MEDICAL focuses on two main segments of the healthcare market, where it has established market leadership:
- Diagnostic tests, compounds and instruments, used to diagnose widespread diseases such as Hepatitis B and AIDS, to protect and test blood held in blood banks, and to test patients?and donors? blood in emergency transfusions. Many of these tests can be used by doctors in the field, away from a lab.
- Lab tests, technology and equipment used for testing for infectious diseases, cancer, hormone dysfunction, infertility and other conditions.
The offerings are produced to the highest medical standards, and many of them enjoy patent protection. Margins are relatively high due to strong demand, but the company must spend a substantial proportion of its revenues on research and development to maintain its market leadership.
Although MEDICAL is the market leader in these segments, there are many competitors with a similar market share. The company has to fight hard to hire the best staff, set industry standards and best-practice benchmarks, and to achieve a high growth rate in profits.
The essential business problems in these market segments are:
- Sales are not straightforward; they involve dealing with a large number of medical staff and administrators, all with different concerns. These ?complex sales? take a sales team many months to close.
- Government regulation is a major issue, and every country has a different, and constantly changing, set of regulations.
- In many countries, false results from a test can lead to very bad publicity; for example, if a test fails to identify a batch of infected blood from donors, it is very likely that the media will portray the problem in an alarmist way.
- Clinical lab customers work under high pressure and are very demanding.
- Competitors seek to undermine each others? products and services.
- It is difficult for customers to differentiate between competing offerings.
- Clinical lab customers have high standards but are price-sensitive.
- Clinical lab customers are often inefficient, and are sometimes unaware of the need to improve their operations
Typically, sales teams attempt to close sales by offering a wide variety of concessions, extra services and discounts which hurt profitability and efficiency.
The Lean Six Sigma solution
MEDICAL wanted to address the problem of ?giveaways?; the aim was to find ways to develop these into offerings that customers would value and willingly pay for.
MEDICAL formed a development team headed by a senior manager and gave it funding for two years; the target was to achieve profitability in Year 3.
The development team analyzed its customers to identify their needs, and in particular to better understand the medium and long term goals of the clinical labs.