“We’ve Got Rhythm! Medtronic Corporation

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QUESTION 1 Medtronic enjoyed 70% of the market share through the 1960s, taking advantage of its position as first entrant into the pacemaker field. However, in the 1970s and 1980s, the market became highly competitive with the rapid technological change as well as the demands for product quality became very tightening, and the competitors proved much faster than Medtronic at developing new products. Several key employers even left Medtronic and moved to start-ups seeking greater opportunity to develop their new pacemaker product ideas. We defined three root causes of why Medtronic lost its leading position. The first root cause is that there was no single process or person in the organization to articulate the company’s strategy of new product development. As a consequence, they always had too many ideas for new products and no project got the focus and attention needed to get it done. The second root case is its organization structure where functional managers made most major decisions for product development. During the company’s early years, functional managers used to work intimately with each development project. However, as it grew larger, they were mainly responsible for the management of operations. As a result, cross-functional coordination became less important for functional managers. Development and marketing people, for example, often started pointing fingers at each other when customers’ demands evolved faster than the speed of product development. The last root cause is company’s compensation model where people were being majored by cost centers, and no one had accountability for the delay or failure of the new product. This compensation model was incongruent with the company’s business objective to increase its market share by launching advanced new products faster than any other competitors. QUESTION 2 We see all six new processes were

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