic Conditions
Products Focused on Wellness, Nutrition and Weight Loss
Technologies and Services to Improve Adherence and
Compliance
Quality of Life and Pain Management
29

30. Convergence Across the Medical Technology Spectrum
Insulin Pumps
Thermometers
Anesthesia Machine
Hearing aids
Orthopedic softgoods
Orthopedic Implant
CPAP Machines
CT Scanner
Neurostimulators
Exclusively
Consumer
Exclusively
Professional
Primarily
Professional
Primarily
Consumer
Driven by clinician needs, does not
require active involvement by
patient to achieve effect, requires
RX or MD order
Driven by clinician needs,
requires active involvement
by patient to achieve effect ,
requires RX or MD order
Driven by consumer needs,
requires a clinician
intermediary or Rx prior to
purchase
Care Setting
Purchasing
Authority
Healthcare Facility, High Acuity
Healthcare Facility Covers Most Costs with
Little Direct Reimbursement
Exclusively Used by Clinicians
User
Technical
Complexity
Highly Complex, Significant Training
Required Prior to Use
High Risk for Injury if Used Improperly
Safety Risk
30
Driven by consumer needs,
does not require a clinician
intermediary or Rx prior to
purchase
Home
Consumer Covers Most Costs
Personally
Exclusively Used
by Patient
Low Complexity, Little Training
Required Prior to Use
Low Risk for Injury if Used Improperly

31. Global Analysis
31

32. Globalization of Healthcare is Also Driving Opportunities
for Vertical Market Expansion
Telemedicine driving creation of truly global provider networks, i.e.
Global Virtual Hospital
“Cultural exchange” – foods, fads, fashions, hobbies, ideas, etc. from
OUS
Reverse innovation of new technologies from developing countries
Best practices on primary care, prevention and wellness from those
countries with healthcare systems excelling in those areas - mHealth,
kiosks, wireless technologies much more widespread and sophisticated
OUS, etc.
Medical tourism
Globalized supply chain and manufacturing
Regulatory harmonization across countries
32

33. Best Practices
33

34. Different Strategies for Entering the Healthcare Market
A Modified Ansoff Grid
Low
High
Market Penetration
Product Development
Delivering existing goods and services
to the healthcare market, often
indirectly through partners or
distributors. Limited innovation to
meet specific needs of healthcare
customers. May include licensing and
JV deals as well.
Developing a technology or service
targeting healthcare, but using all or
mostly existing resources and
competencies. May sell indirectly into
market or through existing channels.
Market Development
Diversification
Investing in the creation of new
markets, models and customers in
healthcare to increase usage of goods
and services that are already core to
existing competencies.
Not just a product strategy, but a
broader, long-term commitment to
healthcare. Organic or M&A.
Completely engaged in healthcare.
Developing a new distribution
channel, management team,
regulatory, etc.
Directly in
Healthcare
Increasing Risk
Increasing Risk
PROXIMITY TO
EXISTING MARKET(S)
Existing
Market(s)
DEGREE OF INNOVATION

35. Case Studies on Expansion into Healthcare (1 of 2)
Market Penetration
Market
Development
35
• Display and video signal solutions
provider. Entered medical 5 years ago,
and while it still represents a minority
share of its business, medical represents
the most growth opportunity.
• Company sells through resellers and AV
integrators . Acquired display company
WIDE in 2013 expanding medical
presence internationally.
Subsidiary created to develop a wireless
health ecosystem where Qualcomm’s
expertise in medical device connectivity
and data management can be leveraged.
Launched 2net Mobile connectivity
solution for mHealth
Qualcomm Life Fund invests in wireless
health start-ups that will accelerate
adoption of its 2net platform
Committed to growing the use of mHealth
on 3G/4G networks which will support
royalty revenues for the company

36. Case Studies on Expansion into Healthcare (2 of 2)
Product Development
Diversification
36
• Bluetooth headset designer Jawbone
entered the fitness device market in mid2011 with its Up wearable device. The
entrant of such an established mobile
device maker added legitimacy to the
market.
• Jawbone acquisition of BodyMedia,
Massive Health and Visere in 2013 to grow
health and fitness presence
Display and projector company, Christie
Digital, acquires the vein-mapping
technology company Luminetx in 2010.
Core company becomes Christie Medical
division laying the foundation for further
expansion into healthcare.
Company leverages Christie’s expertise
in optics, engineering and manufacturing
with the innovation, sales channels and
clinical expertise in the medical division.
Christie has seen healthy growth and an
expansion in the Vein Viewer product line
since acquisition.

37. Secrets to Success in Market Expansion into Healthcare
Find the
Right
Partner(s)
Invest for the
Long Term
Know your
Business Model
Define your Value
Proposition
37