Vertical market expansion hc gleikin2013q4campaign


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Great presentation highlighting opportunities for vertical market expansion into Healthcare.

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Vertical market expansion hc gleikin2013q4campaign

  1. 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. 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. 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. 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. 5. The Opportunity in Vertical Market Expansion into Medical Technology
  6. 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. 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 7 Increased use of analytics to define care pathways
  8. 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. 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 9
  10. 10. Competitive Analysis 10
  11. 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 11 • Access to new customers
  12. 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. 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. 13
  14. 14. Economic Analysis 14
  15. 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 15 Goal: Manage Chronically Ill Unmanaged Goal: Informed Decisions End of Life
  16. 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 16 “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. 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. 18. Technology Analysis 18
  19. 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. 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. 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 21 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. 22. Customer Analysis 22
  23. 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 23
  24. 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. 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. 26. Integrated Industry Analysis 26
  27. 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 27
  28. 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. 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. 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. 31. Global Analysis 31
  32. 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. 33. Best Practices 33
  34. 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. 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. 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. 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