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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:
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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