Medtronic (NYSE:MDT) succeeded in stealing the thunder of arch-rival Boston Scientific (NYSE:BSX) in naming its new CEO just a day after its Natick, Mass.-based peer announced that CEO Ray Elliott would be stepping down at the end of the year.
Syed Omar Ishrak is a 16-year veteran of GE’s (NYSE:GE) $12 billion health care business, with wide experience in imaging (including a name on three imaging patents), but has little or no experience with most of Medtronic’s core business areas. And it’s not likely that the move is aimed at bolstering MDT’s tiny navigation business, which includes imaging equipment used in cranial, sinus and orthopedic business and its less than 6 percent of annual sales.
Another thing the move isn’t: A generational changing of the guard. At 55, Ishrak is just a year younger than William Hawkins, the man he’ll replace. So what is it?
JP Morgan analyst Michael Weinstein called the resolution of the CEO search “a positive for Medtronic.”
“The question from here is what is Ishrak’s mandate? Is it same strategy, better execution? Or are there more aggressive plans for Medtronic in the months ahead? Our expectation is the former is much more likely than the latter,” Weinstein wrote in a note to investors.
Larry Biegelsen, an analyst at Wells Fargo & Co., pointed to Ishrak’s “solid track record” at GE, where the ultrasound business quadrupled and clinical systems jumped some 40 percent under his tenure.
One explanation for the pick is that Medtronic, like all American medical companies, is slavering over the demographics of emerging markets and sees Ishrak as the perfect point man.
Ishrak, who is of Bangladeshi heritage, has been involved with Grameen Health, the organization founded by 2006 Nobel Prize Winner Muhammmad Yunus, who is also from Bangladesh. Ishrak led GE’s Healthymagination initiative in that country, which provides low-cost medical equipment for under-served, remote areas. It’s safe to assume he understands the hang-ups American companies face in entering the developing world.
In fact, Ishrak has argued that firms building cheaper medical devices for use in the developing world may be able to leap-frog domestically built devices. A January 2011 article in The Economist had Ishrak extolling the virtues of firms using miniaturization, mobile communications and advanced materials. Such enterprising med-tech makers are creating a revolution in the industry and how it views innovation, he told the magazine.
Sales and distribution systems at firms like GE are set up to sell $100,000 scanners , making them ill-suited for scaled-down versions for less developed markets. Medical device makers “do not present comprehensive evidence of value” and rely on “an emotional kind of sale” in dealing with their industrialized customer bases.
Once he gets comfortable, will Ishrak bring that line of thought to bear on Medtronic? And how would that that jibe with Hawkins’ plan to reposition the firm as a “chronic disease management” business?
“If you asked me when I first came here, ‘What is Medtronic?’ I would have said we’re a pacemaker company, a stent company, or a pump company,” Hawkins told MassDevice last fall. “But today we have the capabilities and technology, and the knowledge, to be able to treat heart failure, to treat diabetes, to treat degenerative disc disease. The real shift is thinking about ourselves in a bigger way, as much more than just a device company.”
Hawkins says he plans to stay involved with Medtronic over the short- to mid-term, staying on as a consultant for a year after departing. Will reconciling his vision with that of the new guy in the corner office build a better Medtronic? Or will a new vision emerge from the world’s largest device pure-player device maker?