Five Things That Turned Around Boston Scientific
Michael Mahoney, the chairman and CEO of Boston Scientific, says he joined the firm because he saw an incredible opportunity at a company with a $7 billion market cap that hadn’t grown in five years.
Today, Boston Scientific’s market cap tops $37 billion.
What steps did Boston Scientific – under Mahoney’s leadership – take to unlock such significant growth? At the Medtech Conference, Mahoney – interviewed by Kevin Hykes, CEO of Metavention, laid out some of the meaningful changes Boston Scientific made.
Change the Culture
Mahoney says upon his arrival he was surprised that the company culture seemed resigned to not winning. “When teams lose their winning spirit or their competitive edge and they start managing rather than leading they get used to growing below the market or not growing, and you start setting targets that are not aspirational,” he said. “We really had to turn around expectations and culture and that getting used to not winning.”
Mahoney knew Boston Scientific had a strong foundation for growth with “incredible technology, incredible engineers, and a commercial team that had been tied down a bit. So the first thing we did was we looked at it as a start-up and we started over.” Boston Scientific changed leadership, rewrote values, and eliminated paperwork that kept people busy. “We encouraged risk,” he said.
Mahoney said decentralization is the key. The company empowered its global business presidents to take responsibility for growth in their businesses. “That is critical because they own the number globally they are able to shift resources globally and you create tough benchmarks, but they own that business and they drive innovation,” he said. “Leaders love that. They want that. They want to have autonomy, they want to have space to make mistakes.” Boston Scientific only centralized supply chain, ops, IT, quality assurance, and some R&D.
Five year ago, Mahoney said 80% of the questions from investors would be CRM and drug eluting stents, now that’s only 10% to 15%. The change represents Boston Scientific’s move into new high-growth Medtech businesses that will dominate the company’s bottom line going forward. By 2020, Mahoney said, only 25% of the firm’s sales will come from drug-eluting stents and CRM, with peripheral intervention, urology, endoscopy, and neuromodulation accounting for the rest. “We compete in markets that grow at 4% to 5%; if we’re growing less than 4% to 5% we’re getting beat,” he stated. “We’ve really repositioned the portfolio into markets that are much more appealing.”
Stick to Medtech
Mahoney said Boston Scientific is “a little less bullish” about the approach being adopted by Medtronic and others to marry Medtech and Services. “We have shifted more toward the diagnostic” in the firm’s multiple areas, he explained. For example, the company is developing HeartLogic™ Heart Failure Diagnostic Service technology that could help hospitals proactively manage heart failure. “We’ve gone more toward diagnostic capability to complement our medical device capability.”
Invest in Start-Up
Mahoney revealed Boston Scientific has about 30 early-stage companies in its venture portfolio. The size of investment varies from minimal equity with options to buy to large stakes with options and purchase prices already in place. “We’ve been involved in a number of Series A investments,” Mahoney said. “We rarely invest in a company that doesn’t have leverage or adjacency to one of our core businesses … We don’t invest for the potential to make money. We invest in the potential to buy the company and that is really our biggest focus.”
To hear the entire interview, listen to this Medtech Talk Podcast above.