Evaluation Case on General Electric Healthcare
1. Summary of the case
General Electric Healthcare in the international leading producer of diagnostic imaging equipments, offering medical clinics around the globe a wide variety of products and services designed to improve the quality of medical diagnosis and treatments. In 2005, GE Healthcare had a market share of 34% of the entire diagnosis imaging equipment in the world.
Along time, the producer had undergone major structural changes, all assisted by current Chief Executive Officer Joe Hogan. Founded as Global Product Company (GPC), the company was reorganized as General Electric Medical Systems (GEMS or modified GPC) and then as General Electric Healthcare (GE Healthcare).
During the GPC era, the company was characterized by intense efforts to reduce costs and even swifted production from the United States to other countries that offered less expensive work force. Under the name GEMS, the producer registered immense growth and development, and by the year 2000, had become the leader in the market of diagnosis devices.
Following the model launched by CEO Jeffrey R. Immelt, Global Product Company, excelled in domains such as manufacturing, research and development, product design, sales, marketing and human resources.
The manufacturing of diagnosis devices was generally characterized by managerial attempts to increase efficiency and reduce costs which led to the formation of “Centers of Excellence” in foreign countries. Up to 90% of the products designed in these centers were being sold abroad. The materials used in production comprised 80% of the total costs, and the labor force was payed with the 20% remaining. The primary goals of GPC were to decrease material costs by 30% and labor costs by 50%.
R&D and product design developed new monitoring and diagnosis technologies, but encountered difficulties in efficiently using their human resources. Revenues increased by 60% due to sales of produced devices and services (repairs and healthcare IT systems). The marketing strategies promoted by GPC revolved around customizing their products to best meet the needs of the buying countries. In regard to the human resource policy promoted by GPC, they placed great emphasis on the technical competences of the managers.
Under the name of GEMS, the producer implemented the program In Country for Country which insured that the majority of devices produced within the Centers of Excellence in one country remained in that country. The largest such program was In China for China.
In 2001, GEMS commenced treaties to purchase Amersham, producer recognized for their equipments of early detection of cancer. The newly formed company took the name of General Electric Healthcare. GE Healthcare placed great emphasis on the rapid technological development and stressed out the strong connection between medical research and information technology’s both software applications as well as hardware devices.
Along its existence, General Electric Healthcare has undergone numerous mergers and acquisitions that sustained the manufacturers’ growth. The acquisition of Amersham, finalized in 2004, made GE Healthcare the international leader of produced medical equipments. The new elements brought by the merger regarded an increased sensitivity and specificity, which automatically generated better diagnosis capabilities. Furthermore, the acquisition of Amersham resulted in intense cooperations with pharmaceutical companies, most of them being former partners of Amersham’s.
2. Issues confronting the company and recommendations
One of the most critical challenges GE Healthcare is currently faced with is keeping up with the developments that occur in the IT and medical domains. A revolutionary discovery of the medical research teams at Harvard Medical School is related to genomics and regards the efficiency of a treatment prior to its commence on a patient. Relevant examples of this challenges are the effects of chemotherapy on cancer patients.
Due to assiduous studies, medicine has proven that genomics could inform doctors of a patient’s response to a certain type of treatment, based on their genes. For instance, a chemotherapy treatment has an efficiency somewhere between 20 and 30 percent. But there is a certain gene mutation (present in about 10% of the population) that increases the efficiency of chemotherapy up to 95%. The current problem is that the tests that identify the certain gene mutation and foresee the efficiency of the treatment are time consuming and a large majority of the terminally ill patients dies before the investigations are complete.
All in all, the problem is that the new innovations in incurable diseases are extremely time consuming, and time is a luxury these patients do not have. There are two directions specialists could follow in order to resolve this problem. First of all, the medical team could work on developing new methods and alternatives to prolong the life expectancy of cancer patients until the genomics test are completed and an informed decision can be made in regard to the treatment.
Secondly, the IT team could work on developing new software applications that speed up the genomics process in order to get the test results as soon as possible. A third measure that could be taken is sustaining a continuous process of informing the population in regard to their health and the importance of regular medical consultations.
Another issue confronting General Electronic Healthcare is the increased need to develop new equipments that identify the diseases in the patients’ body prior to symptomatic manifestations, task impossible for the current X-rays and MRI devices. In order to meet this growing need, the medical and IT teams have to work together and develop means of increasing the machines sensitivity and specificity while performing tests. The increased sensitivity and specificity would insure a more comprehensive analysis of the patients’ body and would expand the number of early diagnosed illnesses. The acquisition of Amersham has generated better chances of developing equipments with increased sensitivity and specificity, and the struggle to produce the best devices continues to be the main occupation of GE Healthcare.
The following issue confronting GE Healthcare regards the way in which medical doctors perceive the equipments, in the meaning that they do not care for high technology gadgets, but for the functionality of the devices and their assistance in detecting and curing diseases. This again implies a strong work connection between the medical and IT team in order to perfectly combine their skills and retrieve equipments that perfectly meet both technological as well as medical functionality.
And probably the ultimate challenge of GE Healthcare is their current intend to step into the healthcare domain with additional products and services. The manufacturer wants to launch new programs regarding innovative drugs. This desire generates the necessity to develop new business partnerships and emphasize on the existing ones with the pharmaceutical companies. This approach would integrate the pharmaceutical business model into the company’s IT/physics/engineering profile, says Dr. Bill Clarke, former head of the R;D division.
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