Ecton, Inc. - Business Case Analysis

Ecton, Inc. - Business Case Analysis

Thomas Koenig

I. Executive Summary and Position Statement

Ecton, Inc. has successfully developed a new concept in echocardiography imaging systems. This concept challenges the conventional systems that are used in the health care industry. Ecton faces a familiar dilemma that many start-up companies. The company has to make the decision whether to continue with product rollout, to force a change in the scale of operations that requires substantial capital input, or to get acquired by a larger company which has the resources and the expertise to ensure production, marketing, sales and distribution for the product. The company´s original plan called for selling the business once a successful business model is produced. By doing this, Ecton would have access to new skills and knowledge, especially in marketing and distribution. Although an acquisition might be challenging, Ecton can take advantage of its position to negotiate the best deal. This would give the founders and the investors the best return on their investment.

II. Situation / Problem

Currently, the market for cardiac ultrasound devices faces several forces (for details see Exhibit 1). A relatively small force comes from substitutes and the threat of new entrants. Suppliers also don’t have a high power within the industry. Higher power within the industry comes from customers such as hospitals and physicians. Because usually the buyers and the users in the health care industry are not the same persons there is an intense pressure to control the costs of health care services. The rivalry in the industry is relatively high. This, it is not very attractive for new companies to enter this market.

Ecton is competing in a market that is full of entrenched processes and structures. While all of the major companies in that market make only incremental innovations that build on the established highly complex machines, Ecton enters this market with its new technology. Usually, Doppler echocardiography instruments for medical use are large and immovable. Thus, hospitals created specific departments where the echo machines are located. Ecton is challenging the market with a product that is both less expensive and more mobile than existing ultrasound devices. The overview of the competition market (see Exhibit 2) shows that Ecton has an advantage both in pricing and mobility of its product.

The distinction between sustaining and disruptive technologies is that sustaining technologies provide only additional features to an already existing technology. In contrast, the disruptive technology provides a different set of attributes that are not valued by existing customers. By applying the litmus test by Clayton M. Christensen, we can see that Ecton is indeed a disruptive innovator. It offers a product for previously untouched customers in the market for ultrasound equipment, it provides a simple and easy-to-use product, and it also helps customers to do the ultrasound examinations easily and efficiently (see Exhibit 3).