Guesstimation model Market Sizing

Webinar Slides
Rahul Choudhary PGDM, IIM Calcutta January 13, 2010

PROBLEM STATEMENT
Market size determination for a device (biogen) that generates electricity for powering implantable powered devices
Segment : IMD (Implantable Medical Device) Product : Implantable Biogenerator Competitors : IMD Battery Makers

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THE CHALLENGE
STEP 1. Secondary Research about the segment STEP 2. Determining the critical factors in the segment STEP 3. Picking variables & constructing logical equations STEP 4. Assumptions to simplify model STEP 5. Building the Excel Model & pooling in the data STEP 6. Tuning Steps 3,4 & 5 on the basis of client interactions and using publicly available data sources(reports, statistics) STEP 7. Scenario Building and Sensitivity Analysis

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THE APPROACH -I
CRITICAL FACTORS (Derived using the IH approach)
Comparative cost of implant influencing the end users decision
Price Comparison , Cost comparison between maintenance

Factors influencing the contact points in the market

Total number of implant facilities (Hospitals) , Total number of maintenance facilities (Clinics, battery stores), Presence of alliances between IMD battery makers & IMD makers (B2B issue), Rigidity in the market towards a new product

Safety
Success rate of Biogen implants, Procedural difficulties with Biogen implants

Product age/Awareness
Is the demand already present because of product awareness, Product is developed but there is lack of awareness, Is it still in the product development phase

Others
Growing elderly population, Insurance Reimbursements, Investment in healthcare by the Government, Health regulations, price changes for raw materials

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THE APPROACH -II

ASSUMPTIONS AND DELIMITERS (Some Examples)
Failure Rate has been ignored for these high assurance implants (both device and batteries). So, the sales of device because of a device/battery failure have been assumed nil. Externalities (e.g., Insurance reimbursements to end-users for medical care, investment in healthcare by the Government, health regulations, price changes for raw materials, import restrictions on implantable devices) have been ignored considering their low impact in determining sales when compared to the factors that have been accounted for in the model. A normalisation of PPP adjusted per capita health insurance expenditure has been used to determine the insurance cover in the world regions under study, based on the data for US. For Price (or cost) sensitive population fraction, we have calculated NPV of implants based on the number of implants they will need to undergo over their expected life depending on the choice of implant type.
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The Logic
Known Data available from various sources Unknown factor. To be tuned with Sensitivity Analysis Insurance Data is known but acceptance can be tuned

The Size of Battery Market for IMDs

Supporters of Biogen (IMD makers & Hospitals)

Insured & Non-Insured patient acceptance

Biogen Market Size

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THE SOLUTION - I
EQUATIONS

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THE SOLUTION - II
Factor Explanation Data type/source
WHO Statistics on mortality rate across the years An estimation based on the number of existing IMD makers that the client believes to extend alliance An estimation has to be given in the scenario builder Statistics from US health Insurance Reports WHO Statistics on Per Capita Expenditure towards Health Insurance (PPP adjusted) probability to stay alive for Incorporates the effect of resale of IMD due blife years to end of life of device/battery and the need of re-implant % of IMD makers in IMD makers willing to make devices support of Biogen(n) compatible with Biogen will lead to a fraction of market potential being catered by Biogen % of IMD implanters in Physicians and HMOs that would extend support of Biogen(n) support to Biogen insurance effect Price insensitivity of patients because of their private or government insurance cover population fraction with For a region, the % of population that has insurance cover(n) insurance cover based on their per capita insurance expenditure

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Summary Steps For Guesstimation

Problem Statement

Create Hypothesis for Key Factors

Research to validate key Factors and Limitations

Formulate

Arrive at Guesstimate

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Q&A

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