Medtronic Spine to become a separate business unit. I don’t see how this can make them competitive again. |

Medtronic Spine to become a separate business unit. I don’t see how this can make them competitive again.

Medtronic CEO Geoff Martha explains the importance of competition (Medical Device & Design)

A major reorganization will position the world’s large medtech company for higher growth. But employees will be asked to hold on tighter to market share to help drive innovation.

Whether they’re running a start-up or the largest medical device company in the world, CEOs must be competitive. Their job requires a desire to win that’s strong enough to lift and inspire an entire organization.

New Medtronic CEO Geoff Martha is putting his competitive fire more front-and-center than most other CEOs as he takes over the reins from his friend and mentor Omar Ishrak, who joined as CEO in 2011, the same year he convinced Martha to join him.

Martha may have been with Medtronic for nearly a decade, but he’s coming to the corner office with an outsider’s zeal. In a bid to accelerate growth, Medtronic is splitting into 20 operating units. Kaila Krum, managing director at Truist Securities, said that the arrangement — if executed correctly — could motivate leaders of those 20 new units. “It pushes those business leaders to really look and understand the markets they go after,” she said.

But Martha is also asking Medtronic employees to move forward with a new competitive spirit. In an interview with the DeviceTalks Weekly podcast, Martha said he’s seeking to create a culture that is “ultra-competitive outside the company, but in an appropriate way because [medtech companies are] all in healthcare together, and then inside the company, a little bit of a friendly competition.”

The following is a transcript from the interview. It’s been edited for clarity.

DTW: Why is competition important to you?
GM: Well, the first point I want to explain is the `why’ behind the competitiveness. Why is it important for Medtronic? We’re a mission-driven company. We talk about putting patients first. We talk about creating new healthcare markets. The `why’ is important because the markets that we play in have gotten so much more competitive over the years. If we want to carry out our mission, which is to create these new, wonderful therapies and globalize them, once we do that, we’ve got to be able to hold onto our share.

DTW: What does market share have to do with innovation?
GM: We create these new markets and historically, we’ve let competition come in behind us and take big chunks of the new markets too quickly. If that happens, we don’t get the full financial return for our shareholders and we don’t get the capital we need to keep funding innovation. That market share is a source of fuel. It fuels our invention and market development, which is really the mission-driven nature of Medtronic. You have to make that connection. It’s super-important because this innovation doesn’t come free, right? Clinical innovation, technical innovation is very expensive. So we have to do a better job at holding onto this share.

DTW: Salespeople can easily measure success, but how can other employees — say, engineers or clinical trial managers —show their competitiveness?
GM: This is not just about sales. This is about everybody in the company. You mentioned engineers. The best way to hold onto your market share is to innovate, right? Let me give you an example. In the cardiac rhythm space, we have Link. It’s inserted just below the skin and it monitors cardiac arrhythmias, and it monitors atrial fibrillations that could cause stroke. Our new Link2 device has a four-and-a-half-year battery life with low-energy Bluetooth. This means we see all this data in the cloud and can do all kinds of analytics. We created this market and it’s been wonderful for patients and wonderful for us. It’s a $700 million, $800 million business for us. Now Abbott and Boston Scientific came into the market. Despite that, we have held onto over 80% share because we are constantly innovating. We are on our fourth-generation device while they’re coming out with their first-generation device. It doesn’t effectively compete.

DTW: How does this compare to the past?
GM: In businesses that I took over that wasn’t the case. New competition came in and our 100% share position went down to like, 30%. People would think, `Well, there’s three of us. Let’s split it – one, two, three.” Well, no. That’s not the way it’s supposed to work. We’ve got to hold onto that share. That economics is what’s funding other parts of our business. Things like renal denervation, that’ll be one of the biggest things to happen in public health in a long time. Things like the soft-tissue robot, they cost money. These other businesses need to be more competitive to hold onto their share to help fund the fuel for our mission.

DTW: You’re splitting Medtronic in 20 semi-independent operating units. Do you want them to compete with each other?
GM: Not really, no. We talk about that internally. One question being asked was, `Well, can you still be competitive and be mission-driven?’ I went through that whole explanation that I just gave you and the answer is, ‘Yes’ and ‘Yes.’ And then someone asks, `Is this going to drive internal competition?’ I talked about this with our leadership team, our top 200 leaders just last week, and I’m okay with a little friendly competition inside the company. We don’t have overlapping markets where we’re competing. We don’t want to be competing in front of the customer, but I think it’s okay for businesses within Medtronic to strive to be the higher-growth businesses or the business that produces the most cashflow. We need the whole package to work together.

DTW: What does a healthy balance look like?
GM: We have some businesses that are like rocket ships that are growing really fast and generate less cash, and we have others that are mid- to single-digit growth that are throwing off much more cash that we can reinvest in innovation and M&A. Everybody has their role. Internally, we have our Peak Performance Awards that businesses can win for growth or new product launches. That kind of friendly competition is good, but what I really hope to see is everyone sharing best practices and sharing technology platforms that will make Medtronic better.