Cardiac Pacemaker Business 
Harvard Business School
9-698-004
We've Got Rhythm! Medtronic Corporation's
Cardiac Pacemaker Business
The legacy af Medtramc Corporation, the company that created the cardiac pacemaker industry, is a proud one. Starting fram its earliest pacemakers, which had to be carried outside the body, Medtramc had achieved dramatic improve ments ln the functionality, size and reliabilit)' Df these d evi ces. ln 50 doing it had extended the lives, and improved the quality Df lHe, for hundreds Df thousands of p eopIe in whom pacemakers had been implanted. The pacemaker has been designated as one of the ten most outstanding engineering achievements in the world over the past 50 years, along with the digital compu ter and the Apollo 11 moon landing. 1 Medtromc, which in 1995 booked operating profit of $300 million on revenues of $1.7 billion, had been founded in 1957 in Minneapolis, Minnesota by Earl Bakken, a researcher and inventor who had to his credit patents on several af the crucial techn ologies that led to the modern heart pacemaker. Pacemakers were small, battery-powered devices wruch, when implanted within a patient, helped a malfunctioning heart to beat in a steady, fixed rhythm. Because Medtronk was the first entrant into the p acemaker field and built a strong technological lead, it enjoyed a substantial portion (over 70%) of the market sharp for cardiac ['",cing through the 19605. Building upon Medtronic's legacy Df leadership was not easy, however. ln the face of increasing competition, rapid technological change and tightening market and regulatory demands for product quality, Medtromc saw its market share cut by more than half between 1970 and 1986. Though it had invested heavily in technology and product developrnent over this period, much of that investment had been unproductive. Many projects faiJed to produ ce product designs that could be launched competitively, and the features and functionality of most of the products the company was able to
9-698-004
We've Got Rhythm! Medtronic Corporation's
Cardiac Pacemaker Business
The legacy af Medtramc Corporation, the company that created the cardiac pacemaker industry, is a proud one. Starting fram its earliest pacemakers, which had to be carried outside the body, Medtramc had achieved dramatic improve ments ln the functionality, size and reliabilit)' Df these d evi ces. ln 50 doing it had extended the lives, and improved the quality Df lHe, for hundreds Df thousands of p eopIe in whom pacemakers had been implanted. The pacemaker has been designated as one of the ten most outstanding engineering achievements in the world over the past 50 years, along with the digital compu ter and the Apollo 11 moon landing. 1 Medtromc, which in 1995 booked operating profit of $300 million on revenues of $1.7 billion, had been founded in 1957 in Minneapolis, Minnesota by Earl Bakken, a researcher and inventor who had to his credit patents on several af the crucial techn ologies that led to the modern heart pacemaker. Pacemakers were small, battery-powered devices wruch, when implanted within a patient, helped a malfunctioning heart to beat in a steady, fixed rhythm. Because Medtronk was the first entrant into the p acemaker field and built a strong technological lead, it enjoyed a substantial portion (over 70%) of the market sharp for cardiac ['",cing through the 19605. Building upon Medtronic's legacy Df leadership was not easy, however. ln the face of increasing competition, rapid technological change and tightening market and regulatory demands for product quality, Medtromc saw its market share cut by more than half between 1970 and 1986. Though it had invested heavily in technology and product developrnent over this period, much of that investment had been unproductive. Many projects faiJed to produ ce product designs that could be launched competitively, and the features and functionality of most of the products the company was able to