ACME MEDICAL IMAGING

The University of Western Ontario

ACME MEDICAL IMAGING

Donald A. Pillittere wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality.

Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7- phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.

Copyright © 2008, Ivey Management Services Version: (A)2008-03-26

Don Payton and David Sayers had no business feeling as good as they did at that moment. But the California sun was bright, the breeze was refreshing and, for the moment, the laundry list of problems afflicting their company's proposed new product launch was little more than a fast-shrinking speck in their rearview mirror What a week it had been. Their West Coast trip to the supplier had ended Without them achieving either of their intended goals: two-day turnaround on crucial board assemblies, and a 20 percent reduction in build cost. No one at the home office would be happy about that. Their timetable and pricing strategy would suffer. For the moment, however, out on the open road, with the airport still a half-hour away, the eight-speaker sound system cranked up, and the sun warm on their faces, failure could be relegated to the back seat of their rented 2007 Metallic Blue Mustang convertible — the week's only negotiation, it turned out, that they could call a success.

Acme Medical Imaging (Acme) was in the middle of an extremely aggressive project to introduce a new series of products based on breakthrough technology that was generating excitement in the healthcare industry The race to be first to market was going to be won by the company that could rapidly transition functional design into manufacturing — something Payton and Sayers were hired to help accomplish. As the Mustang carried them down the highway, their discussion centered around what could be done to get the project on an accelerated schedule — no small feat, given the lack of a formal commercialization process, limited project resources, no production facility, and the fact that Acme needed to develop a partnership with a contract manufacturer.

Even though the market demands cutting-edge technology — a commodity in abundant supply at Acme — a couple of competitors recently succeeded in bringing low-cost solutions to market, which were attracting "early adopters" and setting prices. This development was forcing every company in the space to fully understand the cost-drivers in the design phase, before it became too late in the commercialization process to meet unit-manufacturing targets. Competitors with more cohesive functions were advantaged in terms of reviewing these cost-drivers earlier in development.

Needless to say, the commitment to a two-week turn for boards that their West Coast trip achieved represented a significant impediment to any kind of early-to-market entry With operations typically the last link in the commercialization chain, Payton and Sayers didn't want to be the visible obstacle to an increasingly problematic program. Again and again, they came back to the question: "What could the operations team do to compensate for the delays and obstacles, and get the program back on track?"

ACME MEDICAL IMAGING

Acme designed, manufactured and sold leading-edge medical imaging products for transmission of images based on the Digital Imaging and Communications in Medicine (DICOM) standard. It was one of numerous small companies in the healthcare industry fighting for customers against giants like General Electric, Siemens Medical Solutions, Philips and Toshiba with remote communications needs. Acme products eliminated the need for cable infrastructure, enabling customers to transmit medical images more cost-effectively and with encrypted security Systems also could be expanded, or added, if a customer's network needs increased.

The company already was in the middle of redesigning all of its products based on the WiMAX standard — a standard that basically would make obsolete their current portfolio. WiMAX products provided higher data throughput, expandability and compatibility among multiple vendor products making the customer decision to adopt much easier hi fact, sales of current Acme products had slowed considerably as customers put off new orders and anxiously waited for WiMAX-enabled products. Getting these products to market before its competitors could make or break Acme, as project spending was quickly outpacing operational cash.

WIMAX

At the time of Payton and Sayers's West Coast trip, a feverish race was under way among healthcare companies eager to develop WiMAX-compatible products. WiMAX was an acronym for Worldwide Interoperability for Microwave Access. It was a certification mark for products that passed conformity and interoperability tests in accordance with the IEEE 802.16 standard.

WiMAX was a standards-based wireless technology that provided next-generation, high-throughput broadband connections over long distances. WiMAX products were capable of forming wireless connections between them to permit the carrying of image data. Basically, the technology amounted to "WiFi on steroids." Medical companies saw an opportunity to use WiMAX to lower the cost of transmitting medical images by eliminating the need for cabling which provided enormous flexibility and efficiency for medical institutes to transmit patient images.

Two companies supplied the chipset and software for WiMAX, one based in the United States and the other in Taiwan. The decision concerning which WiMAX chipset to base product design on was up to each particular company Acme chose the U.S. company on its reputation, proximity and apparent lead in meeting WiMAX specifications related to the healthcare industry

PRODUCTS

Acme sold two main product families that consisted of the Central Imaging Unit (CIU) and the Remote Imaging Unit (RIU). Products were sold

...