This case study presents an industry perspective on medical innovation. Introduced as a scientific breakthrough in the late 1970s, transcutaneous oxygen monitoring was rapidly adopted for routine use in neonatal intensive care. But plagued by technical problems, it was within a decade being replaced by pulse oximetry, a still more recent technology. Its use in efforts to prevent retinopathy of prematurity, an eye disease of preterm newborns often leading to blindness, proved disappointing. The project included interviews with executives and design engineers of companies marketing the device, with investigators who had pioneered the technology, and with senior practicing neonatologists. The findings, reflecting complexity and uncertainty, are relevant to issues concerning health care in the United States and other developed nations. They centre on the key role and ultimate responsibility of the medical profession, with a need for greater attention to the scientific training of health care workers, as perceived by members of the medical device industry. The views of senior investigators are integrated into the picture, with discussion of major challenges faced by the medical community.