High 5 highlights importance of understanding the competition

April 7, 2006
Ronald B. Schilling, PhD

One of the most important factors to determine when evaluating a company, whether a start-up or an established firm, is how well its leaders understand their potential competition. A good example of a bad situation was the lack of understanding that became apparent when the lithotripsy crowd decided to move from kidney stones to gallstones. They viewed the competition as other lithotripsy companies. The real competition turned out to be pharma companies and surgeons. For gallstones can be dissolved with pharma products and the gallbladder simply removed with minimally invasive surgery. They missed the obvious partly because it was not so obvious.

One of the most important factors to determine when evaluating a company, whether a start-up or an established firm, is how well its leaders understand their potential competition. A good example of a bad situation was the lack of understanding that became apparent when the lithotripsy crowd decided to move from kidney stones to gallstones. They viewed the competition as other lithotripsy companies. The real competition turned out to be pharma companies and surgeons. For gallstones can be dissolved with pharma products and the gallbladder simply removed with minimally invasive surgery. They missed the obvious partly because it was not so obvious.

How, then, would one take a broader view of the competition?

An approach that I have often found useful when evaluating competition is the High 5: the top five reasons a customer will buy a product from one manufacturer rather than any other; that is, the customer's purchase criteria. Why only five factors? Because three are too few and seven are too many. Think about the 80/20 rule: For almost anything, 20% of the factors involved control 80% of the result. Why waste time with the remaining 80% of the factors, which can only provide an improvement of 20%.

The key to obtaining the "right" High 5 is to survey the customer base about a given clinical challenge and the proposed technical solution and have the customer provide insight into the factors involved.

When this is done correctly, the company is off and running in the proper direction. The High 5 then becomes the basis for design parameters and helps the company focus on enabling the right technology to solve the right clinical challenge. It becomes the basis for the sales/marketing program, making the case for the features the customer is looking for. It becomes the basis for the competitive analysis: How do we compare with the competition in meeting the needs of the customer? The High 5 can also be viewed as a quality control program, ensuring that the needs of the customer are consistently met.

In sum, everyone in the company should be talking about and resonating with the same High 5 driven by the customer.

Traditionally, for diagnostic imaging, the High 5 has been based on technical leadership, image quality, throughput, life cost, and total service. But criteria change over time, and factors such as patient outcomes or therapeutic impact could be among today's High 5. The important thing is to understand the customer and come up with the right High 5 that speaks to the customers' decision-making process.

I have been arguing for some time that the imaging industry's High 5 is not patient-oriented enough and that adding patient outcomes would move us more in this direction. Many radiologists argue that they don't know how to measure outcomes since they participate in only a piece of the patient medical care process. This is a valid point.

A decision to include patient outcomes in the High 5 criteria depends on the specific procedure being considered. For the interventional radiologist, for example, it makes sense. It might not, however, for procedures that are limited to imaging.

The High 5 is often essential to the start-up seeking to differentiate itself from some of its big company competitors, where it is very difficult to get all the players on the same sheet of music. For the same reasons, the High 5 is key for established companies if they want to stay relevant.

Mr. Schilling is an editorial advisor to Diagnostic Imaging and president of RBS Consulting in Los Altos Hills, CA.