As Jack Ferguson walked from the parking lot toward the offi ces of OR Solutions, he wondered what 2008 would bring for the medical device company, located in an upscale suburb of Tulsa, Oklahoma.

CASE

OR Solutions Reaches

a Crossroad

As Jack Ferguson walked from the parking lot toward the offi ces of OR Solutions, he wondered what 2008 would bring for the medical device company, located in an upscale suburb of Tulsa, Oklahoma. Jack stopped by his offi ce, briefl y checked his email, grabbed his briefcase, and walked down the hall toward the OR Solutions boardroom. Jack looked around the boardroom and sighed heavily; it was quiet and serene now but he knew the serenity would not last long.

In an hour he and his business partner, Tom Marshall, would meet with consultants Michelle Brown and Greg Anderson from Market Research, a regional marketing consulting fi rm, to dis- cuss the future direction and organization of OR Solutions, one of their largest projects. A few years earlier, prospects for OR Solutions seemed so bright; however, now its future success was in jeopardy.

Jack Ferguson, a serial entrepreneur, had worked in software development for nearly 20 years, starting and running several prof- itable companies. His vision and attention to sound business prac- tices had made him a master at helping to turn around companies in diffi culty. Although he lacked direct experience in healthcare,

4

This case was written by E. Lanette Milligan, Gouri Gupte, Maziar Abdolrasulnia, and Peter M. Ginter, University of Alabama at Birmingham. It is intended as a basis for classroom discussion rather than to illustrate either effective on ineffec- tive handling of an administrative situation. *At the request of the organization, names, locations, and financial data have been disguised. Used with permission from the company.

both04.indd 499both04.indd 499 11/11/08 11:14:40 AM11/11/08 11:14:40 AM

C A S E 4 : O R S O L U T I O N S R E A C H E S A C R O S S R O A D 5 0 0

his entrepreneurial instinct told him that technological innovations were part of the solution. OR Solutions ’ technological innovation, the OR Surgical System, could make a great contribution toward improving effi ciency and quality in healthcare.

Tom Marshall was an experienced engineer of medical devices. He had designed an infusion therapy monitoring system for the OSU Medical Center in Tulsa, Oklahoma; the largest hospital in the area with 331 licensed beds and over 6,000 inpatient surgeries, 5,000 outpatient surgeries, and 12,000 patient admissions. When OSU Medical Center surgeons and operating room nurses detailed the ineffi cien- cies and safety issues of the current minimally invasive surgery (MIS) operating procedures, the University Research Foundation contacted Tom for ideas. His idea was the OR Surgical System, currently the only product of OR Solutions.

History of OR Solutions

In 2000, Tom began working with the University Research Foundation to develop a single surgical control system that would (1) integrate and provide a single point of control for all electrosurgical devices used in minimally invasive surgery (MIS) procedures – regardless of manufacturer, and (2) activate a closed – loop smoke evacuator to automatically clear the surgical fi eld when using the operating devices that often generated smoke, making it diffi cult for the surgeon to see.

Minimally Invasive Surgery Marketplace

Minimally invasive surgeries (MIS), or “ bloodless surgeries ” as they were some- times known, accounted for about 30 percent of all surgeries in the United States. MIS procedures were performed across a variety of surgical specialty areas and were considered to have less associated complications than open surgeries. A surgeon performing MIS used a number of electrosurgical devices that performed different functions such as cutting, coagulating, and sealing. For each surgical function, separate instruments (often manufactured by different device compa- nies) each had its own foot pedal to operate the function. The foot pedals were generally out of the sight of surgeons and pedal operation could be somewhat confusing, partly because each device manufacturer used its own standards. In fact, the nurse would often have to crawl under the surgical table to press the foot pedal to let the surgeon know which instrument was attached to which pedal. Application of a wrong pedal during surgery could have serious consequences (for example, cutting instead of coagulating). Other problems included injuries related to heat, insulation failure, and reduced visibility as well as possible health consequences related to smoke generation during surgery.

According to the Director of the Oklahoma Institute of Minimally Invasive Surgery, “ A typical MIS procedure requires electrosurgical devices such as har- monic scalpels, lasers, and others functions with no designed method for coor- dinating the use of the instruments and the only way to know which pedal is pushed is by the sound it makes, which is often too late. ”

both04.indd 500both04.indd 500 11/11/08 11:14:41 AM11/11/08 11:14:41 AM

5 0 1

Tom worked on an idea to coordinate the group of surgical devices required in MIS into one central operating unit and built the OR Surgical System, illustrated in Exhibit 4/1 . Tom realized the potential of the OR Surgical System and believed that thousands of these devices could be installed in hospital operating rooms all over the world. In fact, after seeing a demonstration of the OR Surgical System, Ralph V. Clayman, Professor and Chair of the Department of Urology at the University of California, said, “ Congratulations, you have built a better mouse- trap . . . it is no surprise that the world is beating a path to your doorstep. ”

H I S T O RY O F O R S O L U T I O N S

Display Interface

Exhibit 4/1: The OR Surgical System

both04.indd 501both04.indd 501 11/11/08 11:14:41 AM11/11/08 11:14:41 AM

C A S E 4 : O R S O L U T I O N S R E A C H E S A C R O S S R O A D 5 0 2

“ Problem is, ” Jack mused, “ no one is beating a path to our door. ” Jack opened his briefcase and took out several fi les. As he seated himself at the boardroom table, he began to review the fi les. Jack recalled the summer of 2004, when he fi rst met Tom Marshall. Tom ’ s exuberance concerning his new product was infectious. Jack smiled as he remembered the enthusiasm with which Tom explained the details of the OR Surgical System. Tom was in the fi nal development and testing stages. He had already invested $ 2.5 million of his own funds and a working prototype had been completed. Jack recognized that Tom had a great new prod- uct and the passion and expertise to make it work. Even in their initial meeting, Jack understood the potential of the product and its possible impact on reducing surgical errors and improving the effi ciency of surgical procedures. In addition, he thought it could be tremendously profi table and could lay the foundation for a multiproduct medical equipment company. However, the business model and strategic plan for this product was undefi ned.

After successful animal testing, Jack helped Tom to raise an additional $ 2 million of “ angel investment ” and in return negotiated 15 percent ownership of the company. They worked to develop the business model and create a stra- tegic plan. Together they founded OR Solutions, LLC and sought Federal Drug Administration (FDA) approval for the product. The OR Surgical System received FDA clearance as a Class II medical device in fall 2005. Production began, and in January 2006 the fi rst human surgery using the device was demonstrated with great success at Oregon University.

The Business Plan

Jack opened the fi le containing his original business plan and turned to the market analysis section. Once again he looked at the description of the healthcare market. According to American Hospital Association (AHA) in 2003, nearly 3,860 of the 5,944 hospitals in the US had one or more operating rooms. More than 29,750 operating rooms were used to perform 27 million procedures of which an estimated 30 percent were MIS (AHA Annual Survey Database, FY 2003). “ Wow, that ’ s lots of market potential. The increased effi ciency and safety that the OR Surgical System provides should be obvious to hospital administrators as well as surgeons, ” Jack remembered thinking. He had speculated, “ All that OR Solutions needs to do is demonstrate the product to a few infl uential surgeons and the OR Surgical System would sell itself – this devise solves a lot of operating room problems. ” (See Exhibit 4/2 for a list of potential users of the OR Surgical System.)

Jack noted that his initial optimism was evident in his sales projections as he re-examined the original plan. The sales projections for FY 2007 – 08 were 83 per month for a total goal of 1,000 units and upwards of $ 35 million in revenues (see Exhibit 4/3 ). Yet, sales were sluggish.

As he was getting discouraged, Jack turned the page to his cost and pricing projections (Exhibit 4/4 ). He spoke aloud, “ These fi gures still looked pretty close to actual – the margin was there even if the sales volume wasn ’ t. The price was $ 30,000 for one operating room outfi t; it wasn ’ t like this was outrageous. ”

both04.indd 502both04.indd 502 11/11/08 11:14:42 AM11/11/08 11:14:42 AM

5 0 3

Exhibit 4/2: Target Customers

Target Customers

Hospitals Providing the Following Procedures Infl uences and Recommenders

Obstetrics and gynecology Urology Colon and rectal Cardiovascular Otolaryngology and head and neck Ophthalmology General studies Orthopedics Neurosurgery

• • • • • • • • •

Physicians Head Operating Room Nurses Hospital Administrators Hospital Physical Plant Personnel Industry Consultants

• • • •

Source: Company data.

Exhibit 4/3: Sales Projections for the OR Surgical System Device, Original Business Plan FY 2004 – 05

Total Operating Rooms (US)

Projected Sales (# of units)

Annual % Growth in Sales

Sales Per Month (# of units) Revenue Net Income

FY 2005 29,735 10 — 4 $ 337,917 ( $ 130,125) FY 2006 29,735 250 400% 21 $ 8,827,083 $ 2,827,954 FY 2007 29,735 500 100% 42 $ 17,600,000 $ 3,520,000 FY 2008 29,735 1000 100% 83 $ 35,200,000 $ 7,040,000 FY 2009 29,735 1700 70% 142 $ 59,840,000 $ 11,968,000

Source: Company data.

Exhibit 4/4: Production Costs and Price Projections, Original Business Plan FY 2004 – 05

Component Cost to Produce Sales Price

Main Control Unit $ 1,400 Master Control Unit $ 500 Remote Control Unit $ 100 Industrial Grade PC $ 3,000 Surgical System Cart $ 1,000

Total Sales Price $ 29,500

Additional Components Interface Assembly $ 225 $ 750 Smoke Evacuator $ 1,200 $ 2,500 Disposable Tubing Package $ 25 $ 50

Source: Company data.

T H E B U S I N E S S P L A N

both04.indd 503both04.indd 503 11/11/08 11:14:42 AM11/11/08 11:14:42 AM

C A S E 4 : O R S O L U T I O N S R E A C H E S A C R O S S R O A D 5 0 4

OR Solutions FY 2005 – 06 to FY 2007 – 08

OR Solutions ’ potential appeared promising at its launch in fall 2005, although only 35 units were sold in FY 2005 – 06. On the other hand, OR Solutions had managed to get these devices into a few prestigious operating rooms and into the hands of some prominent surgeons. According to Jack, “ We placed the unit in some great locations but the OR Surgical System was still not ‘ selling itself. ’ In addition, we won the Innovation of the Year Award from the Society of Endo- scopic Surgeons (SES). ”

Jack had worked tirelessly to set up and organize the business and develop a viable strategy to launch OR Solutions that was agreeable to both partners. Jack thought that the plan was sound but implementation had not produced the results he had hoped. At the beginning of FY 2007 – 08, OR Solutions was at a standstill with no real marketing or production activity. Something dramatic was needed or OR Surgical System ’ s fi rst mover advantage would be lost (as well as everyone ’ s investment).

Jack recalled, “ My original intention had been to seek out a strategic distribution partner to handle some of the marketing and distribution logistics. However, Tom wanted to market and distribute the product to have more control over operations and revenue and enjoy substantially more benefi ts. We decided to try to build an internal salesforce that would aggressively move OR Surgical Systems into surgical suites. We hired Henry Spencer as Director of Sales and Marketing. ”

Henry came with extensive experience, having previously worked with teaching and specialty hospitals as well as military institutions. He targeted and managed the introduction and demonstration of the OR Surgical System to top surgeons. Over the course of the fi rst fi scal year, he had some success and was able to place several machines in operating rooms of major hospitals (see Exhibit 4/5 for placements). In addition, during this period, Henry exhibited the device at several trade shows, including Society of Endoscopic Surgeons (SES) and the Society of American Gastrointestinal Endoscopic Surgeons (SAGES). At these trade shows a number of surgeons expressed interest in the OR Surgical System. Henry would then prioritize the leads based on the size of the hospital, its degree of interest, and a ranking of the surgeons to determine priorities for follow – up and an in – person demonstration of the OR Surgical System. He would try to visit the facility the

Exhibit 4/5: Locations of OR Surgical Systems, FY 2005 and FY 20 06

Sample Locations Number of Units

Total Beds Total Discharges

OSU Medical Center, Tulsa, Oklahoma 9 331 12,042 Oregon University, Metro, Oregon 2 657 29,305 South Tampa Hospital, Tampa, Florida 2 422 21,015 Providence Medical Center, Tulsa, Oklahoma 2 214 7,849 Trinity Medical Center, Dallas, Texas 4 356 17,677 Providence Hospital, Oklahoma City, Oklahoma 1 349 15,812

both04.indd 504both04.indd 504 11/11/08 11:14:43 AM11/11/08 11:14:43 AM

5 0 5

day before a surgery appropriate for an OR Surgical System demonstration. Henry soon realized that the demonstrations were helpful for the surgeons but that he would also need to get in front of the hospital administrator to make a sale.

If Henry made a sale, production was initiated by Doug Fischer, Manager of Engineering and Production. Doug was primarily responsible for overseeing the production of the OR Surgical System. Apart from supervision of the day – to – day engineering tasks and documentation, he oversaw the adherence to good manu- facturing practice (GMP) and FDA protocol. Contract technicians helped with the assembling of OR Surgical Systems at the OR Solutions offi ces. Most of the components were purchased through outside vendors and were shipped to OR Solutions for assembly. After the units were fully assembled, they were tested and shipped to buyers. Henry would then assist hospitals to install the OR Surgical System and would train the surgeons and nurses.

Success, however, was limited and by 2006 Jack was convinced that his original strategy of fi nding a distribution partner would be more effi cient, successful, and lucra- tive. Jack believed that a strategic partner would provide several benefi ts including marketing, distribution, and sales. However, Tom was the majority owner and he was wary of losing control of the product and ultimately ownership of the company.

After considerable discussion, Jack and Tom agreed to explore the possibility of creating a strategic alliance to market and distribute the OR Surgical System. In 2006, Jack sent out approximately 20 letters to organizations he considered viable options for potential partnerships. In these letters he introduced the product and called for interested parties to set up meetings to discuss the OR Surgical System in greater depth.

After numerous meetings with potential partners, Jack and Tom had narrowed the list of potential partners to fi ve. Four of the organizations were interested in strategic partnerships in which they would assume all of the marketing responsi- bilities and the fi fth was interested in a purchase. Jack understood that purchase of OR Solutions by another company was not likely to be an acceptable option from Tom ’ s perspective; however, at some point in time it might be the only option as the technology aged. Being “ bought ” was a last resort as far as Tom was concerned.

From Tom ’ s point of view, the ideal situation allowed Jack and Tom to maintain some ownership and Tom and Doug to continue to oversee the engineering and production side of the business. The list of potential partners included Stryker, Smith and Nephew, Ethicon Endo Surgery (a division of Johnson & Johnson), and Storz. In Jack ’ s mind there was no clear answer to the company that would lead to the most successful partnership, for each had its own appealing attributes. Jack began to fl ip through all of the print material he had for each company (Exhibit 4/6 ).

STRYKER Stryker, a Fortune 500 company, was the largest organization that they were considering as a partner. In 2006, 34 percent of its sales were international, leading Jack to believe that they would have a global presence with which to market the OR Surgical System. However, Stryker was primarily focused on orthopedics. Its orthopedic products including implants, powered surgical tools, and operating

T H E B U S I N E S S P L A N

both04.indd 505both04.indd 505 11/11/08 11:14:43 AM11/11/08 11:14:43 AM

C A S E 4 : O R S O L U T I O N S R E A C H E S A C R O S S R O A D 5 0 6

room equipment made up 80 percent of the company ’ s sales in 2006. Medical and surgical products only accounted for 38 percent of its total sales and about a third of these products were operating room equipment. Stryker ’ s size and success posited them well to invest in progressive technologies; however, their investments had focused on products such as navigation, digital imaging, bone morphogenic proteins, artifi cial spinal discs and gastrointestinal equipment with little emphasis on MIS equipment.

SMITH & NEPHEW Smith & Nephew, another potential partner, had a 150 – year history in advanced medical device development and reported $ 2.279 billion in revenue in 2006. Smith & Nephew was heavily focused in the orthopedic market as well as endoscopy and advanced wound management technologies. Smith & Nephew was an industry leader in four Global Business Units – Orthopaedic Reconstruction, Orthopaedic Trauma & Clinical Therapies, Endoscopy, and Advanced Wound Management. The four units jointly offered over 1,000 products.

ETHICON ENDO – SURGERY Ethicon Endo – Surgery (EES), a division of Johnson & Johnson, reported $ 3.376 billion in revenue for 2006. EES proclaimed itself to be leading the charge in advancing MIS procedures. Its focus was on procedure – enabling devices for the interventional diagnosis and treatment of conditions in general and bariatric surgery, as well as gastrointestinal health, gynecology, and surgical oncology. One of its biggest assets was its major contribution to the continued growth of Johnson & Johnson ’ s Medical Device and Diagnostics segment.

KARL STORZ ENDOSCOPY AMERICA INC. Storz was the smallest of the potential partners with fewer than 1,000 employees and approximately $ 100 million annually in revenue. The company ’ s focus was on

Exhibit 4/6: Potential Partnering for OR Solutions

Stryker Smith & Nephew Ethicon Endo – Surgery KARL STORZ Endoscopy America Inc.

Revenue $ 5.1billion $ 2.8 billion $ 3.376 billion $ 100 million Location Global Global Global Germany (HQ),

Global Salesforce 15,000 (Global) 9,600 (Global)) 600 (Global) 1,700 (Global) Divisions Endoscopy

Orthopedic Med Surg Equip, Digital imaging systems

Orthopaedic, Endoscopy, and Advanced Wound Management

Minimally invasive and open surgical procedures, General and bariatric surgery

Endoscopy, Minimally invasive surgery

both04.indd 506both04.indd 506 11/11/08 11:14:43 AM11/11/08 11:14:43 AM

5 0 7

endoscopic instruments as well as digital imaging and data archiving. It was still a family – held business that included 18 worldwide affi liates and fi ve manufacturing facilities. The range of endoscopic equipment for human and veterinary medicine plus industrial applications encompassed over 8,000 products.

REALITY IN 2007 Walking back to the boardroom table, Jack looked at the current organizational

chart and sighed. Henry Spencer was no longer actively marketing OR Solutions. If a healthcare organization approached OR Solutions, they could still contract with Henry who would introduce, demonstrate, and sell the product, but he was no longer on OR Solutions ’ payroll. Doug Fischer was still working in a production capacity for OR Solutions but was becoming more and more involved with other projects out- side OR Solutions. Over the past couple of years, OR Solutions had gradually dwindled from a team of 20 to just two in the organization. Only he and Tom were left.

Finally, Jack reviewed OR Solutions ’ fi nancial performance (Exhibit 4/7 ). “ We had some revenue but plenty of expenses as well. What would 2008 bring? No expenses but no revenue either? ” He knew that decisions needed to be made and soon. What would an effective partnership look like? Should they just sell the company? Would they be able to get a price that was what OR Solutions was really worth?

Jack placed the fi les back on the table in neat stacks and looked at his watch. Tom should be arriving at any moment. Jack knew that Tom was extremely wary about bringing in an outside consulting fi rm. He reminded himself, “ Tom has invested years as well as fi nancial equity into the OR Surgical System and he was very concerned about the fate of his product. His original intention was to grow the business around the product and create an independent entity for marketing the product. Despite the lack of success, Tom still feels that OR Solutions should be taking the product to market with a new salesforce and should stay in complete control of the future of the OR Surgical System. The OR Surgical System was his product, ‘ his baby, ’ and he does not want to let go of it to someone else. ”

Jack, on the other hand, had become convinced that his initial strategy of part- nering with a larger entity for marketing and distribution logistics was the right

Exhibit 4/7: Financial Performance

FY 2005 – 06 Actual FY 2006 – 07 Actual FY 2007 – 08 Actual

No. of units sold plus accessories

5 32 0

Revenue $ 140,000 $ 910,000 $ 395,000 Costs of goods sold $ 55,000 $ 368,000 $ 142,000 Gross margin $ 85,000 $ 542,000 $ 253,000 Selling, General,

and Administration a $ 210,000 $ 493,000 $ 311,000

Net Income/(Loss) ( $ 125,000) $ 49,000 ( $ 58,000)

aIncludes: all salaries, consultants, rent, travel, sales commissions to distributors, and laboratory equipment.

T H E B U S I N E S S P L A N

both04.indd 507both04.indd 507 11/11/08 11:14:44 AM11/11/08 11:14:44 AM

C A S E 4 : O R S O L U T I O N S R E A C H E S A C R O S S R O A D 5 0 8

way to go – indeed – the only alternative left for OR Solutions. He knew, however, that he was going to encounter resistance from Tom to any major overhauls in the organization or strategy.

Jack had asked Michele and Greg from Market Research to react to the informa- tion about the company and the possible partners he had compiled, and to help Tom and him to strategically think through the issues. Jack was hopeful that the Market Research consultant s’ “ outsider perspective ” might shed new light on the best course of action.

The Meeting

“ Tom, I ’ d like to introduce you to Michelle Brown and Greg Anderson from Market Research, the marketing research company assisting us in strategic thinking about OR Solutions. ” Jack continued, “ Our discussions today are on the development of a strategy for the future of OR Solutions. I believe some strategic thinking with outsiders who have marketing expertise – but without personal interests in the company – might help us to put the issues in perspective and help to determine the best course of action. I think we need to develop what I ’ d call a ‘ tipping point strategy. ’ If we can just reach the tipping point for the OR Surgical System, sales will take off and increase revenues signifi cantly. ”

The Strategic Thinking Session

Jack passed out hard copies of the fi les he had been reviewing. “ These are the same materials I emailed earlier this week to bring everyone up to speed on OR Solutions. ”

Greg suggested, “ Perhaps I can go to the white board and we can summarize the strengths and weaknesses of OR Solutions. I ’ ll make two columns and anyone can call out what they perceive to be a strength or weakness of OR Solutions and I ’ ll record them. ” After 15 minutes of discussion the white board contained the strengths and weaknesses shown in Exhibit 4/8 .

Tom broke a momentary silence, “ Well, we have a whole lot of weaknesses, but I still believe we have a winner. ”

Jack agreed, “ This product could change MIS, reduce errors, and increase sur- gical quality and outcomes! I think we have a great product, as well. There are a number of applications for the OR Surgical System and the number of MIS devices is growing in proportion to growth in MIS procedures. In 2005, the market for electrosurgical devices and instruments totaled approximately $ 12 million and is projected to increase to $ 18.5 by 2011. ” He concluded, “ Obviously there ’ s a lot of work to be done, and OR Solutions needs to achieve a substantial growth and profi tability very soon. Tom, why don ’ t you share your thinking on what our strategy should be? ”

Tom responded slowly, “ Well, I think we would all agree that this discussion so far has been very sobering. Jack, it seems to me, even though I ’ m not the business

both04.indd 508both04.indd 508 11/11/08 11:14:44 AM11/11/08 11:14:44 AM

5 0 9

guy in the room, that at this point we probably need to hire some competent sales people to go out there and sell the product. But that ’ s my view, and I ’ d like to hear what others have to say. ”

“ Well, Tom, I think that ’ s an interesting view and defi nitely one option, ” said Greg.

Jack added, “ I think our previous sales people needed more experience and understanding of our customers and who, in the hospital, makes the fi nal decision to purchase medical equipment. I still think our primary customer is the physician but they probably do not make the fi nal decision – but rather pressure hospital administrators – who have all the physicians pressuring them for something! ”

Tom said, “ I don ’ t think we can reach the physicians or the hospital adminis- trators without an informed and committed salesforce and I think our product needs to be the sole focus of the person doing the selling. ”

Jack stated, “In addition, I feel there is a need to formulate a radically new promotional plan – we need to develop physician – focused catalogs and newslet- ters. We have to be a lot more aggressive. Now, on the other hand, I think we should also think about the amount of time and money it would take to develop a trained salesforce and maybe also put the option of a partnership on the table. Michelle, what do you think? ”

“ I agree to a certain extent, ” Michelle responded. “ Tom, we are aware that the OR Surgical System is your ‘ baby ’ and you have nurtured the idea from incep- tion. One option, at this point, might be to hire new sales and marketing staff, provide better training, and offer substantial sales incentives. If you can success- fully do these things, the company should grow and there will be an increase in the profi tability. ”

“ Been there, done that! ” Jack interrupted. He continued, “ Given OR Solutions ’ current funding limitations, I think we should look at the most expedient means

Exhibit 4/8: Strengths and Weaknesses

Strengths Weaknesses

Great product with no close competitor. Patented technology. Tom ’ s engineering skills. Jack ’ s entrepreneurial experience and expertise. Some ability to raise additional capital.

• • • •

Inability to meet the sales quota and short term focus on sales. No sales force. No in – house production capability. No support organization/staff. No real expertise in health care marketing. Company had not made a profi t. Finances are strained. At some point the OR Surgical System will be duplicated in some form by a large competitor. The OR Surgical System was reasonably com- plex and only MIS surgeons “ get it. ”

• • • • • • •

T H E M E E T I N G

both04.indd 509both04.indd 509 11/11/08 11:14:44 AM11/11/08 11:14:44 AM

C A S E 4 : O R S O L U T I O N S R E A C H E S A C R O S S R O A D 5 1 0

of capitalizing on our available opportunities. It seems to me that the most viable option would be to align with a well – funded organization already in the medical device market. I believe that our technology, both current and next generation, represents a vital piece of the puzzle for companies that provide equipment and technology to today ’ s operating rooms. As such, OR Solutions should seek a partner, such as a Ethicon, with the appropriate sales and distribution channels, experience, and fi nancial and human capital to accelerate our product ’ s adoption. We have an opportunity to make the OR Surgical System the standard of care in operating rooms throughout the world. At the same time, I fully anticipate ongoing roles in the partner ’ s organization and fully desire to be fi nancially and strategically aligned with whatever partner we select. ” Jack concluded, “ I propose that this strategy will substantially increase our market share and provide us with the much needed fi nancial support. ”

“ Jack and Tom, you asked us about various options, ” Michelle said. “ I guess this discussion highlights that OR Solutions could try to develop a salesforce or it could adopt a partnership strategy. Both options would entail substantial changes and will raise concerns and issues that must be addressed. ”

She continued, “ Perhaps another option is to acquire another medical equip- ment company with existing and excellent hospital contacts. I understand that OR Solutions currently does not have a great deal of fi nancial strength, but it would solve the problem of having to build a salesforce and develop hospital relationships from scratch. ”

Jack summarized: “ So we have several ideas. I believe the primary strategies identifi ed are to develop an internal salesforce, partner to gain an existing sales- force, buy an existing company with an established reputation with hospitals, or perhaps sell the company. Growth is the primary issue. ” He continued, “ I think we all would agree that before making a decision we will have to deal with a number of issues. Here ’ s what I would propose. I ’ d like each of us to further think strategically and analyze our situation and develop recommendations as to how we should proceed. We could all meet in two weeks with our recommenda- tions. We can check our calendars and email – confi rm the specifi c time and venue for our discussions. ”

Tom joined in, “ Agreed. In two weeks, we will reconvene and determine a best course of action to make OR Solutions the success that we know it can be. ”

both04.indd 510both04.indd 510 11/11/08 11:14:45 AM11/11/08 11:14:45 AM