Medical Device Industry Analysis

MEDICAL DEVICE
INDUSTRY ANALYSIS
NOVEMBER 2013
Abraham Wairisal Juliana Garcia Lauren Rogers Tiffany Lumley

New Delhi
Consulting Company

TABLE OF CONTENTS

___________________________________________________________________________________________0
Executive Summary ___________________________________________________________________________1
Key findings & Implications ____________________________________________________________________ 1
Reccommended Strategic Direction ______________________________________________________________ 1
Looking Ahead ______________________________________________________________________________ 1
Performance Analysis: SWOT ___________________________________________________________________ 2
Rationale ___________________________________________________________________________________ 2
Business Conditions & Trends ___________________________________________________________________4
Demographic Factors _________________________________________________________________________ 4
Global Economic Outlook ______________________________________________________________________ 4
Political, Legal, & Regulatory Factors _____________________________________________________________ 5
Technological Trends __________________________________________________________________________ 6
Natural Environment _________________________________________________________________________ 7
Sociocultural Trends __________________________________________________________________________ 8
Sustainability & Responsibility Landscape _________________________________________________________9
Impact on People and Communities _____________________________________________________________ 9
Impacts on the Planet ________________________________________________________________________ 10
Implications ________________________________________________________________________________ 10
Customer Landscape ________________________________________________________________________ 11
Demand ___________________________________________________________________________________ 11
Market segments ___________________________________________________________________________ 11
Implications ________________________________________________________________________________ 14
Collaborators & Supply Chain _________________________________________________________________ 15
Medical Device Supply Chain __________________________________________________________________ 15
Key Collaborators ___________________________________________________________________________ 15
Implications for ShiftLabs _____________________________________________________________________ 17
Competitive Landscape ______________________________________________________________________ 18

TABLE OF CONTENTS

Industry Structure & Dynamics ________________________________________________________________ 18
Porters Five Forces Analysis ___________________________________________________________________ 18
Who to Watch ______________________________________________________________________________ 19
ShiftLabs Place in the Industry _________________________________________________________________ 20
Implications _____________________________________________________________________________ 20
ShiftLabs Ability to Compete ________________________________________________________________ 21
Company Performance & Abilities _____________________________________________________________ 22
Mission & Vision ____________________________________________________________________________ 22
Business Model & Strategy ____________________________________________________________________ 22
Key Strengths & Relative Weaknesses ___________________________________________________________ 22
Current & Expected Performance ______________________________________________________________ 23
Strategic Response _________________________________________________________________________ 24
ShiftLabs Strategic Response __________________________________________________________________ 24
Recommended Strategic Direction _____________________________________________________________ 24
Expected Challenges & Risks __________________________________________________________________ 25
Conclusions ________________________________________________________________________________ 26
References ________________________________________________________________________________ 27
Appendix _________________________________________________________________________________ 32
Contacts __________________________________________________________________________________ 32

EXECUTIVE SUMMARY

Page 1
Executive Summary
KEY FINDINGS & IMPLICATIONS
India has a population of over $1.27 billion, with a poverty ratio of 29.8%. Due to an increase in
technology, a trained workforce and awareness of health needs the Indian Medical Device Market is
predicted to reach $11 billion by 2023 (Visiongain, 2013). Their GDP is at $1.842 trillion with only 4.2%
spent on healthcare. As a result, the private sector is expected to contribute 80% - 85% of the required
funds until 2025. Small device companies in this space will need to innovate affordable technologies to
most effectively meet the cultural and health needs of the country. This will require collaborators due
to the 66% market domination by four major companies and high barriers to entry.

RECCOMMENDED STRATEGIC DIRECTION
Innovate for the need and context: Companies must understand who has the biggest stake in
health reforms and challenges in India. In this way, it will be important to innovate devices for the
specific needs of the country and market to the party who is able to fund the device. Before marketing,
the entity must understand the cultural components that could impact the effectiveness of the
product. ShiftLabs should design for the challenges that are top of mind for these parties and market
their product to show the immediate impact it would have on pertinent life-threatening issues.

Collaborate: This will allow for sharing of resources, connections with government entities and trust
within the communities needing access to these devices. Partners can explain the most prevalent
needs and the appropriate ways to address them. This model will be effective if motivations to meet
needs are shared among partners.

Funding: R & D requires investors who accept that they will wait longer for their ROI and not receive
as much as with larger companies. In addition, investors need to share a passion for providing access to
medical devices in areas of need.

Possible collaborators: Mercury Medical Technologies and Godisa.

LOOKING AHEAD
Strategic grant writing.
Innovate based on passions of collaborators and investors.
Innovate for the most life-threatening medical needs of the end-user and nation.
Design to manufacture and to the context of the user and resources available for repairs
Maintain quality while keeping prices low and properly market this to individual nations.

EXECUTIVE SUMMARY

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PERFORMANCE ANALYSIS: SWOT
STRENGTHS WEAKNESSES
Strong mission to improve lives of people, shared
with talented staff of engineers & innovators.
Understand and aware of the need for medical
devices to be affordable to the less fortunate.
Do not have to struggle through corporate hierarchy
to bring these low-cost innovations to market.
Strong mission to improve lives of people, shared
with talented staff of engineers & innovators.
Understand and aware of the need for medical
devices to be affordable to the less fortunate.
Do not have to struggle through corporate hierarchy
to bring these low-cost innovations to market.
OPPORTUNITIES THREATS
Population of 1.3 billion in India, growing lower-
middle class and forecasted to be the 3
rd
largest
economy by 2035.
Indian medical device market is forecasted to grow
at a compounded annual growth rate of 15%.
Medical device manufacturing in India is expected
to grow at 17% annually and is boosted by the
development of the Medical Device Technology
Park in Tamil Nadu.
Increasing awareness of health needs in LMICs.
The Indian government is moving forward with
health initiatives geared towards providing
necessary health coverage to rural/poor
populations.

25% Import tax on medical devices in India.
To manufacture, distribute, and market a device will
need approval from three regulatory divisions in
The Ministry of Health: Drugs and Cosmetics Act,
1940; the Drugs and Cosmetics Rules, 1945; and the
Central Drugs Standard Control Organization
(CDSCO).
Different culture: relationships are vital in doing
business in India.
Indian companies are violating IP and creating
cheaper devices, not maintaining quality.
Competitors: Big companies such as Medtronic, GE,
Philips, St. Jude, Johnson & Johnson.
Constantly changing market with new technological
advancements
RATIONALE
Business Conditions and Trends
70% of the Indian people live in rural areas, half of whom live below the poverty line.
Growth in local manufacturing decreasing prices, an increase in technology and a growing
demand for medical devices in India has made the its device industry competitive, despite the
25% import tax on all international goods (Weinstein H.,2013).
71% of Indians are wireless subscribers (Census India, 2011) and 500 million smartphone
users worldwide will be using a health care application (FDA, 2013). This presents an effective
platform for devices. Also, solar powered devices allow for reliable sources of power.

Customers
Best Customers: NGOs (PATH, Red Cross, Doctors Without Borders) and Ministry of Health.

EXECUTIVE SUMMARY

Page 3
Driving Need: to serve a large volume of people within a limited budget and provide access to quality
devices appropriate for the cultural context.

Demand:
The WTO (2013) estimates India will need an additional hospital beds each year for the next
five years to meet the demands of Indias population.
More than 70% of all health expenditure in India is paid for by people from their own pockets
and this expenditure has been rising, especially for the poorest with privatization of healthcare
increasing (Nagarjan R., 2010).

Competitive Landscape
Major players: Johnson & Johnson, Medtronic, GE and St. Judes.

Market shares: Major players hold over 66%, the remainder is split between smaller companies.

Emerging Market: Many larger companies have designed products for emerging markets, therefore,
ShiftLabs should address niche markets, developing products for specific cultural and pertinent health
needs.
Small companies could receive a 3.0% profit margin compared to the upwards of 20% for large
companies (they will decline with the medical device tax) (IBIS World, 2013).
Technological advances are shortening product life, raising the cost of research and patenting.
Changes in trade regulations and healthcare reforms are impacting the major concerns of
customers and costs for bringing products to market.

Collaborators
Potential Partners: NGOs (PATH & The Gates Foundation), The WHO, The Association of Indian
Medical Devices Industries (AI-MED), Mercury Medical Technologies, as well as, competitors
(supporting their global health initiatives).

Regulatory Approval Process: FDA and further approval by CDSCO depending on a companys
intentions in manufacturing, distribution and selling. This is both costly and timely.

Funding: Established companies invest 12% of revenue into R&D and 35% into purchases (IBIS World
Medical Device Industry, 2013), for smaller companies funding will be higher and attained through
partnerships.

Social and Sustainable Opportunities
Training: The company is responsible for making sure the provider (the end-user) can
effectively use the product for true sustainable impact on health issues.
Follow up: To ensure life-changing impact, companies must confirm that products are able to
withstand harsh conditions and fit within cultural norms.

BUSINESS CONDITIONS & TRENDS

Page 4
Figure 2 Indian Medical Device Industry Growth
Business Conditions &Trends
DEMOGRAPHIC FACTORS
The nation of India has a population of over 1.27 billion, while the poverty ratio has decreased
by almost 10% since 2005; it currently remains at 29.8%. The graph below illustrates this change,
specifically, the projected growth of the lower-middle class.

The importance of innovating human-centric medical devices within India is relevant given
that 287 million adults are illiterate (Rajadhyaksha, 2012). In addition, the medical demands of the
nation will increase as the aging population, 60 years and above, will reach 200 million by 2025 (United
States International Trade Commission, 2013).

Within India, 70% of the population lives in rural areas, half of whom
live below the poverty line (Cities Alliance, 2011). Currently, the
dominance of rural poverty over urban poverty is changing; 81 million
people are currently living below the poverty line and there is a
projected slum population of above 200 million by 2020. These
populations lack access to clean water, sanitation and health care
facilities; presenting an opportunity for the innovation of low cost
medical devices especially in the context of a growing economy (Cities
Alliance, 2011). A company that is able to cater their products to the
most prevalent health needs of lower-middle income countries (LMICs)
such as these is going to be successful in the medical device industry.

To meet health care needs the health care infrastructure within the country must be
understood. Indias works as a three tier system: as of March, 2011, there are 148,124 Sub Centres,
23,887 Primary Health Centres (PHCs) and 4,809 Community Health Centres (CHCs) functioning in the
country (AuroLabs, 2012). The PHCs are established and maintained by the State Governments under
the Minimum Needs Programme (MNP) and the Basic Minimum Services (BMS) Programme. CHCs are
being established and maintained by the State as well. These centres cover a differing amount of
populations, affecting the wear and tear on their devices; CHCs by far serve the largest amount of
people.
GLOBAL ECONOMIC OUTLOOK
A global survey on healthcare costs suggests that India spends only 4.2% of its
GDP on healthcare, compared to an average of 8.5% globally, and lower than
other emerging countries such as Brazil (9.0%), China (4.6%), and Russia (5.4%)
(India Brand Equity Foundation, 2013). In general government-run facilities
have inadequate equipment and poor quality, and as a result private players
can capitalize on this opportunity. The private sector is expected to
contribute 80% - 85% of the $86 billion investments required in healthcare
Figure 1 Rising Lower Middle Class


Page 5
until 2025. The medical device industry specifically, was valued at US$ 2.75 billion in 2008 and is
expected to reach US$ 14 billion in 2020 at a compounded annual growth rate of approximately 15%
(FICCI, 2011).

Indias current GDP has grown by 5.6% in 2013, now currently at 1842 Billion dollars and it is
continuing to experience dramatic growth (Economy Watch, 2010). By 2035 it is predicted that India
will be the third largest economy in the world behind the US and China (Business Maps of India, 2010).
The government is working towards new plans to improve the current healthcare system. For example,
New Delhi is increasing public spending on health care from 1.0% to 2.5% of their GDP. In addition,
Prime Minister Manmohan Singh has placed a specific emphasis on health in the countrys plan for
2012 - 2017 (Luthra S., 2012). Despite these initiatives, more than 70% of all health expenditure in
India is paid for by people from their own pockets and this expenditure has been rising, especially for
the poorest with privatization of healthcare increasing and the private healthcare industry is
flourishing (Nagarjan R., 2010).

In India private spending on health is 4.2% of GDP (Nagarjan R., 2010). Within private health
care, fees are unregulated; this results in inconsistent quality of care. Similar to the public facilities, the
private hospitals are often also too busy to properly care for all of the people who come to them for
healthcare services. All of these factors contribute to the inefficient health care in India, this is
specifically challenging for the lower classes.

Indias economy is rapidly growing and the labor market is lucrative. In addition, the device market was
valued at 5 billion in 2012 and is predicted to reach 11 billion by 2023 (Visiongain, 2013). Despite this
rapid growth, over 70% of the market is still dependent on imports, 30% of which come from the US
(United States International Trade Commission, 2013). However, manufacturing in India is expected to
grow at a rate of 17% annually through 2017 backed by demand of expanding health care
infrastructure. There are over 700 device manufactures in India today and the number is growing as
the market expands. It is important note that Indian manufacturers are developing these products for
1/10 of the price. Therefore, if they continue to grow medical device companies from the developed
nations will need to find a new way to compete, especially since with import tax on devices is 25%
(Weinstein H., 2013).

POLITICAL, LEGAL, & REGULATORY FACTORS
A company entering the medical device market is going to be affected by the United States
government and the Indian government. There are many restrictions that a company is going to have
to consider when creating their product. Additionally, there are several regulations that must be taken
into consideration because these take time and capital.

Medical devices must be regulated in the USA, receiving FDA approval, before they will be
allowed to manufacture, distribute, and export to other counties. The amount of time and funds that
are required for this process are going to be dependent on the type of device that is created and how it


Page 6
is classified (A,B or C depending on the risk it poses to the patient). The higher the level of
classification, A is least risky D the most, the longer it is going to take to be approved. Additionally, in
order to manufacture, distribute, and market a device in India companies must be approved through
The Ministry of Health and the three regulatory divisions: Drugs and Cosmetics Act, 1940; the Drugs
and Cosmetics Rules, 1945; and the Central Drugs Standard Control Organization (CDSCO)

TECHNOLOGICAL TRENDS
The technology landscape had grown tremendously since The Industrial Revolution. From
patents filed and approved with respect to medical devices advancements and trends in the medical
device industry can be determined. According to the World Technological Intellectual Property
Organization (2012), in 2010, 1,979,000 Patent applications were filed, an increase of 7.2% from 2009.
In addition, from 1985 to 2011, there have been a total of approximately 36 million patents filed.
According to PR Newswire (2013), the medical device industry demonstrated the largest growth in
patent activity from 2011 to 2012, with a 15.7% growth. From 2009 to 2012, medical devices patents
have been largely focused on surgical instruments and endoscopes as can be seen from IFI Claims,
2013). The main growth drivers for these patents include: the global rise of health care spending, the
improvement of health care infrastructures in developing and vastly populated countries, especially
India and China, the increasing incidence of diseases developed by the spread of Western lifestyle and
the growing demand for technological innovations by
professionals surgeons (IFI Claims, 2013).

With the advent of the Internet, the world has
become flatter, the Internet has allowed for people in
developed countries to be more aware of the living
conditions of those in the emerging markets. This has
encouraged an awareness of global health issues and
promoted the development of an increasing number of
NGOs from 1948 to 2010 to address these issues as can
be seen from Figure 4 (Statista, 2013).

There has been a recent increase in Indian
medical device technology, as shown by the creation of
the new Medical Device Technology Park in Tamil Nadu
(Express
Healthcare, 2010). This may cause increased
barriers to entry for outside companies exporting their
technologies into India, this signifies a possible advantage of
manufacturing within India. Moreover, due to the growth of scientific research and innovation in this
industry, and a growing motivation for companies to build the philanthropic components of their
companies, donation of medical devices to third world companies is growing. On the other hand,
companies such as Phillips are realizing the market potential of these areas and are developing low-
Figure 3 Increasing number of NGOs
from 1948 to 2010 (Statista, 2013).
Number of NGOs


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cost medical devices for these markets. This is increasing the accessibility of these technologies,
allowing for medical issues in India to be more effectively treated.

Another trend is the growing use of
smartphones. Within a total national
population of 1.2 billion, Telecom Regulatory
Authority of India estimated approximately
850 million wireless subscribers in India at
June 30th of 2011 (Census India, 2011). The
prevalence of smartphones throughout a
broad range of contexts, has led to a growing
number of medical device innovations using
smartphone applications as a platform.
According to industry estimates, 500 million
smartphone users worldwide will be using a
health care application by 2015, and by 2018, 50 percent of the more than 3.4 billion smartphone and
tablet users will have downloaded mobile health applications (FDA, 2013). Furthermore, according to
International Telecommunication Union (2011) the adoption of Information Communication
Technologies is crucial to the medical device industry as it enables citizens to electronically connect to
medical care providers in different localities. The Cloud is also an important aspect of the internet as
mentioned by Sarma (2013), Cloud is definitely among the most important technological developments
in the field, and as it continues to evolve, so will it make access to healthcare even easier for millions of
people.

In addition, solar panels serve as reliable sources of power for devices where this access is
often inconsistent. Over the last three years, India has installed 1.8 gigawatt (GW) solar power plants,
and the government is in the approval process for projects contributing 2.3 GW more over the next six
months (The Times of India, 2013).

Many medical devices developed for high-income countries are not sustainable within LMICs.
This increases the demand for effective, low-cost and robust medical devices in the emerging countries
(WHO, 2013). This contributes to the trend of developing medical devices for emerging countries,
which ShiftLabs is currently committed to achieving.

NATURAL ENVIRONMENT
According to the WHO (2012), major disease killers such as diarrheal diseases, malnutrition,
malaria and dengue are highly climate sensitive and are expected to worsen as the climate changes
due to: extreme heat, increase in natural disasters, variable rainfall patterns, and changes in pattern of
infection. Furthermore, areas with weak infrastructure such as LMICs, will be the least able to cope
without assistance to prepare and respond.


Page 8
In India, changing temperatures and precipitation patterns will affect health by changing the
ecology of various vector-borne diseases, such as malaria, dengue, chikungunya, Japanese encephalitis,
kala-azar, and filariasis. The effects of climate change will be more prominent in vulnerable populations
that include the elderly, children and the poor (Bush et al. 2011). The World Bank estimates that 21%
of communicable diseases in India are caused by unsafe water. This impact is evident in the water
contamination from sewage and agricultural runoff leading to an estimated daily 1,600 deaths that are
caused by rhea (Water.org, 2013).

It is evident that the deterioration of the natural environment negatively affects the health of
communities, especially within vulnerable populations such as the elderly, children and the poor. There
are many people in the emerging markets that fall into that category and with the lack of
infrastructure; they are the ones that will suffer the most from climate change. As such, there is a need
to develop low-cost medical devices that are created for the low-middle class populations.

SOCIOCULTURAL TRENDS
The caste system in India sets the norm for treatment of different socioeconomic groups and
the health care services received. These perceptions results in families investing in the cost of private
medical care as soon as they can pay. Given this stigma, companies looking to provide devices to low
resource communities must clearly communicate the quality of their products despite their low costs.
In this way quality care will be accessible to the whole community and they will be able to grow their
market outside of these areas. The population that is willing to pay minimal costs for services will grow
with the middle-class. Therefore, ShiftLabs attitude towards maintaining quality while keeping prices
low will be their most powerful value proposition and should not be sacrificed.

From a business perspective, any company looking to move into the Indian market must
understand the significance of relationships in this context. All business is achieved through whom you
know and the ability to develop trusting relationships. These relationships will be able to inform the
ways that companies address specific health needs. From this standpoint, the societal impacts of your
innovation should be considered from inception. Market research will aid in deciding if devices will
compromise the role of the local clinician or midwife, who is often highly regarded in low-income
communities. Market research will inform these interactions.

US companies, who are focused on creating devices to meet the health needs of the
developing world, must identify investors who are committed to this cause. In addition, interest in
global health initiatives has grown as more people are gaining access to information about the state of
medical services internationally. The rapid globalization within societies and borderless health issues
are inspiring academia to incorporate global-focused content. For example, from 1966 to 2011, the
number of global health articles appearing in PubMed/Medline rose from 1 to 1,734 (Siegel, 2013).
Within the state of Washington there is a strong community of 209 Medical Device developers. Instead
of looking at these entities as competitors, it is important to see the collaborative potential of these
partnerships.

SUSTAINABILITY & RESPONSIBILITY LANDSCAPE

Page 9
Sustainability &Responsibility Landscape
IMPACT ON PEOPLE AND COMMUNITIES
Currently most of the industry is focused on big hospitals and innovations that bring quick
returns on investments. As a result, there is a lack of devices made for smaller hospitals and clinics in
LMICS due to the differing health challenges and limited budgets. Although some larger companies are
making products for this market, the regulatory process, understanding a variety of cultures, and
obtaining a smaller profit margin deter companies from being fully devoted to this market. This
presents an opportunity for companies who are willing to meet this need appropriately.

When developing devices for emerging markets it is imperative that thorough market research
be conducted. If a device is not created, marketed, and introduced with the end-user in mind, its use
will not be sustained. For example, PATH created a sanitation kit for delivering babies that are sold for
$1 in vending machines. The product was highly successful in China; however, sales were remarkably
low in India for the same exact product. PATH then sent workers to India and they discovered that the
graphic design on the package, a woman holding a baby in a white blanket, had stopped customers
from purchasing the product. PATH employees discovered that in India, wrapping a baby in a white
blanket symbolizes the child has died. Even though this mistake had nothing to do with the product
itself, it prevented PATH from making an impact (Neroutsos, 2013).

Another important cultural factor to consider is how the device will impact the community and
their most respected individuals. For example, midwives are highly regarded in rural communities and
developing a product that could displace them will not be accepted into the community (Sweeney,
2013). Therefore, the introduction process of a product to the community is key. When developing an
ultrasound machine, for example, you must take into consideration how you will include the midwife in
the process.

Training is required to fully maximize the impact of medical devices. Given that health care
providers in India often lack this, the company is responsible for making sure the provider (the end-
user) can effectively use the product. For example, many individuals in rural villages and communities
were not educated on how to properly use condoms and thus thought they could be re-used. Despite
the good intentions of those distributing condoms, the lack of thorough training resulted in spreading
sexually transmitted diseases rather than preventing them (Neroutsos, 2013).

As previously mentioned, products must be created to withstand harsh conditions and fit in
with the existing cultural norms. To avoid pitfalls that could deter the impact of a life-changing device,
follow-up care is essential. Rural communities often do not have access to batteries and hospitals
frequently lose power, therefore, designs should include the use of solar power (Langhout M., 2013). In
addition, products should be created with the ability to be fixed with the materials available to the
communities so they can last for the long-term. If innovation, introduction and follow-up are not
properly executed, medical devices can be damaging to people and communities. Therefore, these
steps are imperative.

SUSTAINABILITY & RESPONSIBILITY LANDSCAPE

Page 10
IMPACTS ON THE PLANET
Materials, manufacturing, energy usage and transportation contribute to the largest
environmental impacts within the industry (Frost & Sullivan, 2011). Medical facilities expend twice the
energy of a traditional office space (Frost & Sullivan, 2011) and have been estimated to represent 3 -
8% of the climate change footprint in developed countries (WHO, 2011). Transportation is also an
issue, in 2007; shipping was responsible for 3.3% of the worlds emissions, expending 1 billion tons of
CO2 (Oceana, 2010). Despite these effects, as of 2010, there are yet to be emission reduction policies
for the shipping industry (Oceana, 2010). This impacts the medical devices industry if devices are
manufactured and exported to other countries. Manufacturing devices in the countries where they are
being sold will reduce both the costs and carbon footprint of health care facilities (WHO, 2011).

The medical device industry is the second largest producer of waste in the USA after the food
industry (Science Daily, 2010). Tools and equipment that are single-use such as cutting tools, and
laparoscopic ports are the main contributors to the waste. To reduce waste, proper sterilization may
allow equipment to be re-used (Science Daily, 2010). Using durable materials in manufacturing will
reduce waste while contributing to cost efficiency. Furthermore, medical devices companies can
develop programs to receive outdated and malfunctioning devices from their customers and recycle
the parts. Refinext reclaims this waste by working closely with leading medical device manufacturers to
track, dismantle, destroy and fully reclaim these materials (Refinext, 2013). Companies should look for
these collaborations to increase sustainability.

By reclaiming medical devices waste, soil and water quality can be improved because the toxic
materials in medical devices will not be placed in the landfills. This will also increase biodiversity
because fewer animals will be exposed to these materials. To improve air quality and reduce CO2
emissions, the industry can develop devices that are energy efficient or require no energy to operate
and manufacture devices in the countries they will be sold.

IMPLICATIONS
There is an increase in demand for medical devices due to growth in the population,
specifically among those who are 45 and older. Worldwide, in order for more cost efficient and high
quality devices to reach the areas that are lacking them, change must occur in the process of getting
the devices to market. ShiftLabs has responded so far by identifying issues in these health care settings
and working to innovate solutions. Their business is focused on creating low cost, high quality products
that address specific problems that doctors are seeing worldwide. ShiftLabs desires to place the
medical devices necessary for treatment in hospitals and private clinics worldwide, especially in the
BRIC nations. Therefore, they are creating devices that are adaptable to a variety of contexts.
Furthermore, our client focuses on developing low-energy or no-energy medical devices that can be
used in places with inconsistent power supply. As a company, ShiftLabs is focused on human
flourishing, however, in the medical device industry as a whole, there is a still a need to promote the
holistic development of communities through health care.

CUSTOMER LANDSCAPE

Page 11
Figure 4 Private Sector Expenditure
Customer La ndscape
DEMAND
When looking at customers in the industry, there is a distinction between paying customers
and end- users. For the end-users in India, there is a large demand for affordable, user-friendly, high
quality products because of the significant portions of the population living below the poverty line. As
for the customers, the WTO (2013) estimates that India will need an additional 80,000 hospital beds
each year for the next five years to meet the demands of Indias population. (Rao P.H., 2013). The lack
of expendable income available to these healthcare providers forces them to focus their buying
decisions on the most vital needs of the community. With the realization that quality does not have to
go down with price, the demand for affordable medical devices will expand to the private sector which
has grown vastly over the years and is well established and flourishing (Rao P.H., 2013). Furthermore,
given the growth of the lower-middle class within India as shown in Figure 1, there are more people
who will be able to afford medical care if medical devices are kept affordable. At the same time, the
Indian healthcare industry... is expected to reach US $160 billion by 2017 (IBEF, 2013) both of these
demographics show a growing market for affordable medical devices in India.

In order to effectively assess the current demand within the medical device market, the actual
device and its intended use should be clearly defined. It is difficult to forecast this margin without
these intentions defined. For this reason, specialization can serve as a tool to ensure that the
companies investments in research and development are geared towards the largest needs within a
market that will purchase and use these devices. Currently, there are useful innovations that have not
reached the market due to a lack of urgency for their use in these contexts (stakeholders are focused
on devices that will have immediate life-saving implications) and investment in introducing the product
to the community. The definition of these intentions and a companies intended customer will greatly
inform the potential for a product to go to market.

MARKET SEGMENTS
The lack of resources within the Indian health care system paired with the large demand within
the public sector drives the motivations of NGOs and government entities to make economical buying
decisions for their constituents. This is especially prevalent given that, more
than 70% of all health expenditure in India is paid for by people from
their own pockets and this expenditure has been rising, especially for
the poorest with privatization of healthcare increasing (Nagarjan R.,
2010). By making these processes more effective and efficient, a wider
range of individuals can receive high quality medical care. Additionally,
challenges within the healthcare industry grow with the population. The
government and other interests groups must be proactive in
preventing these issues. Specific health challenges and the resources allocated to address them will
depend on the type of care and area where they are being initiated. The Ministry of Health in India, for
example, is moving forward with a range of health initiatives geared towards providing the necessary
health coverage to rural populations. Given that their primary need is to be able to serve a large

CUSTOMER LANDSCAPE

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Diarrhea
18%
Pneumonia
18%
Measles
1%
Injuries
3%
HIV/Aids
2%
Cogential
Abnormalities
4%
Neonatal
Sepsis
6%
Birth
Asphyxia
9%
Prematurity
10%
Malaria
9%
Other
20%
volume of people, within a limited budget, access to
affordable devices that would specifically meet
health challenges is essential. They will make their
purchasing decisions based on their budget and
how effective devices are in addressing life-
threatening issues. The demand for these products
will be informed by the needs of the communities
they work in. Therefore, companies innovating for
this sector will need to focus in the areas of the
most prevalent health needs (see Figure 5).
Likewise, given that a large part of research and
development will be funded by outside grants and angel investors, it is important that a company
identify the major health needs being addressed by their target
funders. For example, the operations within PATH are focused on
maternal health needs; therefore, in order to collaborate with them a company would have to innovate
within this targeted health issue.

Another market could be found in the local ambulances. To get to the hospital, people use auto
rickshaws, private cars or van ambulances that have no medical equipment or trained technicians.
More often than not, these ambulances function as hearses (Ziqitza). Due to this deficiency in these
life-dependent services, devices that are both affordable and high quality that could function in these
conditions would have a large market. Companies
such as Ziqitza Health Care Limited would be
potential customers for these devices. They
have addressed the lack reliable ambulances
or emergency medical response services
within cities in India by providing reliable
ambulances and charging patients based on
their ability to pay (tiered pricing). The
government, to provide their services to a
wider range of people also subsidizes many of
their services.
Other possible customers could include the World Health Organization, which has clearly
defined millennial goals that will inform their device investments. In addition, doctors working within
these populations that would personally benefit from devices and small private clinics that have a lack
of resources. It is important to note that once devices move into the healthcare markets serving poorer
populations they could more easily move into the private hospital sectors. Medical providers across the
system will be motivated to buy devices that are cost-effective as long as they do not compromise
quality.

Figure 5 Most Prevalent Health Needs

CUSTOMER LANDSCAPE

Page 13

BUYING PROCESS
Depending on the customer, the buying process will differ. If for example, an NGO observed a
prevalent health need within the community they were serving, they may search out a solution to this
issue. More probable however, would be a company approaching an NGO with a product to effectively
meet the need of the community they serve. The NGO would
then have to understand the impact this investment would
have on the lives of the community and the potential it had to
save lives. Governments and NGOs alike seek to avoid
significant health issues that are impacting the quality of life of
their communities. Their hope would be that through the use
of these simple and affordable medical devices, citizens could
achieve a higher quality of life. These devices must be able to
function in adverse conditions and provide a user interface that
guides the physician through proper use of the medical device in the context
of the ailments they are treating (i.e. the appropriate flow rate for different types of
patients). Additionally, according the Mike Langhout of Mercury MedTech, devices should be easily
fixable with the resources available in rural areas (i.e. wood).

In order to better meet the needs of the end-users a company who is entering the market may
want to consider multi-tiered pricing, also known as Compassionate Capitalist Pricing. This pricing
method charges for profit companies, who can afford to pay more money (i.e., GE, Phillips), more for
the product and NGOs (i.e., Red Cross, PATH) less. This allows for the accessibility of these products to
those who would not be able to finance them, while ensuring the sustainability of the
company. In addition, the determination of the manufacturing and distribution process
would affect both the cost and access of products to specific communities and would
affect possible customers. Quantities would be minimal for each clinic and growth in
sales would result from more clinics receiving the same products. A company should
be able to specifically market the benefits of the product within the context of the
needs displayed a specific community. Given that this is a large investment for
buyers, a products value and usability must be evident in order for it to be more
desirable over competitors products. Additionally, by clearly displaying the
value of the product a customer can determine the implications that the
purchase will have on the future of these communities. These customers will
work with smaller medical device companies when they establish a name for
themselves, proved their awareness of cultural issues and have developed a
relationship with them.

Health
Care
Corp
Private
Hospitals
Public
Hospitals &
NGO's
Figure 6 Multi-tiered Pricing:
Charging the most at the top and
moving down.

CUSTOMER LANDSCAPE

Page 14
IMPLICATIONS
Given these factors, companies looking to work in this industry should create products that
are specific to the needs of the specific rural areas that will be using these products. This will include
identifying both the most significant needs in these areas in addition to where funders will place their
investments.

Due to the severe lack of funding in public sector health care and increasing needs from a
growing population for these services, opportunity exists for suppliers that can meet pricing and
usability requirements. Companies such as ShiftLabs should focus on providing devices to meet the
most prevalent health needs in a way that is both affordable and reliable. For this reason, an
understanding of the cultural context and the current needs of these communities holistically, will be
vital in driving ideas for innovation.

COLLABORATORS & SUPPLY CHAIN

Page 15
Figure 8 Supply Chain for Medical Devices
Collaborat ors &Supply Chai n
MEDICAL DEVICE SUPPLY CHAIN

The value-chain of the medical devices industry starts with research and development,
followed by regulatory approval, materials supply, manufacturing and bringing the product to market
through marketing and sales. In R&D needs in the market are identified, products
are developed and tested and prototypes are built. All medical devices have to be
approved by a governmental body because of the risks involved in their use. For
example, in the United States of America all medical devices must receive FDA
regulatory approval proving the safety and efficacy of the product. Additionally, if
a company is considering manufacturing and distributing within India they are
going to need to have their device regulated under the Drugs and Cosmetics Act,
1940; the Drugs and Cosmetics Rules, 1945; and the Central Drugs Standard
Control Organization (CDSCO) which all fall under the Ministry of Health and
Family Welfare (Dubey, 2012). Once the device has been approved, it can start to
be manufactured. Manufacturing starts from obtaining the raw materials required to
make the product, these materials are then used to build the device in a manufacturing plant. Once
they are manufactured, they are stored for distribution in a warehouse or distributed immediately. This
is dependent on the relationship the company has with the manufacturer and whether they are only
making the product or also charged to distribute and sell it. Medical devices can be distributed to
hospitals, pharmacies, or even individual consumers depending on which type of customer the
company is seeking to target. For the medical devices that are distributed to hospitals or pharmacies,
trained individuals such as surgeons, doctors or pharmacists determine whether the medical device
should be used to treat an individual or not.

KEY COLLABORATORS
There are many collaborators that are available for ShiftLabs, or any new company entering the
global market in emerging countries, and current industry conditions are requiring that new companies
have multiple collaborators in order to be successful. Whether a company partners with an NGO, large
corporation, or incubator is dependent on their ultimate goals and vision.

NGOS

PATH is a catalyst for global health that is focused on driving transformative innovation to save
lives in emerging countries (PATH, 2013). After speaking with representatives from PATH we
Research and
Development
Raw
Materials
Assembly and
Manufacturing
Warehouse Distribution
Clinics and
Hospitals


Page 16
discovered that often times when a company desires to enter into an emerging country they
are told by the government to partner with PATH in order to confirm their legitimacy in this
space. Thus, by collaborating with PATH a company can be supported through the relationships
that PATH has with manufacturers, distributors, and governments. However, in order to
collaborate with PATH a company needs to make sure that they are aligned with the same
mission and goals. It is very important to note that when desiring to collaborate with an NGO
missions need to align and developed devices also need to be products that are aligned with
the mission.

W.H.O.
World Health Organization (WHO) is responsible for providing leadership on global health
matters (WHO, 2013), WHO can also support ShiftLabs by providing a big overview of the
global health issues.

Association of Indian Medical Devices Industries (AI-MED) is an association that aims to
promote global coordination of the Indian medical industry (AI-MED, 2013), AI-MED can help
ShiftLabs in providing insights on the current regulations and trends in the Indian medical
device industry.

LARGE CORPORATIONS
GE/ MEDTRONIC
As for collaborating with big medical devices companies such as GE and Medtronics, ShiftLabs
can do so by supporting their global health initiatives. For example, GEs Healthymagination,
which is a shared commitment to creating better health for other people (Healthymagination,
2013). However, a problem that arises here is that ShiftLabs may be seen as a competitor of GE
and GE may refuse to work with ShiftLabs. Collaboration with hospitals is highly critical
because these hospitals are the main customers, and maintaining a successful collaboration
with these hospitals will require consistent delivery of high quality products. Starting a new
collaboration relationship would require a clear communication of the values and the
accountability of ShiftLabs, if the values of ShiftLabs and potential collaborators align, there is a
higher chance that the other party will agree to collaborate with ShiftLabs.

INCUBATORS

One other collaboration that ShiftLabs, or any other startup company, may want to consider is a
medical device company incubator.


Page 17

Mercury Medical Technologies is a medical device incubator working with emerging
companies and program companies to help meet the needs of the underserved through their
own extensive collaborations with investors, industry experts, entrepreneurs etc. (City of
Bothell, 2013). Additionally, Mercury Medical Technologies also provides: consultation, help
with R&D, regulatory approval, along with the relationships in order to move forward with
manufacturing and distribution.

Veol is a company located with India that specializes in innovation, design, manufacture, and
launching the device into the market (Veol Labs, 2013). They are very much like Mercury
Medical Technologies except they are focused on Europe and Asian countries.

IMPLICATIONS FOR SHIFTLABS
ShiftLabs, is mainly in the research and development stage of the value-chain with a desire to
have some influence on manufacturing, distribution and marketing. For most established companies
only 12% of their revenue is invested in R&D and 35% into purchases (IBIS World Medical Device
Industry, 2013), however, for ShiftLabs this percentage is going to be much greater due to the recent
inception of the company. This is going to make it difficult for them to focus their finances on the other
aspects of the business that are involved in getting their products to market. Therefore, collaborations
are going to be essential for ShiftLabs or any new company that desires to make low cost, high quality
medical devices to be marketed into emerging countries. Developed companies that are already in the
market have the relationships to get their ideas into emerging markets and have their products
manufactured and marketed. Additionally, NGOs such as PATH have the partnerships with
governments in these countries that are going to require that ShiftLabs be in contact with them in
order to distribute products in their country.

COMPETITIVE LANDSCAPE

Page 18
Figure 7 Market Domination
Figure 8 Industry Imports
Competitive Landsca pe
INDUSTRY STRUCTURE & DYNAMICS
The competitive landscape of the medical device industry is going to be dependent on the size
of the company and how they are entering the market. If a company is entering the market through
collaboration with an NGO or a larger company, the competition is going to be very different than if
they were entering the market with their own manufacturers and distributors. Competition is also
going to be dependent on the country that a company desires to distribute within; if the country is
prone to value their own devices over those of other countries, there will be more competition as
manufactures and distributors could refuse to support the device.

Currently, the market competition is more intense among the larger players, making it
necessary for smaller companies to find an open niche market to be successful in the field. St. Jude
Medical Inc., Johnson & Johnson, General Electric Company, and Medtronic Inc.
hold over 66% of market shares in the industry with the rest being made up of
small operators (i.e. firms employing fewer than 20 people) (IBIS World,
2013). Due to the dominance of larger companies in the industry, the
number of companies in this market is declining by about 4.2% per year;
larger companies are acquiring the smaller specialized companies in order to
maintain their place in the industry (IBIS World, 2013).

Additionally, it is necessary to understand that most manufacturing is
being outsourced from the U.S. due to costs and global regulations (IBIS
World, 2013, p.8). Therefore, most of a companys revenue is going to be
spent on R&D, employee wages, purchases, and costs associated with FDA and international approval.
It will be difficult for a new, unknown company to come into the industry and be a leading player in the
sense that they are not going to have the connections, brand name, known quality, and globalization to
be effective on their own. Even if they sell products for a smaller price than offered by competitors,
with increased quality and durability and are specialized in a certain area they are most likely not going
to have sufficient capital to be as effective as a larger company. While branding is not a key determiner
of success within the market, price and expertise are very important. The constant advances in
technology are shortening the life of a product, which may cost a company millions of dollars in
research and patenting. Additional shifts in emerging markets are making it more profitable to be a
global company outside of the U.S, while changes in trade regulations and healthcare reforms are also
affecting the industry and the success of Shift Labs.
PORTERS FIVE FORCES ANALYSIS
Supplier Power
Medical device companies are dependent on manufacturing and distributing their
devices at a low cost while maintaining a high quality. Currently in India, there has been a
reliance on imported medical devices, 70% of all devices. However, In response to the
expense and lack of affordability of imported medical devices, many Indian companies are
creating their own, cheaper alternatives to many medical devices manufactured by global


Page 19
giants. India's medical device market is expected to grow to $6 billion by year end (Wiltz, 2013).

Buyer Power
Buyers in the industry have many options, if they can afford to purchase a device. There are
over 22,000 medical device companies in the U.S, which give buyers many opportunities. The types of
devices available are going to be driven by the healthcare demands of the country. Additionally, since
medical devices can range from Band-Aids to pacemakers and beyond the setting in which a buyer will
purchase will be different.

Intensity of Competitive Rivalry
There are many rivals in the industry which is compounded by the fact that four main
companies dominate the market that have great amounts of capital for R&D, manufacturing and
distribution, and marketing. Additionally, the industry is booming in emerging countries, which means
that new companies are going to have to be very strategic in their plan to enter the market if they
desire to be successful.

Threat of Substitution
Substitution can be a very big threat especially since often times in foreign countries a local
company will violate the IP and create the product on their own. Additionally, since it often costs less
there is the pressure to decrease the cost to make devices and get them to market.

Threat of New Entrants
It takes extensive amounts of capital and innovation to enter the market and be successful. The
costs that are required for regulatory approval are great and compounded by the fact that if a company
is exporting from the U.S. to another country a tax will be imposed. Additionally, there is now a 2.5%
medically device tax on every product within the U.S.

WHO TO WATCH

Founded in 1914, Phillips is a large corporation with laboratories across
the globe and their innovation and R&D has led to the creation of over
130,000 patents (Phillips, 2013). Their focus on meaningful innovations
that improve peoples lives (Phillips, 2013) has influenced a strategic
direction that is focused on creating more efficient, sustainable, lower cost products.

GE is a multinational conglomerate with operations that span the healthcare,
financial services, energy, industrial manufacturing and media industries (IBIS


Page 20
World, 2013, p.30). GE is currently the main competitor for Medtronic Inc., holding 24.0% of market
shares. With a focus on improving the productivity of health care services GE operates in multiple
divisions employing over 42,500 individuals in 32 countries (IBIS World, 2013, p.30). Additional
strengths include: a range of industry services, specialization in many markets within the industry, a
majority of their business conducted outside of the country, and extensive funds spend on R&D which
is showing in the quality of their products (IBIS World, 2013, p.30). GEs strategic direction is based
on international expansion through acquiring specialized companies who are addressing needs in the
world right now; such as Clarient who is working on cancer diagnostics. Due to this international
model, GE is extremely successful with revenues upwards of $8.4 billion, which are expected to
continue increasing.

Medtronic specializes in the development and manufacturing of therapeutic
medical devices for chronic diseases and currently holds 25.7% of market
shares due to their cross-market diversity (IBIS World, 2013, p.29). A focus
on innovative research in multiple fields have allowed them to remain the
most desired, recognized, and leading company in the industry. Moreover,
recent international expansion created an 11% jump in annual revenue last year and is expected to
continue to increase in the years to come. Strengths for Medtronic include their specialization in R&D
and innovation. Their current strategic direction is focused on cutting costs by implementing a
manufacturing strategy and working with closely with suppliers (IBIS World, 2013, p.29).

The mentioned companies are a few of the largest players in the field and will be competitors
because of their dominance, unlimited capital, globalization, and specialization. Many of these
companies have designed products for the emerging markets, therefore, in order to set themselves
apart a small company needs to enter a niche market and address specific needs. Additionally, the way
that a company enters the market will further differentiate the competitors. For example if a company
is entering the country by exporting into the country competitors are going to be local manufacturers
and distributors who may violate the IP and re-create the product themselves. However, if a company
is entering the market by building a factory in the country and employing individuals who live there
their competitor will be local companies such as Baxter India.

SHIFTLABS PLACE IN THE INDUSTRY
Implications
In order to be successful in the current market and thrive as an independent company there
must be a strong foundation and specialization for a specific niche market. For example, multiple
relationships with individuals in distribution and manufacturing are essential. Therefore, ShifLabs is
going to need to develop these relationships in order to be successful. Additionally, larger
manufacturing facilities are going to be more productive and generate a larger profit due to their ability
to mass produce, reducing costs and thereby reduce selling prices. Thus, ShifLabs needs to consider
how they are going to set themselves apart from mass producing corporations; what is going to make


Page 21
them stand out and be able to make a difference. Skilled workers, an established global export market,
and access to the latest advancements in technology can set a company apart so ShiftLabs will need to
leverage whatever specialties they have at their disposal. If successful, a smaller company will see
about 3.0% profit, while larger companies will see profit margins upwards of 20%, however, these
margins are predicted to decline due to the implemented medical device tax for larger companies (IBIS
World, 2013). ShifLabs is an extremely small company currently and most of their capital is being put
into R&D. Small profit margins and heavy regulation are some important factors to consider when
thinking about competitors especially for Shift Labs since it is going against the current model of
production. Lastly, due to constant innovation and advancing technology, the life cycle for products is
cut short to about 5 years (IBIS World, 2013, p.14), further reducing profit. Therefore, Shiftlabs is going
to have to be extremely innovative and collaborate to be successful.

ShiftLabs Ability to Compete
ShiftLabs currently is an extremely small company focused on R&D and creating a product.
They do not have the relationships with companies in the industry or the capital necessary to compete.
However, skilled employees who are passionate about their work and a focus on developing devices
that are essential to the industry have placed them advantageous position when moving forward.

COMPANY PERFORMANCE & ABILITIES

Page 22
Company Per for mance &Abilities
MISSION & VISION

The current mission at ShiftLabs is to create beautifully designed, human centric, low cost
medical devices that serve people in emerging markets. While a long-term desire is to have innovations
fill facilities in developing nations that are currently bare and ill equipped to save lives due to lack of
resources. The majority of medical device companies are focused on making complex, expensive
machines for highly trained healthcare professionals in developed countries.

BUSINESS MODEL & STRATEGY
Currently, there is a strategy to create devices that are simple to use, reliable even in extreme
conditions, affordable and yet of high quality. One key part of ShiftLabs strategy involves focusing on
exactly what healthcare providers in developing nations need based on what providers have expressed.
During this process it is important to discuss with providers their budget; even if they express that
something is a hindrance it does not necessarily mean that they have the funds to purchase a
replacement device or device to solve the problem. Also, collaborators and investors are more
interested in devices that tangibly save lives rather than time. While the profit margin in the BRIC
nations is smaller due to the lack of funds, it is a large, relatively untapped market. By creating devices
that untrained individuals can use effectively to treat citizens who cannot afford the expensive private
hospitals, ShiftLabs can differentiate themselves and ideally become profitable.

KEY STRENGTHS & RELATIVE WEAKNESSES
ShiftLabs is currently focused on helping those with innovative ideas bring their creation to
market through commercialization. Their strength are in R&D however, they have been unable to find a
way to take their product to market. Thus, ShiftLabs needs to develop both local and global
partnerships to discover the best way to manufacture and distribute their products. ShiftLabs has
created a medical device, The Drip Clip, which is able to improve the current method of distributing
fluids to patients in developing countries who lack the expensive machines currently used in the
developed world. Since ShiftLabs has only been in existence for a year and a half and employs a team
of only 2 people, controlling the supply chain is too large of a task currently. At this point, they are
uncertain who collaborators in the supply chain will be, where they will be located, and what each
relationship will entail. Your project commercializing a product for PATH could be beneficial to you
since they have many developed connections and relationships that you do not currently possess. Also,
becoming involved with Washington Medical Alliance will allow you to network with people in the
industry and very well could lead to the answers you need.

COMPANY PERFORMANCE & ABILITIES

Page 23

CURRENT & EXPECTED PERFORMANCE
ShiftLabs has been in existence for one year with a current team of five people. They have
successfully developed one product, The Drip Clip, and are seeking to take the product to market. They
have also initiated a relationship with PATH to design a low cost, high quality, ultra sound machine.
Additionally, they have brought together a hacker board and a group of experts who are passionate
about creating products for LMICs. They are currently still in the R&D stage but their ultimate goal is to
facilitate bringing these products to market.

STRATEGIC RESPONSE

Page 24
Strategic Response
SHIFTLABS STRATEGIC RESPONSE
ShiftLabs initial success in finding investors but the lack of a clear business plan deterred them
from taking the investments. The current project does not strategically align with the passions of
collaborators. This could be partially because the Drip Clip creates convenience and saves time but it is
challenging to determine how many lives it will save. ShiftLabs recently hired an expert to help with
fund raising, which will be beneficial.

RECOMMENDED STRATEGIC DIRECTION
Finding enough money to fund the complex process of bringing a medical device from R&D to
market is one of the biggest challenges. Therefore, strategic grant writing is imperative. However,
designing with what collaborators and investors are passionate about is even more vital. Additionally,
devices should answer the medical needs of the targeted customer and nation; thus, resulting in
alignment with dozens of potential collaborators. For example, Philips is working on an ultrasound
machine for rural African communities. This can be quantified easily in terms of preventable deaths
avoided and also strategically aligns with those passionate about womens health and childrens health
such as PATH and the Gates Foundation. It is wise to take into consideration your ideal collaborators
missions and goals when developing new devices.

For companies looking to develop medical devices for the emerging market, they must
understand who has the biggest stake in the health reforms and challenges in the country. In this way,
it will be important to innovate around the specific needs of the country and on who your customer is
(who is going to fund this device). Based on the customer, ShiftLabs should design devices that meet
the challenges that top of mind for these parties. A business in this position must be able to market the
product in the context of these needs and allow the customer to see the immediate impacts this device
could have on their issues. Finally, before marketing this product the entity must comprehend the ways
this device will fit into the structure of the culture and health care facility. This will include questions
such as, who is administering the test, how many patients do they see in a day, what materials are
available to fix the device if it breaks, how are these medical services funded, is the provider a trained
professional, and will the purchase of this device affect the price for the customer?

In order to follow through with the processes of getting these products into the country, a
small business would be dependent on collaborations. Given that access into this market usually
requires the approval of the government, collaborations with other parties who can vouch for
effectiveness in the field will give ShiftLabs a better chance. An example of an entity that could fulfill
this role in India is PATH. They frequently partner with others who are looking to meet the same health
care needs that they are passionate about in these communities and allow them access to their
resources, as well as, relationships with government entities in order for rural populations to have
access to the products they need. In addition, they are experts in the cultures and needs of the
communities and could guide companies through creating specific innovations for these needs.
Washington Global Health Alliance, The Gates Foundation, Mercury Medtech, or collaborators within

STRATEGIC RESPONSE

Page 25
India could also fulfill this role. A company must prepare for the time it will take to see these processes
through in governments that often will put up many barriers to entry.

Through the collaboration process ShiftLabs would be able to locate a trusted manufacturer
and distributor in India. It would be best to allow the manufacturer or distributor or both to have skin
in the game so they are motivated to get the product to market. Eventually, once ShiftLabs develops
relationships and understands in depth how the medical device supply chain functions in India they
could build their own manufacturing plant and hire a small amount of people of their own. They could
also hire a small sales force within India and using the current system distribute their products
themselves. This would allow for them to have complete control over the supply chain. If this continues
to work effectively they could employ their established business model to enter new markets in other
nations.

A second strategic direction would be to license innovations to larger companies. This would
allow ShiftLabs to focus entirely on research and development and not be distracted by the difficulties
that come with manufacturing, distribution, and introducing the product to market. ShiftLabs would be
paid upfront by the larger company for their innovation and this would further fund R&D. This method
would make a faster impact and allow ShiftLabs to take advantage of all of the resources that a large
company has to offer. For example, ShiftLabs would be able to use the brand recognition of a large
company like GE to get their product to people who need the device. However, this will not allow
ShiftLabs to develop their own brand recognition seeing as how a different name will be on the
product. This option is less capital intensive because ShiftLabs is only responsible for one aspect of the
supply chain. Ideally, the payment for their innovations will fund their R&D costs. This direction will not
allow ShiftLabs to integrate vertically because they will not be learning how to do manufacturing and
distribution. It is possible that they will make less of a profit because the large company will make the
majority of the money if the product does well.

Whether ShiftLabs chooses to license or collaborate or a version of both they offer new
innovations that are well made at a low cost. If they can develop products based on market research
that meet the needs of the Indian people NGOs, foundations and larger companies will want to
collaborate with them.

EXPECTED CHALLENGES & RISKS
While collaboration is necessary to be successful as a startup device company in a competitive
industry, one challenge is that it will result in some lack of control. The company will have to be willing
to trust its collaborators judgment and share the control and decision-making process with them. A
benefit to collaboration is that licensing and/or creating joint ventures allows others to have some
profit from the in addition to helping collaborators feel motivated about the idea. However, through
the collaboration process a company might have to change or sacrifice the initial vision or the ability to
have their name on the product.

STRATEGIC RESPONSE

Page 26
Finding funding is always a challenge for small companies. One challenge is that
without a tangible product or technology people will hesitate to invest. Once a company has
established a clear product the ability to market their product to both investors and customers in a way
that reveals it is necessary for survival is important. It will be challenging to create a product that
people in developing nations will want to buy over all others. The company will need data to prove that
their product can save the most lives because their target market can quite possibly only afford to buy
one device. For example, product statistics that show how many people die preventable deaths in India
due to receiving too much or not enough IV fluids to reveal how the drip clip could make an immediate
impact. Another challenge is making sure it can hold up under harsh conditions and last for a very long
period of time without needing replacement parts, which they cannot access.
A company will need to do market research on each nation separately before
attempting to penetrate the market. This will be nearly impossible without the right collaborators and
even then it could be expensive, complex and time consuming. Another challenge of working in the
BRIC nations is that a company will have very little control without having someone from your team on
the ground in those nations. Thus, they will have travel expenses or be forced to invest in full time
employees to manage the business in each nation, otherwise they will need to rely fully on the chosen
distributor and allow them the freedom to do their work as they chose.

CONCLUSIONS
India is an emerging market forecasted to grow at a compounded annual growth rate of 15%
and expected to reach $14 billion by 2020. Additionally, with more than 1.3 billion people in the
middle class the country is primed and ready for the entrance of high quality, low cost medical devices
to reach the needs of the people. Therefore, we are suggesting that ShiftLabs initially develop devices
that meet the pertinent needs of the market, such as diarrhea and pneumonia. Additionally, we are
suggesting that ShiftLabs collaborate so that they can eventually control the supply the chain and/or
license out a product to a larger company so that they are not responsible for manufacturing and
distributing, can focus on R&D, and can make a quicker impact.
We are confident that the outlined recommendations will be beneficial to ShiftLabs, or any
new medical device company, that desires to enter into the emerging market and make a difference in
the lives of many people.

REFERENCES

Page 27
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APPENDIX

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Appendi x
CONTACTS

Dr. Balakrishnan, Managing Director

Tim Shottman, Chief Global Officer

Keith Neroutsos, Director of Procurement

Terry Sweeney, Vice President of Global Clinical Affairs

Michael Langhout, Exceutive Director

Howard Weinstein, Founder/CEO

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