Stc384 team phoenix scenario analysis exec summary approval from ccm
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The document provides an executive summary of a scenario analysis for a cancer detection device that is in early development. It discusses the current medical device industry landscape and various factors that could impact the industry in the future. The analysis identifies key variables like FDA approval process and adoption rates. Several potential scenarios are constructed based on combinations of assumptions for each variable. Scenario 9 is identified as optimal for the cancer detection device, involving a differentiated strategy, focus on a niche market, and a proprietary technology that integrates with existing platforms.
Stc384 team phoenix scenario analysis exec summary approval from ccm
- 1. STC384 Dr. Ruefli Scenario Analysis Executive Summary Team Phoenix Michael Worden Dan Wimmer Claudia Chittim-McFarland Michele Boland Cancer Detection Device Scenario Analysis Executive Summary Foreword The cancer detection device is in an early stage of development and needs to be incorporated with a fiber optic probe, other spectroscopic components, and may or may not end up being part of 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 of maps and seeking knowledge gave us an opportunity to learn the “scenario analysis”. Early Stage Cancer Detection Device The 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 for imaging, diagnostics, screening and early detection largely due to Medicare, Medicaid and private 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 a cancer detection device, which would be a subset of diagnostic medical devices. Porter’s Five Forces 1|Page
- 2. The medical device industry (and sub industry for diagnostic medical devices) is an attractive industry. In view of Michael Porter’s Five Forces, the industry has low supplier power, medium buyer 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 level industry healthcare and all subsectors are heavily regulated by the FDA and face larger challenges 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 standalone components or devices without algorithms, complex software, databases, and archiving. Deloitte and Touche Medical Devices Year 2025 The medical device industry is trending to screening and diagnostic devices for early detection of cancer among other diseases: nanotechnology, miniaturization, and in-vivo imaging are the future, along with sophisticated software algorithms and IT methods for computation of real time results against know data sets. Looking into the Crystal Ball In our consideration of the current industry in terms of Porter’s Five Forces, where the industry is headed, and probable impacts, we viewed the FDA as the single most significant determinant of the medical device industry. The FDA determines what devices will make it into the marketplace. One theory to be tested is the possibility the FDA will begin fast track approval process of diagnostic devices for early cancer detection. A policy change like this by the FDA would have significant impact on this industry. Researchers will be getting grants for over $2.5 2|Page
- 3. billion in NIH funding in 2010. This is a plausible scenario as researchers continue to drive emerging technology through expanded funding; more detection and diagnostic devices will be developed and pushed towards commercialization. Any promising diagnostic or detection medical device is in demand as the overall healthcare industry tries to reduce costs. Possible Scenarios of FDA Fast Track Demand is waiting for supply and if the FDA fast tracked diagnostic and detection medical devices, the industry will shift. New entrants will race to into the industry. The large industry competitors that already have imaging, diagnostic and detection devices will expand their product set or race to either license, form strategic alliances or outright buy new technology to incorporate into their platforms. Technology transfer and adoption must occur in concert with new supply/demand curve in order for new/enhanced diagnostic devices to be used and generate revenue. Therein lies the crux, what will the new diagnostic devices look like, how can they be quickly adopted and deployed, will the devices be components that are adapted for existing systems, 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 Assumptions We used these variables to build our scenario analysis. The number one variable (V1) was change in FDA diagnostic/detection device approval process. Causal factor for external is increasing new entrants into the medical device industry. Internal causal factor is limited 3|Page
- 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 existing endoscopic medical devices. External causal factor for this variable is cost savings, lower priced devices. Range of assumptions for the variable two (V2) is slow and fast (A2,1; A2,2; A2,3). If a new technology can be retrofitted into existing platforms, overall costs may be reduced. As additional assembly components are available, the individual component may be more expensive, 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 motion video and video lenses used in all types of endoscopes, to GE and Siemens Medical as CT and MRI imaging/diagnostics solutions providers. The range of assumptions is brand name modular components, 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 would compatibility 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 Analysis Once we eliminated implausible scenarios, the consistency table aligns the variables to the assumptions and yields the scenarios for in-depth analysis (the numbered set in the consistency table). 4|Page
- 5. Analysis of the scenarios provides insight to possible future industry structure. For example, in scenario 2 above is the view when FDA makes no changes to current policy. The industry does not 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. Scenario 7 below is the scenario that the FDA does change its policy to fast track medical devices. In this scenario, the variable and assumption reflect increased demand, thereby reducing barriers to new entrants into the industry. Rivalry increases, buyer power increases as there will be more products to choose from. In this scenario, a race toward rapid innovation for all competitors could occur, where the stronger competitors add differentiated services, software, training, techniques, to strengthen their individual positions in the industry. Still, brands dominate and a possible shift to whole product, integrated solutions to ward off competitive threat. In the intermediate strategy scenario 9 below, we see a possible view into the industry with FDA fast track policy, and then rapid, potentially disruptive innovative new technology in diagnostic/detection medical devices. In this scenario, the industry is distinctly impacted as entry barriers shift. The structural attractiveness of the industry remains good, yet all competitors are forced to raise their levels of innovation. The strongest competitors may attempt 6|Page
- 7. to crush the new entrant, or may decide to “play nice” with the interloper through licensing agreements or strategic partnerships/alliances. 7|Page
- 8. The optimal strategy for the cancer detection device (scenario 9 above) is to stealthily enter the industry with differentiated strategy and laser focus on specific market segment, and offer a proprietary technology that integrates into existing diagnostic/detection solution platforms. The core 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 whole product solution out of the gate. Because this new entrant is delivering a unique, innovative technology “solution”, the venture should be able to command premium prices. This strategy will not therefore threaten the industry competitors to lower prices, and should not draw retaliation from rivals. 8|Page