Performance Improvement - How to beat the competition and become the market leader

Diploma Thesis, 2004

144 Pages, Grade: 2.3


Performance Improvement
How to beat the competition and become the market
Diploma Thesis
to obtain the degree
Diplom-Betriebswirtin (FH)
at the
University of Applied Science / Fachhochschule Worms
Submitted to the Faculty: International Business and Economics
Prof. Rüdiger Funk
Date: 01.07.2004
From: Silke Frödtert

The work included within this thesis has not been previously submitted, either in whole
or in part, for the award of any other academic qualification. The work is the original
work of the author; assistance from others has been acknowledged where appropriate,
and quotation from other sources is cited in the text.
Silke Frödtert

Index of contents:
Index of contents
Index of abbreviations
Index of figures and tables
1 Introduction
1.1 Problem formulation
1.2 Thesis Objectives
1.3 Thesis Methodology
2 Important Definitions
2.1. Performance
2.2. Improvement
2.3. Market leader
2.4. Measures
2.4.1. financial measures
2.4.2. non-financial measures
3 Dräger Medical ­ A Dräger and Siemens Company
3.1. Before the Joint Venture
3.2. Reasons for the Joint Venture
3.3. After the Joint Venture
4 The Competitive Environment
5 Framework for managing change
5.1. Culture
5.2. Mission
5.3. Vision
5.4. Strategy
5.5. Structure
5.6. Goals and Objectives

6. Evaluation of strategic options
6.1. Analyze the past
6.2. Analyze the present
6.3. Forecasting the future
6.4. Establish strategy alternatives
6.5. Evaluate alternative strategies
a) Financial acceptability
b) External and internal acceptability
c) Feasibility
d) Suitability and Fit
6.6. Select best alternative
6.7. Strategy implementation
7. Improvement concepts in selected Key Areas
7.1. Dräger Group level
7.2. Dräger Medical subgroup level
7.3. Business Unit Monitoring
7.1.1. Marketing Product Management
7.1.2. Business Development
8. Measuring the Improvement
8.1. The Balance Scorecard approach
8.2. First results
9. Conclusion

Index of abbreviations
For example
That is
Refer to
Joint Venture
Business Unit Monitoring

Index of figures and tables
Competition Matrix
Pyramid of Organizational Success
Drägerwerk AG structure
Forecast key figures 2003c/2004e
Life cycle and strategic emphasis
The experience curve
The BCG product portfolio matrix
Porter's competitive strategies
Strategic decision process
McKinsey's 7-S Framework
BU-M Transformations
83 + 84
Market Volume
Customer Needs Process
BSC Perspectives
Financial Key figures

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1. Introduction
"When conditions change, strategies and tactics must also change".
This could
be the motto for the -
Dräger Medical Inc. - A Dräger and Siemens Company
After Siemens Medical Solutions Patient Monitoring Division and Dräger Medical
Systems joined forces in July 2003, the conditions under which the new company
had to operate changed drastically.
Overlaps in management, new processes, new procedures and new
opportunities. The former PCS ­ Patient Care Systems ­ Group became the new
Business Unit Monitoring (BU-M) within the Dräger Medical family, completing
Dräger Medicals product portfolio of Anesthesia, Emergency, Perinatal, Critical
and Home Care. This complete portfolio enabled Dräger Medical to offer
complete, hospital-wide, integrated solutions worldwide. The concept of a "Total
System Solution" refers to the ability for one company to provide all of the capital
equipment that a hospital needs, with all equipment communicating with one
another through network connections.
Dräger Medicals' product portfolio previously didn't include an own monitoring
line. A prior strategic alliance with GE's Monitoring Group did not work out for
several reasons. Mainly, because the strategic alliance didn't give Dräger the
control and brand recognition they needed. Therefore, the primary objective for
Dräger to form the Joint Venture with Siemens Medicals' Business Unit
Monitoring was to offer their own monitoring solutions and integrate them with
their well known Anesthesia systems and patient record databases and provide
an expanded product portfolio for the Emergency Department and the critical
care environment.
Art Collin speech "Finding the will to grow", Chief Executive Magazine, Oct., 2003

Performance Improvement
Dräger Medical needed Siemens' Monitoring line as a key add-on to fill their void
in their product portfolio. The patient monitor is where all the patient information
is collected and displayed. The successful integration of the patient monitors with
Dräger Medicals' anesthesia products and IT solutions was the major aspect of
the Joint Venture.
Siemens Medicals' own Anesthesia and Ventilation business, headquartered in
Solna, Sweden, tied up a lot of Siemens' resources and required a heavy
investment without gaining in market share. All communication and order
management services were performed in Solna, which meant a great deal of
overhead. The costs for those services were added to the cost of the product
which increased by almost 16%. An important element for Siemens to form the
Joint Venture with Dräger was to clear those overheads the operations in Solna
created and at the same time picking up a proven leader in Anesthesia
The joint venture allowed for combined competencies of Dräger's anesthesia
market dominance (40% market share), anesthesia IT competency (effective
electronic record keeper database), and ventilation (equal 30% market share to
Siemens) with Siemens' product portfolio of patient monitors and critical care
electronic flow sheets
While still working relatively independent as an own Business Unit, the
monitoring division had access to a lot more resources ­ human and financial -
than before the Joint Venture. This enabled them to invest heavily in expanding
the sales force, develop new products and archive excellence in quality and
customer service and satisfaction.
The Joint Venture moved Dräger Medical Inc. (Anesthesia, Critical and
Emergency Care) to a new position among competitors. The opportunity to

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become the market leader in their market segments determined to be a greater
potential for success after forming the joint venture.
To reach that goal to become the market leader, the organization had to rethink
its strategies, reinvent their tactics and reorganize the whole subgroup. That
process was led and driven by determined executives, who knew that
Medical ­ A Dräger and Siemens Company
, had what it takes to beat the
competition - provided they play their cards right.
In their book "The Discipline of Market Leaders", Treacy & Wiersema describe
the three value disciplines of market leaders as such:
1. Operational Excellence
2. Product Leadership
3. Customer Intimacy
They argue, that no one company can expect to excel in all three areas, and that
the better part of competitive strategy is to determine in which of these three lies
your company's core competency and develop a strategy focused on excelling in
the single dimension that plays most to your strength.
1.1 Problem formulation
Companies have to focus on a single discipline to create a foundation for
The problem is to identify that single discipline. In a medical device
company like Dräger Medical, this is a hard thing to do. All of the disciplines
seem to be equally valuable.
Ref. Michael Treacy & Fred Wiersema, The Discipline of Market Leaders, 1995
Ref. Geoffrey A. Moore, Inside the Tornado, 1995, p. 233

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The first value discipline is operational excellence, which means providing the
market with low priced and highly qualitative goods and services, while at the
same time minimizing problems for the customer. To excel in that discipline,
companies have to focus primarily on the efficient management of people, the
management of efficient transactions, dedication on measurement systems,
management of customer expectations and customer service, implementation of
effective processes, training and education, effective Human Resources
management and Research and Development processes.
The second value discipline is product leadership, which is dedicated to
providing the best possible products that push performance boundaries from the
perspective of the features and benefits offered to the customer. Here companies
should focus on the encouragement of innovation, a risk-oriented management
style, a recognition that the company's current success and future prospects lie in
its talented product design people and those who support them and a recognition
of the need to educate and lead the market regarding the use and benefits of
new products.
The third value discipline is customer intimacy, which involves the selection of
one or a few high-value customer niches, followed by an obsessive effort at
getting to know these customers in detail. This requires anticipating the target
customers' needs as well as (if not better than) they themselves do, and
sometimes sharing risks with them when the development of new products or
services is required.
In the case of Dräger Medical, that translates into: We have the best and most
innovative products, for less cost than the competitors', which will address all
your current and future needs. We provide the best service and value every
(June 26
2004) see Appendix

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So where does a company start striving for excellence? Which one of these
disciplines values most to the company? Where is the most room for
improvement? And do you have to neglect the other disciplines in order to excel
in the discipline you selected as closest to your companies' core competencies?
1.2 Thesis Objectives
The objective of this thesis is to describe the process of performance
improvement at Dräger Medical and the changes the joint venture brought about.
Some of the content is particularly targeted at Dräger Medical and can therefore
not be generalized or implemented at other companies without modifications.
This thesis tries to provide a conceptual framework for the management of
change, improvement efforts and the actions Dräger Medical had taken or will
take to reach its goal to become the market leader. The objective of this thesis
cannot be an exhaustive treatment of every area of the company, where
performance improvement can be achieved. Therefore I limit my approach to
certain business related key areas, where I believe improvement is absolutely
necessary in order to increase and improve the overall business performance.
Note, that the implementations of many new strategies, which will be discussed
in this thesis, are not yet implemented or are still in the process of being
implemented. Therefore only the desired outcome can be presented and not the
actual outcome supported by empirical observations.
1.3 Thesis Methodology
First, an overview of Dräger Medical and the identified changes and resulting
new opportunities will be given in order to establish key areas, where

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performance improvement is necessary. Those key areas will be picked up later
in the thesis, to describe possible methods and strategies to improve
performance in those key areas.
Secondly, an overview of the medical device industry and of selected competitors
will be given, to position Dräger Medical and show the giants Dräger wants to
beat. This also serves as an explanation for choosing the identified key areas of
performance improvement.
Finally, some basics on how the improvement can be measured followed by the
first results the company has achieved.
2. Important Definitions
Referring to the title of this Thesis, I will define the terms `performance',
`improvement', `market leader' and `measures'. Other definitions will follow
throughout the text wherever the need arises.
2.1 Performance
When we talk about performance: What kind of performance do we mean? How
accurate can we measure performance and how do we interpret these results?
First, let's start off with some basic definitions of the term performance as it is
used commonly and as I will use it throughout this thesis:
The performance of an organization at any one time is the consequence of its
posture and the position it occupies in its environment at that time
The posture
of an organization is a picture of what the company looks like, its shape and its
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 140

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capabilities. The posture of an organization is what you see when you stand at
the organizational boundary and look inwards.
The position of an organization, then, is a picture of how an organization relates
to the people that are its environment. The position is what you see when you
stand at the organizational boundary and look outwards.
The posture and position of the organization are the result of the strategy it has
pursued. That posture and position determine its performance at the time and
performance refers to:
financial dimensions such as cost levels, return on capital, profit growth
operational dimensions such as quality and service levels
proper identification of product requirements
Acceptable financial performance is defined in terms of the next best opportunity
open to the owner of an organization for using or investing their funds.
2.2 Improvement
Here the questions to ask would be: What kind of improvement? Do we want to
improve sales? Revenues? EBIT? Processes? Workflow? Cash flow? Not every
improvement increases the financial standing of a company. Many successful
improvements cannot be detected on the companies' balance sheet or other
financial statements. But they can lead to substantial financial improvements in
the long run, if practiced continuously.
The stimulus for an (improvement) decision may be the voluntary recognition of a
problem or an opportunity, or the result of some pressure or mild crisis, or the
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 5 ff.
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 147

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consequence of a major crisis that forces a decision. The routine for recognizing
a problem depends upon the behavior of individuals, is culturally conditioned,
and involves political interaction. Once managers have recognized a problem,
the diagnosis routine is activated.
Old information channels are tapped and new ones opened. The diagnosis may
be formal or it may be very informal. It may be skipped altogether. What
managers are doing here is trying to shape or structure the problems so that they
may decide how to deal with them. Many small stimuli may need to build up to
some threshold before a decision need is identified and a decision triggered. In
this regard the frame of reference of the manager is important (Johnson, 1987). If
the stimuli for a decision fall outside the currently shared wisdom on what the
business is about and how it should be conducted, then managers will ignore the
Thus, the different approaches to performance improvement are based on the
knowledge, the experience and background, and the open-mindedness of the
individual manager. During my research on the topic of performance
improvement I passed out questionnaires to different managers at Dräger
Medical. Depending on their expertise and the department they worked in I
received very different answers to the question in which key areas they see the
greatest potential for improvement. Those key areas mentioned will be closely
dealt with later in this thesis.
2.3 Market leader
How do we define market leader? Is it the market share? The relative market
share? Is it revenues? Or profit? EBIT? Depending what measure we use to
define market leader, the result is going to be different.
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 38

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Market share is the relation between the companies sales volume to the
complete market sales volume.
Relative Market share on the other hand, is the relation between a companies
market share and the market share of it's biggest competitor. Is the relative
market share > 1 than the company is to be considered dominant.
The desire to increase market share, or relative market share, cannot be the
strategy or an objective of an organization. It is merely the result of strategically
performed actions. David Packard once reminded his managers: "Anyone can
build market share; if you set your prices low enough you can have the whole
damn market. But I'll tell you it won't get you anywhere around here."
The strategy is the pattern in actions. The result of the strategy is the posture and
position of the organization. Together posture and position determine
performance and they provide the platform from which further patterns in action
are developed.
2.4 Measures
"You cannot manage what you can't measure." - William Hewlett.
Within any hierarchical structure, managers must plan the activities of their
organization and monitor the implementation and outcomes of their plans. To do
this, managers must first identify and agree upon the performance levels, both
financial and operational, that they wish to achieve by some point in the future;
Peters & Waterman, In search of excellence, p. 184
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 12

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that is, they must set the quantitative and qualitative objectives that they are
going to strive for.
2.4.1 Financial measures
In the past and still today organizations use financial measures to set
performance objectives and measure their organizational performance.
Robert Eccles, former professor at the Harvard business school and author of
"The Performance Measurement Manifesto", one of the first publications on the
topic of performance measurement in 1991, explained the dominance of financial
measures: "Not surprisingly, methods for measuring financial performance are
the most sophisticated and the most deeply entrenched. Accountants have been
refining these methods ever since double-entry bookkeeping was invented in the
fifteenth century. Today their codifications are enforced by a vast institutional
infrastructure made up of professional educators, public accounting firms, and
regulatory bodies."
But this purely financial approach works only well for evaluating a current or
proposed strategy, but falls short when it comes to predicting future performance
or suggesting actions that might improve results.
2.4.2 Non-Financial measures
The integration of non-financial measures is not revolutionary for companies
"Many managers can honestly claim that they ­ and their companies ­ have
tracked quality, market share, and other non-financial measures for years.
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 103
Eccles, Robert, The performance measurement Manifesto, in Harvard business review, p. 134
Ref. Norbert Klingenbiel, Performance Measurement & Balanced Scorecard, p. 27

Performance Improvement
Tracking these measures is one thing. But giving them equal (or even greater)
status in determining strategy, promotions, bonuses, and other rewards is
By increasingly measuring other key business drivers, like customer satisfaction,
operational excellence, organizational learning, quality of service and
innovations, organizations focus more and more on measures that determine
competitive advantage today. With similar product lines and product features,
companies have to pay more attention to those non-financial measures to
differentiate from the competition.
3. Dräger Medical ­ A Dräger and Siemens Company
Before we take a look at the competitive environment and the requirements to
succeed in it, we need to clarify why the corporate vision of becoming the market
leader is feasible now and hasn't been before the joint venture for both
companies individually.
The formation of Dräger Medical ­ A Dräger and Siemens Company was the
result of the unusual marriage between Siemens, the global mammoth company
and Dräger, the small but aggressive anesthesia company picking up, and
finding value in a monitoring line that they now want to control.
3.1 Before the JV
Siemens Medical Solutions is one of the largest healthcare providers in the
world, renowned for its innovative products, services, and complete solutions.
Eccles, Robert, The performance measurement Manifesto, Harvard business review, p. 134
Ref. Norbert Klingenbiel, Performance Measurement & Balanced Score Card, p. 27ff

Performance Improvement
The extensive product spectrum covered diagnostic and therapeutic imaging
systems, electro-medicine, audiology, and IT solutions that optimize the
workflows and improve the efficiency of clinics and practices.
Upon the signing of the JV agreement in late 2002, Siemens Medical Solutions
and Dräger Medical were competitors in the field of Anesthesiology Systems and
Breathing Ventilators used in operation rooms and intensive care units.
As required, Siemens Medical Solutions had to divest its Life Support System
(LSS) unit in Solna, Sweden, (Ventilation and Anesthesia unit), after objections
on competitive grounds by the EU anti-trust authorities in Brussels.
Dräger Medical AG & Co. KGaA is one of the world's leading manufacturers of
medical equipment. Before the Joint Venture, Dräger Medical's portfolio mainly
consisted of Ventilation and Anesthesia products.
3.2 Reasons for the JV
By combining Siemens patient monitoring systems with Dräger's patient data
management and hospital architectural systems, the joint venture will be able to
offer a complete workplace solution for effective and cost-efficient patient therapy
at the acute point-of-care. In addition, the Dräger Medical home care products
contributed to the joint venture expanding the portfolio into the home care
The enthusiasm for building a successful joint venture was experienced by all
those involved. The entrepreneurial spirit to achieve something together, to make
technical progress, and to develop innovative solutions for benefit of both the
Press Release "Dräger and Siemens Plan Joint Venture in Acute Point-of-Care Solutions" May 30, 2002

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patient and the customer, was extraordinarily strong on both sides. Subsidiaries
in 40 countries were committed to take over sales and service for monitoring.
For Dr. Wilhelm Isenberg, former head of the Business Unit Monitoring for
Siemens and president of Dräger Medical Inc., the joint venture was a wise
management decision. "Just like Dräger, we in Danvers always had the vision of
merging respiration and anesthesia devices with monitors and IT solutions to
create an integrated solution. This vision was foundation for our "love match" and
is also the reason why we have been able to form successful teams so quickly. In
addition to our shared vision, another reason for the success of the integration
was the fact that management decided against a long, drawn-out project running
two to three years. We wanted to go on July 1, and we did it."
With their combined product portfolio, Dräger Medical ­ A Dräger and Siemens
Company, will be able to offer more highly integrated workstations in the areas of
anesthesia and critical care. Through synergies in R&D and technological
expertise, they will be able to increase the innovation rate at reduced costs. With
an improved coverage in sales and service, particularly in the USA and Asia, the
target is to further improve sales and service to customers around the world.
3.3 After the JV
Siemens acquired a 35% direct stake in Dräger Medical AG & Co. KGaA and in
return contributed its Electromedical System's Monitoring unit and the cash from
the sale and transfer of the LSS unit to the venture. Drägerwerk AG holds the
remaining 65%.
By agreeing to a 65% Dräger and 35% Siemens share of the joint venture,
Siemens was allowing Dräger to manage the joint venture. The 65/35 split
Dräger, Annual Report 2003
Internal Dräger Medical Newsletter

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resulted from the comparative market share of both companies in the Anesthesia
and Critical Care Product segment.
The combination of forces proved to benefit all stakeholders involved:
For customers, Dräger Medical ­ A Dräger and Siemens Company offers
Ventilation and Anesthesia equipment with fully integrated patient monitors and
IT solutions. When working closely with Siemens Medical (Imaging, Ultrasound
etc.) they are able to offer a complete solution for the entire hospital for more
effective and cost-efficient patient therapy.
Compared to both stand-alone businesses, the JV benefits from a more complete
product portfolio, from improved fix-cost coverage and the synergies that appear
from combining complementary businesses. Since the formation of the JV further
improves the position of Dräger Medical, shareholders benefit from sustained
growth and profitability in the long run.
Together as a joint venture, Dräger Medical ­ A Dräger and Siemens Company
will be a leading company in acute point-of-care and home care ventilation
businesses. This offers an exciting environment and great potential for long-term
development and success for those employees who develop with the changing
requirements placed on them. A stronger position in the market means increased
employment security.
The biggest challenge for the JV was product branding, communicating strengths
to customers, explaining the segmentation from Siemens, maintaining
relationship with Siemens so they can be part of hospital wide purchasing deals,
organizing order management processes, integrating staff with similar positions
while maintaining morale. Also associated timing issues with implementation of
Internal Dräger Medical Newsletter

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new SAP and System prices (quotation tool) processes. Also the education of
over 150 sales representatives presented a huge challenge.
Another challenge was the integration of two different cultures, the formulation of
a common vision, mission, the agreement on a new strategy and new
organizational goals and objectives.
Although Dräger could fill the void in their product portfolio by adding Siemens'
patient monitors, it didn't substantially increase enough in size to compare to
giants like GE or Philips that they were trying to beat.
4. The competitive environment
Know your enemy ­ the first principle of all conflict, whether on the battlefield or
in the marketplace.
GE Medical, Philips Medical, Datascope, HP, Spacelabs, Datex-Ohmeda,
Instrumentarium, Baxter, Marquet, Nihon Kohden etc...
Those are some company names that represent the competitive environment in
the medical device industry. But as soon as this list of names has been printed it
may already be outdated. Joint Ventures, acquisitions, strategic alliances and
takeovers in vast combinations shake up this environment on a regular basis.
The graphic below has been published at the time of the Joint Venture between
Dräger Medical and Siemens Medical.
John M. Kelly, How to check out your competition, p. 294

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With the title "We are uniquely able to meet your needs with a more
encompassing approach" the table intended to show the large, enterprise-wide
portfolio of Dräger Medical in comparison to the other market players. Just 1 year
later the competitive environment looks different due to acquisitions and mergers.
The medical device industry transformed tremendously during the millennium.
The Y2K problem concerned all players. All patient monitors and software
solutions had to be upgraded for the year 2000. It was a race against time as all
competitors tried to upgrade their products before the other one does. Philips
turned out to be the winner in that race and was able to gain market share during
that time, taking it away from GE.
Internal Dräger Medical Presentation

Performance Improvement
And the industry continues to change rapidly today. The consolidation of medical
device players greatly influences both the suppliers and the purchasers. The
imperative to sustain strong growth, as well as offer a broad product line to
economic buyers has driven competitors to expand aggressively through
To understand the competitive environment one must take a closer look at the
major competitors and the consequences of those acquisitions.
Dräger Medicals major competitor is GE Medical, now known as GE Healthcare.
Joyce Bruzzese, International Education Manager at Dräger Medical, said: "GE
has acquired Instrumentarium and I see them (now) as the Giant to beat."
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Ref. Medtronic, "Vision 2010" case study, Harvard Business School, 2000, p. 2f

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With the Instrumentarium acquisition, GE Healthcares' portfolio expanded
Another competitor for Dräger Medical is Philips Medical Systems.
Philips Medical systems is part of Royal Philips Electronics, one of the world's
largest electronics companies.
Philips Medical Systems delivers one of the world's most robust portfolios of
medical systems for faster and more accurate diagnosis and treatment. Philips'
product line includes best-in-class technologies in X-ray, ultrasound, magnetic
resonance, computed tomography, nuclear medicine, PET, radiation oncology
systems, patient monitoring, information management and resuscitation
products, as well as a range of services which include asset management,

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training and education, business consultancy, financial services and e-care
business services.
Philips Medical Systems is represented in more than 100 countries and employs
over 22,000 people. All products are backed by Philips' worldwide network of
research and development and sales and service organizations.
In 2000, Philips acquires 70% of MedQuist, a US-based provider of outsourced
electronic record transcription services, the process by which the taped dictated
texts from clinicians are converted into written medical reports. Philips Medical
Systems, takes over all rights to the CardioLogica software program from
Milwaukee-based Cardiovascular Computer Systems, Inc. CardioLogica is a
Cardiology Information System (CIS) for Electronic Patient Folder (EPF) creation.
Also, Philips Medical Systems takes an 18% stake in SHL Telemedicine, an
Israeli company that offers unique personal tele health monitoring services to
heart patients. And also in 2000, Philips acquires ADAC Laboratories.
In 2001, Philips Medical Systems and SHL Telemedicine establish the joint
venture Philips Heartcare Telemedicine Services Europe, that will roll out the
telemedicine concept in Europe. Philips Medical Systems holds an 80% stake.
Philips Medical Systems agrees to acquire Marconi's Medical Systems business,
a company with leadership positions in several core imaging modalities. Philips
Medical Systems acquires Agilent Technologies' Healthcare Solutions Group
(HSG) in late 2001. HSG, a Hewlett-Packard company, is a market leader in
cardiac ultrasound and has a broad portfolio of products that includes cardiac
and monitoring systems.
These acquisitions make Philips the world's second largest manufacturer of
medical diagnostic imaging equipment ­ after GE Healthcare.
Philips has gained worldwide leadership in acute-care patient monitoring systems
and critical-care clinical information systems. The company has also secured the

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leading worldwide position in automated external defibrillators, as well as a
strong market position in electrocardiography.
A major competitor for Dräger Medicals' Business Unit Monitoring is Datascope.
Datascope Corp. is a diversified medical device company that manufactures and
markets proprietary products for clinical healthcare markets in interventional
cardiology and radiology, cardiovascular and vascular surgery, anesthesiology,
emergency medicine and critical care.
Its four major product lines incorporate Patient Monitoring, Collagen and
Vascular Products and Cardiac Assist. Datascope has a worldwide marketing
organization that includes direct sales forces in the U.S. and Europe, supported
by field service and clinical education specialists, and a network of independent
5. Framework for managing change
"We start with a mission, then we create a vision and strategy and then we
implement." ­ Steve Mahle
After the new company was created and the reasons for this joint venture already
set the course to be more competitive and take on the global giants, it was a
Medtronic Vision 2010 case study, Harvard Business School, 2000, p. 6

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collaborative work of both companies' executive to combine the two companies
to act as one.
To reach this goal, the company had to start at the very beginning, at the very
root of every company - the interaction and mind-set of people working for and in
the organization. Ralph D. Stacy called this process `social reengineering', which
means combining cultures, values, mission and vision. When those social
principals are set, the strategy emerges almost automatically and is being
translated into actual goals and objectives.
This process must start with the culture as no action plans will be implemented if
they run counter to the belief system, or if they adversely affect social structures,
or if they do not motivate people.
5.1 Culture
The first major step the new company had to undertake was to create a new
corporate culture. With culture I refer to common beliefs, shared values, cultural
norms and morals of all individuals within a company.
In a study conducted by Tom Peters and Robert Watermann, where they
researched top companies "in search of excellence", they found out, that without
exception, the dominance and coherence of culture proved to be an essential
quality of the excellent companies. Moreover, the stronger the culture and the
more it was directed toward the marketplace, the less need was there for policy
manuals, organization charts, or detailed procedures and rules.
Some of the riskiest work [a company can] do is concerned with altering
organization structures. Emotions run wild and almost everyone feels threatened.
Why should that be? The answer is that if companies do not have strong notions
Ralph D. Stacey, Strategic Management & Organizational Dynamics, p. 197

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of themselves, as reflected in their values, stories, myths, and legends, people's
only security comes from where they live on the organizational chart. Threaten
that, and in the absence of some grander corporate purpose, you have
threatened the closest thing they have to the meaning in their business lives.
Siemens AG, as mentioned earlier, is the global mammoth company. Originally
founded by Werner von Siemens in 1847, Siemens was a small telegraph
company. But through extensive expansion in the 1980s and 1990s Siemens
grew into a giant powerhouse. Siemens is a name synonymous with success.
Their corporate culture is defined by diversity, by open dialogue and mutual
respect, and by clear goals and decisive leadership. Their principles include such
values as: strengthen the customers, push innovation, enhance company value,
empower our people, embrace corporate responsibility.
Dräger has a company history spanning over 110 years and one of it's supreme
objectives is to retain the independence and character of the family business. An
open, harmonious and holistic communication with all target groups ­ customer,
shareholder, opinion-formers and staff ­ in times of rapid global, technological
and structural change is their most important condition for success. Also
corporate social responsibility is a long-standing tradition at Dräger. This
responsibility and the principles of sustainability, tolerance and fairness are put
into practice at Dräger. It also promotes individuals learning in a learning
organization. Dräger believes that success is achieved by actively encouraging
its staff and its managers.
Combining the two cultures was a challenge. Even though both companies'
headquarters are located in Germany, the `international flavor' at Siemens
prevailed. The top management executives of both companies had to work
together and find mutual agreement in decision making. The executives that took
Peters & Watermann, In search of excellence, p. 75ff.
Siemens Annual Report 2003
Dräger Annual Report 2003

Performance Improvement
leading positions within the other company brought a new kind of leadership and
culture that was different and new to the employees.
Especially the former Siemens employees and executives felt threatened. The
resistance to change, especially on the side of long-time Siemens employees,
was hard to overcome. As Siemens Medical Solutions only holds a 35% stake at
the company, all final decisions and directives came from the Dräger
organization, with only a few high level Siemens executives included in the
decision-making process. The fear of loosing pension and medical plans, loosing
other benefits or even employment, and the unavoidable feeling of being taken
over instead of working as a partnership joint venture nurtured the resistance
against change among all Siemens employees.
The reasons why people might resist a change in culture need to be identified
and plans formulated to overcome the resistance. Participation, communication
and training are all seen as ways of overcoming resistance.
The first step in planned social change is that of analyzing the force field existing
at any one time in a specific organization to identify what the driving forces [for
change] are and what the resisting forces are. The analysis would reveal much
about the attitudes, the satisfactions and dissatisfaction of people throughout the
organization, the strengths and weaknesses of the organization.
At the new Dräger Company the driving force for change was of course the joint
venture and the new competitive position. The company needed to incorporate
the new monitoring division on a structural basis and all its employees on a
cultural level. The resisting forces against this change were the long-term
Siemens employees, who felt threatened in their existence.
Ralph D. Stacy, Strategic Management & Organizational Dynamics, p. 185f
Ralph D. Stacy, Strategic Management & Organizational Dynamics, p. 200
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Performance Improvement - How to beat the competition and become the market leader
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Dipl. Betriebswirtin Silke Frödtert (Author), 2004, Performance Improvement - How to beat the competition and become the market leader, Munich, GRIN Verlag,


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