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Remolding a Leader

Originally Published MX January/February 2003

COVER STORY

Interview by Steve Halasey

Martin D. Madaus, 
president and CEO 
of Roche Diagnostics, 
on leadership 
in the market--
and in the boardroom.

Leadership counts--and not just on the bottom line. Company leadership can influence the direction of a marketplace and its investors, making available resources that would otherwise have gone into other sectors or industries. And personal leadership can encourage companies to take on challenges well beyond those of an already competitive marketplace.

But don't take our word for it. Ask Martin D. Madaus, president and CEO of Roche Diagnostics Corp. (Indianapolis), the leader in the global market for in vitro diagnostics (IVDs). Rising through the ranks at Boehringer Mannheim (acquired by Roche in 1997), Madaus took over the helm of the company in January 2000. He arrived with a clear notion of the kind of company he wanted to lead, and rapidly set about putting his changes in motion.

Madaus's efforts have paid off in the company's bottom line--and elsewhere. During the past year, Roche has repeatedly grabbed top honors at a wide variety of awards presentations. In December, the company's e-business unit received

Swimming into 2003

Originally Published MX January/February 2003

EDITOR'S PAGE

During 2002, the great debate among economists was whether the U.S. economic recovery might falter, slipping into a so-called double-dip recession. 

Led by analysts such as Stephen Roach, chief economist at Morgan Stanley Dean Witter Co. (New York City), the double-dippers cited weak economic conditions--growing unemployment coupled with low rates of manufacturing growth, consumer spending, and corporate profits--as key factors making the economy vulnerable to such a second hit. During the final quarter of 2002, however, most economists brushed such predictions aside, instead projecting that the world's economies will experience a sluggish but steady recovery during 2003. 

When EarningsCan Wait

Originally Published MX January/February 2003

Finance

When Earnings Can Wait

Early-stage medtech companies may maximize shareholder value in the long run by forgoing profits in the short run.  

by Mark Speers, Nathan Harrington, Brian Chan

An old belief holds that small, growing companies should earn profits as soon as possible. Corporate boards, supported by some Wall Street analysts, often push CEOs to steer their companies quickly into the black under the mistaken notion that positive earnings always drive valuations higher and higher. However, the most expeditious course to profits frequently entails a lean expense base or opportunistic selling--circumstances that may inadvertently and unfortunately limit a company's innate potential and its long-term shareholders' gains.

Promoting True Healthcare Reform in Japan

Originally Published MX January/February 2003

INDUSTRY ASSOCIATIONS

AdvaMed offers medical technology as a palatable solution to Japan's healthcare crisis.

Marjory E. Searing

Marjory E. Searing is executive vice president of global strategy and analysis at AdvaMed (Washington, DC), an industry trade association.

There is a Japanese expression to the effect that "good medicine is bitter in the mouth." Certain medicines, however, are less difficult to swallow than others. Advanced medical technology, if afforded the right environment, is an example of a less-bitter solution to Japan's healthcare problems. 
As Japan moves forward with planned reforms of its regulatory and reimbursement systems for medical technologies, it will be crucial for Japanese authorities to consider the roles that high-technology medical devices and diagnostic products can play in their society. Such medical technologies have the potential not only to improve the quality and efficiency of healthcare in Japan, but also to improve Japan's overall financial and economic situation. 

The Medtech Outlook for 2003

Originally Published MX January/February 2003

MARKET ANALYSIS

Economic recovery and continued growth seem the likely outcomes for most medtech companies--but perhaps not for everyone. 

by Steve Halasey

Looking at the balance sheets of medtech's largest companies, one would never imagine that company leaders might have concerns for the future of their firms. In a time when sales growth among the companies listed in the S&P 500 is puttering along at a mere 1.52%, growth rates such as those of medtech's average of more than 15% look pretty good. 
But to find out what's really going on in the medtech sector, one also has to look beyond the largest companies. Among the thousands of start-ups and small companies that populate the medtech landscape, company leaders are watching the future warily and hoping for the best.

This article offers a look at what industry watchers think is in store for the coming year, including the future prospects for some key sectors of the industry.

Sidebar:
Participants

It's the Stupid Economy

The Medtech Outlook for 2003- Expanded Version

Originally Published MX January/February 2003

MARKET ANALYSIS

The Medtech Outlook for 2003 - Expanded Version

Economic recovery and continued growth seem the likely outcomes for most medtech companies--but perhaps not for everyone. 

Interview by Steve Halasey

Looking at the balance sheets of medtech's largest companies, one would never imagine that company leaders might have concerns for the future of their firms. In a time when sales growth among the companies listed in the S&P 500 is puttering along at a mere 1.52%, growth rates such as those of medtech's average of more than 15% look pretty good. 

But to find out what's really going on in the medtech sector, one also has to look beyond the largest companies. Among the thousands of start-ups and small companies that populate the medtech landscape, company leaders are watching the future warily and hoping for the best.

Sidebar:
Participants

This article offers a look at what industry watchers think is in store for the coming year, including the future prospects for some key sectors of the industry.

It's the Stupid Economy

Fight or Join Forces?

Originally Published MX January/February 2003

TOPSPIN

By seeking common ground, medical device company executives can avoid patent infringement litigation and advance shared strategic objectives.

Brad Sorenson and Dan Goldberger

In March 2001, QRS Diagnostic LLC (Minneapolis) spotted some unsettling news on the Web site of Dolphin Medical Inc. (Hawthorne, CA):

Brad Sorenson (left) is president and chief operations officer of QRS Diagnostic LLC (Minneapolis), and Dan Goldberger (right) is president of Dolphin Medical Inc. (Hawthorne, CA).

 Dolphin was intending to introduce a pulse oximeter designed in the Compact Flash format. QRS holds two patents on the design of medical devices in computer cards, including Compact Flash cards, and notified Dolphin that its new pulse oximeter could potentially infringe on the QRS patents. Within days, the companies' patent attorneys had exchanged letters staking out each firm's basic position.

Beyond the Gantt Chart: New Methods for Measuring Product Development

Originally Published MDDI January 2003

PRODUCT DEVELOPMENT INSIGHT

Deliverable-based metrics offer a product development team objective measures of project progress—and the focus needed to get the job done.

David Warburton

Discuss this article on-line!
Share your comments and questions with the author and other readers in MD&DI's Author Forums.

Many new product development programs fail to finish on time. That observation is not a surprise to anyone. What might be a little more surprising, however, is that the project manager often does not recognize (or admit) that the schedule isn't being met until very late in the project. And what is very surprising is that the project manager's subsequent estimates of completion may be no more accurate than the initial estimate.

Projects fall behind schedule for countless reasons, many of them unavoidable. But the reasons that a project manager doesn't foresee the schedule slips—and then cannot predict when that same project will finish—are usually the same. In these cases, the Gantt chart, that ubiquitous tool of the project manager, is not providing accurate enough information about a project's progress against schedule.

Gantt's Limitations

Henry Gantt developed his chart in the beginning of the twentieth century to schedule textile workers more efficiently, and it has become an almost universal tool for displaying the schedules of engineering projects. For all its utility, however, a Gantt chart—and the commercial scheduling software packages that create it—does not easily allow a project manager to measure progress.

There are two reasons for this. First, it can be difficult to accurately measure the progress of even a single task using the chart; second, the methods used by commercial packages to calculate and report progress are not always transparent to the user.

Figure 1. A typical product development cycle for a medical device.
(click to enlarge)

The reason that it is difficult to measure the progress of even a single task lies in the nature of the product development process itself. For a medical device, the typical product development cycle looks like Figure 1. The transition from one phase of the project to the next is gradual, and there is typically considerable overlap between the efforts performed by each functional group. The same holds true for individual tasks. Unlike a task performed by an individual textile worker in a turn-of-the-century factory, tasks in a new product development cycle usually show a gradual increase in activity leading to a period of maximum effort; this is followed by a gradual, hyperbolic transition to the next task.

Such a task cycle can create difficulties in determining progress. For example, when an electrical engineering manager confidently states that a particular design task is "80% done," the last 20% of the effort may well take as much time as did the first 80%. Thus, from a timeline perspective, this means that the task is actually only 50% done. Given that the manager's estimate is probably only accurate to ±10%—not to mention that the engineering manager and project manager may be defining the word done in two completely different ways—the difficulty in accurately assessing progress on even a single task becomes obvious.

Now, consider that a typical new product development schedule may have more than 100 tasks. In order to determine progress against the overall schedule, the progress estimates for each task must be summed to give an overall progress estimate. Commercial scheduling products do allow the manager to "roll up" the progress on groups of tasks to generate a summary progress estimate; however, the methods used to generate that number are not necessarily transparent, and they cannot be easily modified by the user.

A Deliverable-Based Approach

Frustrated with the limited ability of commercial scheduling packages to help me measure progress against schedule, I began to look for other methods. Ultimately, the approach I took focused on a program's deliverables rather than its tasks. Deliverables are easy to count and are either complete or incomplete, eliminating the inherent subjectivity of the progress estimate. Furthermore, progress metrics based on deliverables can be compiled and calculated in a transparent, easy-to-understand manner.

While all phases of the development program can benefit from deliverable-based methods of progress measurement, this article focuses on two methods I have used successfully to measure the design engineering effort. For most projects, the engineering design phase requires the largest amount of time and resources.

Figure 2. A forecast of when the engineering project will finish and whether the due date will be met.
(click to enlarge)

The most basic deliverable metric is to count the number of parts released to the manufacturing resource planning bill of materials (BOM). Ultimately, in order to release a product to manufacturing (or to begin validation), all the product's parts must be released to a BOM through an engineering change order (ECO). I plot both the numbers of parts released each week and the cumulative numbers of all parts released. Then, based on data for similar products, I estimate total parts count and use that to forecast when the engineering effort will be complete (see Figure 2).

The method of counting the released parts works well; the progressive addition of parts to the BOM creates a large number of distinct, easy-to-measure events. Most manufacturing resource planning or product data management systems provide a query that will report the number of parts in an indented BOM, so calculating the number is simple and objective—there is no room for creative interpretation.

This metric's most powerful advantage is that it graphically illustrates the effects of resource limitations. It also provides some indication of one of two things: how many additional resources are required, or when the project will finish with the existing resources.

The metric also has two major limitations. First, it is only effective on products with high part counts. For example, I did not find it useful when developing implants, which often consist of only a single part. The other limitation is that the metric is only useful in the latter stages of the product development cycle. It provides no information during the (often long) period before the first part is released.

So I began to use a more sophisticated metric.

A New Metric

This method involves identifying between 20 and 50 key components or assemblies in the product. This is possible in all but the simplest projects. The information can usually be obtained from a product's engineering family tree. Next, the project leader identifies the stages that each of those components must pass through before it is complete. Typically, each component will go through these phases:

  • Concept definition.
  • Modeling.
  • Drafting.
  • Design verification or refinement.
  • Release to manufacturing BOM.

Again, every organization approaches product development differently, but it should be possible to identify four to five distinct phases that each component of the product passes through.

Figure 3. Calculating the number of parts in an indented BOM is simple and objective.
(click to enlarge)

To determine progress, the project leader can determine the number of components that have completed each phase, then plot the progress of completion week by week (see Figure 3).

There are many advantages to using this metric over the simple part count. Even on relatively simple projects with less than 100 parts, there is enough resolution in the method to measure progress as frequently as every week. Progress can be measured very early in the project, long before the first part is released to a BOM. Although the method is more complicated to set up and maintain, it does provide a useful discipline. In order to complete the weekly tally, the project manager is forced to check the progress of each of the key components. This ensures that no deliverable is overlooked.

Other Metrics

Figure 4. Plotting week-by-week progress is superior to keeping a simple part count.
(click to enlarge)

Once project managers embrace the concept of tracking tangible deliverables, they will quickly find other deliverables to measure as well. The measurement of success in the one-part implant, for example, was completing the process validation on time. The same techniques can be applied. First, identify the tangible deliverable: in this case, the completed, signed-off validation report. Then identify the phases each validation report must pass through before completion. Third, chart weekly (see Figure 4).

Conclusion

The Gantt chart and the critical path method of scheduling have proven to be useful tools to the project manager. Like all tools, however, they have limitations. Deliverable-based metrics complement the Gantt chart because they provide objective measures of progress that are based on tangible items, such as documents and drawings. When deliverable-based metrics are used, people have greater confidence in the schedule forecasts because they are based on objective data, not opinion. The data, because they are easily normalized, can also be used to compare the performance of different projects, and can be used as a scheduling aid for new projects, which has typically been a difficult thing to do.

Finally, and most importantly, the metrics help the development team focus on the most fundamental objective of the project—completing the hundreds of necessary documents required to release a new product on time.

Copyright ©2003 Medical Device & Diagnostic Industry

Getting the Most out of Customer Data

Originally Published MX January/February 2003

INFORMATION TECHNOLOGIES

An enterprisewide analytics software package can bring competitive advantage and enhance customer loyalty.

Amy Valley and Joseph McGee

Thanks to continuing advances in customer relationship management (CRM) and enterprise resource planning (ERP) software systems, medical technology executives can gain access to increasingly enormous amounts of data about their customers and business operations. But therein lies a problem. That abundance of raw business information somehow has to be turned into usable knowledge on which intelligent business decisions can be based. How can medtech company leaders quickly integrate and analyze customer and market data gathered from multiple sources in order to increase sales, enhance targeting efforts, and improve customer service?

Behind the Gantt Chart: The Critical Path Method

Originally Published MDDI January 2003

PRODUCT DEVELOPMENT INSIGHT

The critical path method (CPM) is the scheduling method upon which most new product development schedules are based. It was developed in 1957 by DuPont to assist in managing a series of well-scripted, routine tasks used to shut down chemical plants for maintenance. Since then, the CPM, coupled with the graphic display of the Gantt chart, have become almost-universal tools for scheduling engineering projects, despite their limitations.

Larger projects, however, often require a more sophisticated variation of the CPM, the program evaluation and review technique (PERT). PERT was developed in the late 1950s for the Navy's Polaris nuclear submarine program. It allows for multiple estimates of completion time, and provides a range of possible completion dates based on a statistical analysis of the most likely completion time ranges for each individual task. The author will be responding to questions and comments about this article in MD&DI's Author Forums during the week beginning January 29, 2003. Visit www.devicelink.com/mddi and select the Author Forums link.

Copyright ©2003 Medical Device & Diagnostic Industry