Client Case Study - Medcorp Medical Devices
Medcorp Medical Devices, a start-up, planned to produce
and market a basic unit of its Cardometer cardiac output monitor and
use the revenue to fund development of a more sophisticated unit.
BUSINESS CHALLENGE - VALIDATING A PRODUCT CONCEPT
Having funded the venture for two years without seeing a product,
the investors insisted on testing market acceptance of the Cardometer.
The investors sought answers to two questions:
- Would emergency medical professionals and cardiologists use cardiac
output information to gauge patient well-being?
- How should Medcorp design, price, position, and sell the cardiac
output monitor?
Animal trials had shown that a prototype of the Cardometer could measure
cardiac output. Existing cardiac devices could only provide information
on blood volume pumped out (ejection fraction) while the Cardometer
could measure the volume that was originally present in the heart. The
company believed that doctors and nurses in hospitals, cardiologists
with private practices, and paramedics in ambulances and helicopters
would use this device, but they had not yet ascertained if the data
it produced would be useful.
WINETT ASSOCIATES' SOLUTION - TESTING THE MARKET
Winett Associates interviewed doctors, nurses, physiologists, and
emergency medical personnel on the ground and in the air to explore
current methods for gauging cardiac health and also to gauge acceptance
of the Cardometer. To learn how companies market and sell medical devices,
we also talked with people who sell medical devices ranging from disposables
to MRI equipment. At the same time we searched medical literature for
articles on using ejection fraction to assess patient well-being. Additionally,
we estimated the size of the market and the size of the potential opportunity
for the startup.
WHAT WE LEARNED
It was a classic chicken and egg situation: Cardiac
output data was unavailable; therefore, doctors and nurses did not
know how to interpret or use this type of information. Furthermore,
emergency healthcare technicians claimed not to have the time to connect
a patient to the Cardometer to learn what they could just as easily
learn by looking at the patient. Additionally, the Cardometer had
to be designed for use in darkened ambulances or helicopters. The
Cardometer also had to be able to withstand being dropped on hard
ground-level emergency room floors during a crisis.
Salespeople had other reservations. As the Cardometer was incompatible
with medical equipment produced by the market leaders, it would be hard
to sell. At $500-$1,000 each, the monitors were too complex and too
expensive to be listed in catalogues alongside disposables and other
low-end equipment. However, this price point was too low to be of interest
to salespeople on commission.
In order to sell the device, Medcorp first had to demonstrate the
value of cardiac output information to medical personnel. This would
take time. Medcorp would also have to redesign the device to make it
compatible with the devices used in emergency rooms, operating rooms,
and ambulances. Medcorp would also have to motivate the distribution
channel to sell the device. These measures would require additional
funds and considerable effort.
VALUE TO THE INVESTORS AND TO MEDCORP
Winett Associates provided the investors with a realistic view of
opportunities and issues associated with marketing the Cardometer. In
addition, we provided Medcorp with recommendations for adapting their
product to meet the needs of both users and sales and marketing people.
Medicorp would have to enhance the design and performance of the product,
educate the target market, and forge relationships with partners and
distributors. The investors would then have to subsidize the company
as it navigated the three-phase Food and Drug Administration (FDA) approval
process. In short, Medcorp would need several millions of dollars to
bring the Cardometer to market. We provided the investors with sufficient
information to decide whether or not to continue to fund the company.
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