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

2. P3 January 2005 Class 6: ISM 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

3. P3 January 2005 Class 6: ISM Information Flows: The “Enterprise” Problem Hospital IS (Billing, Patient data) Radiologist Referring Physician Patient 50% not online 15% lost Hospital IS (Billing, Patient data) Radiology X-Ray Radiology X-Ray Referring Physician Patient Integration & Storage Radiologist Pre Post

4. P3 January 2005 Class 6: ISM 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

5. P3 January 2005 Class 6: ISM 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)

6. P3 January 2005 Class 6: ISM 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

7. P3 January 2005 Class 6: ISM 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

8. P3 January 2005 Class 6: ISM Stakeholders StakeholderKey Issue Radiologists“Funky functionality” Referring Physicians Images accessibility Reasonable resolution Small Hospitals Cost Integrate with current IT Risk averse to new IT Large Hospitals High resolution High quality services to radiologists Cost Incumbent (General Electric) Increase radiologists market share Improve current technology Increase radiologists’ services (= more $)

9. P3 January 2005 Class 6: ISM 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

10. P3 January 2005 Class 6: ISM 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

11. P3 January 2005 Class 6: ISM 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

12. P3 January 2005 Class 6: ISM 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

13. P3 January 2005 Class 6: ISM Stentor’s Organisation 2001 QE* CEO EngineeringCTOOperations Quality Eng CEO Engineering CTOSales/Mktg Tech Support Operations

14. P3 January 2005 Class 6: ISM Stentor’s Organization 2002 *QO=Quality Operations**QE=Quality Engineering ***TS = Technical Support****SA = Strategic Alliances

15. P3 January 2005 Class 6: ISM A Clear Implementation Procedure

16. P3 January 2005 Class 6: ISM A Technology Monitoring System

17. P3 January 2005 Class 6: ISM 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

18. P3 January 2005 Class 6: ISM 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

19. P3 January 2005 Class 6: ISM Next Class Internet, Technology, Society Adopting IT at the societal level Assessing the social IT readiness