At first it seemed that Medtronic Chairman and CEO Omar Ishrak planned to deliver a superficial introduction to Medtronic, as if maybe no one in the full ballroom had heard much about his company before.
What triggered this fear of a dreadful CEO speech last week was a slide of the Hermundslie garage, a famous little building in a residential neighborhood of northeast Minneapolis. That’s where Earl Bakken and his brother-in-law Palmer Hermundslie got Medtronic going in the late 1940s.
Happily for those in the audience, Ishrak went on to give a lively talk about the strategy of Medtronic in 2018 and well beyond. He started his speech with the garage only because that’s where Medtronic got the statement of the company mission he’s using right now.
That something written that long ago remains relevant to Medtronic leaders in 2018 is interesting, of course, but it’s worth thinking about why that is. In fact, it’s hard to imagine even business leaders as gifted as Ishrak picking up a pen now and improving on it all that much.
It’s really a collection of six statements, but most of the power comes from the very first one, the one that says Medtronic’s mission is “to contribute to human welfare by application of biomedical engineering … to alleviate pain, restore health, and extend life.”
Not a word of this seems to be about business, not really anyway. It’s clear why this idea appeals so much to Ishrak, though, because it sure talks about something of real value. “No one’s ever going to argue or debate … whether there’s value in alleviating pain, restoring health and extending life,” he said at a sold-out lunch meeting of the Economic Club of Minnesota. “No one.”
Ishrak hopes Medtronic can lead a big transition in health care from getting paid for a thing to getting paid for an outcome. In other words, the financial reward shouldn’t come from just pushing another box of Medtronic products out the door, but from enabling a person to live a longer and healthier life.
Ishrak started talking about the mission of Medtronic as soon as he was appointed to run the company in 2011. This past New Year’s Day he took to Twitter to deliver this message: “Let’s welcome 2018 with renewed resolve to follow the Medtronic Mission — it inspires us, guides our strategy and defines our culture.”
This mission statement that Ishrak finds so useful was created by co-founder Bakken and his colleagues years before it was fashionable for companies to have such things. And as Ishrak pointed out, “I’m not sure Earl even realized how profound it was.”
The statement about what customers should pay for clearly isn’t the only reason he likes it. It’s also a way to set the strategic boundaries for Medtronic, a simple idea that means identifying just what a company needs to work on.
One example is a diagnostic device. Useful, sure, but after a diagnosis the therapy or procedure that’s going to help the patient feel a lot better or live a longer life gets turned over to somebody else. That’s not what Medtronic wants.
Maybe the best thing about Bakken’s thinking was how grand his vision was. As it turns out, thinking too small in a corporate boardroom is far more likely to be a problem than thinking too big.
That was a point made in spades in a groundbreaking article published nearly 30 years ago by business professors C.K. Prahalad and Gary Hamel. They were trying to quickly get across to an American audience why big companies in North America and Europe were then finding themselves losing so much ground to Japanese competitors.
In a nutshell, American managers had grown far too accustomed to making their long-term plans based on the people and assets they had. While that seems sensible — why draft a plan that depends on people who do not even work for you or technology not yet invented? — one big problem was that this approach stripped companies of their loftiest ambitions.
Competitors in Japan and Korea once had a fraction of the manufacturing capability and technical know-how of the Americans and Europeans but planned to someday take over the lead in a global market anyway. Over time, many of them succeeded.
As the professors found, however, it wasn’t nearly enough to just set an ambitious goal. Company leaders needed to consistently remind everyone that what they were all working toward was achievable someday and well worth a lot of long days. No one could say precisely how the organization would get there, either, so that meant they needed a lot of creativity and problem-solving all over the company.
What Earl Bakken started drafting in 1960 isn’t a perfect fit with the strategic model these professors outlined, but the point is that Bakken wasn’t thinking small. And this set of statements about mission came at a time when Medtronic had next to no money and minuscule annual sales.
Bakken and Hermundslie needed capital, so they launched a $215,000 offering of convertible notes in 1959. It took them months to finally raise it. Even then the company didn’t turn the corner. At one point the founders tried and failed to find a buyer for it.
Yet this was the period when Bakken really turned into a CEO, as described in the business history by writer Donald Hall. As the company raised additional financing and added directors to the board, he brought the mission statement to them for approval.
You know the rest of the story, as the company outgrew its garage and became a global giant. Yet there obviously remain, nearly 60 years later, a lot of people in the world who today are in pain and hope to feel better and get stronger.
That’s another reason Medtronic’s first and only mission statement endures. And that’s why, as Ishrak put it last week, “we are permanently a growth company. If we can’t grow, that’s our fault.”