BcgCaseInterview.docx

BcgCaseInterview.docx

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BcgCaseInterview

WhattoexpectinaBCGinterview

AtBCG,welookforsomethingbeyondintellect.Intheinterview,wewanttolearnwhoyouareaswellashowyouthink.Soeachinterviewhastwoparts:

thepersonaldiscussionandthecase.

Thepersonaldiscussionisourwayofgettingtoknowyou.Thereisnofixedformatoragenda,butinterviewersoftenfocusthediscussiononanexperienceoraperiodofyourlife.Thereisverylittlethatcanbedonetoprepare,sorelaxandusethetimetohelpusgettoknowyoubetter.

Thecaseinterviewmakesupthegreaterpartoftheinterviewtime.Thebestpreparationistofamiliarizeyourselfwithtypesofanalysisyoumayemployandpracticegeneratingsound,defensiblehypotheses.Tohelpyou,we'veassembledseveralresourcesaswellassometipstoprepareforthecaseinterview.

Cases:

1.Findingrevenuegrowthinthemedicalsoftwareindustry

Step1:

Activelylistentothecase

YourclientisGenCo,alarge,international,diversifiedcompanywithahealthcaredivisionthatproducesawidevarietyofmedicalinstrumentsandrelatedservices.Fiveyearsago,itexpandedintothehealthcaresoftwareindustrybypurchasingMedCount,whichmarketsadministrativesystemstolargeU.S.hospitals.Thesesystemsaredesignedprimarilyforback-officefunctions;theyarenotdesignedformanagingpatientsorprovidingotherphysicianandtechnicalsupport.Sinceitwaspurchased,thesoftwaredivisionhasfailedtodeliverthegrowthneededtojustifythemultipleGenCopaidforit.GenCofeelsithasalreadysqueezedmarginsasmuchaspossible,andnowislookingfornewsalesopportunities.MedCountturnedtoBCGtohelpidentifypotentialwaystoincreaserevenues.Howwouldyouapproachthisproblem?

Step2:

Establishyourunderstandingofthecase

First,letmemakesureIunderstandtheproblem.Theparentcompanyproducesmedicaldevicesandservices,butbeforetheacquisitionwasnotinvolvedinhealthcaresoftware.Thecompanyitpurchased,MedCount,sellsonlyadministrativesystemssoftwaretolargehospitals.Itisnowlookingforopportunitiestoincreaserevenues.

Thatiscorrect.

CouldItakeamomenttojotdownafewthoughts?

Sure,thatwouldbefine.

Step3:

Setuptheframework

Iwouldsuggestusingthefollowingframework:

First,I'dwanttounderstandthemarketsizeandgrowthratesforMedCount'smarketandrelatedsoftwaremarkets.Next,Iwouldliketoexplorethecompetitionandtheirmarketshares.Third,Iwouldliketoexaminecustomerrequirementsandthen,giventhoseexternalconditions,lookatthedivision'scapabilitiestounderstandhowwellprepareditistomeettheneedsofthemarketplace.

Thatsoundsfine.Sowhatdoyouwanttoknowaboutthemarket?

Step4:

Evaluatethecaseusingtheframework

Well,thefirsthurdlewouldbetoidentifythemarketsthecompanywouldbeinterestedin.Besidesadministrationsystems,whatothertypesofmedicalsoftwaresystemsdolargehospitalspurchase?

Therearemanysoftwaresystems,butforthesakeoftime,theteamfocusedonthreeprimarymarkets:

administrationsystems,patientadministration,andphysiciansupportsystems.

Whatdothosesystemsdo?

Patientadministrationincludessystemslikeadmissionsandtracking.Physiciansupportsystemsaremorespecialized,forindividualphysicianprocedures.

Iwouldliketoknowhowlargeeachmarketisandhowfasteachisgrowing.Iwouldusesecondarysourcessuchaspressreleases,analystreports,andpublishedmarketstudies,toobtainthisinformation.

Great!

Thatiswhatwedidduringthemarketstudy.Ourinformationrevealedthefollowingmarketsizesandgrowthrates.

Administration

Patientadministration

Physiciansupport

Marketsize（$M）

1,500

1,000

1,200

Growthrate

5%

5%

12%

Fromasizeandgrowthperspective,physiciansupportsystemslookslikeaveryattractivemarket.I'dliketoknowalittleaboutthecustomersthemselves.Theclientiscurrentlytargetinglargehospitals.Approximatelywhatpercentageofthemarketdotheyrepresent?

Wewereunabletogetanexactbreakdown,butweknowthatthesehospitalsmakeupthevastmajorityofthetotalmedicalsoftwaremarket.

Thatwouldmakesense,sincethemoresophisticatedproceduresatahospitalmightnecessitatemoreadvancedsoftwaresolutions.Iknowthattherehavebeenalotofchangesintheindustryasaresultofmanagedcare.Idon'tknowmuchabouttheindustry,soIwouldwanttolookatmarketstudiesandpressclippingstogetabettersenseofthehospitalmarketingeneralandanytechnologyorsoftwaretrendsmorespecifically.

Okay.Let'ssaythatyoudidthatandwerepresentedwiththissummaryofmarkettrends:

∙Consolidationintheindustry,withthreetofourlargehospitalnetworksdominating45percentofthemarket

∙Costcontrolsinstituted,particularlyastheselargehospitalnetworksacquiresmallerhospitals（centralizationoffunctionsbeingakeycostissue）

∙Manyhospitalsseekingtoconsolidatetheirvendorbase

∙Withregardtotechnology,manyhospitalsupgradingtheiroldersystems

Ifhospitalsareconsolidatingvendors,perhapsourclienthasanadvantageinbeingpartofalargermedicalcompany.Maybetheclientcouldalsogainsomeadvantagesbyexpandingintoothersoftwaresegments.Arethepeopleresponsibleforpurchasingsoftwareatthehospitalthesameforallthreesegments?

Likeallthings,itdiffersbyhospital,butthelargerhospitalnetworks,havetriedtoconsolidatetheirpurchasingnotonlywithinbutalsoacrosshospitals.

Isthedecisionmakerformedicalsoftwarethesameasformedicalinstrumentationanddevices?

Insomecases,theheadofpurchasinginfluencesbothdecisions,butthepersonwhomakesthefinalchoiceisdifferent.SoftwaredecisionsareusuallymadebythehospitalITfunction,andthoseforinstrumentationbythemedicalstaff.

IthinkIhaveaprettygoodunderstandingofthemarketfornow.Let'slookatcompetitionnext.Wecouldidentifyallthecompetitorsandbuildupthemarketsharesusingacombinationofpublicdataandestimates.

Well,let'sassumethatyoudon'thaveaninfiniteamountoftimetolookatallthecompetitors.Youcanonlylookatthetopfivecompetitorsineachmarket.Youaregiventhefollowingdata:

AdministrationSystems

Sales（$M）

Growth（%）

MedCount

700

4%

HCSSoftwareSystems

100

7%

MorningsideSoftware

80

3%

AdminSystemsSolutions

70

2%

HTISoftware

50

15%

PatientAdministration

Sales（$M）

Growth（%）

HTI

300

5%

RegistrationSoftwareSolutions

240

4%

SignupSoftware

60

3%

HCSSoftwareSystems

30

16%

PatientSoftware

20

-1%

PhysicianSupport

Sales（$M）

Growth（%）

HCSSoftwareSystems

150

16%

PhysicianSupportSystems

100

11%

MedicalTechnologyInc

25

18%

HTI

20

32%

MedSys

5

15%

Veryinteresting.ThefirstthingIwouldnotefromthedataisthatthemarketconcentrationsareverydifferent.Inadministrativesystems,thetopfivecompetitorscontrol66percentofthemarketandinpatientadministration,theycontrol65percent.Butinthephysiciansupportmarket,theycontrolonly25percent.

Iwouldwanttoknowwhatgrossmarginslooklikeineachofthesemarketsaswell.Imightturntoanalystreportsandlookatcompetitors'financialstatementstodeducewhethertheyaremakingmoneyineachmarket.

Grossmarginsvary,ofcourse,buttheanalystreportshavemarginsof25to30percentforadministrativesystemsandforpatientadministration.Forphysiciansupport,themarginstendtobehigher,morelike45to50percent.

Iseethattwocompetitors,HTIandHCSSoftwareSystems,haveverylargerevenuegrowthinallthreesectors,althoughtheyeachdominateone.Iwouldwanttolookattheirfinancials,annualreports,andpressreleasestofindoutabitmoreabouttheirstrategyineachoftheseareas.

You'dfindthattheyrecentlyenteredthesenoncoremarkets.Whymighttheyhavedonethat?

Perhaps,likeourclient,eachhadastrongpositioninitsownsegment,HTIinpatientadministrationandHCSSoftwareSystemsinphysiciansupport.Maybetheytoodecidedtobranchoutintotheothersegmentstofindadditionalgrowth.

Thatisaverygoodhypothesis.Let'ssaythereisevidenceinthesourcesyouconsultthatsupportsyourassertion.

Well,ifthatweretrue,thesetwocompaniescouldbeathreatnotonlyintheothertwosegments,butalsoinourclient'ssegment,administrativesystems.Itlooksasiftheclientisslowlylosingmarketshareinitssegment,sinceitisgrowingmoreslowlythanitsmarket.

Goodobservation.

Themarketandcompetitortrendscouldalsosuggestthattheclientmaywanttoentertheseothermarkets.Inparticular,thephysiciansupportmarketlooksattractive,givenithashighgrowthandlackofadominantcompetitor.Thehighergrossmarginsmayprovideattractivereturnsonthenecessaryinvestmentinsoftwaredevelopment.However,thepatientadministrationmarketmayalsobeattractive.Althoughitismoreconcentratedandofferslowermarginsthanphysiciansupport,theclientmaybeabletoenterthissegmentwithasmallerup-frontinvestment.Giventhetrendtowardupgradingexistingcomputersystems,itmaybeimportantforMedCounttohaveaproductofferingineachofthethreemarketsegments.Thatshouldnotbetoodifficult,sincethecompanyisalreadyinthesoftwareindustry.

Perhaps,butyoushouldthinkalittlemorecloselyaboutthesetypesofsoftware.Areallsoftwaresystemsalike?

Well,letmethinkaboutthatforamoment.Isuspectpatientadministrationwouldhaverelativelylowentrybarriers.Fromyourear