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REV: JANUARY 14, 2009

ATH MicroTechnologies: Making the Numbers
This case describes the evolution of an innovative, entrepreneurial firm in the medical technology industry. The successes—and difficulties—of the business are due in large part to management’s attempts to design and use formal control systems to achieve profit and performance goals. The case is structured in five chronological sections: (1) founding of the company, (2) growth phase, (3) push to profitability, (4) refocus on process, and (5) takeover by new management. At the end of each section, you will be asked a series of questions about how managers should use control systems to overcome the problems that they encounter. Write your brief answer in the space provided before proceeding to the next section. In this way, you can evaluate your understanding of the applicable techniques to balance profit, growth, and control.

I. Founding
In 1997, Dr. Charles Casper and John Frost founded ATH MicroTechnologies, Inc. to develop, manufacture, and sell a new medical imaging product. Dr. Casper (47), a radiologist, had trained at Johns Hopkins medical school and, after a research fellowship at Harvard Medical School, joined a private practice in Florida. Casper specialized in the use of imaging systems for the medical practice. Over time, he had experimented with different procedures, such as ultrasounds and x-ray, until he became interested in a new technology based on sending electronic impulses through electrodes attached to the skin and observing how these impulses changed as they went through the body. Together with John Frost—an engineer who specialized in digital imaging for medical applications— Casper perfected the technology, reducing its cost and improving its resolution. Both founders anticipated a significant market potential for their product. Relatively low cost combined with improved image quality made it a very attractive alternative for applications where other imaging systems were prohibitively expensive to use. With these expectations, they convinced a group of doctors to invest in the venture. The company started with $3.6 million in paid-in capital. In 1998, ATH MicroTechnologies received regulatory approval to market its first product⎯an imaging system to work in conjunction with minimally invasive surgical procedures. Building on this initial success and after a detailed sales and profit projection over a five year period, a deal was struck with Alumni Capital Partners, a venture capital firm, which agreed to invest $8.7 million to support the launch of the new product. The business plan anticipated the introduction of new products with increased image resolution and a broader range of applications to pull the company into profitability by the end of 2001. During this period, all the cash of the business would be invested in product development, production tooling, and marketing.

________________________________________________________________________________________________________________ Professor Robert Simons and Doctoral Candidate Antonio Dávila prepared the original version of this case, “ATH Technologies, Inc.: Making the Numbers,” HBS No. 197-035, which is being replaced by this version prepared by Professor Robert Simons. Certain details have been disguised. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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ATH MicroTechnologies: Making the...
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