From 1989 to 1997 I had a front row seat on the rocketship called U.S. Surgical Corp.
My ticket for the ride was punched in 1982, when I started as a sales rep at U.S. Surgical. I was fortunate enough to work through the ranks to senior director of sales and later became a VP of sales, responsible for half of the U.S. Over my more than 15 years with the firm, we went from just over $100 million in annual sales to $1.4 billion by 1997, the year before Tyco Healthcare acquired us for $3.3 billion.
In a series of posts in the coming weeks here at MassDevice.com (where I’m a founding investor), I’d like to talk about the medical device company that shaped my professional career. (I’m no longer affiliated with U.S. Surgical or its eventual parent, Covidien. Anything I write about has long since passed.)
In hindsight, the U.S. Surgical story seems to me to be a textbook case study about the strength of innovation and the power of a dynamic and aggressive sales force.
I still contend to this day that U.S. Surgical had one of the best sales forces in the world. We created great wealth for our company and our shareholders. The company changed the face of surgery with the "Green Berets of wound closure" leading the way, aggressively marketing to surgeons and training thousands of physicians along the way.
It was a rocketship ride, but we ignored the perils of our own success. Eventually the arrogant belief that our growth would never stop infected the company and hit us where it counted. We didn’t see it at the time, but that rocketship we were riding flew directly into the moon.
Boosting sales and taking names
U.S. Surgical was founded on the principles of innovation and education. Our founder, Leon Hirsch, owned a dry-cleaning equipment business. He had no college education or medical background, but he had the idea that you could use staplers in surgery. While it wasn’t a new concept, staplers weren’t widely used then in medicine in the U.S. Like all good bootstrapping stories, Hirsch built a prototype in his basement, which he used to raise the seed funding for the company.
By the time I arrived, U.S. Surgical was a $100 million company. Like Hirsch, I had no experience in medicine. In fact, I was a rug salesman, but after going though the company’s rigorous training process, I quickly jumped into the world of medical device sales.
For those first 5 years, we grew sales organically at a decent clip, but it wasn’t until 1987 when things really started cooking. That’s when we released the first disposable trocar, as well as 4 other products targeted at the OB/GYN market.
Hirsch espoused the idea that the future of surgery was through 10-millimeter trocar cannulas, rather than large open incisions. The problem was that we didn’t have any instruments that went through the trocars for performing those surgeries.
What we didn’t know at the time was that GYN’s would push back against single-use products. These physicians had been using reusable trocars for years and had the benefit of a forgiving organ in the uterus, which could be easily repaired if penetrated by a newly sharpened trocar.
In 1988, a general surgeon from Nashville and a GYN colleague from Atlanta began looking for new ways to remove gallbladers. They needed a surgical clip, graspers and scissors that could be inserted through a 10-millimeter trocar to perform the surgery. They turned to U.S. Surgical to develop the devices; we created the necessary products for them to successfully perform a laparoscopic gallbladder procedure.
We presented a video of the procedure at the American College of Surgeons meeting in the fall of 1988, to a mixed reception. Most of the academic hospital surgeons considered it a dangerous procedure, but the private practice surgeons saw an opportunity: They could draw patients from their competitors if they could perform a procedure which eliminated the severe and painful incision through the muscle below the ribs.
The original procedure required a 5-day hospital stay and 6 weeks of recovery. With 4 small trocar incisions, we could get patients back to normal activity within a week.
Those early successes spurred strong word-of-mouth from satisfied patients. By 1989, we were able to produce enough instruments to satisfy the needs of this bnascent market.
Then the news about the procedures started hitting local newspapers. The story was picked up by The Associated Press, which brought a New York news crew to film an interview with a surgical pioneer in Bridgeport, Conn., where they interviewed 1 of his very satisfied patients. The story aired on the national news and went viral.
We started getting calls from general surgeons all over the country who were losing patients to minimally invasive surgeons. The general surgeons wanted safe, sharp, single-use trocars because they were operating on males and females and the disposable trocar with a safety shield made sense to them.
They were willing to pay to go to courses and buy the necessary equipment, which also included small cameras and video monitors as well as insufflation devices that pumped CO2 gas into the abdomen to expand the operating space.
As sales grew across the country, we had to hustle to provide enough inventory and training for all that demand. We helped train 10s of thousands of surgeons over the next 2 years.
It was an incredible ride and our profits grew 50% in 1990, 98% in 1991 and 52% in 1992. During those years we all felt like there was no limit on how much we could grow the company.
Our success also bred some habits, which would eventually come back to haunt the company. For example, our demand exceeded our supply, so If a competitive account wanted to buy our Lap Chole products, they needed to sign a Prime Vendor contract and convert all of their stapling products to U.S. Surgical. We picked-up plenty of new business in our core product lines, but the materials managers were not happy.
Over time, this would prove to be a bigger problem for the company, which we’ll discuss in later posts.
Charlie Johnson is CEO of Charlie Johnson Consulting Assoc. He’s been a leading sales force and global sales leadership and management training consultant for the last 13 years, after a 17-year tenure at U.S. Surgical, where he was VP of Sales, VP of Global Education and a Corporate Officer. Follow Charlie on twitter @LeadershipCJCA, Linkedin or drop him a line by email.