Is Omar Ishrak the last, best hope for the medical device industry?
That seems to be the implication of an Economist article that lays out all of the woes facing the once-mighty sector and then posits the recently installed CEO of Medtronic as someone who could possibly point the way back to the promised land.
From the article:
Mr Ishrak joined Medtronic from GE Healthcare in June. He has commissioned an independent, transparent review of Infuse. New R&D efforts and acquisitions, he says, will be evaluated with more rigour. To appeal to stingy customers, he wants to change the way Medtronic’s products are sold, gathering data on cost-effectiveness so that the firm can “project offerings in economic terms”.
Most important, Mr Ishrak will devote more attention to emerging markets.
As we mentioned in this space when he was hired, Ishrak seems like a relatively straight shooter, especially for a CEO, at least as evidenced by his willingness to question whether industry's current approach to business will be sustainable in the long run. Where others might be tempted to blame all of industry's ills on factors like the device tax or FDA, Ishrak seems like the type to look inward and ask how industry—or, at least, Medtronic—can adjust to changing realities in a way that leads to long-term benefits.
Of course, this is all speculation, and, of course, I've never run a major corporation. But I do know that in today's world of nonstop marketing and posturing, it's rare to come across someone with any kind of power or visibility who is willing to actually acknowledge, in public, the unpleasant realities of their business.
Candor is something we could all use a little more of. It's far better to accept a situation as it is rather than loudly adhere to a fantasy, simply for the sake of maximizing one's public image. That's the first step toward making things better. If Ishrak can do that, he'll already be leaps and bounds ahead of most of corporate America.
What do you think? Is Ishrak going to revolutionize the way things are done? Or is he, with apologies to Mr. Townshend and Co., the "same as the old boss"? For that matter, is industry's situation truly as dire as the Economist would seem to have it?
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The real deal
Having had the pleasure for working for Omar in the past I can say that your characterization is right on. He's a no-excuses kind of leader who digs in deep to business dynamics and has the horsepower to gain insight. While I don't know if he's an industry savior (or if any one leader can be) but he will absolutely drive Medtronic to executional excellence and strong value offerings.
Good luck
I am never convinced then any one person can turn the world on its head. His legacy will be the amount of $$$ he cuts to shore up share.If he is fortunate a new product or strategic marketing will give a boost and create a nominal picture of health in the industry. All industries is on a roller coaster, we just need to know when we are ready to head down the biggest hill with our hands held up high for all to see.
'Economist' Casts Medtronic CEO Ishrak as Savior of Device Indus
Not sure what Omar's strategy and actions will amount to but recognition of the reality of healthcare economics is a good place to start for medical device and pharma industry. The developed world has reached a saturation point in terms of what it can afford to spend on health care. Patent protection has enabled the industry to charge unsustainably high prices for branded products which in turn has fostered expensive R&D, sales and marketing industry models. Essentially the companies have been able to prosper on the back of U.S. and other major developed markets. They will have to change this business model based on the dual fact that the developed markets will demand better ROI on the healthcare spend and the developing markets are highly price sensitive. Companies in the healthcare industry will have to adopt a new economic and business model where the cost of bringing products to market are significantly reduced, profit margins and prices on products are brought down and global access and sales are increased. Successful companies who start dialing these new realities into their business practices will be hugely successful. Most company executives are in denial but at least Omar seems to be accepting of this new reality.
Candor About a Route That Will Fail
I totally agree with what kbrown2005 stated.
The Economist seems to focus on cost-cutting measures, which have already been a major push by the previous two Medtronic CEO's, but have only lead to declining Medtronic stock prices during their tenure. And, with the lack of any major new products for the past ten years, how could putting more economic rigor (i.e. brakes) on new R&D efforts produce revolutionary products to save the medical device industry? Only innovative products that treat unmet medical needs will save the medical device industry! Not some new talking head! Indeed, looking at the history of Medtronic, the writers at the Economist should have known that more of the same will simply not cut it. Of course, not pursuing more poorly performing, massive acquisitions as in the past would make sense, but one shouldn't need a high-priced CEO to figure that one out. Any sane person with absolutely no business education could see that just as well.
I can't believe how Mr. Blair has fallen so hard for what appears to be refreshing honesty. Just because Mr. Ishrak doesn't outrightly complain about the medical device excise tax does not mean that Medtronic isn't funding Advamed to do his wailing for him. From what Mr. Ishrak has stated publicly to investors, he has primarily focused Medtronic's future efforts solely on emerging markets...the exact same thing St. Jude Medical and Boston Scientific are doing.
Each of the Big Three, looking to sell their old stuff to some new people, will be in extremely tight competition with each other, and they will totally be focusing on market share and the bottom line. Who can strive the best to scratch out one more tenth or one more million at whatever cost at the expense of the other two? In that emerging market race-to-the-top, that cost will be what all of the three CEO's see as mere "costs", the liabilities of new R&D and worthless employees who only did their best to get those three companies where they are today.
I second the comment. No, he is no "last best hope". Indeed, he has carved a path, that will be emulated by others, to lead the continued downfall of the major players of the medical device industry.
CEO
Device companies have been able to have large margins in the past. This has CONTRIBUTED to poor quality of Management in this field and the knowledge of efficient Operations that produces a quality product. I know they will say the $$ is in research cost i.e. clinicals etc. but most of the cost is from prototype products going to commercialization after clinicals in an inefficent Op's environment. Is this guy the Savior? No. Just another CEO who sees easy money moving jobs off shore for whatever reason i.e. taxbreaks, cheaper labor, etc.