1. 1 VEXTEC Technology Marketing Plan Aashish Bapat, April Boldt, Jason Deaner, Grainger Greene, Dani Shuck

2. 2 Technology Marketing Plan  I. Capabilities Analysis  II. Technology Marketing Intelligence  III. Marketing Segmentation  IV. Leverage and Resistance Points  V. Industry Analysis  VI. Value Proposition  VIII. Interviews

3. 3 Capabilities Analysis  VEXTEC is a Product Leader Unique technology, patented  Core competency is modeling the physics of failure  VPS-VIEW with VPS- MICRO performs this  VEXTEC also excels in Customer Intimacy Does not translate into Medical Device sector, unknown in this industry

4. 4 Technology Marketing Intelligence  Important Questions: What is the current method by which prosthesis manufacturers perform reliability analysis, if at all? How much does this method cost? Capital costs and recurring costs per unit? How satisfied are you with your current method? Can a virtual physical testing method possibly become approved by medical safety boards such as the FDA in the U.S. or ISO in Europe? How much money and time can VEXTEC save a company on reliability analysis, and how much can they improve a company's product? Is the prosthesis market large enough and interested enough to bother entering this market? Have you considered alternative approaches to reliability analysis, and what conclusions did you draw?”

5. 5 Technology Marketing Intelligence  Future Contacts: Ossur Endolite Ottobock Medi Fillauer Freedom Innovations Ohio Willow Wood Smith-Global Bulldog Tools DAW

6. 6 Future contacts continued  Meeting with Prof. Burcham Owen Business School faculty Health care specialist CEO of Paradigm Health a health care provider for specialty care Consultant to healthcare and venture firms

7. 7 Market Segmentation  3-Screen Technology Market Scan  Figure 2: Importance-Advantage Map

8. 8 Three-Screen Technology-Market Scan  Need Screen  Economics Screen  Time Screen

9. 9 Needs Screen  Feasibility - Will it work in the intended application? (Can we deliver?)  “ Criticality ” - How critical is this application to the overall mission or financial performance of the customer organization?

10. 10 Economic Screen  Performance/Value Advantage  Price  Ease of Use  Reliability

11. 11 Time Screen  Readiness to solve problem Cognizance (“shopping”) vs. precognizance  Receptiveness to new technology e.g, early vs. late adopters

12. 12 Time Screen (ctd)  Compatibility with customer operations Word processors vs. nuclear reactors  Dependence on other technologies  Market Concentration/Heterogeneity  Customer Buying Practices  Competitive Intensity

13. 13 Importance-Advantage Map Importance Advantage

14. 14 The “Winner” Importance Advantage Important to Market/ Competitive Technology

15. 15 Strategy for the Winner Importance Advantage GO

16. 16 Technology Ahead of its Time Importance Advantage Unimportant to Market/ Competitive Technology

17. 17 Strategy for Technology Ahead of its Time Importance Advantage Develop Market Redeploy Assets

18. 18

19. 19 Industry Analysis  Michael Porter’s industry forces model

20. 20 Five Competitive Forces that Determine Industry Profitability Suppliers Buyers Potential Entrants Substitutes Industry Competitors Rivalry among existing firms Bargaining power Threat of substitute products or services Bargaining power Threat of new entrants

21. 21 Analyzing Porters Forces ( Strengths are on a 1-3 scale, with 3 the strongest) 1. Industry Competition / Rivalry (Rating 2) Cutting edge technology, unique approach No direct competitors In house reliability testing methods 2. Potential Entrants (Rating 3) Proprietary rights High R&D costs and time 3. Supplier (Rating 2) Device Testing Databases

22. 22 Porter forces (contd…) ( Strengths are on a 1-3 scale, with 3 the strongest) 4. Buyer (Rating 1.5)  Lack of confidence/ Inexperience in medical device industry 5. Substitutes (Rating 1)  More expensive, theoretically weaker but age-old proven industry norm : physical testing  Statistical analysis providers like Relex & Reliasoft

23. 23 Industry Analysis  Identify key competitors

24. 24 Direct Competitors: Reliasoft  Founded in 1992  Product Base: Weibull++ Software Family  “Industry standard in statistical life data analysis (Weibull analysis)"  Services: capabilities technology marketing consulting

25. 25 Direct Competitors: Reliasoft  Methods: Failure Mode and Effects Analysis and Fault Tree NO physical testing  COST: Weibull++ 7, a single user software package is $995.00

26. 26 Direct Competitors: RELEX  Reliability services for 20 years  Product base: Relex Reliability Studio 2007  Methods: FMEA and Fault Tree Analysis No physical testing Support Oracle/Microsoft SQL server for scalability

27. 27 Direct Competitors: RELEX  Cost: sequentially purchase software “modules” to build and grow with a business plan  Services: 30 day eval/money-back guarantee  Customer Relationships: Broad portfolio of working relationships: from Dell to Boeing

28. 28 Leverage and Resistance Points  What role does the product play in the customer's value chain?  What concerns (leverage points and resistance points) might they have, and how could you address them?

29. 29 Ultimate Goal  Matching of what customers want versus what vendors claim of their services 1) Customer assessment 2) Market segments 3) Customer value models 4) Flexible market offerings 5) Competitive advantage

30. 30 Discussion Question: Customers Needs vs. Vendor Claims What CUSTOMERS WANT for their business Increase sales Improve quality/reliability of product/process/service Maintain/build reputation Reduce time (to develop, build, process, respond, etc.) Increase resource productivity Reduce costs (direct, overhead, fixed) Reduce uncertainty (sales, inputs, investments, etc.) Minimize disruption (customers, workforce, processes) etc. What VENDORS CLAIM for their products and services Performance Reliability Cost of Use Ease of Use Compatibility Support etc. Do they match???

31. 31 Pin-pointing Customer Values Heath-care industry concerns: Product quality Reliability and uncertainty (liability) Time Resource productivity Overhead = fixed costs + operational cost Financial liabilities Ease of use

32. 32 VEXTEC Advantage  Embedded in automotive/aerospace = brand name?  Product advantage Reliability: reduce physical prototype testing Cost advantage: stronger reliability statistics = more cost savings  Design process: Reduced uncertainty Warranty clarifications Recall and redesign repercussion forecasting Time = speed FDA approval = $$

33. 33 Resistance Points Common barriers technologies in infancy:  disruption of existing operations  threat to owners of current solutions  fear of the unknown Discern resistance point before adoption = weapon against competitors

34. 34 VEXTEC Resistance Points 1) Resistance to change: hesitancy to radical innovation in implant sector, liability of manufacturer brand 2) Government barrier: FDA and proposed reliability methods 3) Health Care Industry Brand Names: lack of specific relevance/Brand in medical device industry 4) Transferability of field experience: proven success in automotive/automobile to prostheses manufacturers

35. 35 Value Proposition  Develop a qualitative value position  Simple spreadsheet model showing how a typical customer would benefit from the product  How value proposition will be of value to the target market

36. 36 Core Competency  Unique software reliability analysis platform unmatched in 1) its ability to accurately forecast the most robust product design 2) project modes for improvement based on outputs such as cost savings

37. 37  Assume an “average buyer” Re-engineer your offering for every buyer Design flexibility into the offering –(80:20 rule) Focus on one segment –Going “vertical” Options for Coupling Your Value Proposition to the Market

38. 38 Designing Flexibility into the Offering Designing Flexibility into the Offering to Modulate Your Value Proposition Your pool of core competencies Modularity Market Segments Scalability Customer Size Evolvability..... 2008 2007 2006 Life Cycle Your “base” product Your value proposition

39. 39 Pro-Forma for Manufacturer

40. 40 Value of Value Proposition  Increase Quality of Prosthesis Increase Warrantee Decrease Unit Production Cost Increase Price  Why does manufacturer care? Average patient changes insurance every 2-3 years because of company Therefore, focus on government employees

41. 41 Customer Interviews

42. 42 Interview with Richard Holmes  Previous employee of Pratt & Whitney VEXTEC capabilities that helped approach and gain trust in industry:  Customer intimacy Confidence in individual Relationship with industry Heard of VEXTEC personally  Technology advantage

43. 43 Interview with Kevin Line  Former employee of Lockheed Martin Integrate technologies: how to model and predict failure in airplane parts ideal to continuously know the health of airplane electronics Navy funded VEXTEC incorporated Lockheed technology electronics into model  Electronic leads in pacemakers, etc

44. 44 Orthotist (Dr. Gregory Mencio) & Prosthetist (Dr. Mark Watson) 1) What are the most widely used makes/models of above- the-knee prostheses? Popular makes: endolite, ossur, ottobock Models catered to individual lifestyle Work with interface of socket Exoskeletal: hard crustacean design Endoskeletal: inside all laminated foam, internal pylon 2)What basic advantages do the most popular models have over others in their design and or materials used? Steel vs. carbon fiber Carbon fiber: lighter, enhanced performance, more comfortable Steel: more durable Endoskeletal: lightweight

45. 45 Orthotist (Dr. Gregory Mencio) & Prosthetist (Dr. Mark Watson) 3) What is the most common source of failure in these prostheses? Do they differ among models? Breakage at knee joint: inevitable, life depends on quality and activity of patient Loosening at socket: atrophy causes loosening around the socket Selection of prosthetic: Cost: approx $30,000-500,000 Activity: hydraulic versus geriatric patient Vets from Iraq receive new prostheses about every 2 years Cheaper models break down quickly, less comfortable, fewer “bells and whistles” 4) How common are mechanical failures in these prosthesis? Set screws often toggle and break Failure at knee linkage

46. 46 Orthotist (Dr. Gregory Mencio) & Prosthetist (Dr. Mark Watson) 5) What kind of warranties (if any) come with above-the-knee prostheses? 0-3 years Most often 6 months – 1 year Warrantees = improves life of product 6) Do the prostheses manufacturers offer any technical support in your practice? New product education Insight on amputation and fitting for prostheses

47. 47 Mark Watson: Orthotist/Prosthetist 7) How much time and money to these manufacturers spend on reliability analysis? Endless process for better/more durable models 8) What does their process for reliability analysis involve? Cheap models break down  insurance and prosthetists pay Engineers design durable models Summary: Materials tested, materials combined, models engineered, models tested, then human testing following FDA approval

48. 48 Uncertainty  Mark Watson ultimately unsure about reliability testing Will provide contacts at Otto Bock and Ossur, others Team will contact manufacturers, design engineers to determine specific processes

49. 49 Interview with Dr. Fitzsimmons  Easier to get devices approved in Europe ISO standards less than FDA Perform physical tests with predetermined forces  Warranties are mostly guesswork Feet – 36 months Knee – 24 to 36 months Medicare recommends 5 year life for prosthesis Ultimately depends on activity level (0-4) 4 level cannot expect for device to last more than a year  Most failures from feet Below-the-knee prostheses more common than above- the-knee, thus more feet likely to fail than knee’s

50. 50 Interview with Dr. Fitzsimmons  List of manufacturers Otto Bock Ossur Endolite Ohio Willowood Medi Bulldog Tools Jim Smith Sales Euro International Fillauer  Otto Bock has 4-5 large facilities within U.S.  Provided contact with Otto Bock

51. 51 Phone Call to Otto Bock  Spoke with Scott Weber, Marketing Manager for Feet Units at Otto Bock Minneapolis office  Most prostheses exempt from FDA approval, use ISO standards Microprocessor knee unit is not FDA exempt  Physical testing is expensive and time consuming, lots of money wasted on testing incorrect prototypes  Exo-skeletal knee prostheses are vanishing from market  Feet units are more customized than Knee units, more failures in them also

52. 52 Phone Call to Otto Bock (contd.)  They do use Finite Element Analysis to some extent in their reliability analysis Do not use statistical modeling, never heard of Relex or Reliasoft Otto Bock goes above and beyond ISO standards in their testing ISO would be a good resource for specific force loads used on prosthesis units.  Gave contact at Salt Lake City office Sarah McCarviell, Head Engineer(?) All physical testing and design engineering done at Salt Lake City office

53. 53 Questions?