Ishrak
Targeting the growing middle class in China, India and other emerging countries may be “potentially less risky than creating new products for the flat U.S market,” new Medtronic Inc. (NYSE:MDT) CEO Omar Ishrak said in his first shareholders meeting today.
Ishrak, who has been charged with expanding the mission of the world’s largest pure play medical device maker, even as 40 percent of its core businesses experienced negative growth last year, laid out his vision for the second time this week.
The newly minted chief executive revealed his move to reshape the company, first reported by MassDevice, in an email sent to employees last week. The most dramatic moves concern expanding Medtronic’s global footprint by creating eight geographic regions: the U.S., Western Europe/Canada, Latin America, Greater China, Asia (including Japan), India, Middle East/Africa and Central and Eastern Europe.
This morning, Ishrak explained that those moves were necessary in order to reignite growth at the company.
“The biggest long term opportunity will be to meet the needs of billions of people who have no access to healthcare at all,” he said. “The population in emerging markets is tenfold that of developed countries. These statistics are further compounded by the fact that U.S. market is essentially flat…reaching the global middle class opens up opportunities to us beyond anything we’ve ever seen before.”
He added that there was already 200,000 to 300,000 people in the middle class in India who could afford many of Medtronic’s technologies right now and that helping to build the health care infrastructure around those patients could lead to millions more. The same scenario is true in China, where Ishrak said the market could be larger than the U.S. by the end of the decade. Combined with opportunities in Brazil, Russia and other emerging markets he laid out a goal of reaching 25 million patients by 2020.
“Our mission applies to all people,” he said. “It is both our responsibility and our opportunity.”
Ishrak even circled back to his own upbringing in Bangladesh saying that he was “keenly aware” of how people growing up in poor countries are deprived of even the most basic of Medtronic’s technology portfolio, going as far back as MDT-founder Earl Baaken’s first pacemakers.
But while he was looking to the future, Ishrak also continued to hammer Medtronic for its recent performance, saying that the company’s somewhat slow growth was the result of poor execution, quality issues and a sluggish business model.
He said while the company has acquired lots of companies and launched more than 16 new products over the past year, it has failed to capitalize in a meaningful way.
“The number of new products does not have any correlation with growth,” he said. “Our method of selecting and prioritizing our investments has to change.”
He promised to be intimately involved in those processes and to integrate them into the culture of Medtronic.
Ishrak said his vision of crisp execution and a holistic view of the global markets was the only way the company could start to return to the meteoric growth that was once synonymous with the Fridely, Minn.-based medical device giant and its share price.
“I know stock is of concern. The value of our stock is largely the reflection of our performance. When we are able to demonstrate growth the stock market will reward us,” he said. “We need to resist the temptation to blame the markets and begin to adapt. Ultimately, our job is to deliver growth despite whats happening to our markets.”
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