In a changing market place with products with long life-cycles, Diagnostic Imaging companies need to think very carefully about the competitiveness of their product portfolio. Options to rebrand supplied systems from 3rd party vendors and to consider a module approach to system design are more and more common as players focus their limited engineering capabilities on the areas with the greatest impact on innovation and cost reduction. We believe that channel partnerships, value chain plays, licensing of technology and many other elements will combing in product and market strategies for the future. New product concepts to improve workflow and/or reduce dose are more important now than ever before as ways to differentiate from the pack. Pricing systems to the right price point through the right channel for each country is a massive task and has implications for margin and for product differentiation.
Hendy Consulting has worked with leading Imaging companies to refine the profitability and scope of their product portfolios.
With sourced components and commodities representing up to 40% of the total cost for an Imaging System, players are looking for ways to find break-through cost reductions at the same time as delivering new innovation. Low cost country sourcing is one key lever, but design changes to fundamentally new technologies or architectures and new suppliers are still good approaches. The challenge is both identifying sources of value and then in gaining the executive traction and support needed for engineering resources to be applied over a multi year period.
Hendy Consulting has identified many tens of millions of Euros of cost savings for major Imaging players
Today’s Imaging market is already interconnected. Players trade in “vanilla” systems that are rebranded, players share hardware blocks and players supply each other with key components. However, players increasingly need to focus on core strengths especially since the budgets needed for fundamental breakthroughs are ever increasing, we believe that more and more of the strategies from high tech markets will be found in Healthcare.
- Joint ventures and alliances
- IP and technology licensing
- Value chain plays with different players taking up different roles in horizontal cuts of the value chain
- Channel partnerships
Hendy Consulting has worked on all of these structures and can help Healthcare companies select appropriate partners and deal structures to create value.
Key components (such as Tubes, Generators, Detectors, Grad Amps, Tables etc) play a large role in providing breakthrough innovations in Diagnostic Imaging. However, the cost of new innovations is rising, with a breakthrough new tube design in the tens of millions of Euros. Many of the leading players are vertically integrated for such components, while there are markets of 3rd party suppliers that in some cases can substitute product or be co-development partners. Some of these players have economies of scope in non-Healthcare markets that make them very cost effective partners and innovation engines. What succeeds in the Non Destructive Testing market can sometimes be used in X-Ray Imaging.
Complex make/buy and partnering options are therefore an option, which can save Imaging players many tens of millions of Euros without sacrificing innovation. Hendy Consulting has worked on many component strategies, covering Tubes, Generators and Detectors
With the slowdown of Imaging markets in 2009-2010, firms increasingly looked to reductions in their work-forces as one option to respond. Hendy Consulting has worked with the management teams of businesses and functions to reorganise and upskill the team. Putting in place an organization structure that supports the economics and processes and geographical spread of any business, while balancing these with the strengths and weaknesses of individual managers is a challenging process. Competitor analysis, internal and external benchmarking and transparent stakeholder management all increase the likelihood that management and the team will buy in to the proposed changes.
Diagnostic Imaging companies are increasingly being called upon to focus on their core strengths, as the complexities and costs of delivering next generation innovation rise. Difficult decisions need to be made as to how to collaborate and partner with 3rd party suppliers over outsourced elements of system design and manufacturing.
In this, a M&A type way of thinking is helpful: partnerships over significant chunks of cost for a diagnostic system are complex and risky ventures for which the (EMS) supplier base is not yet ready. These are not simple commercial transactions, but are discussions on innovation pipelines, delivery of cost down, assumption of business risk, competency development and tough negotiations on pricing models.
Given that the supply base is not yet ready (in the same way that it is available in the IT market-place), Diagnostic Imaging companies are faced with the need to develop suppliers over the medium term, encouraging them to buy or develop new skills and/or low cost locations before they can be viable outsourcing partners.
What is more, few Diagnostic Healthcare companies can afford to work with two outsourcing partners in the same arena, given constraints on development engineering, so resolving questions of how to set up balanced business outsourcing relationships, so that the supplier does not become a monopolist remains an important consideration.
Hendy Consulting has worked extensively on outsourcing projects, working on supplier and competency assessments, business cases, action planning and executive decision making on outsourcing.