The medical diagnostics imaging industry

In 1977, five years after it revolutionized the medical diagnostics imaging industry by successfully introducing the first CT scanner, EMI was facing many challenges both internally and externally. The biggest one was the imminent entry of General Electric’s third-generation CT scanner. Can EMI capitalize on its early success and the first mover position? Can EMI continue its growth in the CT scanner market as the industry had evolved?

Can EMI rapidly respond to the changing dynamics and maturing of the CT scanner market? Can EMI manage its own grow up pain in all functional areas, including R&D decision-making and marketing & manufacturing decision-making? Can EMI succeed in the largest market – U. S. market? In this assay, I will make a few strategic and tactical recommendations to John Powell, Managing Director, EMI, to address challenges his company was facing in 1977 and forward.

My vision for EMI is to be the leader in the medical diagnostics imaging device market by developing, manufacturing and marketing innovative medical diagnostics imaging device. Beat GE at its own game is the motto for the company. It is an ambitious goal that requires EMI to excel at all three key capabilities. But this vision establishes a clear direction the company can move toward and guides the company to make decision on resource allocation and strategic planning.

My first set of recommendations is in the research & development area. EMI should better CT scanner technology as the top priority for its R&D division, either through the development or acquiring of the third-generation CT scanner. As demonstrated in the case, customers in the medical diagnostics imaging market are technology driven and will embrace the new CT scanner enthusiastically if it incorporates technology advancement, which contributes to superior clinical diagnosis benefits. The doctors -users- are not very price-sensitive.

Truly innovative and value-added CT scanners can command a premium price. However, it is not simply being the first entrant that retains customer bases and sustains EMI’s growth. It is the combination of competitive advantage in the short term and dynamic capability in the long term that determines first mover advantage (Modern Competitive Strategy, pp75, Gordon Walker). Continuing product innovation should be the cornerstone of its competitive strategy. Innovation is the blood to succeed in this technology driven market.

EMI has to beat its own first generation CT scanner and make it obsolete. EMI should not distracted by the small incremental improvements introduced by its competitors and should focus its limited resources on developing significant technology breakthrough, which offers differentiable features for its next generation CT scanner. GE’s third-generation CT scanner was a clear and present danger in 1977. Better and equivalent CT scanner is needed for the EMI’s continued growth in the market, particularly in the U. S.

To implement this R&D strategy – better CT scanner technology, EMI should streamline or centralize its R&D operations not only for focusing its resources but also for rapidly responding to changing dynamics in the largest CT scanner market – the U. S. market. To be specific, I would recommend EMI consolidate R&D facilities and develop a U. S. -centric R&D institute. Furthermore, EMI should install a R&D decision-making process to ensure that the U. S. team is able to provide commercial inputs early on into the product development.

EMI need to design R&D performance matrix and milestones to measure its R&D productivity in the technology development, experimentation and new product design and development. I may also recommend that EMI evaluate the acquisition proposal in order to retain the technology leadership in the CT scanner business and to keep continuing growth in the medical diagnostics imaging device market place. EMI could consider Picker as the acquisition target. Picker had $300M sales in 1977 while EMI had $1. 2B sales with $85M in medical imaging though. Although this move is quite ambitious, here are the rationales for doing this.

First, Picker has a hybrid 3rd generation CT scanner in the development and it can provide EMI with a near-term product to compete with the big upcoming threat- GE’s 3rd generation CT scanner since EMI currently did not have any comparative product in the near-term pipeline. Secondly, Picker is a leader in X-ray, nuclear and ultrasound device segment and has strong marketing and service bases. These capabilities will not only dramatically enhance the current EMI’s medical diagnostics product portfolios but also offer EMI much-needed sales, marketing and service infrastructures and product bundling power in the U.

S. market. It is a bold, aggressive and risky strategy but offers EMI the best chance to successfully compete with GE head to head in the U. S. on all sides – from differentiable products, market and sales muscles to pricing. Other less aggressive recommendation related to the acquiring advanced technology is to in-license or collaborate with other industry leaders, such as Phillips or Picker to co-develop and co-market the 3rd generation CT scanner, which would give EMI a stronger market position to compete with GE.

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