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Creating Your Own Customers

Forward integration into the service sector may be right for a select number of medical product companies, but many such mergers fail. Services require dramatically different core competencies and prospective customers may view the product company as a competitor. The few successes highlight the strategies' hurdles.

Until the early 1980s, almost all kidney dialysis patients received hemodialysis in centers. There, large equipment cleansed their blood in dialyzers outside their bodies. But in the 1970s, Baxter International Inc. developed a system to free some dialysis patients from their machines. Its continuous ambulatory peritoneal dialysis (CAPD) system utilizes the patient's own peritoneal membrane inside his body as the semipermeable barrier through which blood can be filtered. In the convenience of the patient's home, dialysis solution is introduced through a catheter into the patient's peritoneal cavity. Toxins collect in the solution, which is then withdrawn from the patient through the same catheter.

Baxter's first CAPD kit was approved in 1979. The problem: this innovative product was ahead of its time, with no...

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