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STC384Dr. RuefliScenario Analysis Executive SummaryTeam PhoenixMichael WordenDan WimmerClaudia Chittim-McFarlandMichele Bo...
The medical device industry (and sub industry for diagnostic medical devices) is an attractiveindustry. In view of Michael...
billion in NIH funding in 2010. This is a plausible scenario as researchers continue to driveemerging technology through e...
number of product options. Range of assumptions for the variable one (V1) are low, medium,high (A1,1; A1,2; A1,3).    The ...
Analysis of the scenarios provides insight to possible future industry structure. For example, inscenario 2 above is the v...
Scenario 7 below is the scenario that the FDA does change its policy to fast track medicaldevices.   In this scenario, the...
to crush the new entrant, or may decide to “play nice” with the interloper through licensingagreements or strategic partne...
The optimal strategy for the cancer detection device (scenario 9 above) is to stealthily enter theindustry with differenti...
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Stc384 team phoenix scenario analysis exec summary approval from ccm

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Stc384 team phoenix scenario analysis exec summary approval from ccm

  1. 1. STC384Dr. RuefliScenario Analysis Executive SummaryTeam PhoenixMichael WordenDan WimmerClaudia Chittim-McFarlandMichele Boland Cancer Detection Device Scenario Analysis Executive SummaryForewordThe cancer detection device is in an early stage of development and needs to be incorporatedwith a fiber optic probe, other spectroscopic components, and may or may not end up being partof an endoscope solution. This has been a journey in “what if?”. From discovery of the knowns,we were able to carefully map the unknown scenarios. This process of learning, integration ofmaps and seeking knowledge gave us an opportunity to learn the “scenario analysis”.Early Stage Cancer Detection DeviceThe cancer detection device is expected to be launched in the medical device industry.Considerable changes are taking place in the industry subsector that is medical devices forimaging, diagnostics, screening and early detection largely due to Medicare, Medicaid andprivate health insurers’ willingness to reimburse for screening and early detection procedures.Thus, we have come to the determination that our early stage technology best classifies as acancer detection device, which would be a subset of diagnostic medical devices.Porter’s Five Forces 1|Page
  2. 2. The medical device industry (and sub industry for diagnostic medical devices) is an attractiveindustry. In view of Michael Porter’s Five Forces, the industry has low supplier power, mediumbuyer power, and medium threat of substitutes, medium rivalry, and low threat of new entrants.The industry however, is at the mercy of the U.S. Food and Drug Administration. The top levelindustry healthcare and all subsectors are heavily regulated by the FDA and face largerchallenges of a possible government run, single payer, healthcare system. “Sixth Force” aside,the medical device industry is dynamic and technological developments are shaping the industry.Information technology is a huge differentiator and very few devices exist as standalonecomponents or devices without algorithms, complex software, databases, and archiving.Deloitte and Touche Medical Devices Year 2025The medical device industry is trending to screening and diagnostic devices for early detection ofcancer among other diseases: nanotechnology, miniaturization, and in-vivo imaging are thefuture, along with sophisticated software algorithms and IT methods for computation of real timeresults against know data sets.Looking into the Crystal BallIn our consideration of the current industry in terms of Porter’s Five Forces, where the industryis headed, and probable impacts, we viewed the FDA as the single most significant determinantof the medical device industry. The FDA determines what devices will make it into themarketplace. One theory to be tested is the possibility the FDA will begin fast track approvalprocess of diagnostic devices for early cancer detection. A policy change like this by the FDAwould have significant impact on this industry. Researchers will be getting grants for over $2.5 2|Page
  3. 3. billion in NIH funding in 2010. This is a plausible scenario as researchers continue to driveemerging technology through expanded funding; more detection and diagnostic devices will bedeveloped and pushed towards commercialization. Any promising diagnostic or detectionmedical device is in demand as the overall healthcare industry tries to reduce costs.Possible Scenarios of FDA Fast TrackDemand is waiting for supply and if the FDA fast tracked diagnostic and detection medicaldevices, the industry will shift. New entrants will race to into the industry. The large industrycompetitors that already have imaging, diagnostic and detection devices will expand theirproduct set or race to either license, form strategic alliances or outright buy new technology toincorporate into their platforms. Technology transfer and adoption must occur in concert withnew supply/demand curve in order for new/enhanced diagnostic devices to be used and generaterevenue. Therein lies the crux, what will the new diagnostic devices look like, how can they bequickly adopted and deployed, will the devices be components that are adapted for existingsystems, entirely new platforms that plug and play with existing diagnostic/detection platforms?What if a technology was so innovative as to disrupt existing imaging, diagnostic processes,software platforms, and services?Constructing Scenario Variables and Range of AssumptionsWe used these variables to build our scenario analysis. The number one variable (V1) waschange in FDA diagnostic/detection device approval process. Causal factor for external isincreasing new entrants into the medical device industry. Internal causal factor is limited 3|Page
  4. 4. number of product options. Range of assumptions for the variable one (V1) are low, medium,high (A1,1; A1,2; A1,3). The second most significant variable (V2) is adoption rate of new technologies into existingendoscopic medical devices. External causal factor for this variable is cost savings, lower priceddevices. Range of assumptions for the variable two (V2) is slow and fast (A2,1; A2,2; A2,3). Ifa new technology can be retrofitted into existing platforms, overall costs may be reduced. Asadditional assembly components are available, the individual component may be moreexpensive, but the overall solution platform may provide more value at lesser cost. The third variable (V3) we chose was medical device packaging. The interaction of large,well known diagnostic and imaging brands such as Karl Storz, Pentax, Olympus in full motionvideo and video lenses used in all types of endoscopes, to GE and Siemens Medical as CT andMRI imaging/diagnostics solutions providers. The range of assumptions is brand name modularcomponents, brand name whole product solution, high short term shift for new technology (A3,1;A3,2; A3,3). What would the product set look like in various scenarios? The forth variable (V4) selected is the Information Technology factor: what wouldcompatibility with existing IT platforms used for diagnostic and detection devices look like?The range of assumptions includes proprietary software and open integrated software (A4,1;A4,2; A4,3). What approach would be most intriguing given various scenarios?Results and AnalysisOnce we eliminated implausible scenarios, the consistency table aligns the variables to theassumptions and yields the scenarios for in-depth analysis (the numbered set in the consistencytable). 4|Page
  5. 5. Analysis of the scenarios provides insight to possible future industry structure. For example, inscenario 2 above is the view when FDA makes no changes to current policy. The industry doesnot change, but remains attractive, competitors continue to enjoy economies of scale and scope,and demand will increase within the normal industry parameters. 5|Page
  6. 6. Scenario 7 below is the scenario that the FDA does change its policy to fast track medicaldevices. In this scenario, the variable and assumption reflect increased demand, therebyreducing barriers to new entrants into the industry. Rivalry increases, buyer power increases asthere will be more products to choose from. In this scenario, a race toward rapid innovation forall competitors could occur, where the stronger competitors add differentiated services, software,training, techniques, to strengthen their individual positions in the industry. Still, brandsdominate and a possible shift to whole product, integrated solutions to ward off competitivethreat.In the intermediate strategy scenario 9 below, we see a possible view into the industry with FDAfast track policy, and then rapid, potentially disruptive innovative new technology indiagnostic/detection medical devices. In this scenario, the industry is distinctly impacted asentry barriers shift. The structural attractiveness of the industry remains good, yet allcompetitors are forced to raise their levels of innovation. The strongest competitors may attempt 6|Page
  7. 7. to crush the new entrant, or may decide to “play nice” with the interloper through licensingagreements or strategic partnerships/alliances. 7|Page
  8. 8. The optimal strategy for the cancer detection device (scenario 9 above) is to stealthily enter theindustry with differentiated strategy and laser focus on specific market segment, and offer aproprietary technology that integrates into existing diagnostic/detection solution platforms. Thecore software will be proprietary but nicely plug into existing diagnostic platform software tools.The venture needs to be able to deliver the highest quality product and should deliver a wholeproduct solution out of the gate. Because this new entrant is delivering a unique, innovativetechnology “solution”, the venture should be able to command premium prices. This strategywill not therefore threaten the industry competitors to lower prices, and should not drawretaliation from rivals. 8|Page

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