Learning from the Guidant Acquisition

It’s been six months since Boston Scientific acquired troubled ICD maker Guidant. CEO James Tobin shares the steps taken and lessons learned so far.

December 1, 2006

3 Min Read
Learning from the Guidant Acquisition


The acquisition of Guidant brought Boston Scientific a more balanced and diversified product mix. But it also brought many headaches, starting with a series of recalls. The question everyone asked was whether Boston Scientific could fix all of Guidant's quality problems.

“To those who think we paid too much for Guidant, it's key to understand that we had some important strategic reasons for the acquisition,” said CEO James Tobin. “We did our due diligence. Although the cardiac rhythm management (CRM) market had slowed down, we felt that it was showing signs of a comeback. And, we needed to diversify Boston Scientific.” Tobin made his remarks at the Cleveland Clinic Innovation Summit on November 7. Tobin talked about his view of the acquisition, noting that some of the lessons learned could benefit other device companies.

First of all, he said, “Even the best ideas aren't any good unless you execute them with reliability and quality.” He also stressed that it is critical for a company to understand the rationale behind a transaction in order to realize its potential.

“We saw that Guidant had good people with bad habits. If you change those habits,” he said, “you still have the good people.”

Tobin said Boston Scientific has taken great steps to begin fixing Guidant's problems. Significantly, he said, it was more difficult to “integrate Guidant into Guidant than it was to integrate Guidant into Boston Scientific. Everyone at Guidant operated in his or her own silo.”

With that challenge, Tobin set about making structural changes to Guidant's organization, particularly its manufacturing activities. “We added more testing at the design and design execution stages,” Tobin said. “It takes time and money, but it is well worth it.”

“We created a systems engineering group that reevaluated failure modes and fixed them, and we created a quality group.” The last five Guidant recalls were all component related, he explained, and so he stressed that a key lesson is to trust vendors, but verify what they say.

“We reduced research expenditures and kept only 20 key products. We took product development out of marketing, and we changed the way Guidant thought about safety. It now has product performance reports that are posted on the Web site monthly,” noted Tobin.

To restore confidence in Guidant, the company needed more transparency with physicians and patients. “The goal,” he said, “is that salespeople never have to apologize for their products.”

With the structural changes in place, Boston Scientific then made leadership changes. Tobin appointed himself head of Guidant and brought in only four Boston Scientific people. Outside people were brought in to fill new two new patient safety offices, and a new head of quality was hired. A new project management office was created from existing Guidant staff.

“It's too early to judge success,” said Tobin, “but at six months, we are already where we predicted we would be at 12–18 months. And we have not stopped innovating. We are looking at remote wireless monitoring, which is key to the future of CRM and to the future of Guidant.

Tobin said that the plan for Guidant is to overcome the current problems, grow the business, and execute new products. Guidant has reduced research and reallocated those resources to product development. Tobin said Guidant would build a couple of month's worth of inventory.

“We learned that operations matter and that people in the plant matter. We learned that there is no substitute for good products,” said Tobin. “And, we learned that it helps to be lucky, but the harder you work, the luckier you get.”

Sherrie Conroy for the Editors

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