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Strategic analysis of VR in Surgical Usage

How have companies in this domain captured the value created during
each point of evolution?

All began with panoramic paintings where you should feel like you could see this
painted reality in front of you. When in the 1900s stereoscopic googles where
invented it was possible to see a 3D image in front of your eyes. With the
innovation of colour films and disks the images could be portrayed in colour and
in 1939 the View Master was patented where you could see famous sites from
all over the world in 3D.

Another approach was the Link trainer which was a simulator to train pilots.
Introduced in the 1930s, the link trainer reacted physically to the pilots
commands. Without screens to simulate a real flight, this was an early attempt to
make a simulator for pilots.

But before these simulators transformed into high tech machines as we know
them know, Sensorama from Morton Heilig was developed in the 1950s, making
not only a physical interaction but also visual reality with the machine possible.
In the 1960s this technology was used to make the first simulators with screens
for pilot training. With this adding up visual and physical interacting, companies
tried to make the experience as real as it could get and specialized in military
training in the beginning.

In 1968 the first visual reality, augmented reality head mounted display was
introduced by Ivan Sutherland. Due to its enormous size and weight it had to be
mounted to the ceiling. The main goal for researches was to make powerful
googles which made a real looking image in front of the eyes.

But it was not before 1987 that VR glasses were available on the market. Due to
more powerful processors, further developed displays and bigger data storage it
was possible to make wearable glasses and gloves. VPL were one of the first to
introduce this to the market with their EyePhones and gloves.

In the early 1990s arcade machines were developed to play games on them with
the use of a virtual reality headset and physical interacting. It was real-time
interaction with less than 50ms delay. Other companies tried to make VR
headsets for gaming at home but failed to make it popular in the 1990s.

As for medical VR surgeon systems, the DaVinci Surgical System was introduced
in 1999 and approved for surgery by the FDA in 2000. With it began the
development of better, more precise VR surgical system which can be used for
training and VR/AR systems for real time surgery. With now even more methods
to measure and analyse the data, further advancing technologies, VR in the
medical field is considered to be 2 Billion Dollar business by 2019.

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What business models have worked and which havent?

To describe the business models for virtual reality for surgery simulation we
have choosen some suppliers and analyse their offer for this product. The offers
of these suppliers can be distinguish between learning software and training
products (see examples below). Suppliers which offer learning software usually
sell just the software whereas suppliers for training products need to concentrate
on selling the hardware and software. They also need to adress the shipping and
installation issue. As far as our research went we just can find suppliers who sell
their products. There were no suppliers who decided to rent them or offer some
specific training education courses for surgeons. These might be an area these
business can develop and also represent a business opportunity.

Example learning software: SimSurgery offers products for surgical

simulation, combining simulation and multimedia content to support training
and education of skills. One of the features of SimSurgery products is the
possibility to develop a structured training program for trainees, which is based
on their own SEP learning concept.

Example training products: Surgicalsciences product line contains two

hardware and one software offers. The hardware products can be customized
with different software modules, which are made specific for the hardware

Hardware devices:

How important are uniqueness, resources, intellectual property

or complementary assets? How significant are standards? How
significant are network effects?

Innovation to provide solutions is not enough since the technology is vulnerable

to be copied quickly. Rivalry is intense since all competitors have their own
engineers who understand the process. Thus, VR for surgery needs uniqueness,
even when the innovation is not unique during the product life cycle, such as
resources, intellectual property and complementary assets.

Intellectual property protection, which is patent, is extremely important in VR for

Surgery Simulation to prevent R&D and product differentiation be stolen or
imitated. Compatibility between hardware and software to create real-time

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simulation and graphic is the main priority in developing the technology
innovation. Reverse engineering is the biggest threat for the company since
competitor can market the product faster in timely manner. Exclusivity is needed
to protect creative designs, brands, and most importantly, the technology
innovation. Thus, exclusivity will be an incentive to aid the company to reinvest
in R&D to improve companys competitiveness.

In Porters Five Forces, VR Surgery Simulation Companys bargaining power as a

buyer is high since the hardware suppliers sell the same component to various
companies. Thus, the switching cost to another supplier is cheap. The most
valuable resources of the company are the R&D engineer and the machine that
produce and create the VR.

Innovation combined with complementary assets is a protection. The company

must provide non-innovative service to win the market. Firstly, 24 hours online
customer service must be provided as a basis of customer service. Fast, reachable
and responsive representative should be prioritized. Secondly, product bundle
must include free periodic updates and repair and maintenance. Thirdly, system
lock-in as part of customization for academic institution and hospitals is
applicable, such as integrating it with their system; for example, directly put the
score and assessment display it the school information system. Lastly, offering
trade in with the newest device will be very beneficial to retain the existing
customers and render them as a repeat buyer. Reusing the second-hand
components or resell the second-hand products will also be a source of revenue.
Thus, supporting activities support the primary products within the value chain
of VR Surgery Simulation, even when the product matures.

The standard for the virtual reality in surgery simulation is still in its early stages,
considering of its progress. The explosive growth of virtual reality is rising
rapidly these past two years. Its net benefits and possible implementations have
yet to be fully uncovered. Within the VR industry itself, rules are being
established as we go on. In many ways, VR is self-regulating. For instance, unlike
a normal game or film, creating the wrong sort of experience in VR can make
users feel ill. Developers now understand what causes this and will aim to avoid
it. If the users feel ill, nobody will use the experience of virtual simulation.
Moreover, for the future software of virtual reality in surgery simulation, the
approval from some medical association such as World Medical Association
(WMA) or American Surgical Association (ASA) will be needed to provide a valid
standard to all medical students and surgeons all over the world.

Network effects means that the value of the technology depends on the number
of people using it. Nowadays, virtual reality is ready for widespread adoption.
Furthermore, this technology will soon be cheap and widely available, including
the surgery simulation software itself. The network effect of virtual reality will be
mind-numbing. As more people use VR, more media will become available for the
platform and the platform gets more engaging, bringing more users and
continuing the cycle.

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How do you anticipate that value creation in this domain may change
in the future?

The Value being created for the customer right now is the possibility to be taught
and educated without actual human casualty or other consequences.
The Value creation for the provider of the Software right now is being generated
by the fees and contract-payments of Universities in order to be able to use the
Software to educate students and improve or reintroduce the surgical skills of
professionals. The Software is not in a state of being easily adjustable yet. In case
of a development into a modular system, where the existing basic surgeries can
be easily adjusted to a real case with its own, very specific factors such as
sicknesses concerning blood pressure, diabetes, tissue problems etc. the value
creation may change.
A basic modular system, which enables users to adapt their Simulation, might
attract different customer groups. It could be used to quickly brief procedures
before actual operations in order to refresh the operators memories about this
procedures challenges and dangers. Another possibility would be to accompany
the surgery via the use of the concept of Augmented Reality. Here it would be a
reminder and helper of the surgeon providing him with all the important
information such as blood pressure, heart rate etc.
Then the Value creation might change from an educational use to a supporting

Before: After:
VC: Education VC: Assisting with important
information for the surgeon

What are the implications for the Key Players in this domain, and those
affected by it?

In order to be able to stay competitive in the future the Key Players have to
constantly stay in close contact with the educational sector of universities and try
to include surgeons into the creation of the application. This way they will always
be able to provide the product the customer actually needs.
Simply continuing with the same strategy might lead to a product that does not
meet the customer needs.

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