Lead User Lead Market Concept

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Lead User - Lead Market Concept
Case Study on Sulzer/Medical Technology Case
Study on La Roche/LCD Development

• Seminar on Strategic Management
• of Technology and Innovation
• TIM 99

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Lead User Concept
Lead users had been defined by Von Hippel as
follows

• Lead users face needs that will become general
  in a market place - but faces them months or
  years before the bulk of that market place
  encounters them
• Lead users are positioned to benefit
  significantly by obtaining a solution to those
  needs

Nagel, Rolf Lead User innovationen, Weisbaden
DUV, Dt. Univ.-Verl., 1993
3
Lead Market Concept
According to Albach, Lead Market concept is
related to lead Consumer concept.

• Lead Consumers are individual persons or groups
  who can be defined as end users of a product or
  system. These end users or lead consumers of a
  product or system constitute a Lead Market.

Nagel, Rolf Lead User innovationen, Weisbaden
DUV, Dt. Univ.-Verl., 1993
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Content

• Introduction
• Case Study on Sulzer/Medical Technology
• How a healthy hip works and what a THR does
• The history of hip prosthesis development
• Sulzers incursion in the Med. Tech.
• Phase 1 in Sulzer (knowledge generation)
• Phase 2 in Sulzer (new products and
  diversification)
• A world leading company in medical technology

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Introduction

• Multinational companies are trying to reach two
  goals at the same time productivity and
  diversification.

• There are autonomous and inductive processes of
  diversification

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Case Study on Sulzer

• Hip Implant Systems and the Success Story of
  Sulzer AG in Medical Technology

7
History of the Hip Prosthesis Surgery
1890 Gluck designed the first hip
joint prosthesis
1938 Wiles implanted first metal
endo-prosthesis to replace hip joint
1958 Charnley developed first bone-cement for
anchoring of implants
Switzerland became the worldwide No.1 Lead
Market in medical implants
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The Evolution of Hip Prosthesis Development
1938 Wiles prosthesis (UK)
1956 G.Mckee - Norwich (UK)
1959 K.M. Sivash - Moscow
1964 P. Ring - Redhill (UK)
1965 G.McKee-J.Farrar (UK)
1965 A.H.Huggler-Chur (CH)
1972 B.Weber-St.Gallen (CH)
1988 B.Weber-St.Gallen (CH)
1998 Sulzer Metasul couples
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How is the Hip joint constructed?

• A metal cup is connected to the pelvic bone
• A metal ball (spherical articulation) for
  rotation
• The long stern is fitted snugly into the thigh
  bone (femur)

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How Sulzer enters in the Med. Tech Field
Early external pushes and impulses to develop
prosthesis Key persons A.Huggler (CH), M.Müller
(CH), J.Charnley (UK ) and H.Straehl (Sulzer)
Sulzer decides to develop prosthesis
1963 Sulzer produced first 100 prosthesis
1965 Sulzer received order for 12.000 prosthesis
Transference of Technology to Switzerland
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Phase 1 SULZER Company
Increasing market of prosthesis Developing of
medical technology
Innovation in hip, knees, and elbow
prostheses New material used Ceramic (to
reduce friction)
External pressure and impulses Information
of Lead Markets
Creation of SBU with own RD Sulzer Medica Tech
Narrow interaction with material
suppliers Extremely strict control of manufacture
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Some obstacles...

• However Sulzer Medical Techniques was created as
  a SBU, it was dependent of the textile machinery
  department.
• Due a lack of resources for RD, the implant
  technology was affected in quality.

• The top management was not in favour of the
  project and the SBU was put in question.

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Reorganisation of Sulzer (Phase 2)

• In 1981 the company was reorganised and a new top
  management took the control of the business.
• the Sulzer Medical Techniques was one of the two
  BU with highest growth potential and smallest
  financial resources.
• To create new strategies and to provide more
  resources for the Medical Techniques department,
  became the most important mission of the Sulzers
  concern.
• The new strategy included
• Globalisation strong position on important
  markets (USA)
• To develop products to substitute human body
  parts
• Premium price and quality strategy
• Strategy of planned growth by world-wide
  acquisition

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a worlds leading company in medical technology...

• Two main divisions Orthopedics and
  Cardiovascular Prostheses
• Supplies high technology products in more than
  100 countries.
• Research and production facilities in Europe and
  North America.
• Operating income Mio 156
• RD expenses Mio 65

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Sources of Information...

• Alexander Gerybadze/Frieder Meyer-Krahmer/Guido
  Reger, Gobales Management von Forschung und
  Innovation, Schaffer Poeschel, 1997 (chapter 3)
• http//www.sulzer.ch
• http//www.sulzermedica.com
• http//www.sulzerorthopedics.com
• http//www.metasul.com

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Development of future business in the area
optoelectronics / display
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• The early origins the Liquid Crystal Display
  (LCD) development

• 1888 - Discovery of liquidcrystalline statuses of
  materials
• in Germany.

Liquid crystal is a material, whose state of
aggregation is neither liquid nor solid, but
somewhere between them.Liquid crystals are
produced, by mixing different materials,in order
to obtein. characteristics such as viscosity,
elasticity, reflection ability etc..

• 1963 - Williams of RCA discovered the dynamics
• Scattering - effect.

• 1968 - Heilmeier Helfrich developed a first
  indicator at RCA named DSM-LCD without a real
  success.

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Phase 1

• 1969 - LaRoche decided diversification to be able
  to research
• in new potentials areas.

• 1970 - H. Helfrich took over the direction of the
  Liquid Crystal - group in LaRoche.

• 1973 - the first industry LCD - clock of the
  world presented were the BBC together with
  Ebauche and Faselec.

• 1974 - BBC established the first factory of the
  world in Lenzburg,

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Phase 2 took not place
Phase 1 Phase 2 Today Conclusion

• In spite of the leading market-position by ROCHE
  and BBS they were not able to transform phase 1
  into a real business.
• The first reason was the incapacity by ROCHE to
  comprehend the dynamic of the electronic market.
• The second reason was the quarrel of
  patent-rights with FERGUSSON and the loss of it
  (USA, Germany).

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Phase 2 took not place
Phase 1 Phase 2 Today Conclusion

• The third reason was mentality of the swiss
  merchants Show me 100 mio turnover and you
  can get 1.000 for FE.
• So were the RD for LCD only represented by two
  scientists, beside the normal FE by ROCHE.

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Phase 2 took not place

• On the other side the Japanese competitors went
  very aggressive into the new LCD-market.
• From 1972 up firms like SEIKO or HITACHI visited
  European and American firms to buy the new
  technology.
• After a short time HITACHI was able to produce a
  lot of LCD-displays.
• So Japan became the first market for LCD and
  ROCHE/BBC were not presented.

Phase 1 Phase 2 Today Conclusion
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Phase 2 took not place

• Results

Phase 1 Phase 2 Today Conclusion

• ROCHE/BBC leaded the LCD-market in phase 1.
• They were not able to transform this leading
  position into a real business and lost their
  position against Japanese competitors.
• They leave the growing market up from 1990
  because of bad management and the loss of
  RD-advantages.

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ROLIC Research Ltd.
Phase 1 Phase 2 Today Conclusion

• Founded as a spin-off company of Roche 1995
• Interdisciplinary research company
• CEO Dr. Martin Schadt co-inventor of the Twisted
  Nematic Liquid Crystal Display (TN-LCD)
• Rolic has a team of internationally recognised
  scientists
• Until December 1996, Rolic was a subsidiary of F.
  Hoffmann-La Roche then it was sold to a Swiss
  entrepreneur

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Phase 1 Phase 2 Today Conclusion

• a new licensing joint venture company formed by
  the Rolic Group and BTG / march 1998
• RTL provides a portfolio of around 800 patents
  and patent applications developed by Rolic's
  research team
• BTG has great experience in the protection,
  development and marketing of intellectual
  property rights (IPR) / BTG holds 25

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Evaluation and conclusions
LCD case

• Leading position in phase 1 (Innovation-breakthrou
  gh in the own company and a primary market)
• No phase 2 development (building up international
  strategies, structures and investments)
• internal decision structures
• communication and negotiation weaknesses with
  national partners
• more effective and target strategies of Japanese
  competitors
• working without LEAD USERS and LEAD MARKET

Phase 1 Phase 2 Today Conclusion
Reasons
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Evaluation and conclusions
LCD case
Phase 1 Phase 2 Today Conclusion
How to make it better?

• Bundle the power to build up own capacities in
  research, production and distribution on LEAD
  MARKET Japan
• Strategy change of Roche or at least an earlier
  spin-off of LCD technologies

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Evaluation and conclusions
Sulzer case
Phase 1 Phase 2 Today Conclusion

• You need long term breath (in this case over 30
  years)
• phase 1 - collect know how and take Impulses
  world wide but bundle the activities and
  competence in one area
• phase 2
• new strategic orientation
• provision of recourses and finance
• globalisation of activities