There was an increasing demand for healthcare in near future and 60% of hospitals in 1989 were small in size (below 200 beds). STM’s product was best suited for these small hospitals, so there was a scope for STM to capture 60% of the market with his product. STM’s advantage was its ability to understand the market requirements and was the first mover in this market segment. Since they have already installed their software in few clinics and had received good feedbacks, it was right time for them to expand otherwise it would be too late and some big player in the market will do it. As I see, there are two options with them, either go alone all the way and get the appropriate funding for expansion as Jerry was planning. The other option was to tie up with big players like IBM and use their resource and marketing force for expansion.
I would recommend tying up with big players in the market. Even though STM had a first mover’s advantage, it’s very easy for big player to jump in and give them competition. The product did not have the ability to lock in customers as they were for small hospitals, which could change their software anytime with minor effort and help from big players. Also to expand quickly they needed credibility, which they did not have at that time. Small clinics, which are already using some software wont, change and install STM unless they are comfortable that STM could last for couple of years. Tying up with big players will give them a channel to promote and expand their product and also the credibility that it’s being backed by big player and won’t get bankrupt. Instead of spending time and effort in marketing and searching for right venture capitalist and resources, they could use it in R&D, market research and product enhancement. This way they could have been a sprinter, rather than a marathon runner.
Jerry is a visionary and has many ideas. He is focused and he knows what he wants to do with his ideas. He wants to see his company as a vehicle, capable of supporting large-scale projects in system development. He could have just stayed local and earned money with local business, but that was not what he wanted. After reading the article, it seems to me that the approach he took for STM, to reject offers from IBM and other companies for alliance does not completely abide to his vision. He and his team seems to be more talented and interested in system development, but then by rejecting the offers from IBM would mean that they wanted to build the necessary infrastructure as well. The software that they developed could have been installed on any system, but Jerry neither selected any computer manufacture for hardware, not did he accepted IBM’s offer. This shows that he was not very clear which path to follow for achieving his target. He was hesitant and does things only if he was comfortable with it. He was hesitant to tie up with IBM because he did not understand the kind of inter-company dealings.
On the flip side, this behavior of Jerry could be seen as risk taker and innovator. He had the ability to take the challenge of going all alone and implementing full system, the hardware and software required for the clinic. He knew the market’s requirement too well and he also knew that he would have to act fast and in a smart way so that the big players do not crush them. He knew that he had a lead of one year from other players and within that time frame he will have to build his empire from scratch without compromising with big players.
My recommendation for Jerry would be to focus on software development and leave the hardware part to big players like IBM, i.e. alliance with big players and let them be a supporter rather than a competitor.
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