P3 January 2005 Class 6: ISM IT and Market Dynamics The (R)Evolution of Technology

Class 6: ISM P3 January 2005

IT and Market Dynamics

The (R)Evolution of Technology


The Imaging Healthcare Problem

450 million imaging studies a year X $35

life time cost per study = $15 billion cost

50% of imaging studies not available to

physicians when needed

15% of imaging studies permanently lost

4% expected annual increase of imaging

studies


Information Flows: The “Enterprise” ProblemHospital IS (Billing,

Patient data)

Radiologist

Referring Physician

Patient

50% not online

15% lost

Hospital IS (Billing, Patient data)

RadiologyX-Ray

Radiology X-Ray

Referring Physician

Patient

Integration & Storage

Radiologist

Pre

Post


Ease of versioning: different people can receive it in different forms – new economies of scope

Ease of large scale distribution: low cost of production and logistics – new economies of scale

Information Products: New Economies of Scale and

Scope


The Failure of PACS

High cost (only radiologists in large hospitals could afford it)

Many IT integration issues with existing IT Lots of new IT infrastructure needed, such as

information storage systems New technology risk (e.g. for small hospitals)


Why would MI say ”no”

Focus on current market, radiologists in large hospitals.

A small market (physicians in small hospitals) is too small for a large company

Focus on improving current PACS technology Focus on increasing services to current

market (more services = more $) Fear of cannibalizing their current market


What “Wise” People Said… 1. “I think there is a world market for maybe five computers”

Thomas Watson, chairman of IBM, 1943

2. “There is no reason anyone would want a computer in their

home” Ken Olson, president, chairman and founder of Digital

Equipment Corp., 1977

3. “The horse is here to stay. The automobile is only a novelty,

a fad” The President of Michigan Savings Bank telling Ford’s lawyer

not to invest in the Ford Company, 1903


Stakeholders

Stakeholder Key Issue

Radiologists “Funky functionality”

Referring PhysiciansImages accessibility

Reasonable resolution

Small HospitalsCost

Integrate with current ITRisk averse to new IT

Large HospitalsHigh resolution

High quality services to radiologists Cost

Incumbent (General Electric)

Increase radiologists market share Improve current technology

Increase radiologists’ services (= more $)


Stentor’s Market Entry Approach “Attack from below”

Serve the less demanding physicians (“enterprise market”) in small hospitals

Avoid competition – it’s a virgin space

Low-cost/Low-risk proposition ASP model: pay per use, rent not buy Installed at zero cost over the internet 30 days free trial option Hardware, if needed, provided at cost

Minimize IT integration problems Use existing IT with minimal changes

Consider moving in the more demanding market of radiologists later, using revenues from the entry market


Entering the high-end market: Key Challenges

1. Technology:– Can iSyntax technology move up-market?

2. Service: – Stentor ranks lowest in market

(implementation, support, monitoring, etc)

3. People:– Many engineers, poor product

understanding by operations and sales people

4. Vision, Mission, and Culture:– A focus on Product and Technology


Challenge #1: Technology

Improve key technology features Possible once you have the money from the initial market (physicians) to support technology improvements for the high-end market (radiologists)

Increase functionality Achieve high technology reliability Increase resolution performance


Challenges # 2+3: Service and People

Recruitment of a COO (ex-EDS manager)

Build a new services organization Develop large IT implementation

capabilities (training, testing, etc) Provide excellent 24/7 IT monitoring,

support, and maintenance Manage technology upgrades


Stentor’s Organisation 2001

QE*

CEO

Engineering CTO OperationsQuality Eng

CEO

Engineering CTO Sales/Mktg Tech Support Operations

VP Level

Senior Director Level

Director Level

Manager Level

Jumior Level

VP Level

Senior Director Level

Director Level

Manager Level

Jumior Level


Stentor’s Organization 2002

COO

CEO

Engineering CTO Marketing

Sales QO* TS***QE**OPS

24 members

1 Senior director

2 Managers

SA ****COO

CEO



24 members

1 Senior director

2 Managers

COO

CEO



24 members

1 Senior director

2 Managers

COO

CEO



24 members

1 Senior director

2 Managers

COO

CEO



COO

CEO



COO

CEO

Engineering CTO Marketing COO

CEO



24 members

1 Senior director

2 Managers

24 members

1 Senior director

2 Managers

SA ****

*QO=Quality Operations **QE=Quality Engineering

***TS = Technical Support ****SA = Strategic Alliances


A Clear Implementation Procedure


A Technology Monitoring System


Challenges #4: From Product to Service

Centered

Stentor’s Mission 2001:

To deliver customer- focused, high performance, medical information

solutions

Stentor’s Mission 2002: To Improve Patient Care


Key Lessons Technology’s evolution is shaped by the dynamics of :

– The different (types of) stakeholders/users/markets– The differences in the needs and technology risk profiles of the different stakeholders– The difficulties of integrating the new technology within the current technological infrastructure

An entry strategy of new technologies:– Enter a (often new) less demanding market: “attack from below”– Provide a low cost and low risk proposition – Minimize integration issues with existing IT infrastructure

The “natural” evolution of new IT- Improve key functionality features- Move from product to service

… and (as always) the power of IT to transform healthcare through digitization: dramatic cost reduction, improved service


Next Class

Internet, Technology, Society

Adopting IT at the societal level

Assessing the social IT readiness

Documents

P3 January 2005 Class 6: ISM IT and Market Dynamics The (R)Evolution of Technology