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VEXTECTechnology Marketing Plan

Aashish Bapat, April Boldt, Jason Deaner, Grainger Greene, Dani Shuck

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Technology Marketing Plan

I. Capabilities Analysis II. Technology Marketing Intelligence III. Marketing Segmentation IV. Leverage and Resistance Points V. Industry Analysis VI. Value Proposition VIII. Interviews

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Capabilities Analysis

VEXTEC is a Product Leader Unique technology, patented

Core competency is modeling the physics of failure

VPS-VIEW with VPS-MICRO performs this

VEXTEC also excels in Customer Intimacy Does not translate into

Medical Device sector, unknown in this industry

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Technology Marketing Intelligence

Important Questions: What is the current method by which prosthesis manufacturers

perform reliability analysis, if at all? How much does this method cost? Capital costs and recurring costs

per unit? How satisfied are you with your current method? Can a virtual physical testing method possibly become approved by

medical safety boards such as the FDA in the U.S. or ISO in Europe? How much money and time can VEXTEC save a company on

reliability analysis, and how much can they improve a company's product?

Is the prosthesis market large enough and interested enough to bother entering this market?

Have you considered alternative approaches to reliability analysis, and what conclusions did you draw?”

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Technology Marketing Intelligence

Future Contacts: Ossur Endolite Ottobock Medi Fillauer Freedom Innovations Ohio Willow Wood Smith-Global Bulldog Tools DAW

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Future contacts continued

Meeting with Prof. Burcham Owen Business School faculty Health care specialist CEO of Paradigm Health a health care

provider for specialty care Consultant to healthcare and venture firms

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Market Segmentation

3-Screen Technology Market Scan Figure 2: Importance-Advantage Map

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Three-Screen Technology-Market ScanThree-Screen Technology-Market Scan

Need Screen

Economics Screen

Time Screen

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Needs ScreenNeeds Screen

Feasibility - Will it work in the intended application? (Can we deliver?)

“Criticality” - How critical is this application to the overall mission or financial performance of the customer organization?

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Economic ScreenEconomic Screen

Performance/Value AdvantagePriceEase of UseReliability

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Time ScreenTime Screen

Readiness to solve problem Cognizance (“shopping”) vs.

precognizanceReceptiveness to new technology

e.g, early vs. late adopters

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Time Screen (ctd)Time Screen (ctd)

Compatibility with customer operations Word processors vs. nuclear reactors

Dependence on other technologies Market Concentration/Heterogeneity Customer Buying Practices Competitive Intensity

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Importance-Advantage Map

ImportanceAdvantage

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The “Winner”The “Winner”

ImportanceAdvantage

Important to Market/CompetitiveTechnology

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Strategy for the WinnerStrategy for the Winner

ImportanceAdvantage

GO

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Technology Ahead of its TimeTechnology Ahead of its Time

ImportanceAdvantage

Unimportant to Market/CompetitiveTechnology

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Strategy for Technology Ahead of its TimeStrategy for Technology Ahead of its Time

ImportanceAdvantage

DevelopMarket

RedeployAssets

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VEXTEC VPS-MICROMedical Device Market

Readiness

Funding/ PartnershipsLiab. Risk

Competitive IntensityBuying Prac

Mkt Conc

Compatibility with Customer Operations

Receptiveness to New Technology Price Sensitivity

Avail Complementary Tech

Reliability

Ease of Use

Performance/ Value Advantage

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1.5

2

2.5

3

3.5

4

4.5

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1 1.5 2 2.5 3 3.5 4 4.5 5

Relative Importance

Rel

ativ

e A

dva

nta

ge

Superior but Unimportant in thisapplication- Develop market- Search for other markets

Important but Inferior- Invest in Improvement

Important and Superior- Deploy

Inferior but Unimportant- Reallocate resourcesto other factors.

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Industry Analysis

Michael Porter’s industry forces model

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Five Competitive Forces

that Determine Industry Profitability

Suppliers Buyers

PotentialEntrants

Substitutes

IndustryCompetitors

Rivalry amongexisting firms

Bargainingpower

Threat of substituteproducts or services

Bargainingpower

Threat ofnew entrants

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Analyzing Porters Forces(Strengths are on a 1-3 scale, with 3 the strongest)

1. Industry Competition / Rivalry (Rating 2) Cutting edge technology, unique approach No direct competitors In house reliability testing methods

2. Potential Entrants (Rating 3) Proprietary rights High R&D costs and time

3. Supplier (Rating 2) Device Testing Databases

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Porter forces (contd…) (Strengths are on a 1-3 scale, with 3 the strongest)

4. Buyer (Rating 1.5) Lack of confidence/ Inexperience in medical device

industry

5. Substitutes (Rating 1) More expensive, theoretically weaker but age-old

proven industry norm : physical testing Statistical analysis providers like Relex & Reliasoft

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Industry Analysis

Identify key competitors

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Direct Competitors: Reliasoft

Founded in 1992 Product Base: Weibull++ Software

Family “Industry standard in statistical life data

analysis (Weibull analysis)" Services: capabilities technology

marketing consulting

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Direct Competitors: Reliasoft

Methods: Failure Mode and Effects Analysis and Fault Tree NO physical testing

COST: Weibull++ 7, a single user software package is $995.00

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Direct Competitors: RELEX

Reliability services for 20 years Product base: Relex Reliability Studio

2007 Methods: FMEA and Fault Tree Analysis

No physical testing Support Oracle/Microsoft SQL server for

scalability

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Direct Competitors: RELEX

Cost: sequentially purchase software “modules” to build and grow with a business plan

Services: 30 day eval/money-back guarantee

Customer Relationships: Broad portfolio of working relationships:

from Dell to Boeing

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Leverage and Resistance Points

What role does the product play in the customer's value chain?

What concerns (leverage points and resistance points) might they have, and how could you address them?

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Ultimate Goal

Matching of what customers want versus what vendors claim of their services

1) Customer assessment

2) Market segments

3) Customer value models

4) Flexible market offerings

5) Competitive advantage

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Discussion Question:Customers Needs vs. Vendor Claims

What CUSTOMERS WANT for their business Increase sales Improve quality/reliability of

product/process/service Maintain/build reputation Reduce time (to develop, build,

process, respond, etc.) Increase resource productivity Reduce costs (direct,

overhead, fixed) Reduce uncertainty (sales,

inputs, investments, etc.) Minimize disruption (customers,

workforce, processes) etc.

What VENDORS CLAIM for their products and

services Performance Reliability Cost of Use Ease of Use Compatibility Support etc.

Do they match???

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Pin-pointing Customer Values

Heath-care industry concerns:

• Product quality

• Reliability and uncertainty (liability)

• Time

• Resource productivity

• Overhead = fixed costs + operational cost

• Financial liabilities

• Ease of use

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VEXTEC Advantage

Embedded in automotive/aerospace = brand name? Product advantage

Reliability: reduce physical prototype testing Cost advantage: stronger reliability statistics = more cost

savings Design process:

Reduced uncertainty Warranty clarifications Recall and redesign repercussion forecasting Time = speed FDA approval = $$

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Resistance Points

Common barriers technologies in infancy: disruption of existing operations threat to owners of current solutions fear of the unknown

Discern resistance point before adoption = weapon against competitors

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VEXTEC Resistance Points

1) Resistance to change: hesitancy to radical innovation in implant sector, liability of manufacturer brand

2) Government barrier: FDA and proposed reliability methods

3) Health Care Industry Brand Names: lack of specific relevance/Brand in medical device industry

4) Transferability of field experience: proven success in automotive/automobile to prostheses manufacturers

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Value Proposition

Develop a qualitative value position Simple spreadsheet model showing how

a typical customer would benefit from the product

How value proposition will be of value to the target market

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Core Competency

Unique software reliability analysis platform unmatched in 1) its ability to accurately forecast the most

robust product design 2) project modes for improvement based

on outputs such as cost savings

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Assume an “average buyer”Re-engineer your offering for every buyerRe-engineer your offering for every buyer

Design flexibility into the offeringDesign flexibility into the offering– (80:20 rule)(80:20 rule)

Focus on one segmentFocus on one segment

– Going “vertical”Going “vertical”

Options for Coupling Your Value Proposition to the Market

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Designing Flexibility into the OfferingDesigning Flexibility into the Offering to Modulate Your Value Proposition

Your poolof core competencies

Modularity

Market Segments

Scalability

Customer Size

Evolvability

..... 2008 20072006

Life Cycle

Your “base”product

Your value proposition

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Pro-Forma for Manufacturer

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Value of Value Proposition

Increase Quality of Prosthesis Increase Warrantee Decrease Unit Production Cost Increase Price

Why does manufacturer care? Average patient changes insurance every

2-3 years because of company Therefore, focus on government

employees

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Customer Interviews

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Interview with Richard Holmes

Previous employee of Pratt & Whitney VEXTEC capabilities that helped approach

and gain trust in industry: Customer intimacy

Confidence in individual Relationship with industry Heard of VEXTEC personally

Technology advantage

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Interview with Kevin Line

Former employee of Lockheed Martin

Integrate technologies: how to model and predict failure in airplane parts ideal to continuously know the health of

airplane electronics Navy funded VEXTEC incorporated Lockheed

technology electronics into model Electronic leads in pacemakers, etc

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Orthotist (Dr. Gregory Mencio) & Prosthetist (Dr. Mark Watson)

1) What are the most widely used makes/models of above-the-knee prostheses?• Popular makes: endolite, ossur, ottobock• Models catered to individual lifestyle• Work with interface of socket• Exoskeletal: hard crustacean design• Endoskeletal: inside all laminated foam, internal pylon

2) What basic advantages do the most popular models have over others in their design and or materials used?• Steel vs. carbon fiber• Carbon fiber: lighter, enhanced performance, more

comfortable• Steel: more durable• Endoskeletal: lightweight

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Orthotist (Dr. Gregory Mencio) & Prosthetist (Dr. Mark Watson)

3) What is the most common source of failure in these prostheses? Do they differ among models?

• Breakage at knee joint: inevitable, life depends on quality and activity of patient

• Loosening at socket: atrophy causes loosening around the socket

• Selection of prosthetic:• Cost: approx $30,000-500,000• Activity: hydraulic versus geriatric patient• Vets from Iraq receive new prostheses about every 2 years• Cheaper models break down quickly, less comfortable, fewer

“bells and whistles”

4) How common are mechanical failures in these prosthesis?• Set screws often toggle and break• Failure at knee linkage

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Orthotist (Dr. Gregory Mencio) & Prosthetist (Dr. Mark Watson)

5) What kind of warranties (if any) come with above-the-knee prostheses?

• 0-3 years• Most often 6 months – 1 year• Warrantees = improves life of product

6) Do the prostheses manufacturers offer any technical support in your practice?

• New product education• Insight on amputation and fitting for prostheses

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Mark Watson: Orthotist/Prosthetist

7) How much time and money to these manufacturers spend on reliability analysis?

• Endless process for better/more durable models

8) What does their process for reliability analysis involve?• Cheap models break down insurance and prosthetists

pay• Engineers design durable models• Summary: Materials tested, materials combined, models

engineered, models tested, then human testing following FDA approval

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Uncertainty

Mark Watson ultimately unsure about reliability testing Will provide contacts at Otto Bock and

Ossur, others Team will contact manufacturers, design

engineers to determine specific processes

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Interview with Dr. Fitzsimmons

Easier to get devices approved in Europe ISO standards less than FDA Perform physical tests with predetermined forces

Warranties are mostly guesswork Feet – 36 months Knee – 24 to 36 months Medicare recommends 5 year life for prosthesis Ultimately depends on activity level (0-4) 4 level cannot expect for device to last more than a year

Most failures from feet Below-the-knee prostheses more common than above-

the-knee, thus more feet likely to fail than knee’s

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Interview with Dr. Fitzsimmons

List of manufacturers Otto Bock Ossur Endolite Ohio Willowood Medi Bulldog Tools Jim Smith Sales Euro International Fillauer

Otto Bock has 4-5 large facilities within U.S. Provided contact with Otto Bock

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Phone Call to Otto Bock

Spoke with Scott Weber, Marketing Manager for Feet Units at Otto Bock Minneapolis office

Most prostheses exempt from FDA approval, use ISO standards Microprocessor knee unit is not FDA exempt

Physical testing is expensive and time consuming, lots of money wasted on testing incorrect prototypes

Exo-skeletal knee prostheses are vanishing from market Feet units are more customized than Knee units, more failures in

them also

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Phone Call to Otto Bock (contd.)

They do use Finite Element Analysis to some extent in their reliability analysis Do not use statistical modeling, never heard of

Relex or Reliasoft Otto Bock goes above and beyond ISO standards

in their testing ISO would be a good resource for specific force

loads used on prosthesis units. Gave contact at Salt Lake City office

Sarah McCarviell, Head Engineer(?) All physical testing and design engineering done at

Salt Lake City office

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Questions?