Australian paper Manufacturers (a) a case study

Submitted by: Group 4

Mukesh Kumar Sahu 27NMP22Amit Gujjewar 27NMP43 Komal Tagra 27NMP51Weve Got Rhythm! Medtronic

IntroductionFounded in 1957 in Minneapolis by Earl BakkenIt created the cardiac pacemaker industry and achieved dramatic changes that went on to extend and improve the lives of manyPacemakers for 2 disorders:Bradycardia- When heart not generates enough pulsesTachycardia- When heart generate too many pulsesIn 1995 they had a operating profit of $300 million on revenues of $1.7 billionStarted with a strong technological lead and over 70% of the market share through the 1960s.

IssuesKey employees left to other competitors or start-upsIncrease of competitionInvested large funds into innovation but did not follow throughNot efficient in reacting to changes in market demandQuality of products (defects) 4 malfunctioning products, including 2 major recallsMassive loss of share, from 70% in 1970 to 29% in 1986

Why Failure ? Management took on too many projects at onceMedtronic turned into a follower & not an innovatorNo cohesion & communication between departments i.e marketing & R&DLow accountability for management & employeesNo strategic written guidelines

A Home run saves the dayThe decline was arrested in 1986 more by good fortune than any change in management practice.Medtronic developed Activitrax a rate responsive pacemaker a device which could sense changes in body activity and accordingly stimulate the heart to beat accordingly

The turnaround in medtronic R&D1987 Assignment of Mike Stevens as VP for product developmentStevens started career with Medtronic in 1973 when Motorola decided to shut down its hybrid circuit mfg operations & Medtronic financed thatStevens had watched Medtronic struggles in Prod development form suppliers viewpoint

Stevens New PhilosophiesCommitments are sacredCreate a sense of urgencyProductiveness means happinessManagement means responsibility, not statusYou only get what you measureFocus on gaining market share

Measuring product development PerformanceSpeed Time required to get new product into the marketCost Focus on fully allocated costs gets managers thinking about the market shareInnovativeness translates into market share, pure & simpleProduct Quality In this business field failure is unavoidable

Processes & PracticesSpeed Reviewed new product ideas according to their potential for meeting business objectives.Platform Strategy many derivative products that could extend their life & market reachProject Documentation Marketing to sign off on Product specification & Engineering to sign off on Product description so that each other understand & agree to the requirementsPhase definition Business analysis phase (prod description & financial benefits were estimated), demonstration phase (technological feasibility was probed), Commitment review (commitment by each member of the project), development & commitment phase(chance of 100% success). In the first two phases lot of product ideas falling out

Processes & PracticesRhythm Management team established a schedule, far into the future, according to which products would be developed & launched. This was like setting a train schedule. It helps people to know when the next projects are scheduled to leave the station.Market Inputs Review physicians board became critical to Medtonicss ability to define the right pacing systems to meet clinical & customer needs

Time for new platform products was reduced by 75% between 1986 and 1996Fully allocated product cost per unit fell 30%Manufacturing defects dropped by a factor of 4No. of field failure over the life of implant dropped by 90%Market share increased from 29% to 51%Became leader in every segment of the market !Results to date

Process for new product concept definition

Challenges for FutureSuccess brought new set of challenges to the Medtronic teamFirst When trained people leave every two or three years, the understanding of what we are doing & why, it has a very short half-lifeSecond weve always measured the performance of our products in terms of their therapeutic benefits, but we need to change the rules of the game. We have to figure out how to add value in different waysThird Challenge was to stay ahead of competitors at least a generation aheadFourth Expansion to other markets bringing pacing to less developed countries our culture wont allow us to bring them substandard therapy just to make it affordable price reduction was a challenge

Differentiating factor to createWe have to work much more closely with our customers to understand how to make them more successful & profitable by using our productsCustomers not only physician, cardiologist, surgeons but also hospital management, payors & buying groups

Thank You!!