Madison-based TomoTherapy, a health care technology innovator, has sold out to another niche radiology technology company, California-based Accuray. The combined company will be better able to afford the direct sales and service forces and R&D investments critical to success when selling against radiology leaders like General Electric (GE), Varian Medical Systems and Siemens. Accuray’s superior financial performance made it the acquirer.

Many in the region had hoped when TomoTherapy went public at a high valuation that it would join Epic and Promega as mid-sized companies headquartered in our region anchoring Madison’s biotech community.  Had TomoTherapy evolved its business model strategy, it just might have succeeded. Instead, a plummeting then flat stock price led to the sale and, with it, an anticipated loss of high paying management jobs from Madison.

TomoTherapy invented a break-through niche radiology product that enabled higher doses of radiation to get to just the right spot, creating better cancer eradication results with less healthy tissue damage. What Tomo leaders forgot, however, is the Law of Nemesis – competitors always copy a good thing. Therefore, if you can’t build a moat around your product’s advantages, you’d better build a hard-to-copy business model around the product. Like osteoporosis technology leader Lunar before it (a company eventually sold to GE), management mistakenly assumed that it could win on product features against larger companies with multiple channel advantages and products deemed as “good enough” by purchasers.

The right model for Tomo to have followed was Hologic, which created an 800% return to shareholders since 1990 by broadening its scope to become a leading medical products manufacturer focused on women’s health.  An innovator in mammography equipment to detect breast cancer, the company defied convention by combining categories across industry boundaries through acquisition and internal development. Today its scope includes all the tools clinicians need “to spot cancer or osteoporosis while they can still do something about it. And treat the whole woman at every stage of her life, not just the disease.” Products range from mammography and breast biopsy to radiation treatment for early-stage breast cancer to preterm birth risk assessments.

Hologic’s business model innovation was to create  a compelling relationship with and offering for physicians focused on women’s health, a group that might have been lacking attention given imaging giants’ primary focus on radiologists and, to a lesser extent, interventional cardiologists. Hologic’s business model is captured in its mission – “to help women everywhere lead longer, healthier lives. It is our reason for being and the single focus of every breakthrough we pursue, every solution we design, every investment we make.” Great outreach marketing to women advances this mission over and beyond what Hologic’s products accomplish.

By way of contrast, Tomo kept innovating around the same platform, digging deeper and deeper into commodity-market quicksand. Remember, it takes only two qualified options for a strong purchasing department (which many hospitals have) to create price-driven competition.

One elephant in the room that Tomo might have addressed with an innovative business model is the lack of care coordination for cancer patients in tertiary hospital settings. Testing is poorly coordinated across the silo medical specialty departments, creating delays and confusion for patients and their families. Families in shock over a diagnosis are forced to become aggressive on behalf of their loved ones, often without the information needed to coordinate care. “But this expanded scope seems outside the focus of Tomo’s business and what it’s good at,” you might claim.  That’s exactly what was said about Hologic as it began its quest to make women’s health care better for clinicians and patients alike.

I appreciate that it’s easy to cast stones in retrospect at any company’s outcomes. So I want my readers to know that I follow what I preach about business model innovation. I am enhancing my company’s business model in light of Web 3.0 thanks to ICanPilot.

ICanPilot is a start-up by ex-3M executives formerly involved in 3M’s marketing and internal training. Founders Mary Paul, Rita Shor and Tomasz Rudolf aim to disrupt management consulting by distilling leading consultants’ processes into cloud-based software that enables teams to self-guide successfully through a challenging strategy or marketing project. Videos, worksheets, macros, examples, an online practitioner community and additional content from me, the consultant, are included in the offering.

I’d been wondering how my business might take advantage of web-technology changes when the ICanPilot team selected my business model innovation process over others in the strategy literature. So I jumped on the opportunity, as ICanPilot’s technology lets me serve brand new markets – smaller businesses who cannot afford consulting services and CEOs who want their leadership team to work without a consultant. Typically left on their own to “implement” great ideas in the business literature, ICanPilot’s solutions will enable these teams to achieve (at much lower investment levels) the great business results that successful consultants help their clients create.

Read this great review of the ICanPilot “Reinvent your Business Model” software. Chuck Frey, Founder and Publisher of the popular and well-reviewed Innovation Tools wrote the review.

Remember, your most important role as a leader is to design winning business model strategies for the markets that you serve and then align resources to execute against them, being careful to capture important synergies across your business models. Never stop asking, “What is changing around our business and how can we capitalize on it to our company’s advantage?”

How can you use business model innovation to become the Hologic of your industry, rather than its TomoTherapy? How can you follow my example and disrupt your business before new entrants disrupt it?