Lowering the Cost of Ultrasound Equipment through Digitalization

This week’s discussion focus is technology innovation, through the use of examples that we research and share. Before we begin this discussion, please review an example of a company who used strategies to exploit a new era of digitalization and benefited from it, “Lowering the Cost of Ultrasound Equipment through Digitalization.”

This example shows how a company reached a previously untapped market niche by digitalizing a product, which also allows the firm to reduce expenses. Thus, digitalizing can support a firm that is pursuing a simultaneous advantage in differentiation and cost leadership.

Managing Innovation Example

The ultrasound unit is an important diagnostic tool, producing images of organs. The technology is very valuable, but the equipment is bulky, heavy, and expensive, so it is used primarily in dedicated hospital facilities. ATL, a leading ultrasound company, decided to reduce the size of an ultrasound set-up to about the size and weight of a laptop computer. This would be accomplished by replacing many of the machine’s solid circuits with software (in a process called “digitalizing”), reducing size and costs. The researchers reasoned that a portable and inexpensive ultrasound unit would find market opportunities in totally new niches. Smaller size and lower cost would allow the units to be placed on ambulances or into physician’s offices – market niches that were impossible to reach with the technology of the day. The researchers later became part of a project team within ATL, and thereafter became an entirely new company, SonoSite. Late in 1999, SonoSite introduced its first unit, which weighed just 6 pounds and cost about $25,000. SonoSite targeted niches that full-sized ultrasound products could not reach: ambulatory care and foreign markets that could not afford the more expensive equipment. In 2010, the company sold over $275 million of product.

Now it’s your turn, research a company that has managed an innovation and provide the story. Include, The company, the technology, the impact made with the innovation and short history of the industry and need for the innovation.

Along with providing your example, please answer the following question:

  • How are companies coming up with strategies to exploit and benefit from the new era of digitalization?