May 4th 1988 Scanvest Ring - parent company - 2 businesses - telecommunications(mature mkt & product) & informa

Paul Ruggieri (CEO & President – Ring Group), a wholly owned subsidiary of Scanvest Ring, Norway(one of Scandinavia’s l
2 issues –
1) HCS-100, single major opportunity for Ring Group to turn a profit for 1st time since 1984.
2) HCS-100, would enable Ring Group (Hq in NY) to break dependence on mature products & markets and position the comp

B’4 this 2 happen, board members to (i) resolve how the organizational responsibilities for the HCS-100 product should be div
organizational issues apart, there were 2 distinct marketing challenges - product policy & channels of distribution.
product policy - for most hospitals, TAS represented an incremental investment(a new addition), as opposed to an
HCS filled the need of a physician for a separate answering machine. TAS was considered a potential s
avg per month# ofspend
physicians
on
incremental
answering
servived
hardware
op
per
machine
exp
TAS
/ annum
cost
servicing
on a/c
cost
payback
of full time
period
contribution
attendant
100 65 30000 55000 10000
both hard $ & soft $ advantages. TAS seen as a significant hospital enhancement. Ruggieri, Owens & F
extremely attarctive margins in after sales add-on services = on an installed based of 24 hospitals, add-

channels of distribution - 3 distinct schools of thought - (i) deployment of manufacturing reps as opposed to a direct
Ruggieri supported the idea of some functional tasks be located out of HQ in NY, ie after sal
In addition Ruggieri wanted to pitch HCS to the mature hardware mkt customers, there

HCS-100 product was housed in Ring Medical(a div of Ring Group).

Ring Medical, since inception(ie July 1986) had operated autonomously, located in Massachusetts.
Entire management of Ring Medical, especially Ed Owens(Head) & Dave Forester(Technical Director) – the 2 men credited w
HCS-100 launched in Oct/Nov 1987 – a lot was expected – sales of an avg of 2-3 units / month & a revenue of $150,000 / mon
However in 7 months(ie till April’88), only a total of 5 systems had been sold Vs a budgeted sales of 30 or a tgt rev ($1.7 mil)
Management’s attention focused on the Sales & Distribution of HCS-100.
Company (National Sales manager – Charlie Witteck @ NY) hired 8 manufacturing reps @ 20% commission on sales of each
Company (National Sales manager – Charlie Witteck @ NY) reported to NY that the problem w/ HCS-100 sales effort is the u
To date investment in HCS-100 = $700,000. CEO Helge Midttun & other board members were Hesitatnt to invest further.

Ring Group 1st launch in US – sales & servicing of a “handsfree” duplex intercom system. In 1987, Intercom sales = $2 Millio
2nd major family of products - Automatic Call Distributors(ACD)
YEAR PRODUCTSALES CHANNEL GM competitors PRICE REMARKS
1987 handsfree duplex
2000000
intercom system
1987 intercom 60% 5-6 manu. Reps
direct sales50-60%
35% 60 national distributors
35%

OEM(pvt lbl) 20%

1988 ACD market600 million Northern Telecom, AT&T, Rockwell, Redcom, Suma-four
1990 ACD market1 billion
E-911 DIRECT sale by Ruggieri & a field representative.
100000 to $5 mil had a long sale cycle-6-1
7 manu rep coord by sales administrator crucial influence-local te
HCS-100 70,000 w/ all 6 functionalities. M
TAS(Telephone Answering Service) 55,000 DID(Direct inward dialing

1987 Tgt Mkt - Hospital. 7000 US hospitals spent ov

* add exhibit 7
challenges - buying behaviour was complex in
competitors - Ring Medical had 5 principal com
customers concerns - HCS system reliability &
canned demo package a

All products manufactured by Kitron in Norway.

Distributor(domestic & Intl) - Brekke in Norway. Transferred manu goods TP at TP.Margin +20-30%
Ring Group had 2 frustrations - (i) ACD in the US was pxed 50-80% higher than competition. This is on a/c of higher labour co
(ii) Ring Grp was not allowed by Scanvest Ring(Hq) to customize the products. As hq believed that benefits fm mod
this rigidity on behalf of hq is potentially b'cos of Scanvest Ring's near monoply position in domestic market & henc

Ring Group paid $25000 for acquiring IPR from Telphi Inc for their "computerized internal communication"for the hospital mkt.
IPR Initial Start-up
Working
cash Cap. Loan
25000 20000 50000

Ed Owens VP Marketing & Sales

Charlier Witteck National Sales Manager
Dave Forster Director - Engineering
 mkt & product) & information system(new & high grwoth).
ay(one of Scandinavia’s largest Information technology companies). Ring grp was the lone surviving foreign subsidiary. It had long been a

ets and position the company for future growth.

100 product should be divided, and (ii) apv a mkting plan of action.
channels of distribution.
dition), as opposed to an expenditure to replace an existing activity w/ new technology. Hence HCS-100's positioning be a source-efficienc
s considered a potential source for hospital revenue

ment. Ruggieri, Owens & Forster agreed to position HCS-100 as the unequivical "high end" hospital communication system. Relative to com
ased of 24 hospitals, add-on sales gross margins = $1 million.

eps as opposed to a direct sales force. Fixed Cost of each direct sales person = $60-75000 / annum. Challenges - danger of manu reps turn
ut of HQ in NY, ie after sales service, spares, warehouse, etc. However onsite service may not b reqd as HCS is a software intensive produ
are mkt customers, there by leveraging the mature & emerging market segments. He suggested a 3rd distribution strategy altogat

or) – the 2 men credited with designing, engineering & launching the HCS-100 product – strongly wanted their autonomy to continue. Repo
evenue of $150,000 / month a/w an avg gross margin of of nearly 50%. In the broadest sense, HCS-100 served to improve cost effectivene
30 or a tgt rev ($1.7 mil) achievement of only 15%.

mmission on sales of each installed system. However in 7 months the manu reps were able to sell only 1 system. The rest of the 4 had been
CS-100 sales effort is the utter lack of consistency in product policy, pricing & customer support….. n that w/o sorting out these problem
tatnt to invest further.

ntercom sales = $2 Million, ie 20% mkt share. Core customer = hospitals. New mkts for latest generation intercom products.
 REMARKS

m, Suma-four

had a long sale cycle-6-18 months(contact to installation).

crucial influence-local tel company-configured, installed & maintained the system.
w/ all 6 functionalities. Most technically advanced.
DID(Direct inward dialing). On recpt of call, the screen would display a file of information on the physician - as to how the physician wud lik

000 US hospitals spent over $1.4 billion on telecommunications equipment. Ring Medical strategy was to target large & med hospital(which

ehaviour was complex in hospital industry. Many hospitals were part of multi hospital buying groups, purchase negotiations was often centr
edical had 5 principal competitors, of which only 1 (ie AIS) focussed exclusively on hospital market. AIS's competing product offered 5 of the
- HCS system reliability & Ring Medical's reputation & history.
canned demo package as standard equipment to all, which provided decision makers a very realistic display of various HCS modules.

on a/c of higher labour cost for manufacturing @ Kitron & a higher distribution cost on a/c of channeling thru Brekke.
eved that benefits fm modification were out weighed by the r & d and manuf cost advantages thru product standardization.
n domestic market & hence no desire for competitve product features.

ation"for the hospital mkt. Ring had great engineering expertise & selling experience.
sidiary. It had long been a problem child.

ning be a source-efficiency(ie cost reduction) or source-effectiveness(ie quality enhancement) system.

n system. Relative to competition, HCS-100 was the "cutting edge", "most dependable hardware" & "the greatest # of module offerings. a c

- danger of manu reps turning in to competitors products. (ii) training. (iii) little control on manu reps. in addition loss of momentum, lack of c
a software intensive product. This being a high tech product in a new mkt, it may not b a good idea to separate product development from c
ribution strategy altogather, ie a network of telecommunications distributors - resellers w/ experience in telecommunication prod

utonomy to continue. Reporting up through Ring group would destroy the entrepreneurial spirit of the group.
improve cost effectiveness, efficiency & quality of communication between various participants in a hospital's ops, ie physicians, patients

The rest of the 4 had been sold by Ed Owens.

sorting out these problems, it would be futile to expect the reps to do their job.
 how the physician wud like the phone answered, how physician can b reached & special instructions for handling emergency calls. Simulta

arge & med hospital(which constituted more than 50% of total). Of all, only 5% had an automated TAS. Bal 95% mkt = $260 million(med & l

gotiations was often centralized. Equipment buying however tended to be more decentralized involving the hospital administrator. Large ho
ng product offered 5 of the 6 features. Only no premise alarm module was offered. Distribution was direct to hospitals & also via telecommu

various HCS modules.

# of module offerings. a clear quality edge(high end) with a low relative price point.

ss of momentum, lack of coordination & general shock to the entrepreneurial culture at Billerica.
oduct development from customer complaints.
elecommunication products & a reasonable clientele of health-care customers. Introlink, a west coast resller cud represent in wes

ps, ie physicians, patients, administrators & maintenance workers. HCS was an assembley of telephone, computer hardware & software, all
g emergency calls. Simultaneuos to being able to suitabley attend to calls, the operator wud also in return type a message into the physicia

mkt = $260 million(med & large hospitals). Atleast half of these would upgrade to an auto TAS in the next 5 yrs.

tal administrator. Large hospital's DMU(Decision Making Unit) included many managers & clinical people. A typical DMU for purchasing an
itals & also via telecommunications distributors. Direct sale covered - New England, NY & Chicago. Estimated 80 installations. AIS system
ller cud represent in westcoast, where Ring is not present. Sales must b under Ring's brand name, margins cud b negotiated, pric

r hardware & software, all of which were available "off-the shelf", with the exception of DCD(Digital Call Distributor). The DCD was man
message into the physician's TAS file. These messages cud be transmitted to the physician's digital pager or he cud access them independ

al DMU for purchasing an HCS-100 would involve the administrator & telecommunications manager, although others may participate depen
installations. AIS system was totally dependent on the hospital PBX system. However HCS-100 system was independent & wud be operat
ns cud b negotiated, pricing must be uniform. While Ring's own sales force of manu reps cud represent east coast.

butor). The DCD was manufactured by the Norwegian Scanvest Ring Subsidiary. Of the 4 building blocks of HCS-100, the DCD was the m
ud access them independently. The product's USP was it's flexibility in screen design & that the software was at nominal cost.

ers may participate depending on the module configuration.

ependent & wud be operational even when the main switch failed. As a 2nd benefit, an independent TAS switch wud allow independent trac
S-100, the DCD was the most Strategic, as it was among the few suitable for US telephony.
nominal cost.

ud allow independent tracking of the incoming / outgoing call fm other call traffic. Hence AIS user wud hv to pay a flat fee, however an HCS
a flat fee, however an HCS customer cud opt for a usage based charges model.