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W14725

FORUS HEALTH: CROSSING THE DISRUPTIVE PRODUCT CHASM

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Ramesh Narasimhan, M. V. Ravikumar and N. Barnabas wrote this case solely to provide material for class discussion. The authors
do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the

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permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.

Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-03-24

In April 2013, K. Chandrashekhar, the co-founder and chief executive officer (CEO) of Forus Health
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(Forus), sat in his office in Bangalore, India reviewing the company’s performance during the last
financial year.1 Despite initial challenges, Forus had managed to sell more than 100 of its patented
“3nethra”2 ophthalmic devices since inception in January 2010. A quarter of these sales came from
unanticipated export orders and the rest from hospitals and clinics in the domestic market. The company
needed additional funds to grow and in April 2012 received venture capital funding. During the last three
years, the number of employees at Forus had grown to 50 and the main office had moved into a larger
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independent building.

In January 2013, Chandrashekhar’s venture capital partner had urged him to recognize and size up the
market’s potential for 3nethra. The venture capital partner felt it was high time that Forus exploited its
first mover advantage in the market before imitators stepped in. Based on an assessment of the market
potential and the past sales performance, a target of 300 units was set for 2013/14. Chandrashekhar had
been busy setting up a new sales team over the past three months, but it would need time to come up to
speed in the field. He knew that while his team had to seek new customers for 3nethra, he could not
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underestimate the efforts required to keep existing customers happy with the product’s performance and
frequent upgrades. Chandrashekhar faced two opposing challenges: 1) maximize the sales volume of
3nethra by targeting the entire market but risk not being able to gain deeper acceptance within any
segment; and 2) maximize 3nethra adoption by focusing all efforts on the ophthalmology segment but at
the cost of uncertainty in achieving the sales target. Later that day, Chandrashekhar was scheduled to
meet with the senior sales team and formulate an approach that would help them achieve the sales target.

FORUS HEALTH: THE COMPANY

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In early 2005, Chandrashekhar and Dr. Shyam Vasudev, who were colleagues at Philips India Limited,
happened to listen to a passionate presentation by Dr. Aravind, the administrator of the world-famous
Aravind Eye Hospital3 in Madurai, on its missionary efforts to “eliminate needless blindness.” A poignant
documentary, “Infinite Vision,” which followed the talk, portrayed the plight of millions of blind poor in
the remote villages of the developing world. Vasudev and Chandrashekhar were visibly moved by the

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powerful message of the documentary: if soft drinks could reach the blind, why could not eye care? The

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duo pondered how they could contribute to the cause of solving health problems in countries such as
India. This thought led to the establishment of Forus.

Vasudev and Chandrashekhar had joined Philips on the same day in 2004. Vasudev had a doctorate in
embedded systems from the Indian Institute of Science, Bangalore and had a stint in academia as a faculty

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member in a technical institute. He had also been an entrepreneur for four years with an information
technology (IT) venture that out-licensed its anti-virus solutions for DOS-based computer systems. In
fact, Vasudev used his royalty income to pursue his doctoral program from 1991 to 1995. Vasudev
worked with CG Smith for two years, then with Ericsson as the head of their India research and
development centre for three years and at the company headquarters in Stockholm for four years. He
returned to India to work with Tata Consultancy Services for one year before joining Philips in 2004 as
the technical director of its health care division.

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Chandrashekhar had graduated from BITS, Pilani in 1988 and worked with CDIL and Alliance
Semiconductors in product management and business development. Prior to joining Philips in 2004,
Chandrashekhar had done his Master of Business Administration at Annamalai University and a global
management program at the Indian Institute of Management, Calcutta in 2003/04 with international
immersion in countries including Brazil, Russia, China and South Africa.

Vasudev recalled:
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Chandrashekhar and I form a curious team. That we had joined Philips on the same day was a
mere coincidence. I am a hard-core technologist with a strong research interest in embedded
systems. Chandrashekhar comes with an extensive experience of marketing and business
development in semiconductors. But we share a common vision.
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Chandrashekhar spoke of that vision:

Initially, we did not know what to do or how to contribute. But the passion to work in preventing
blindness had become strong in Vasudev and me. Over the following two years, we made several
visits to Madurai and attended the eye camps in remote villages. We concluded that innovation in
the eye screening device and the way it is deployed could help address the humungous problem of
preventable blindness4 in India.
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Chandrashekhar resigned from his job in February 2009 when an angel investor agreed to extend financial
support for the development of 3nethra. By December 2009, Chandrashekhar and Vasudev were
reasonably sure that the product concept of a versatile ophthalmological device, which would combine the
basic functions presently carried out by different devices, would be technically viable. They decided to
name the device 3nethra due to its multi-functionality that included imaging of the front and back of the
eye, generating a report on the patient through a connected computer and sending the image and report to
a specialist ophthalmologist through telemedicine. The device was conceived to be not only cost-effective
but also more rugged and portable than the imported brands currently in use. They legally registered the
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company as Forus Health Private Limited in January 2010, with an investment of INR10 million and with
Chandrashekhar as the founder and CEO. The word “forus” signified that the company would be “for us
— my community and me.” Vasudev joined Chandrashekhar in April 2010 as the chief technology officer
(CTO) and president, along with a team of five engineers, some of whom had worked on the prototype of
3nethra with him even before he joined the company officially.

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Vasudev closely interacted with the ophthalmologists at Aravind Eye Hospital during the early stages of

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product development. According to him, the optics technology of the camera in 3nethra posed the biggest
challenge, especially considering the deficiency of technological capability in India. By June 2010, the
prototype of 3nethra was completed, but the angel funding stopped as the angel investor lost interest in
the business. This was the first time Chandrashekhar realized that they had to be on their own and earn
their own living. He reminisced, “We started putting our real skin into the game. But the passion was

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there.” He had recognized that the success of 3nethra entirely rested on its acceptance by
ophthalmologists. Because the quality of the image produced by 3nethra did not compare well with those
of imported brands, Vasudev and his team continuously worked on its enhancement and provided free
upgrades to existing customers. A consultant was appointed to explore the opportunity to tap the non-
governmental organization (NGO) channel, which played a key role in conducting eye screening camps in
rural areas. Such an initiative, which started with one of the NGOs in Bangalore in September 2011,
resulted in a purchase order for two 3nethra from Sankara Eye Hospital, Bangalore in January 2012. By

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March 2012, Forus had added two sales executives and had sold 18 3nethras, mainly to ophthalmology
hospitals and ophthalmologists in the cities.

In April 2012, Forus received venture capital funding of INR300 million (US$5 million). The company
ramped up the head count to 50 employees and added senior positions such as chief financial officer,
vice-president of engineering, vice-president of manufacturing and head of sales and marketing. In the
financial year 2011/12, the company posted revenue of INR70 million (US$1.1 million) and profit of
INR2.7 million (US$0.05 million) (see Exhibits 1 and 2). By March 2013, Forus had installed 127 units
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of 3nethra, including 24 units that were exported to 10 different countries.

EYE-CARE CHALLENGES IN INDIA

A recent World Health Organization study5 estimated that there were about 550 million people in India —
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about half the population — who needed some vision correction. The country also had the largest number
of diabetic patients.6 Eighty per cent of India’s estimated 15 million blind people, accounting for more
than one-quarter of global blindness, could be cured if diagnosed early. Diabetic retinopathy, cataract,
glaucoma, cornea problems and refractive errors constituted 90 per cent of the causes for blindness. In
2010, India had an estimated 18,000 ophthalmologists and the same number of paramedic personnel that
included ophthalmic assistants and optometrists.7 A mere 800 ophthalmologists graduated every year,
keeping the ophthalmologist to patient ratio at approximately 1:60,000. The ophthalmologist to
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population ratio in rural India was abysmally low at 1:250,000.8 With such a low number of qualified
ophthalmology practitioners, only 7 to 10 per cent of people at various stages of blindness could be
screened and treated. Since the existing vision care system required specific diagnostic devices (a single
device for every problem) and an ophthalmologist for screening, it was very expensive. Thus, the rural
market remained underserved.9

OPHTHALMOLOGY MARKET ECOSYSTEM IN INDIA

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Ophthalmology Practice

Of the 20,000 ophthalmologists in India, about 4,000 worked at ophthalmology hospitals. These hospitals
had multiple specialty departments as well as an outpatient department (OPD) and were equipped with
high-end diagnostic devices. Aggarwal’s Eye Hospital (Chennai, Tamil Nadu), Nethralaya (Chennai,
Tamil Nadu), Sankara Eye Hospital (Coimbatore, Tamil Nadu), Vasan Eye Hospital (Trichy, Tamil
Nadu) and LV Prasad Eye Hospitals (Hyderabad, Andhra Pradesh) with their pan-India presence and

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Aravind Eye Hospital (Madurai, Tamil Nadu) with its pan-Tamil Nadu presence, were a few of the

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prominent ones in this segment.

An estimated 8,000 ophthalmologists worked at smaller eye hospitals, which had an OPD and a limited
in-patient facility. These hospitals usually had two or three ophthalmologists, an optometrist and a few
nurses. Around 3,000 ophthalmologists practiced at their own clinics. The rest were with ophthalmology

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departments of general hospitals10 that typically had multiple departments for treatment of several
ailments. The small eye hospitals and clinics attracted patients mainly through walk-ins. On the other
hand, large hospitals, besides attracting walk-in patients, also held pre-screening eye camps where
patients were examined for cataract and other common eye ailments. If an ailment was detected, the
patients were referred to the main hospital for further diagnosis and treatment. Pre-screening camps were
held for the general public in city suburbs, small towns and villages. They were also held in cities for
people living in residential clusters and for employees working in large corporations. Large hospitals had

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the personnel, infrastructure and networks required for regularly organizing pre-screening camps. In many
cases, these camps were sponsored by NGOs. Often non-ophthalmology practitioners, such as
diabetologists and general practitioners (GPs), referred patients to the hospitals and clinics and received a
referral commission.

Non-ophthalmology Practices
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Non-ophthalmology practices, such as diabetic centres, optical shops, pediatricians, diagnostic centres
and GPs, often attended to patients with eye-related disorders. These practices had very high potential for
early screening and identification of ophthalmic problems, thus aiding reference of such cases to an
ophthalmologist. But such referrals were currently small in number. Dr. Praveen, an ophthalmologist in a
leading hospital, commented:
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While non-ophthalmic doctors like diabetologists, general practitioners and pediatricians came
across many ophthalmic cases, their priority & competency was to treat the systemic illness often
missing to attend to the eye ailment. Efficient screening tools to document and triage ocular
conditions and where needed refer & confer through telemedicine to a remote ophthalmologist
will improve early diagnosis and referral and improve overall care to the patient.

Ophthalmic Diagnosis Process and Devices

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In a typical ophthalmic diagnosis scenario, after completion of the registration formalities, a patient went
to a pre-consultation room where an optometrist measured the prescription number of the eyes using an
automated refractor and a subjective refractor. Further, the prescription number of the patient’s lens, if
any, was checked with a lensometer. The intraocular pressure was then measured using a non-contact
tonometer. All these measurements were recorded for the reference of the ophthalmologist. Before the
patient met the ophthalmologist, drops were administered to dilate the patient’s eyes to facilitate further
examination. The ophthalmologist conducted a routine checkup of the eye using an ophthalmoscope. The
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anterior (cornea) and the posterior (retina) of the eye were examined using a slit lamp along with a 20D
and 90D lens. The doctor then prescribed treatment for the ailment diagnosed. If needed, the patient was
referred to ophthalmic specialties for further diagnosis and treatment. The specialists used advanced
devices for diagnosis. For example, a glaucoma specialist used an optical coherence tomography machine
to measure the cup-to-disc ratio, and a retina specialist used a fundus camera to take images of the
posterior that helped assess damage to the optical nerve. A depiction of the ophthalmology department
process flow is presented in Exhibit 3.

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The ophthalmic devices market in India remained quite fragmented with multinational firms having

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significant presence in some segments. The key players were Advanced Ophthalmic Imaging System,
Consolidated Products Corp. Pvt. Ltd., Bausch & Lomb, Carl Zeiss, J&J Vision Care, Appasamy
Associates, Mehra Eyetech Pvt. Ltd. and Toshbro Medicals (see Exhibit 4).

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CHALLENGES AT EYE CAMPS

Most parts of rural India lacked an eye care facility at primary health care centres. People from rural areas
relied mostly on eye camps conducted in their area by NGOs such as Rotary, Lions or some charitable
institution. NGOs created awareness about the camp and informed the villagers in advance to ensure that
enough people visited. On any given camp day, about 200 to 300 villagers would visit. Since they would
have to wait for a few hours, they could not attend to their work that day. A team of optometrists and

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paramedical staff checked the patients initially and referred only cases like cataract or corneal opacity to
the ophthalmologist present at the camp. Since such cases were found in 10 to 20 per cent of the visitors,
the ophthalmologist ended up spending more than the required hours at the camps, so many
ophthalmologists attached to hospitals did not want to be associated with them. As typical eye screening
equipment was expensive and could not be carried to the field for camps, eye inspection was conducted
with the help of a hand-held ophthalmoscope and torch light. For further detailed checkup, the patient
would be advised to visit the ophthalmologist at the hospital.
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3NETHRA: THE PRODUCT AND ITS POSITIONING

In 2011, Forus launched 3nethra as a single, portable, intelligent, non-invasive, non-mydriatic11 eye pre-
screening device that could help detect five major eye-related ailments such as diabetic retinopathy,
cataract, glaucoma, cornea problems and refractive errors. The device was an imaging unit consisting of a
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camera mounted on a stand for positioning the eyes of the patient. The unit could be connected through a
USB interface to an operator console, i.e., an off-the-shelf personal computer loaded with 3nethra
software that aided in imaging, analysis and communication. It combined the functions performed by
multiple stand-alone devices (Exhibit 5). The 3nethra device was capable of capturing pictures of the
posterior (retina) as well as the anterior (cornea) of the eye and generated an automated “Normal” or
“Need to See a Doctor” report, which was useful especially during the early onset of an eye disease when
patients did not experience symptoms. Through telemedicine, the device could connect patients with
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doctors at primary care centres or at eye camps to secondary or tertiary care centres for remote diagnosis
of ailments. At about INR0.5 million (US$8,500), the device was considered low cost, greatly reducing
the direct and indirect cost of pre-screening. Chandrashekhar explained:

Suppose we pre-screened 100 patients in a village with 3nethra and identified 20 of them as
having some eye-related problems. Among these, we referred 10 patients for further consultation.
But only four patients actually visited the doctor. Since we have their whereabouts with some
follow-up, we could encourage the remaining six to also consult the doctor. Thus, we could
increase the conversion rate from four to even seven patients.
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Positioned as an “intelligent pre-screening device,” 3nethra claimed to deliver the following benefits:
 Doctors: 3nethra obviated the need for the doctor to be present at the location of pre-screening. The
operator could send reports of the screened cases to the doctor through the telemedicine network and
the doctor could offer remote diagnosis and suggest treatment or a meeting at the hospital, if required.
This allowed the doctor to spend time only on patients who needed immediate attention.

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

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Hospitals: Pre-screening in rural areas would help identify patients at early stages, thereby increasing
the inflow of symptomatic patients to the hospitals. It also enhanced the corporate social
responsibility image of the hospital.
 Patients: Pre-screening at low cost, integrated with remote diagnosis, could help a patient get
screened for a problem right at his doorstep in a remote village. This saved travel and associated time
and cost, as well as lost earnings.

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 Government: 3nethra would be a great value enhancer to the blindness prevention efforts of the
government.

Referring to the eye camps, Dr. Meena Menon of Sankara Eye Hospital commented:

Sending senior doctors was not optimal use of manpower at the screening eye camps. A 3nethra
device fitted best here [eye camp] not only because it was economical, but it could also be easily

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operated by anyone with some training. 3nethra could also fall back on a remotely placed expert
(doctor) especially in such remote camps. The portability of the device made it even more
attractive for camps that otherwise had to have doctors screening patients with the help of torch
light, ophthalmoscope and other multiple devices with no ability to objectively record.

Over the past two years, 3nethra underwent product improvements resulting in enhanced quality of
images. All existing customers received upgrades for the software on their devices free of cost. Add-on
software applications, such as one for calculation of the cup-to-disc ratio, was available at extra cost.
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3nethra was priced at INR500,000. Another model, called the 3nethra Royal, was introduced. It included
an objective auto refractometer12 as an additional feature at an extra charge of INR50,000.

MARKETING 3NETHRA
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Chandrashekhar recounted how the positioning of 3nethra had changed over the past three years in
presentations he made during the annual conferences of the All India Ophthalmology Society13 held in
Ahmedabad (2011), Cochin (2012) and Hyderabad (2013). He said:

In 2011, our emphasis was on pre-screening as a concept for outreach camps and 3nethra’s
uniqueness in that context. The following year, we addressed the ophthalmologist as a user of
3nethra, highlighting the quality of the image (higher pixels) and the elimination of dilatation
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(non-mydriatic). We understood that it was essential to get the acceptance of the ophthalmologist
before we could gain wider adoption of 3nethra or for that matter any device. In the conference
this year (2013), we shared the case studies of actual usage by various customers. In fact, we
asked potential customers the application where they wanted to deploy 3nethra — be it eye
camps, mobile vans for telemedicine, pre-consultation and doctor’s consultation; in an OPD,
diabetic or diagnostic centre, GPs, etc. — and then shared our successful case studies in each of
these applications. For example, when we called on GPs, we emphasized the return on their
investment in 3nethra through the increase in patient footfall, additional income from the 3nethra
Pre-Screen Report [which was like an X-Ray report] and the commission that could be earned
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from referrals to specialist ophthalmologists.

K.M.K. Rajendran, the new sales head at Forus who had long years of experience in selling medical
devices, felt that 3nethra had not been sufficiently exposed to all possible users. He said:

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We demonstrate 3nethra to the doctor in an actual clinical setting with a patient. Invariably, the

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doctors have been excited and overwhelmed about the multi-functionality, compactness and
affordability of this innovation. By the end of the year, we will have 15 personnel promoting the
3nethra in different locations. This is basically like pharma sales — meet the ophthalmologists,
opticians and GPs and promote the product, generate interest and close the sale. The bigger the
funnel, the better the catch.

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SELLING 3NETHRA

Anil Chaturvedi, the company’s regional manager-south, believed that the sales approach had to vary with
the type of customer and that a one-size-fits-all approach would not succeed. At Dr. Samina Zamindar’s
clinic (an independent ophthalmologist), 3nethra was proposed as an affordable substitute for the

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expensive imported fundus camera, facilitating better patient compliance. At the Aggarwal Eye Hospital
branch in Bangalore, 3nethra was used as a pre-screening device for eye camps. On the other hand, at
Shekar Nethralaya, a stand-alone medium eye hospital, 3nethra was deployed in the OPD section,
restricting the use of the fundus camera exclusively for conducting fundus fluorescein angiograms for
diabetic retinopathy cases.

Chaturvedi explained:
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It is essential to build an excellent rapport with customers to gain a deeper understanding of what
suits them. For an independent ophthalmologist, we may have to suggest the possibilities of
revenue enhancement with 3nethra. Owning a 3nethra, an equivalent of the expensive fundus
camera, in addition to the regular slit lamp, would enhance the professional image of the doctor.
The 3nethra images could be used for educating and counseling patients, thus ensuring better
compliance to doctor’s instructions and better treatment outcomes. The additional service of
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counseling, with the help of 3nethra images, could be made chargeable — a win-win for both the
patient and the doctor.

Chaturvedi narrated how a dozen 3nethras, the single largest order so far, were sold to the Aggarwal Eye
Hospital:

We had sold them two machines on trial. In 2012, they invited me to a camp held in Mauritius,
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where they have a hospital. There was a long queue of people waiting for free eye checkups.
Luckily for me, the CEO of the hospital was sitting next to me observing the progress of the
camp. I kept updating him on the number of patients screened for further consultation and
treatment for glaucoma, retina or cataract. He was so impressed that the next day he called up and
told me that he would place an order for 10 more devices.

Camps had been useful for getting increased footfalls to hospitals. Chaturvedi added, “See this SMS from
the administrator at Aggarwal’s . . . this is a thank you message. It says that he got 14 OPD walk-ins from
the camp held the previous day.”
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A sales person, on average, demonstrated 3nethra to about 75 ophthalmologists in a month. Referring to

the developments of the recent month, Rajendran observed that “In January 2013, four of my territory
sales managers had sold four 3nethras and there is more business to come. Doctors are appreciating the
product. We have not heard about any objections related to the product. The low rate of conversion14 is
either due to lack of funds to buy it immediately or the doctor already had a high-end device.”

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The three applications of 3nethra — namely, pre-screening, OPD and diagnosis — accounted for roughly

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50 per cent, 40 per cent and 10 per cent, respectively. For a detailed sales mix of Forus for the financial
year 2012/13, refer to Exhibit 6.

CHALLENGES FACED IN 3NETHRA ADOPTION

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According to some doctors, though the large ophthalmic specialty hospitals were reaching out to the
general public and employees of big IT companies through camps, their number was small. On the other
hand, though the stand-alone medium and small eye hospitals were large in number, they were not used to
conducting outreach camps. Hence, in the first place, these customers (doctors) had to be convinced about
the benefits of conducting eye camps and would need to be supported in organizing them. This would
demand effort in terms of identification of the right locality, promotion of the camp among local residents

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and managing logistics, etc. at the level of the device manufacturer. It would only build momentum
gradually, with no assurance of quick results.

The same doctors further commented that, given the intense competition among independent
ophthalmologists, they would not be inclined towards charging anything more than normal consultation
fees. It was felt that at a corporate chain of eye hospitals, such as Vasan’s Eye Hospital with a pan-India
presence, the doctors might not feel comfortable with anything less than an imported Carl Zeiss or
Topcon brand of devices.15 While 3nethra produced pictures clear enough to help make sound diagnosis,
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some of these imported brands claimed better picture clarity. Besides, 3nethra or any fundus camera, in
the view of many ophthalmologists, was only an also-have rather than a must-have for diagnosis. “3nethra
provides only two-dimensional images and does not allow a direct examination of the patient’s eyes
unlike the slit lamp or ophthalmoscope,” commented Menon.
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ORGANIZING THE SALES EFFORTS

Chandrashekhar contemplated a sales approach for the current year:

We have six members in our sales team now and soon we would be 15 by the end of the year [see
Exhibit 7]. They would focus on the “standard segments” of ophthalmology and diabetology and
push “boxes” like the medical reps do. I have an intern from the United States who will work
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only on the GP chain. We have already begun covering the national GP chain. Once we are able
to hit 50 GPs, including the leading national GP chains in the country, we will hand over the GP
chain to a three-member sales team and tell them to go after the 600,00016 identified GPs in the
entire country since the product had already worked with 50 GPs. We may have to give a monthly
installment facility or have a pay-per-use model for GPs. But I expect as much as 80 per cent of
the sale to come from the ophthalmology segments next year, including exports.

As Chandrashekhar browsed through the Excel file on his computer screen, he thought he had greater
clarity on what to do for the current year. He recalled the argument of the venture capital partner in the
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morning meeting: “Consider only the ophthalmologists. There were 20,000 of them attached to about
8,000 clinics or hospitals.” Thus, an annual sales target of 300 units looked meager, given the potential of
the addressable market. The question was how to pull all the stops before imitators came into the market.
Chandrashekhar shared his concern: “While our technology is protected by patents, the competition could
work around the same. Any of the international brands could also pose challenges to Forus. Even
domestic players, like Appasamy, who offer a wide range of equipment, could add a device similar to
3nethra.” What can he do to take the company forward?

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EXHIBIT 1: INCOME STATEMENT OF FORUS FOR THE YEAR 2012 (AUDITED)

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FORUS HEALTH PRIVATE LIMITED
STATEMENT OF PROFIT AND LOSS
Amt in INR
For the year ended March 31, For the year ended March
2012 31, 2011

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Revenue from operations 69,623,641 4,250,000
Total Revenue 69,623,641 4,250,000
Expenses:
Cost of Goods Sold; employee benefits; 2,487; 83,117; 997; 550,962; 7,139; 2,717; 712; 408,221;
expenses; finance costs; depreciation; 68,628; 256,049 258,290; 470
amortization expenses
Other expenses 17,230,482 44,904,867
66,934,598 60,268,273

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Research and Development Expenses
(55,000,000)
capitalized
66,934,598 5,268,273
Profit/(Loss) before exceptional and
2,689,043 (1,018,273)
extraordinary items and tax

Profit/(Loss) before tax; Tax expenses 2,689,043 (1,018,273)

(1) Current tax 550,000 –
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(2) Earlier year tax – –
(2) Deferred tax 101,524 314,647
Profit/(loss) for the year from continuing 2,240,567 (703,626)
operations

Profit/(loss) for the year 2,240,567 (703,626)

Earnings per share:
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(1) Basic Earnings Per Share 83.2 – 26.1

(2) Diluted Earnings Per Share 83.2 – 26.1

Source: Forus management.

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EXHIBIT 2: BALANCE SHEET OF FORUS FOR THE YEAR 2012 (AUDITED)

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Amt in INR
As of March 31, 2012 As of March 31, 2011
I. EQUITY AND LIABILITIES
(1) Shareholders’ Funds:
(a) Share Capital 269,230 269,230

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(b) Reserves and Surplus 1,536,941 1,806,171 (703,626) (434,396)
(2) Share application money pending
allotment 3,450,000
(3) Non-current liabilities:
(a) Long-term borrowings 10,437,196 10,437,196 61,500,000 61,500,500
(4) Current liabilities:
(a) Trade payables 8,485,947 1,554,072
(b) Other current liabilities 14,892,980 1,401,034

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(c) Short-term provisions 550,000 23,928,927 - 2,955,106
Total 39,622,295 67,470,710
II. ASSETS:
(1) Non-current assets
(a) Fixed Assets
(i) Tangible assets 28,682,944 58,794,558
(b) Deferred tax assets (Net) 416,171 314,647
(c) Long-term loans and advances 776,579 4,658,521
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(d) Other non-current assets - 29,875,694 - 63,767,726
(2) Current assets
(a) Trade receivables 1,584,000 2,093,358
(b) Inventories 8,135,101 141,750
(c) Cash and cash equivalents 27,499 9,746,601 1,467,877 3,702,985

Total 39,622,295 67,470,711

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Source: Forus management.

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EXHIBIT 3: PATIENT FLOW AT A TYPICAL OPHTHALMOLOGY CONSULTATION ALONG WITH

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THE EQUIPMENT USED

The patient In the pre-consultation Optometrist checks

completes registration room, optometrist power of existing
formalities and goes checks the power of lens, if any, using

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to pre-consultation the eyes with lensometer
room refractors

Patient’s eyes are dilated Optometrist checks

before meeting the doctor IOP* with the help of
a tonometer

Doctor advises treatment or

directs the patient to
ophthalmic specialties yo The doctor examines
the cornea and
retina with slit lamp
The doctor conducts
routine examination of
the inside of eyes with
ophthalmoscope
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Optometrists record all
measurements for doctor’s
Glaucoma Retina specialist takes reference. Doctor also records
image of retina with
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specialist measures all measurements and

cup-to-disc ratio fundus camera diagnosis in the same file
with OCT**

*IOP: intraocular pressure.

**OCT: optical coherence tomography.
Source: Case authors prepared this process flow based on observations made at Sanakara Eye Hospital, Bengaluru.
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EXHIBIT 4: EQUIPMENT FOR EXAMINATION, DIAGNOSIS AND MEASUREMENT OF EYE

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PROBLEMS

EQUIPMENT&USE PRICE RANGE IN US$

AND BRANDS
Devices for Examination and Diagnosis
Direct Ophthalmoscope: A hand-held instrument for routine examination of $250 to $600

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the inside of the eye. It allows for a magnified image of the retina and optic (Heine, Welch Allyn)
disc.
Binocular Indirect Ophthalmoscope (BIO): BIO provides a thorough view $1,000 to $2,000; up to $10,000
of the retina and vitreous of the eye through a dilated pupil in order to for video models
evaluate the health of the interior of the eye and to identify structural (Heine, Keeler, Welch Allyn)
abnormalities.
Slit Lamp: An instrument consisting of a high-intensity light source that can $2,000 to $13,000
be focused to shine a thin sheet of light into the eye. It specifically examines (Zeiss, Haag Streit, Marco,
the external and internal anterior structures of the eye. Topcon)

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Fundus Camera: Used for creation of a photograph of the interior surface of $15,000 to $60,000
the eye, including the retina, optic disc, macula, and posterior pole (i.e., the (Canon, Topcon, Kowa, Zeiss)
fundus).
Devices for Measurement and Diagnosis
Tonometer: Tonometer measures the internal pressure of the eye or $1,200 to $6,000
Intraocular Pressure (IOP). An increased IOP may indicate glaucoma. (Medtronic Xomed, Haag Streit,
Perkins)
Refractor: A machine used to provide an objective measurement of a $2,000 to $6,000
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person’s refractive error and prescription for glasses or contact lenses. (Reichert, Topcon, Marco)
Keratometer: Also known as an ophthalmometer is a diagnostic instrument $1,200 to $10,000
for measuring the curvature of the anterior surface of the cornea. (B&L, Reichert)
Diagnostic Ultrasound: In A mode: measures the axial length of the eye. In $5,000 to $15,000 for A scan;
B mode: provides a two-dimensional image of the interior structures of the $10,000 to $35,000 for A/B scan
eye, which permits detection of retinal detachments, foreign bodies and (Quantel Medical, Alcon,
tumours. Sonomed and OTI)
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Source: “Guide to Ophthalmic Equipment for Non-ophthalmic People,” Orbis, April 4, 2004, http://telemedicine.orbis.org/
data/1/rec_docs/211_Opthalmic_Equipment.pdf, accessed September 5, 2013.
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 Page 13 9B14A064

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EXHIBIT 5: 3NETHRA, AN INTEGRATED OPHTHALMOLOGY DEVICE

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Ophthalmology Departmental Process Flow &
3nethra–Integrated Pre‐Screening Device
4 3
Keratometer NC Tonometer

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(Curvature of (Glaucoma by measuring
Cornea) intraocular pressure)
2

Refractor(Myopia
Hyperopia) Paramedic
eliminated administers 5
eye drops

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Slit Lamp for pupil dila on
(image of cornea)
Fundus camera
(Image of Re na)

1
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3nethra PC Display with Camera 6
& intelligent image processing SW + PC
interface for tele‐ophthalmology
1‐6 : Process Flow

Source: Company brochure.

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EXHIBIT 6: FORUS HEALTH SALES MIX FOR THE FINANCIAL YEAR 2012/13 (%)

Segments Share
Ophthalmology Segment 60
Large eye hospitals, i.e., hospitals having multiple eye 16
specialty departments
Small eye hospitals 21
No

Stand-alone ophthalmology clinics 5

General hospitals with ophthalmology department 18
Non-ophthalmology Segment 40
Telemedicine 15
Diabetologists 5
Opticians 4
Corporate social responsibility, i.e., NGOs associated 4
with companies
General Practitioners 2
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Source: Forus management.

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 Page 14 9B14A064

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EXHIBIT 7: FORUS ORGANIZATION STRUCTURE

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CEO (K. Chandrashekhar)

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Head Sales
(K.M.K. Rajendran)

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Services Engineers
Bangalore - 2
Mumbai - 1*
Delhi – 1*
Regional Regional Manager –
Manager-South & West & North (T.
East (A. Amin)
Chaturvedi)
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Sales Sales Sales Sales Sales Sales

Territory Territory Territory Territory Territory Territory
Manager Manager Manager Manager Manager Manager
(Coimbatore) (Hyderabad*) (Nagpur) (Delhi) (Kolkata*) (Chandigarh*)
No

Note: (refer to Forus Organization Chart on current page)

1. A. Chaturvedi and T. Amin had been with Forus since inception.
2. K.M.K. Rajendran and the sales territory managers had been with Forus for less than three months.
* Proposed recruitment.
Source: Forus management.
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 Page 15 9B14A064

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ENDNOTES

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1
Financial year as per common Indian practice ends in March.
2
In Hindu mythology “3nethra” refers to the third eye of Lord Shiva, which symbolizes the forces of creative destruction in
the cosmos.
3
Aravind Eye Hospital received the Hilton Humanitarian Prize in 2010 and the Gates Award for Global Health in 2008
among many other awards and accolades.
4
Preventable blindness refers to blindness that occurs over a period of prolonged weakening of vital parts of the eye. Such

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blindness occurring due to diseases such as glaucoma can be prevented through timely intervention at the onset of the
illness.
5
H.K. Tewari et al., “Vision 2020: The Right to Sight,” NPCB Publications, CME Series 9, www.aios.org/cme/
cmeseries9.pdf, accessed September 10, 2013.
6
Diabetes is one of the major reasons for damage to the retina.
7
Typically, ophthalmologists focus on diagnosis and surgeries whereas optometrists check for primary eye care refractive
errors, such as presbyopia, and prescribe contact lenses, low-vision aids and vision therapies.
8
G. Venkata, S. Murthy, S.K. Gupta, D. Bachani, R. Jose and N. John, “Current Estimates of Blindness in India,” British
Journal of Ophthalmology, 2005, 89, pp. 257–260.

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9
Forus website, http://forushealth.com/forus/products, accessed September 24, 2014.
10
A general hospital is set up to deal with many kinds of disease and injury and normally has an emergency department to
deal with immediate and urgent threats to health.
11
Non-mydriatic means not requiring dilation of the pupil of the eye for inspection by the doctor.
12
An auto refractometer checked the power of the eyes without manual adjustments.
13
All India Ophthalmology Society is the largest association of eye surgeons in India. It was started in 1930 and has
currently about 16,700 members. A number of scientific programs, symposia, seminars and workshops are held as part of
the four-day annual conference.
14
The statement on “low conversion rate” was in comparison to the high appreciation doctors had for 3nethra, which was not
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resulting in sales.
15
Carl Zeiss and Topcon are widely recognized within the profession as among the leading global brands and the
benchmark for quality ophthalmological equipment.
16
U. Anand Kumar, “India Has Just One Doctor for Every 1,700 People,” New India Express, September 22, 2013,
www.newindianexpress.com/magazine/India-has-just-one-doctor-for-every-1700-people/2013/09/22/article1792010.ece
accessed January 23, 2014.
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No
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