Case Study: Medical Ultrasound Technology

The age of a market can be a tremendously important indicator for a company on how it should structure its
new product development programs and marketing investments.
The Problem
One client in the medical ultrasound business had two products in the development phase in 1979: a real
time scanner and a !scanner. The !scanner pro"ect had started several years before# and at pro"ect
commencement the second generation of its !scan product was e$periencing sales growth of %& percent
per year.
The technology for a !scan image appeared to be in danger of being superseded by realtime images. !
scan images could be taken every 1& seconds# versus eight per second or more with the new realtime
machines.
The !scanning machines still offered some advantages in positioning# and the firm felt the image 'uality
would be better with !scanners# so the pro"ect continued. (n 19)&# the pro"ect came up for review. *
careful analysis showed that the market for !scan ultrasound e'uipment was indeed maturing. The unit and
dollar sales for !scanning instruments had stabili+ed in 197919)1. The market# despite a slight recession
at the time# was mature and had reached saturation. The realtime units were in a very rapid growth stage#
e$panding at over ,&& percent per year. -owever# the realtime market was still a great deal smaller than
the !scan market# which was close to .1&& million per year.
The big 'uestion was when the market would leave the maturity stage and move into the decline stage. This
calculation would have to be based on market engineering# and we decided to undertake two separate
investigations:
(nterview competitors on their /01 plans for !scanning e'uipment and their opinion of future
technical trends
(nterview 1#&&& medical practitioners to get a feel for their purchasing plans
2e 'uickly found we were in serious trouble. 1uring the competitive interviews we found that 13
manufacturers had abandoned future /01 in the product area. This was e$tremely illuminating# as they
were no longer supporting the product type in the trade press or at trade shows.
Our beliefs were confirmed as we conducted customer interviews. Of the 475 responses received# fewer than
) percent were interested in future purchases of !scan e'uipment. Over 7& percent of survey respondents
e$pressed strong interest in realtime imaging devices# and in the future would consider purchasing only
these instruments.
(t was now obvious that this product would be stillborn. The client could never sell enough units to recoup
initial /01 and product marketing investments. 6nfortunately# our presentation to the company failed
miserably. The firm7s management was composed largely of engineers who e$pressed disbelief in the
results# indicating that market engineering was 8for toothpaste and did not apply to hightechnology
markets.8
The /esults
2e were slightly off kilter in our forecasting. The market did not decline over the ne$t three years as we
predicted it was totally dead within 1) months. 9i$ manufacturers went out of business# another cut prices
by 75 percent. The remainder of the manufacturers had shifted to realtime instruments to cater to swings
in market demand.
6nfortunately# our client not only lost the .5 million the firm allocated to /01# but also an additional .,
million in marketing e$penses. 2e had also miscalculated on the sales forecast for the product:
:arket engineering pro"ected: 5& units per year
The client pro"ected: 3&& units per year
The market purchased: 5 units per year
The actual market history for this ultrasound market is presented in Chart 2. (t clearly illustrates the
product life cycle of !9can images.
2e should point out that the goal of these case studies is not to show how clever we are and how naive
clients can be. 2e are trying to illustrate that the market is constantly giving off valuable signals that need
to be 'uantified and acted uponnot ignored. :ost certainly# these signals are not always 1&& percent
accurate. -owever# they can greatly increase the probability of your making the right decisions. *s you
know# you need to be correct only 51 percent of the time to come out ahead in the long run. *lso# even
though many of the measurements turn out to be inaccurate# it is not the relative precision of the forecast
that counts# but rather that the trends of the market are properly identified.