Vendors recast e-business strategies to emphasize customers, not sales

June 20, 2001

The past year of tumult for Internet-based businesses has left its mark on imaging companies, many of which entered the e-commerce space with hopes of high-volume “hits” that would translate into big online profits. But the industry has

The past year of tumult for Internet-based businesses has left its mark on imaging companies, many of which entered the e-commerce space with hopes of high-volume “hits” that would translate into big online profits. But the industry has learned that high numbers of hits, when they did occur, did not translate into a high volume of sales.

As a result, vendors are backing away from strategies built on creating a sales boom vis-à-vis the Internet. Instead, they are concentrating on the development of targeted services focused on maintaining and building their customer base, such as offering courses or downloadable software upgrades.

Initially, vendors leapt at the Internet as a way to increase sales. GE Medical Systems was among the highest profile advocates of this approach. Last year, company executives said customers were clamoring to buy medical equipment online because of the added convenience (SCAN 3/15/00). The company cited more than a dozen Web-based orders for its OpenSpeed MRI system as proof.

Now that the dust has settled, it’s clear that e-commerce is less of a boom than originally expected, agree officials at Siemens, Philips, and Marconi. (GE declined to be interviewed for this story.) Diagnostic imaging vendors have learned that successful online initiatives take time and tinkering.

“E-business is not a short-term endeavor,” said Henry J. Soch, vice president of consulting services and e-business development for Philips Medical Systems. “The field of dreams approach-put it up there and they will come-has not happened. We’ve modified our approach in the last 12 months to incorporate services that customers really want.”

The consensus among the major diagnostic imaging vendors is that the most successful online initiatives focus on innovative customer support before and after the sale. Internet-based tools can configure systems, download and road-test new software upgrades, track order status online and in real-time, and learn new system functionality using Web-based interactive methods. When it comes to actually buying high-end imaging equipment online, however, customers have voted with their feet.

“The real value of e-business is not going to come from selling MRIs over the Internet,” said Dr. Ajit Singh, vice president of e-business for Siemens. “One can create a lot of hype doing that, but it’s not where the real value is. The value is in postsales support and services, and e-training. Those are services that create traction and that people need on a day-to-day basis.”

While customers may buy an MRI device once every seven to eight years, they take a CME course on average once a month, Singh said. They need the newest software releases every three months or so. Such higher volume transactions are what e-business models are all about, he said.

Much of the imaging industry has come to grips with this tenet of e-commerce. Vendors are teaming up with e-based group purchasing organizations such as Global Healthcare Exchange, Neoforma, and Medibuy as a way to sharpen their competitive edge in the $2.6 billion medical imaging supplies market.

Marconi has been particularly aggressive in courting online GPOs and dot-com companies as partners for its healthcare products group Web site. Such affiliations expand visibility as well as potential to attract new customers, according to Al Christianden, director of marketing for Marconi’s healthcare products group.

“There’s still a huge opportunity for the dot-coms that remain, and that’s why we are working with them,” Christianden said. “To maintain only a proprietary presence on the Web is to underuse the technology.”

That fits with Marconi’s perception of its own e-commerce ventures, which date back to the firm’s foray into electronic data interchange (EDI) transactions 15 years ago. The company’s online catalog at marconihcp.com features a range of products from contrast media to radiation protection accessories-but not capital equipment, Christianden said.

“The Internet is just the dial tone,” he said. “And once you have the dial tone, what are you going to do with it that will have value for your customers? That’s the question.”

Such an approach is in keeping with the new way of thinking about the role of the Internet in business, a step forward in the technological transformation of how information is shared-from barcodes to PCs to e-business. And while the rise and fall of dot-come hype has hurt some companies, it has cleared the way for a more realistic view of e-business opportunities.

“We’ve been constantly restructuring our e-business offerings since we introduced them at the last RSNA meeting,” Singh said. “But our premise is that even though the e-business hype is gone, the benefits and the value proposition of e-commerce are still there.”

The biggest challenge for diagnostic imaging companies seeking to court the radiology market online is identifying the customer and understanding customer needs, Soch said. Each of the three major vendors cited here relies heavily on customer response to ideas and services through interactive polls, online user groups, and password-protected, invitation-only Web sites to view newly proposed online services.

Through such sleuthing, for example, Philips designed an online program that supports product purchasing from a variety of perspectives. Radiologists can log on to the site and obtain information about the clinical applications of a given device, information technology staff can identify technical specs, and administrators can tap into a specialized calculator to determine return on investment for the purchase. Using the same tool, a purchasing agent can track a pending order and its status. The latter feature is in the final phases of testing at Philips. Siemens and Marconi are developing similar purchasing support features online.

“Customers have told us they want to use Web-enabled tools to help make well-informed purchasing decisions. That includes specification information, DICOM compliance, and benchmark comparisons,” Philips’ Soch said. “Then, once they’ve made their purchasing decision, they want to be able to track the status of that order online: where it is in terms of factory build, shipment date, and project-management issues related to that purchase.”

In addition to building loyalty among existing customers, moving more purchasing functions online is expected to save companies money. Industry-wide, it’s estimated that 48% of healthcare supply chain costs could be avoided. Providing e-based support is one way to do so.

The promise of dramatic savings achieved by replacing traditional sales with online transactions was a primary motivator behind GE’s online push for its high-profile aircraft, plastics, and medical systems divisions. But only about 5% of GE’s total sales were tied to the Internet in 2000, a far cry from the 30% the company projected last year, according to Mark Roberti, an analyst with the Industry Standard, an e-business trade magazine.

Companies need to transact at least 40% of their business online in order to achieve financial benefits from their investment, according to a survey of 1200 U.S. and European companies conducted by the Center for Research in Electronic Commerce at the University of Texas in fall 2000. That’s isn’t likely to happen in the diagnostic imaging equipment industry. As a result, vendors are focusing on strategies that help customers, while working internally to use e-business to streamline their own operations and transactions with suppliers. Meanwhile, they continue to refine and reshape their online offerings, which also include e-based training for technologists and medical education for physicians.

“Administrators at our customer sites can assign (customer) staff to log on and learn functionalities of new software and upgrades when it’s convenient for them, so that they can get up to speed more rapidly,” said Soch. In addition, on-site training delays can be avoided, an added value for busy radiology departments and a cost savings for the vendor.

And Philips is not alone. Siemens has about 200 online courses that cover the CME gamut, as well as courses pertaining to specific imaging devices for training, Singh said.

“We know that the people using our services are customers,” he said. “And we know that they already have a busy day-they are not going to tinker around with downloading software upgrades that don’t bring them value. Plus, it gives us the opportunity to seed the market with something we’ve created that’s new. And that provides us with an opportunity to market similar products to that customer.”

Despite the ups and downs of the e-commerce market space, all three companies agree that investment in Internet-based services is a business imperative. Moreover, Soch said, market changes in the past year have shown that “bricks-and-clicks” companies have a leg up on “clicks-only” dot-com firms.

“Customers know we are going to be here for the long term,” he said. “If we can demonstrate that we can make their life easier and add value to their day-to-day lives, it’s a win for them and for us.”