Applico’s expertise and platform knowledge was essential to enabling us to capitalize on this platform opportunity. Their team helped us transform a traditional, linear business into a platform. No one understands how to effect this type of digital transformation like Applico.

CEO, Private Equity Backed Medical Device Company

Overview

This client is a high-growth medical device company that received a nine-figure backing from a top-three private equity firm. The company’s medical devices are upending the industry by modernizing and democratizing access to essential medical equipment.

Client Challenge

Our client’s goal is no small order. It is looking to sell more of its small, revolutionary devices than any previous product.

The sales cycle for medical equipment is typically very slow and almost always requires a large salesforce to grow revenue. This approach works when selling large, expensive equipment to hospitals and care providers, but our client’s business model involved selling a larger number of lower-cost devices. Its business model didn’t fit this old approach to selling, so it needed to investigate new paradigms for moving its product.

Applico partnered with the client to figure out how to build a platform around its hardware that reduced cost per unit sold and significantly shortened the sales cycle. It also wanted to lock in recurring revenue and increase customer retention through the network effects this platform created and leveraged.

The client saw this platform as essential to driving purchases of its hardware offering and making its business model function at scale. After reading Applico’s book, Modern Monopolies, the client came to Applico for our expertise in platform innovation.

Applico’s Solution

Applico worked with the client to map out the healthcare and medical device landscapes and helped determine the key user groups needed to build a lasting network. With the network and ecosystem planning validated, this process also enabled the team to identify additional lines of business in cloud services that over the next two-to-three years will generate $50-85 million in earnings while also enhancing the growth and sales of its core hardware devices.

Next, Applico built the business case, roadmap, and growth strategy for a closed development platform around the client’s hardware devices. This platform, which included a cloud analytics component, allowed third-party developers to build software around the client’s core hardware and software, driving value to individuals doctors as well as the broader medical community.

We also worked out the SDK for the client’s hardware and MVP and built the product roadmap for launching the service.

Outcome

The platform we designed with this client enabled doctors to make faster and more accurate diagnoses and facilitate the correct treatments. It also makes the device simple enough to use that other medical practitioners, such as registered nurses, physician assistants and nurse practitioners, can examine the patient, while relying on the platform to connect to medical doctors who can facilitate correct diagnoses.

Given the shortage of medical doctors, the client’s device, in tandem with the platform we built as partners, empowered the device to be a pivotal part of the solution to this labor shortage, while also enabling hospitals to satisfy the cost controls put in place by the Affordable Care Act.

According to the client, “Applico’s expertise and platform knowledge was essential to enabling us to capitalize on this platform opportunity. Their team helped us transform a traditional, linear business into a platform. No one understands how to effect this type of digital transformation like Applico.”

Companies following this platform model are valued at a multiple between 10-20x revenue, as opposed to the client’s initial hardware-based business model that is typically valued at 4-6x. Over the next three years, the platform and additional business units built out in this engagement will generate between $750 million to $1.6 billion in enterprise value and $100 million in earnings.