Toshiba maps future strategy around customers and culture

September 1, 2004

Toshiba Medical is building on core competencies in MR, CT, ultrasound, and x-ray, focusing R&D on the development of sensor technologies while using alliances with other companies to enhance their utility, speed, and power. Clinical applications, not

Toshiba Medical is building on core competencies in MR, CT, ultrasound, and x-ray, focusing R&D on the development of sensor technologies while using alliances with other companies to enhance their utility, speed, and power. Clinical applications, not brute technological power, hold sway over how products develop, just as social culture in and outside of Japan dictates managerial approaches. Together these influences shape corporate strategy and the final form of products.

Corporate leaders view their future in terms of the "virtual patient." They are developing technologies based on clinical opportunities defined largely by luminaries in key markets. Then they will seek out or expand alliances that provide the flexibility to meet the requirements of individual markets. Doing so requires a multimodality approach.

In MR, Toshiba is focusing on 1.5T, emphasizing clinical applications on a short-bore magnet. Higher field strengths, particularly 3T, will be necessary eventually, but they are not critical immediately.

"What is important is to provide a variety of applications with 1.5T technology," said Ken-ichi Komatsu, Ph.D., senior vice president and chief technology executive at Toshiba Medical Systems. "We have a strong clinical application basis with 1.5T, so we expect a high return for MRI."

"Open-sided," like Toshiba's own four-pole Opart platform, or "clamshell" is how open MR is typically described. Komatsu defines open MR as whatever creates a feeling of openness for the patient. Sticking with an ultracompact cylindrical design, exemplified by Toshiba's Excelart Vantage, the company can provide customers the clinical advantages of a high-field MR system and the patient comfort of an open design.

"It is difficult to provide open MR at high tesla," he said. "So we are providing open MR with a short bore-a bore like a CT gantry."

Komatsu is holding open the door on development of higher field cylindrical systems as the means for achieving functional imaging. Broad-based clinical spectroscopy may require 3T or above to achieve the necessary signal to noise. But there may be other ways to approach molecular imaging. One is through the use of pharmaceuticals designed specifically for MRI. How to proceed will be determined largely through cooperative research between Toshiba and clinical luminaries in the U.S., Europe, and Asia, he said.

In CT, the focus is on detector development, with a 64-channel product nearing commercialization and a 256-channel version in prototype. As in all Toshiba imaging technologies, clinical applications will determine how CT evolves, according to Komatsu.

The sensor technologies in CT and x-ray will not converge, as some industry pundits have opined. While each of the two types of detectors will cover a broad physical area-flat panels assuming the sizes of image intensifiers or CT detectors adding channels until they approach the dimensions of flat panels-Toshiba's sensors will be fundamentally different. CT detectors will rely on a scintillator that releases photons when struck by x-rays, according to Komatsu. Area detectors developed for radiography and fluoroscopy will not be so constrained.

"These two kinds of sensors, CT and x-ray, cannot merge," Komatsu said. "They cannot be only one thing."

Similarly, the evolution of Toshiba ultrasound depends on developing advanced sensors. Real-time 3D imaging is inevitable, according to Komatsu. Its arrival will extend the use of ultrasound, particularly in pediatrics and vascular imaging. The engine driving its acceptance will be highly sensitive detectors that acquire data in the x and y axes. Advances in material science may determine the path Toshiba takes in ultrasound, as engineers now are studying whether to create probes based on multilayered piezoelectric materials or go with single-crystal ceramics or polymers.

The answers to these and other questions may arise from work done at the Toshiba Corporate R&D Center. Centralized efforts on key issues affecting product development help Toshiba marshal its resources. Corporate R&D, for example, laid the groundwork for the 64-slice CT detector, which will be built into Toshiba's flagship Aquilion system later this year.

Toshiba engineers construct the building blocks of the company's products. Toshiba strategists craft alliances that enhance the products' value. The company's use of three different firms for postprocessing technology makes this point. Mississauga, ON-based Cedara provides the software built into Aquilion CT scanners to process data acquired during scans into 3D images. Minneapolis-based Vital Images provides the postprocessing workstations that complement scanners sold into the U.S. Zio Software, a Tokyo-based company, supplies the workstations sold to Aquilion customers in Japan.

Toshiba uses corporate alliances to address opportunities over the long term, as well as the short. This limits Toshiba's costs for R&D while providing flexibility.

"From these different alliances we can select different products to meet local requirements," said Masamichi Katsurada, president and CEO of Toshiba Medical Systems.

The use of different corporate partners reflects the differing technological and cultural needs of customers. Cost, quality, and clinical utility enter into the picture to varying degrees, depending on the market. Japanese customers demand extraordinarily precise imaging, according to Komatsu. Three-D CT "volumetry" using the Zio workstation, for example, has been used to exactly size-match liver transplants. Conversely, U.S. customers are more oriented toward diagnostic applications. Addressing these different markets carries certain risks.

"We hedge our risks by working with different companies," Komatsu said.

In its still-evolving approach to molecular imaging, Toshiba plans to use corporate partnerships with the suppliers of PET hardware and pharmaceuticals. If the company enters the PET/CT market, it would provide the CT component, while another firm, possibly CTI Molecular Imaging, would supply the PET component. A pharmaceutical partner might provide the probes for getting into molecular imaging, but not necessarily radiotracers for PET. The next generation of MR contrast agents might come from such an alliance, allowing Toshiba to reap the benefits of MR molecular imaging without the kind of investment made by GE Healthcare in its acquisition of Amersham.

"We are a different company," Katsurada said. "We do not do things the GE way."

Maybe not, but there are similarities. Toshiba makes extensive use of the quality control regimen six sigma. So does GE. The Japanese company, like GE, promotes the development of core technologies, establishing and strengthening staff capabilities in certain critical areas: CT, MR, x-ray, and ultrasound. As for Toshiba's still largely unrealized ambitions in molecular imaging, the company operates a biochemistry business (one that deals specifically with clinical analyzers), which could provide the expertise and engineering to ally effectively with a pharmaceutical firm, according to Komatsu.

But there are also significant differences between Toshiba and its multinational competitors. Toshiba management works in a uniquely Japanese style. Toshiba Medical operates in other countries, but the company engineers and manufactures most of its products in Japan. Some R&D is performed in other countries, but only as needed to address specific aspects of those markets.

Overseas subsidiaries are composed largely of managers drawn from the markets they address, but those managers report to the Toshiba Medical home office, where the top management is all Japanese. It is not so much a lack of trust that keeps Toshiba from hiring top execs from other countries but an inability on the part of foreigners to grasp the subtleties of the Japanese culture that guides the company's management, according to Katsurada.

"Japanese company authority and tradition are different," he said. "We cannot say it is good or bad, but different."

There is also a language barrier. Few foreigners speak Japanese fluently. And few Toshiba executives are good at speaking other languages.

"Communication is a challenge," he said.

Staffing subsidiaries with local talent serves Toshiba's goal of being a corporate friend to Japan and listening to the voice of its customers. When operating outside Japan, Toshiba is reaching out not only to the actual users of its products, but also to the administrators who sign off on purchases and the patients who use them.

"There are many opinions and requirements, and we collect them and use them to develop specifications for systems," Katsurada said.

The company's strategies seem to be working. Successes are most evident in MR and CT. Toshiba has been a major player in the lucrative U.S. CT market for the past six years, while Japanese competitors Shimadzu and Hitachi have been unable to gain traction. After many years of playing only in the midfield open MR niche in the U.S., Toshiba now appears on the verge of cracking the mainstream 1.5T market with its Vantage ultracompact scanner. Research at this field strength is focused on whole-body scanning that would image blood vessels 1 mm in diameter and assess plaque burden without the use of contrast.

Innovations in ultrasound, such as the company's handheld remote that makes its Aplio scanner easier to use, are tailor-made for markets, such as the U.S., that are growing ever more interested in ergonomics. Advanced x-ray sensor development could further help the firm, as the global market turns from film toward digital answers.

In the future, Toshiba will forego the development of 3T systems in favor of advancing clinical applications for its short-bore technologies, a strategy that falls well within the mainstream of the industry. Progression in CT technology will aim to meet opportunities in cardiology and the detection of lung cancer. Evolution of x-ray sensors will be in a different direction from that of their scintillator-based cousins in CT. And ultrasound sensors will take whichever path will obtain the signal quality necessary to achieve real-time 3D.

Toshiba has yet to welcome foreign managers to its inner sanctum. But the company is reaching out in other ways. Top management has begun schooling junior executives to understand global business. The goal is to make them more effective at managing overseas subsidiaries. These managers could serve as conduits for new ideas, allowing Toshiba to reap the rewards that typically come from bringing in outsiders without actually doing so.