We’ve Got Rhythm! Medtronic Corporation’s
Harvard Business School
9-698-004
July 8, 1997
We’ve Got Rhythm! Medtronic Corporation’s Cardiac Pacemaker Business
The legacy of Medtronic Corporation, the company that created the cardiac pacemaker industry, is a proud one. Starting from its earliest pacemakers, which had to be carried outside the body, Medtronic had achieved dramatic improvements in the functionality, size and reliability of these devices. In so doing it had extended the lives, and improved the quality of life, for hundreds of thousands of people 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 computer and the Apollo 11 moon landing. 1 Medtronic, 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 of the crucial technologies that led to the modern heart pacemaker. Pacemakers were small, battery-powered devices which, when implanted within a patient, helped a malfunctioning heart to beat in a steady, fixed rhythm. Because Medtronic was the first entrant into the pacemaker field and built a strong technological lead, it enjoyed a substantial portion (over 70%) of the market share for cardiac pacing through the 1960s. Building upon Medtronic’s legacy of leadership was not easy, however. In the face of increasing competition, rapid technological change and tightening market and regulatory demands for product quality, Medtronic saw its market share cut by more than half between 1970 and 1986. Though it had invested heavily in technology and product development over this period, much of that investment had been unproductive. Many projects failed to produce product designs that could be launched competitively, and the features and functionality of most of the products the company was able
9-698-004
July 8, 1997
We’ve Got Rhythm! Medtronic Corporation’s Cardiac Pacemaker Business
The legacy of Medtronic Corporation, the company that created the cardiac pacemaker industry, is a proud one. Starting from its earliest pacemakers, which had to be carried outside the body, Medtronic had achieved dramatic improvements in the functionality, size and reliability of these devices. In so doing it had extended the lives, and improved the quality of life, for hundreds of thousands of people 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 computer and the Apollo 11 moon landing. 1 Medtronic, 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 of the crucial technologies that led to the modern heart pacemaker. Pacemakers were small, battery-powered devices which, when implanted within a patient, helped a malfunctioning heart to beat in a steady, fixed rhythm. Because Medtronic was the first entrant into the pacemaker field and built a strong technological lead, it enjoyed a substantial portion (over 70%) of the market share for cardiac pacing through the 1960s. Building upon Medtronic’s legacy of leadership was not easy, however. In the face of increasing competition, rapid technological change and tightening market and regulatory demands for product quality, Medtronic saw its market share cut by more than half between 1970 and 1986. Though it had invested heavily in technology and product development over this period, much of that investment had been unproductive. Many projects failed to produce product designs that could be launched competitively, and the features and functionality of most of the products the company was able