MARKETING

Case Studies in Engineering Management

Tamara BrownApril 18, 2007

ENGINEERING MANAGEMENT

Solving a problem well

Solving the right problem

TODAY’S DISCUSSION

Choice of Topic: Automated External Defibrillators

Approach

Practical Lessons

Major Findings Impact of Study

TODAY’S DISCUSSIONMARKETING ISSUES

The same attention to detail and thorough

approach applied to engineering “problems” give engineers an ideal mindset to investigate

marketing issues.

THE “PRACTICAL PROBLEM”

AUTOMATED EXTERNAL DEFIBRILLATORS

News/ press coverage indicates a rapidly growing market

Interest of new medical group Past career involvement with semi-

automatic defibrillators Good fit with need for learning

opportunity/ independent study project

APPROACH

Who is audience?

What information am I trying to convey?

What will people do/ learn as a result of this study?

Various managers at my company

Informing… Conveying an overall view of the market

Recipients will have better understanding of the market and will be able to decide if there is any opportunity for commercialization.

ORIGINAL PLANMarket Study: Automatic External Defibrillators

1. History and Evolution of/ Need for Cardiac Defibrillators

2. State of Market Today

3. Kinds of Cardiac Defibrillators (Overview of Three Main Types)- Differentiation, Users, Major Manufacturer, Examples

4. Focus on Automatic External Defibrillators- Manufacturers and Product Offering

5. Focus on Automatic External Defibrillators- U. S. Cost Information and Purchasing Patterns

6. Technology Assessment/ Product Differences Among Selected Suppliers/ Types

7. Emerging Opportunities for Automatic External Defibrillators- Market Trends/ Where Market is going, New Technology Developments or Potential Needs- Impacts (Legal, societal), Enablers and Potential Impact/Requirements

8. Key Resources (ex. Industry Associations, etc.)

9. Summary

MARKET STUDYAutomated External

Defibrillators

History of Defibrillation

Initial efforts in dogs in 1899 by J. L. Prevost and F. Batelli (France)

First U.S. work by Con Ed and Johns Hopkins in 1920s

Case Western Reserve University in 1930s and 1940s

First open heart defibrillation: 1947 First non-invasive defibrillation: 1955 Later efforts: portability, lower energy

Need for Cardiac Defibrillation

Heart-related disease is the leading cause of mortality in the United States.

Sudden cardiac arrest causes 250,000 deaths annually due to change in heart’s electrical system most common cause is ventricular

fibrillation (VF) treatable by cardiac defibrillation

DefibrillationSingle greatest “determinant of survival”

0

20

40

60

80

100

1 3 5 7 9 12

Time Since Collapse (minutes)

Ap

pro

xim

ate

Su

rviv

al R

ate

(%

)

Types of Defibrillators Implantable

(Internal) External

Hospital Portable Automated

External Defibrillators

0

200

400

600

800

1000

1200

ICD HospitalDefibrillator

PortableDefibrillator

AED$ (

milli

ons)

Automated External Defibrillators

Growing rapidly

Three major manufacturers Medtronic Philips Cardiac Sciences

0

200

400

600

800

1000

1200

1996 (actual) 2001 (actual) 2006 (projected) 2012 (projected)

Year

$ R

even

ue (

mil

lio

ns)

Estimated Market Sharebased on 2001 data

Philips40%

Medtronic40%

Cardiac Sciences

17%

Other3%

Philips

Medtronic

Cardiac Sciences

Other

Key Characteristics of Currently Marketed AEDs

Manufacturer Product Weight(lbs.)

Targeted User OtherComments/

Features

Selling Price

Access Cardio Systems Access AED 2.8 First responders $1400-$2000

Access Cardio Systems Access ALS 2.8 not specified Allows manualoverride of system

$1400-$2000

Cardiac Science Powerheart 7.7 Minimally trained users Provides constantmonitoring

$3500

Cardiac Science Survivalink 7.7 minimally trained users $3000

Medtronic Physio Control Lifepak CR+ 4.5 minimally trained users $3500

Medtronic Physio Control Lifepak 500AED

6.5 -7.4 first responders $3500

Philips HeartstartFR2

4.7 minimally trained users Approved for use onall ages

$3500

Philips HeartstartHome

Defibrillator

3.3 "virtually anyone"* review oftraining materials

recommended*based on product literature

Available byprescription at

pharmacies

$2300

Zoll AED + 6.7 minimally trained users not indicated forchildren under age of

8

$2000

Use of AEDs

30 % of Ambulances in US 15 % of Emergency Fire Units 2 % of Police Vehicles

Training is relatively simple and inexpensive.

Enablers

Community Access to Emergency Devices Act

Cardiac Arrest Survival Act

Aviation Medical Assistance Act

Occupational Safety and Health Administration

American Heart Association (AHA),

American College of Emergency Physicians

Future Direction

Medical Use Commercial Use Home Use Public Access Defibrillation *

Public Access Defibrillation

Rapidly growing segment

Several studies in major airports (Midway and O’Hare)

Effectiveness of minimally trained users based on sixth graders

$405.6

$300.4

$222.5

$164.8$122.1

$90.5$67.0

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

2000 2001 2002 2003 2004 2005 2006

YEAR

REVE

NUE

($M

illio

ns)

Patent ReviewCATEGORY NUMBER OF

PATENTSUser-Directed Prompts 1Battery Related 3Charging Mechanism 4Casing for Device and /or Components 4

Defibrillation Mechanism or Timing 4Energy Reduction/ Energy Control 5Training/ Self-Test/ Simulator 6Algorithm/ Rhythm/ Monitoring 7Alarm/ Response System/ Data Transfer 8Lead / Electrodes 9

Future Developments Ease of Use: Public use demands the need for

even simpler operation. Lightweight/ Easy to Carry: Most AEDs weigh

under ten pounds, in the range of three to seven pounds. Miniaturization continues to be an important focus for these products.

Improved Recognition of VF rhythm: AEDs will almost always – 90%-- shock in instances of VF and will rarely, if ever, deliver a shock in non-VF cases. Improved detection of rhythms can only help to improve safety as needed for widespread public and home use.

BACK TO THE “PRACTICAL PROBLEM”

SUMMARY OF MARKETING STUDY

Automated external defibrillators are a fast growing segment of the medical device market.

Revenue from AEDs is expected to grow from $489 million in 2001 to $1 billion in 2012. This growth is partly based on the expansion of public access defibrillation.

The escalation may also offer an opportunity for complimentary emergency products which may provide significant revenue.

USE OF MARKETING STUDY

Automated external defibrillators are a fast growing segment of the medical device market.

Revenue from AEDs is expected to grow from $489 million in 2001 to $1 billion in 2012. This growth is partly based on the expansion of public access defibrillation.

The escalation may also offer an opportunity for complimentary emergency products which may provide significant revenue.

Possible new directions, new engineering

problems to solve… Possible growth for the

company

MAJOR “TAKE-AWAYS”

The final product may not be exactly the same as the original plan….. OK!

Proper management of rapidly changing data is key.

Process for approaching marketing study: (Does this process sound familiar from Dr. Barnes’ lectures?)

The same as other endeavors; apply the same techniques.

Thank you!