Commoditization of PACS and the Opportunity for Disruptive Innovation

Abstract

The transition from film-based (i.e., analog) to filmless (i.e., digital) medical imaging represented a radical innovation in medical imaging practice and technology, which in large part was driven by the creation of the picture archival and communication system (PACS). For the first time, medical imaging professionals could capture, archive, transmit, and display medical images digitally, thereby eliminating the inefficiencies associated with hard copy film, which had been the norm for almost a century. This radical technology innovation in turn led to a myriad of medical imaging practice innovations including the outsourcing of professional medical imaging services (i.e., teleradiology), rapid report turnaround times (through speech recognition software), and instantaneous and ubiquitous access to medical imaging data. While the early adoption of PACS in the USA was in large part restricted to the academic practicing community, its dissemination over time has effectively permeated the entire medical imaging community. The result is that the PACS market has been transformed from a new purchaser to replacement market, which has dramatically reduced economic opportunity for PACS vendors. Along with this shift in market dynamics, PACS technologic innovation has declined, which in part is attributable to its longevity. The early and mid-stages of the PACS S-curve were defined by incremental innovations leading to substantive performance gains in workflow, productivity, and operational efficiency, which effectively created a positive return on investment (ROI) for PACS vendors [1]. The late stage of the PACS S-curve has been associated with a relative dearth of innovation and lack of performance improvement measures, which has led to its commoditization. The resulting declines in PACS profit margins and new sales have in turn lead to a further decline in R&D expenditures, which perpetuates this commoditization trend and lack of innovation. While this may seem like a lost economic and technologic cause, the reality is that these market conditions have created an opportunity for disruptive innovation. If successful, this could reinvigorate the PACS marketplace and produce a new cycle of technologic and practice innovation.