MGMT 8805M Week 3 Entry Analysis Example

Which Tier Falls Next: An Entry Analysis Segmenting an Ultrasound Maker's Customers by Revenue, Margin and How Much of the Offered Image Quality Each Actually Uses, Locating the Overserved Foothold and the Nonconsumers, and Projecting the Entrant's Route Upward

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Walden University

MGMT 8805M: Agile and Disruptive Innovation Management

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Month Day, Year

Which Tier Falls Next: An Entry Analysis Segmenting an Ultrasound Maker's Customers by Revenue, Margin and How Much of the Offered Image Quality Each Actually Uses, Locating the Overserved Foothold and the Nonconsumers, and Projecting the Entrant's Route Upward

Incumbent and Entrant

This analysis takes the position of Brightwater Medical Imaging's strategy staff in early 2026. The entrant is Pocketsound, whose handheld probe has already won primary care practices and some emergency departments. The question is which of Brightwater's customer tiers Pocketsound is positioned to take next, and by what route.

Segments and Their Basis

Tiers are drawn by clinical use, not by hospital size, because the image quality a buyer needs depends on what the scan is for. Each tier's usage measure is the share of the system's imaging presets and advanced functions its users touched at least monthly, from Brightwater's own service logs.

[after]

Revenue and margin figures come from Brightwater's segment reporting to its board; usage comes from service log data on 2,300 installed systems. Margins include service contracts.

Table 1

Brightwater Customer Tiers, 2025

The Overserved Foothold

The bottom of the table shows the overserved tiers Christensen and Raynor (2003) describe as the classic foothold for low-end entry: customers who pay for performance they do not use. Emergency departments and anesthesia teams use fewer than one in ten advanced functions, and Brightwater earns its lowest product margins from them. Pocketsound has already entered the first and is a natural fit for the second, since needle guidance for nerve blocks and line placement needs a clear, shallow image rather than diagnostic depth.

The Nonconsumers

A second foothold sits outside the table: ambulance services, rural clinics and primary care practices that never bought ultrasound. They were not overserved; they were not served at all. Pocketsound's early sales came from this group, which matters because nonconsumers compare a handheld with nothing, not with a cart, and so judge it far more generously.

How Much Is at Stake in Each Foothold

The two lowest tiers together account for 23% of Brightwater's revenue but a smaller share of its gross profit, about 15%, because their margins are lower. That gap is the arithmetic behind the incumbent's indifference. The nonconsumer foothold is harder to size, since it shows up in no Brightwater report. A rough count from state licensing data finds about 1,900 ambulance services and 2,600 rural clinics in Brightwater's sales territory, few of which own ultrasound. At Pocketsound's price, equipping even a third of them would produce a customer base several times larger than Brightwater's installed emergency department systems, which is the kind of volume that funds the entrant's next round of improvements.

Why Brightwater Would Welcome the Loss

Brightwater's own priorities make the low tiers easy to give up. Its 2025 plan targets gross margin above 58% and directs new engineering spending toward cardiology and radiology, where margins and usage are highest. Losing emergency and anesthesia business would raise its average margin. Christensen (1997) described exactly this pattern: incumbents rationally move upmarket, away from the customers an entrant takes, and feel better off doing so.

The Projected Route

Adner (2002) argued that whether an entrant can move up depends on demand: on how much the requirements of the low-end and mainstream segments overlap, and on whether mainstream customers would value the entrant's improvements. Applied here, anesthesia's requirements overlap heavily with emergency medicine's, so the next step is short. Obstetrics is the likely step after that, since routine dating and growth scans use modest image quality, while cardiology's dependence on advanced functions makes it the hardest to reach. The projected order is anesthesia by 2027, routine obstetric scans by 2029 and, possibly, cardiology screening after that.

What Would Change the Projection

If Pocketsound's next product releases target diagnostic features rather than ease of use, it may skip anesthesia and aim at obstetrics directly. If obstetric departments decline handhelds for liability reasons, the route stalls below Brightwater's core.

Limits

Usage data shows what functions are touched, not which ones matter for a decision. A survey of obstetric sonographers on which functions they would give up would test the projection. The nonconsumer count is also rough, since licensing records do not show which services already own a probe of some kind.

References

Adner, R. (2002). When are technologies disruptive? A demand-based view of the emergence of competition. Strategic Management Journal, 23(8), 667-688. https://doi.org/10.1002/smj.246

Christensen, C. M. (1997). The innovator's dilemma: When new technologies cause great firms to fail. Harvard Business School Press.

Christensen, C. M., & Raynor, M. E. (2003). The innovator's solution: Creating and sustaining successful growth. Harvard Business School Press.