GUIDANT

CORPORATION
Shaping Culture
Through System

GROUP 5
JAHJA SHELY MEIFUZI
WISNU DASUKI
SAMMY SANTOSO EDI
SURYANTO STEVANUS
PASSAT

Guidant Corporation
Established in January 1994
Created from the spin-off of 5
companies from Medical Devices
and Diagnostic Division -> generate
value by reducing costs and
creating competencies.
Design, produce, and sell medical
devices
Product : pacemakers, defibrillators,
catheters, and devices for minimally
invasive abdominal surgery

Business unit
1.Cardiac
Rhythm
Management
(CRM)
2.Vascular Intervention (VI)
3.Minimally Invasive Surgery (MIS)
Sales organizations
1.Western Hemisphere Sales
2.European Operations
3.Pacific Rim Sales

Challenge :
Competitor
create
new
technology in similar product
(more smaller) and subtitute
product with lower price.
Building
and
maintain
customer by create product
that have competitive price.
To be able achieve cost
leadership to compete with
competitor

GUIDANTS STRATEGY

Sharehold
er Value

Global
Innovation

Product

25 product were introduced.

45% sales came from product
introduced
Platform development takes 23 years and involves significant
leaps
in
innovation
and
technologies.
Family approach to speed
product development
Apply
strategy
to
using
common parts and freezing
requirements
early
in
the
process
Risk : new technologies is
monitored by FDA.

Economic Partnerships
With
Customers
Worldwide
Build strong relationships
with
physicians
and
healthcare administrations
Develop
a
direct
salesforce
in
markets
(Japan and Europe)
Reorganize sales function
to
establish
closer
relationships
with
customers and become
independent
from
the
business unit.

Organizational Excellence
Create organizational excellence as As a culture in which all
employees function as owners of Guidant
Create employee commitment to the new Guidant Corporation and
create core theme to work with for the eight strategic design teams

Shareholder Value
To create shareholder value, IPO in 1994
Create company goal : double market value in 1999
($ 7 billion)
Cascade the company goal into 6 financial goals :
Sales growth
greater than
competition
Decrease
effective tax
by 1% per
year
Maintain
capital
expense
below

25% Debt to
Equity
Decrease
OPEX 2% of
sales per
year
Improve
gross
margins

DESIGNING THE SYSTEM

1. Measuring Economic Value to Align
Systems drive the innovation and value
ceation

Incentive system objective:

1. to align the motivation of employees with the creation of
market value
2. have every person at Guidant benefit from the success of the
company
Economic Value Addes is
A new indicator to measure the progress towards the creation of
shareholder
value

Residual income
= Net income Cost of Capital
= Net income (Average Assets Average Current
Liabilities)*13,5%

Performance Measurement
System
10% of compensation was
contingent upon increases in
this residual income measure
for Guidant
60% of their compensation
linked to stock performance
through stock ownership and
stock options (as part of the
long term compensation)
The incentive structure would
facilitate
communication,
learning and mobility across
divisions

Performance Measurement
System
The bonus was adapted to
the changing needs of the
division and based on the
divisional performance.
The employees contribution
was invested in a diversified
fund
Next, would be necessary to
fine-tune
the
incentive
system
to
reflect
unit
performance more heavily
than corporate performance.

2. Risk Management System

prevent misbehavior
Managing risk of the heavily regulated environment and the sanctions
from Food and Drug Administration (FDA) to ensure the health-delivery
standards was safe
FDA required:
- detailed information on the characteristic of new medical device
products and the manufacturing process
- Guidant to inform the agency of any changes in products, manufacturing
process and sales material
A new compliance function (Chief Compliance Officer) was created to
address this important control issue
Each of the business units where compliance officers assumed a critical
role, the same structure was duplicated
A corporate audit function also established to document organizational
processes, identify best practices across the company, perform process
engineering and ensure the internal controls accomplished their
objectives.

3. Set Up Belief System

communicate core company
values
Communicating
Core
Values to reduce the
potential of undesirable
behavior by distribued a
32-page Code of Conduct
among its employees
Guidants
mission
statement
and
core
values
were
powerful
vehicles to remind people
what they were working
for (a firm reminder of the
foundation upon which
economic value must be
created)

FUTURE

RECOMMENDATION
Manage risk by comply to regulation.
Setting the balanced incentive system.
Repetitively internalize the vision, mission to have goal
congruen.
Focus to customer needs by achieve cost leadership to
creare competitive product price.