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15.912 Technology Strategy
Fall 2008
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Strategy and Product
Development at Medtronic
Professor Jason Davis
MIT Sloan School of Management
What went wrong?
Pressure to meet
short term targets
Declining
Performance
No time for thinking
through strategy
Overload
No decisions
How was it fixed? “Best Practice”
• Clear, committed leadership
• Well articulated strategic goals
– “He cleaned up the front end…”
•
•
•
•
Coherent management philosophy
Measures and incentives
Processes and practices
A sense of urgency
• That reinforce each other
Medtronic’s Activity System
Heavyweight &
Lightweight
Team
Structures
Train
Schedule
Platform
Strategy
Gate
Documents
to Force
Integration
No Failure
After
Commitment
Review
Technology
Development
Change in
Career
Paths
Performance
Metrics
Funnels & Project Plans
The innovation funnel
Phase I
Phase II
Phase III
Launch
An Innovation Funnel Example
Gatekeeper
Gatekeeper
Gatekeeper
Gatekeeper
Idea
Feasibility
Capability
Concept
refinement and
prototype
creation
Product
optimization
Generation
Initial marketing
and technical
concepts
Contract
Charter
One page description of
proposed project including
objective, rationale and
development routes. Early
Commercial Assessment
Cross-functional
development plan
including project plan as
contract between team
and Gatekeeper.
Launch &
Rollout
Commercialization
Production &
Distribution
Launch
Proposal
Launch Plan including
CEP approval request.
Post
Launch
Review
Tracks success of
and key learnings
from launched
products
KEY
= GATE
= DOCUMENT
An Example
Low
Resource
Consumer Value Perception
Enabling
Technology
New Core
Product
New
Benefits
Improvement
High
Resource
Moderate
Resource
No Change
Variant
Breakthrough
Radical
Platform
Next
Generation
Sxxxx
Fruit
Cxxxx
Fruit
Natural
Incremental
Lxxxx
Export
Txxxx
Base
Cxxxx 2000
Fxxxx Face
Rxxxx
Fruit
Vxxxxx
Improvement
Brand
Support
Cxxxx
Lxxx
Derivative
Bxxxx
Extension
Super
Cxxxx
Before: Medical Products Co.
Process Changes
New Core
Process
Product
Changes
New Core
Product
Next generation
of Core Product
Next
Generation
Process
ALPHA
WATER
EARTH
FIRE
Single
Dept.
Upgrade
Tuning and
Incremental
Improvement
No
Change
CALIFORNIA
NEW YORK
Addition to
Product Family
SPARROW
OWL
FINCH
SIGMA
Add-Ons and
Enhancements
KENYA
DELTA O
HAWK
No Change
B-THROUGH / PLATFORM
ROME V
ROME VI
ROME I
ROME II
ROME III
ROME IV
SUMMER
GEMINI 1-10 (10 PROJECTS)
CROW
CLEO
SOLSTACE
DALLAS
SPRING
AUSTIN
OAK
WINTER
SANTA FE
CEDAR
FALL
FLAGSTAFF
DERIVATIVE / CPS
LEO
ROLAND
PINE
Before: Medical Products Co.
• Company makes an automated diagnostic system that
– contains three components ‐ electro optical hardware, software and a disposable panel
for bio material.
• A lot of derivatives ‐ all small, on all three system components.
• Derivatives character was aimed at increased functionality and features, which
was counter to what the customer wanted. They were giving them “more bells
and whistles”.
• Not a single new platform in 7 to 8 years.
• Had four very small efforts designed to explore “next generation” 21st Century
technologies ‐ while competitors were investing 100s of millions of dollars.
Within one year of implementing, the company’s product development restructuring
process had the following effects...
After: Medical Products Co.
ADVANCED
DEVELOPMENT
Product
Changes
Process Changes
New Core
Process
Next
Generation
Process
Single
Dept.
Upgrade
Tuning and
Incremental
Improvement
No
Change
New Core
Product
ALPHA
GAMMA
VENUS
Next generation
of Core Product
Addition to
Product Family
BETA
MARS
DELTA
DELTA I
ZEUS
ATLANTIS
ROME V
SIGMA
DELPHI
Add-Ons and
Enhancements
DELTA II
ROLAND
LEO
ROME I
ROME II
ROME III
No Change
ROME IV
B-THROUGH / PLATFORM
DERIVATIVE / CPS
CLEO
OAK
CEDAR
PINE
After: Medical Products Co.
• Eliminated all but one of the breakthrough projects, and subsequently eliminated
all breakthroughs.
• Joint ventures between corporate parent to share development resources.
• Part of a joint corporate effort to think about next generation technologies.
• Eliminated a lot of derivatives and feature enhancements that weren’t adding
value to customers.
• New partnered platform project:
– Outside companies are doing the hardware and software components.
– The client company is doing the bio components.
– Sufficient amount of resources have been allocated to ensure that the project is
adequately staffed to meet all project requirements.
• Focus Development efforts to be in line with core competencies and establish
alliances to do all other tasks outside their own business.
Results:
• Cut R&D spending from $65mm to $35mm.
Less Is More:
Medical Products Co.
36
21
8
5
Before
After
# of Projects
in Portfolio
Before
After
# of Projects
Launched /Year
Measures
Focus
Measure
• Speed
• Cost
• Innovativeness
• Cycle time
• Fully allocated product costs
• Product performance relative to
competitors
• Field performance
•
Product Quality
Note that measures are balanced against each other. Note also that
other measures may be appropriate to capture each “focus point” in
other contexts.
Processes and Practices
• Speed
– “Being fast eliminates so many other problems…”
– Clear product definition process, rooted in strategy
• Platform strategy
– Leverage technology across the range
– Clearly differentiate technology development from
product development
•
•
•
•
Project documentation
Phase definition
Rhythm
Market inputs
Why does it all matter? For
Medtronic?
• Because all the growth would be in differentiation:
– Cochlear Implants
– Insulin Pumps
– Etc.
• Specific S‐curves and Market Diffusion Curves can
taper, and business models can be imitated, but these
Organizational Competencies remain:
– Best practice product development mostly generalizes to
other product platforms
– Similar customer relationships: doctors and baby boomers
The Bottom Line…according to the
mangers…is commitment
• “People ask us what the secret is, to make a
development organization work effectively. I
tell them there aren’t any magic bullets that kill
the problems. It’s just discipline. You need to
do what you say needs to be done. You need to
be in it for the long haul. There are no quick
fixes.”
• “ It’s interesting how many people leave these
conversations and then go off in search of an
easier answer from some guru somewhere. It’s
amazing that the obvious isn’t so obvious”
Looking forward
• Next session: Launching Toyota Prius
– Decision Making in Real‐Time