Magnetic Resonance Imaging Business

Magnetic Resonance Imaging Business 1. The Magnetic Resonance Imaging Business Magnetic Resonance Imaging (MRI) is a non-invasive medical imaging modality that has emerged in the first half of 1980s and become a preferred tool in detecting a wide range of diseases (Yildirim, et al., 2015)[1]. Since its invention, MRI has undergone a continuous flow of innovations and proven itself as a versatile tool that addresses an increasing number of clinical problems and enables research in a growing spectrum of clinical and technological fields. Over the course of its evolution MRI has proven itself has a well-established diagnostic tool and enabler in particularly neuro-radiological applications, functional and anatomical imaging of the brain, imaging of the musculoskeletal (MSK) system and the spine, and a strong contender in cardiovascular imaging, breast imaging and imaging of the abdomen and pelvic region. As a result of its versatility and non-invasive nature, MRI enjoys an increasing demand (Wilson, et al., 1999; Al-Kwifi McNaughton, 2013) and becomes a strong alternative to less costly modalities such as X-ray and Computed Tomography (Semelka, 2004). Despite all the innovations, and the advantages it offers with respect to other techniques, MRI remains the most expensive medical imaging modality, both in terms of production costs and cost of ownership constitutes a global market that is currently about à ¢Ã¢â‚¬Å¡Ã‚ ¬ 5 billion, and is expected to exceed à ¢Ã¢â‚¬Å¡Ã‚ ¬ 7 billion by 2021 (MarketsAndMarkets, 2015). Figure 1 MRI, applications areas and competing technologies.   1.1. The Market Over the past three and a half decades, the MRI business has evolved into a nearly mature market, particularly in terms of number of installations and users, which mainly consist of academic hospitals and research institutes, public and private hospitals and specialized clinics and centres (Oh, et al., 2004; MarketsAndMarkets, 2015). The MRI market is dominated by three vendors, namely Siemens, General Electric (GE) and Philips, which cover about 75% of the market, and followed by smaller firms like Toshiba and Hitachi as well as relatively smaller firms and new entrants such as Fonar, Alltech and United Imaging (MarketsAndMarkets, 2015). Geographically, the MRI market is dominated by North America and Europe, which happen to be the birthplaces of the modality (Lauterbur, 1973; Mansfield, 1977), with respective shares of 31% and 29% (MarketsAndMarkets, 2015). These, so to speak, old regions are followed by a younger and dynamic region, Asia, which has a share of 25% and observes a demand that is rapidly increasing (MarketsAndMarkets, 2015). The remainder of the MRI market is populated by emerging markets such as Latin America, the Middle East, the Pacific and Africa (MarketsAndMarkets, 2015). Figure 2 Global MRI market (Adapted from MarketsAndMarkets, 2015). The industry is governed by fast technological change and substantial heterogeneity in terms of technology and implementation among vendors (Krieg, 2004; MarketsAndMarkets, 2015). While products can roughly be categorized into groups representing magnetic field strength expressed in Teslas (e.g. 1.0T, 1.5T, 3.0T) or architecture (e.g. open versus narrow-bore or wide-bore cylindrical) (MarketsAndMarkets, 2015), differentiation among products and vendors is dictated by features, clinical applications and research techniques that come integrated with a MRI system (Krieg, 2004; Al-Kwifi McNaughton, 2013). In recent years, the business has observed a significant development that manifested itself as a clear split in market segmentation, with premium (or high-end) products catering to the upper half of the market and value products (or low-end or low-cost) catering to the lower half (Donoghue, et al., 2012; Global Industry Analysts Inc., 2015). This split, which was initially caused by the demand structure seen in the Asian and emerging markets, also found acceptance and support in Europe and North America, particularly in sectors where cost began to assume a primary role in purchase decisions as well as reimbursement policies (Proval, 2014; Global Industry Analysts Inc., 2015). In older markets such as North America and Europe, and also in Japan, the business seems to have reached a certain level of maturity (AuntMinnie.com, 2013). In these regions, the market shows a declining growth rate, mostly as a result of substantial market saturation and negative environmental influences such as declining reimbursements resulting from more stringent policies implemented by governments and insurance companies (Proval, 2014; Global Industry Analysts Inc., 2015). Another development that challenges the vendors is the increased number of brand switching, which, to some extent, can be related to market saturation (Al-Kwifi McNaughton, 2013). Customers moving from one vendor to another as such is observed to accelerate price erosion and hurt profitability significantly. In developing markets and markets showing a positive growth rate, like the emerging markets and Asian regions such as China and India (AuntMinnie.com, 2013), cost of investment and operation emerges as the primary factor affecting the business (Global Industry Analysts Inc., 2015). Additionally, the business, particularly of the incumbent firms (i.e. the big five) is challenged by governmental policies that directly or indirectly favour local competition, particularly in the low-end segment (Torsekar, 2014; Rizzo, 2016; Business Standard, 2016). Access to a larger portion of these markets is blocked by either complicated bureaucratic procedures (Torsekar, 2014), elevated import taxes (Business Standard, 2016), or by directly backing local manufacturers by means of targeted subsidies or privileged contracts (credible source needed).      Ã‚   1.2. Product Innovation Historically, MRI has been a technology driven industry, and as it is typical for high-tech businesses, product innovation has been critical to market performance and central to sustainability of the business (Krieg, 2004; Paladino, 2006). Different than most high-tech industries, however, MRI has strongly benefitted from a co-creation culture where most innovations have emerged from interactions and partnerships between vendors and key, and mostly academic, users (Figure 3). This culture led to a symbiotic vendor-user relationship that resulted into a rapid pace of product innovation, which, in turn, boosted demand for more advanced and specialized products (Krieg, 2004). Figure 3 A history of co-creation in MRI (Adapted from Philips Healthcare, 2016) However, the rate of ground-breaking and truly differentiating innovations is facing a slowdown (Holloway, 2014). In the last 10 years very few breakthroughs led to a significant or long lasting technological and competitive advantage, or have opened new areas of application and research. In the fields where MRI has proven itself as a mature diagnostic apparatus, such as neurology, MSK and brain imaging, all major vendors products are known to deliver very similar performances and adequate quality as far as general purpose use is concerned. Only in case of very specific needs, a particular vendor is seen to differentiate itself from the others and gain advantage in winning a bid or public tender. This situation, which can be defined as technological equilibrium, and relatively long presence of the modality in old markets, with an average age of about 15 years in North America, is believed to propel brand-switching (Al-Kwifi McNaughton, 2013), and more importantly, to move the accent of product innovation away from revolutionary breakthroughs to more evolutionary changes that particularly improve ease of use, patient comfort and productivity (Global Industry Analysts Inc., 2015).   1.3. Established Marketing Strategies Almost every major MRI vendor is part of a multi-national conglomerate that is active in multiple areas of business. Therefore, the strategies followed by individual companies draw a lot from the business group they belong to, and show differences particularly in cultural background, brand positioning and messaging. Yet, over time the medical device business, and particularly MRI, has developed its own common ground and generally accepted and practiced traditions. The business commercial heart-beat is primarily set by the annual gathering of the Radiological Society of North America (RSNA), which is held towards the end of the year and known to be the stage for new product launches, and secondarily the annual meeting of the International Society of Magnetic Resonance in Medicine (ISMRM), which takes place in spring time and lays the emphasis more on scientific and technological advancements in the field. While aligning their annual activities with these two events, vendors seem to show little indifference in the marketing strategies they follow, resulting into an equilibrium state very much similar to that seen in product innovation. Even, marketing materials, such product brochures and whitepapers give the impression as if they originate out of same hands, aside from small nuances in messaging, branding and company culture[2]. Inferred from marketing materials and product pricing, target market definition is predominantly based on pricing, which is strongly correlated with hardware characteristics (e.g. field strength, gradient system, receiver architecture etc.) and applicatory capabilities (Figure 4). Figure 4 In practice, however, the market seems to be far from consisting of two segments clearly separated from each other, as such. In his empirical study investigating the effectiveness of marketing strategies in medical markets, Brian Smith (Smith, 2003) identified that the segments are divided into sub-segments based on varying behavioural and preferential characteristics of users. However, the study also established that, despite such variation, the market does not show a continuum of homogeneous and distinct motivator based sub-segments, as seen in most consumer businesses, but rather consists of a discrete segmentation with limited degrees of freedom, which most possibly arises from the rather rigid, dominant and costly hardware characteristics of the modality and the highly regulated nature of the business environment. Of course, the relatively low number of incumbents, and their close collaboration and interaction in determining the industry standards under the directive of the Inte rnational Electrotechnical Commission (IEC), also plays also a significant role in the setting and rigidity of the boundaries of the business. Despite the constraints inherent to the nature of the modality and business environment and financial boundaries set by the customers budgetary considerations, vendors seem to seek strategic strength and competitive advantage by recognizing behavioural and preferential differences and formulating value propositions that match the specific needs of the users (Smith, 2003). In MRI, this is mainly done by fine-tuning the product composition, particularly the applicatory capabilities, which, while being very dependent on the underlying hardware platform, are defined by the software capabilities, namely data-acquisition routines (a.k.a. pulse-sequences), image reconstruction algorithms, and post-processing tools. The value-proposition is further augmented with service and support, as well as more intangible offerings and benefits of secondary and tertiary importance, such as membership of strong user network, participation in advanced research activities etc. Such customization approaches , however, are mostly left to the discretion of the local marketing and sales teams, and observed to show strong variation depending not only on the needs of the customers, but also on the specific circumstances of the negotiation and/or bidding process and position with respect to competition. From general and global marketing activities perspective, the business seems to rely on downstream activities, which centralize around new product offerings in terms of new hardware platforms and configurations, and applications consisting of novel pulse-sequences, reconstruction algorithms and post-processing methods and focus mostly on the RSNA, and upstream activities, which involve input gathering from the customer base, particularly from the so called key opinion leaders (a.k.a. key users), research collaborations with a select number of sites as well as general user surveys, feedback from local marketing and sales teams, and competitive analysis of market changes. While downstream marketing and the show to be put on stage during the RSNA help the vendors catch the attention of the market, and, more importantly, the prospective customers, it is mostly the upstream activities, and the subsequent product definition and development process, that paves the way of success, and embodi es the governing dynamics the organization. 1.4. Governing business model While exact implementation may vary from one vendor to another, it is observed that the majority of the major players follow product definition and development processes that are quite similar in the general sense. According to this, input gathered from upstream activities are converted into a user requirement specification, which subsequently is translated into one or more product definitions, and evaluated as a combined or individual business cases, with market and sales projections based on feedback from local marketing and sales teams and competitive analysis. Based on the value offered by each case product proposals are accepted to the annual operations plan (AOP), and are programmed for feasibility studies, if any needed, and product development. Most vendors, divide their annual plan into two parts, first spanning the first half of the year and catering to the installed base in terms of service releases and product updates, and second spanning the second half of the year and f ocusing on the new product introductions intended for the RSNA. 1.5. Changes in the Market Historically, the target audience of medical devices in general, and MRI in particular, has been the medical practitioners (e.g. radiologists, specialists), administrators of medical institutions and clinics and research scientists from various medical and engineering. In the earlier years of the business, the composition of this audience was mostly dominated by researchers and medical professionals with strong understanding of the physics and engineering of MRI, and driven by the desire of exploring new fields of research and application disciplines (van den Brink, et al., 2015). However, as the modality matured, the market evolved into a state where the focus shifted more to utilizing MRI as a robust and reliable diagnostic tool, than just a research platform (Holloway, 2014). Paired with this change, the proportion and influence of the medical professionals, including administrators, started to exceed those of researchers and scientists disciplines (van den Brink, et al., 2015). Over the years, and driven by increase in demand for clinical MR scans, the business also saw the entrance and influence of a new type of user, namely the operator, also known as the technologist or radiographer. In time, in the clinical, as well as in a considerable portion of the research settings, the day-to-day of operation of the systems were seen to be taken over from highly knowledgeable medical professionals, engineers and scientists, by operators whose sole responsibility was to operate the MRs disciplines (van den Brink, et al., 2015). Hence, as a combined result of these changes, the practical knowledge of utilizing MR in a clinical setting increased, together with the demand for clinical MR scans, and number of MR installations, and the average knowledge of MR physics and engineering of the people sitting on the operators chair declined (Yildirim, et al., 2015). This, together with the demand for higher productivity (i.e. higher number of scans per day) and desire for shorter training investments brought new factors into the equation of product formulation, namely, workflow and usability (Holloway, 2014; Duszak, 2012). Aware of the increasing importance of workflow and usability, the vendors have implemented marketing strategies that emphasize the productivity and efficiency of their existing products, in addition to the technical capabilities. At the same time, vendors introduced product changes that focus on higher patient throughput, simplified patient handling, improved usability of the MR console etc. As a consequence of these changes the jargon governing product and marketing materials slowly shifted from a technically savvy language to a softer language expressing customer excellence, efficient workflow, easy scanning. In addition to the changes in market demographics and demand structure, which mostly arose from the internal dynamics of the market, the MR business is also observed to be influenced by external changes, particularly advancements in mobile communications, information technologies (IT), the internet and social media. As mentioned before, the MR business is based on a strong co-creation culture and close interaction between customers and vendors. As an integral part of this culture, there is strong empathy among MR users for the complexity of the technology and challenges vendors face during product development and manufacturing. However, the empathy of MR users may not last very long. In a recent survey conducted among MR users (Yildirim, et al., 2015), it was observed that the MR user becomes less tolerant to lengthy product service update cycles and new product introduction cycles that are measured in months to years. There is a significant lack of empirical studies addressing this change. However, this behavioural change believed to be an extension of the observed impact of technological advancements on consumer behaviour, particularly in e-commerce, online services, IT and telecommunications products. Studies conducted in these businesses have shown that the consumers have become more and mor e accustomed to high responsiveness from companies in acquiring goods and services, as well as prompt feedback in case of inquiries and complaints.   2. Purpose of work 2.1. Problem Statement In light of the changes and trends observed in the market, as well as the level of maturity reached in about 65% of the global market, the number of challenges the MR business is facing, and will likely continue to face in the foreseeable future can be summarized as follows: High costs associated with high-end scanners Increasing demand for low-end scanners Slowdown in ground-breaking innovations Homogenization of technology Brand-switching in mature markets Changing market demographics and declining technical proficiency of users Shifting of demand from novel applications to clinical utilization and efficiency Weakening of co-creating culture and increasing impatience of users On global scale the MR market is far from stagnation. However, challenges above make maintaining market share and gaining new grounds a difficult task. Some of these problems, particularly those related to high costs of innovation, manufacturing and ownership, are not new to the industry. But problems arising from the changes in the market, particularly those related to the maturation of the market, changes in user profile and behaviour and demand structure are new. Strategies based on technological innovations, while being helpful in preserving brand image and presence in high-end segment, will not suffice to address these issues and sustain competitive advantage and profitability. In order to stay afloat, the business, and particularly an incumbent, will need to explore new strategies and solutions to deal with the emerging problems. This work, aims at contributing to such an exploration by addressing the following problem statement: How can the MR business, particularly an incumbent, overcome the challenges arising from market changes, without resorting to costly technological innovations? Obviously, such a statement is very broad and may require a comprehensive solution, also including product innovations, and probably a total overhaul of the business strategy. But in respect to imitations inherent to a dissertation, the scope of the work presented will mostly focus on solutions that will address changes in demand structure and user profile.   2.2. Proposed Solution Reducing manufacturing costs and cost of ownership, improving robustness and usability and introducing products that meet the needs of the low-end segment will require solutions that greatly rely on innovations in product design and manufacturing. However, these issues, and specifically issues related to changes in demand structure, demographic composition, focus of utilization as well as competitive elements involving homogenization and brand-switching can also be addressed by innovations in organizational and operational approach to the business. Today MR vendors seem to focus too much on the future in terms of the next novel technology and new markets or users to be conquered. The business process is almost sole based on this focus. Next to being future oriented the business may also find benefit in focusing on the past, or more accurately, the existing installed base. This idea, encouraged largely by the level of maturity of the market, entails learning from collective experience of users, and on the larger scale, from the collective experience of the whole MRI world, and formulate product improvement, marketing and sales strategies based on this learning. Learning as such can be realized in many ways and, in fact, is not new to the MR business. Vendors, collect information from their customers through regular and structured surveys, or occasional direct contact by marketing and sales teams. Also annual events, like RSNA and ISMRM, form a viable platform for information and feedback gathering. Next to these, firms also collect information and receive feedback from third party sources like Net Promotor Score surveys and market research reports, which also contribute to the business intelligence activities of the companies. In addition to such business and market oriented feedback gathering, vendors also receive feedback from another type of source: customer complaints. A customer complaint, as the name implies, is an expression of dissatisfaction (Landon, 1980), and is a formal and regulated entity in MRI in particular, and medical imaging in general. Customer complaints, may entail actual product defects, that is, unintended behaviour or malfunction of the product or a component thereof, or annoyances that arise from the intended behaviour or design of the product. Regardless the reason, customer complaints are issued using formal tools, and monitored by regulating bodies with strict rules regarding handling and processing (U.S. Food and Drug Administration, 2015). While in general, a low number of customer complaints, is very much desirable, feedback as such is an invaluable opportunity for vendors to learn from their mistakes.   Sources mentioned so far, while all beneficial, have one character in common. They are, in one form another, expressions of explicit feedback, which is known to mostly capture the part that is immediately visible, and therefore is prone to being incomplete or insufficient in uncovering actual user experience and value (Vargo, et al., 2007; MacDonald, et al., 2011). As a complementary source, this work proposes the utilization of implicit feedback, which is tacit in nature and captured in various forms of data generated by the user, or more accurately, the use of MR systems. The data consists of so called machine-data, which are mostly log files that are generated by the MR systems automatically, as well as human-data, such as clinical protocols that are created by users and reflect preferred ways of system use, and scientific output in the form of publications and conference contributions, particularly generated by academic users. Currently there are about 35 to 40 thousand operational MRI systems, with a yearly expansion of 2500-3000 systems. That means that, currently, a major incumbent would have had about 10 thousand operational systems, and over the past 10 years about 7500-8000 in average. Considering has been producing at least one log file per day, the minimum number of log files estimated to have been accumulated would be about 30 million. Assuming that each file is of 100 MB ins size, such a collection will yield 3000TB of data, large enough to fill more than half a million DVDs. Adding, protocols, publications and other sources to this, the data will multiply massively in size reaching the zettabyte scale (Raghupathi Raghupathi, 2014). In information science, datasets of such size and complexity are defined by the term Big Data (Russom, 2011; Singh Singh, 2011; Madden, 2012) whereas the processes and techniques used to structure and analyse such complex data and retrieve meaningful information out of it are brought together under the term Data Analytics (Russom, 2011; Singh Singh, 2011).   Ã‚   The proposed solution relies heavily on Big Data and Data Analytics, or shortly Big Data Analytics. But rather than being an exercise of solely academic nature, the work aims at defining a framework that integrates Big Data Analytics into the operational and organizational structure of an incumbent MR vendor. The work also includes practical examples of how to utilize Big Data Analytics in identification of implicit and hidden user needs, product formulation as well as, and particularly, in marketing and sales and create value for both the company and customers. 3. Big Data Analytics Big Data is a term used for massively large data sets with complex and heterogeneous structure that cannot be handled, i.e. stored and analyzed, using conventional techniques (Russom, 2011; Singh Singh, 2011; Madden, 2012). Data Analytics, on the other hand, is a collection of techniques and procedures that are used to process and analyze massive amounts of data. Brought together under the name Big Data Analytics, the purpose of this toolset is to identify hidden correlations and patterns in data, and convert a seemingly unordered pile of data into meaningful information and insights (Russom, 2011; Singh Singh, 2011). Although the concept of Big Data has emerged no longer than a decade ago, the use of data analytics in business practices is not a new idea. In 1950s businesses were analyzing information captured in electronic spreadsheets manually in order to uncover and understand trends and changes in data (Handfield, 2013). With the advances in of computer technology, the spreadsheets have been evolved into large electronic databases and later into data-warehouses, whereas the labor intensive manual processing practices made room for computer programs capable of running complex algorithms in an automated and efficient manner. In time and with technological advances particularly in computing and communications, the number of events and amount of information worth recording increased dramatically, and with decreasing cost of electronic storage, so did the record keeping. It is even said that, more than 90% of what is described as Big Data, has been created in the past few years (Dragland, 2013), and has the potential to transform business, provided that it is processed and consumed properly (LaValle, et al., 2011). Nevertheless, handling Big Data, and converting it into meaningful and actionable insights is not a trivial task. In their field work, LaValle et al. (2011), identified that there are three levels of capabilities, or stages, in which organizations go through on their Big Data Analytics journey: aspirational, experienced and transformed. Organizations in aspirational stage are described to be furthest of achieving the analytical targets they set, and lacking some of the essential requirements such as expertise and tools. Organizations that are described to be experienced, are those have managed to lay down a basis that enable better ways to collect data, conduct analytics and act upon insights. These organizations, also look to go beyond the immediate benefits of Big Data Analytics, which is typically in cost management, and create value in other domains as well. It is however the transformed organizations that make most of Big Data Analytics. Transformed organizations are those that have passed the stage of acquiring expertise, implementing tools and exploring new uses of Big Data Analytics beyond cost management. Instead, they are deemed to be proficient in data driven resource management and optimization of tools and processes and they use Big Data Analytics to create competitive advantage (LaValle, et al., 2011). 3.1. The Five Vs of Big Data Analytics In order to progress from the aspirational stage towards the transformed stage, a business first needs to develop a solid understanding of Big Data and what makes it big and challenging to deal with. Technically, Big Data is characterized by a set of attributes, which are called the Vs of Big Data: Variety, Velocity and Volume (Laney, 2001). As the name implies, Volume represents the amount of data, whereas Variety represents the heterogeneous composition of data sources and data originating thereof. It is particularly Volume and Variety that make Big Data really big and complex (Laney, 2001; Qureshi Gupta, 2014). Velocity, on the other hand covers the flux of data inflow, as well as the rate of change. Velocity also has implications regarding the speed of processing and analysis of data, and is a source of a different type of challenge that manifests itself in constraints and complexities in operational implementation and execution (Qureshi Gupta, 2014). Beyond the basis laid down by Laney (2001), recent studies in the field have extended the Vs of Big Data further by adding Veracity (Morgan, 2012) and Value (Qureshi Gupta, 2014). Veracity mainly deals with the quality and reliability of data. Expectedly, and particularly considering the high volume and velocity, Big Data is far from being 100% correct and usable. Nonetheless, it has to be valid and of good quality at a certain level to be useful. Without Veracity inte