December 2009 Deborah DiSanzo at Philips Medical Systems (A)

Patient Monitoring was a solid business unit, a market leader with a leading market share and a high EBITDA. Perception of the leadership team and the employees was that there was no need for change. That mentality really elevated the division above the customers: We spoke using technical jargon, had an invincible attitude, and behaved like we controlled the paradigm. In reality there was growing competition from a number of small, low end Chinese companies that made products that were much more affordable, if not as high quality. They were making inroads into the low to mid tier market and threatened Philips competitive position in emerging and developed markets. - Leslie S., Chief Financial Officer We needed someone who could drive Patient Monitoring to the next level, but most importantly, not to screw things up. At the time Philips was sitting on a lot of cash and investors were clamoring for its investment. The next GM would need to be someone who could aggressively seek acquisitions and integrate them successfully. -- David R., Vice President of Marketing

In the spring of 2006 Deborah DiSanzo was asked by her longtime boss Steve Rusckowski, CEO of Philips Medical Systems, to leave her role as General Manager of the Cardiac Care unit and assume the leadership of the Patient Monitoring business. Now the phone was ringing with Steves caller ID number and no doubt he was looking for her response. DiSanzo had her reservations. Indeed, lately shed even been thinking it might be time to leave the corporate world and try her hand with a start-up. Shed had so much fun growing the cardiac business and she wasnt sure whether patient monitoring could offer the same challenge. I did defibrillators. I built the market. It had 15% growth. I was all about growth markets and changing the world. Patient monitoring looked sleepy by comparison. Who wants to go to a business thats growing 4-5% when you could be growing at 15%? In addition to the prospect of moving to a much more mature industry sector, DiSanzo had a hard time getting excited about the PM strategy and purpose.
Professor Nan Langowitz prepared this case with the assistance of Ben Corum M10 Price-Babson Fellow at the Arthur M. Blank Center for Entrepreneurship. The case is intended to serve as the basis for class discussion rather than to illustrate either effective or ineffective handling of business decision-making of a managerial situation. Copyright 2009 Babson College

The strategy was a bit boring I was saving lives [at Cardiac Care]They [Patient Monitoring] were selling boxes that beeped I wasnt sure it would be my cup of tea. But the light was flashing on her phone and she knew she needed to give Steve an answer. She told Rusckowski she would accept the role as General Manager for Patient Monitoring, conditional upon the opportunity to talk with just one more person. Werner H. was Vice President, R&D, Measurements for Patient Monitoring and had been with the business unit since 1984. He was famous. He was a thought leader in the industry. He had designed Intellivue. DiSanzo recalled. I needed to be sure that we could work together before I fully agreed to take the job. DiSanzo knew that her success in the new role would require a functional working relationship with Werner H. and that he had not always seen eye-to-eye with past GMs.

Leading Cardiac Care

DiSanzo was General Manager of the Cardiac Care business unit within Philips Medical Systems, where she oversaw 300 employees and growth and operations for five businessesAutomated External Defibrillator, Advanced Life Support, HeartStart Home Defibrillator, Diagnostic ECG, and Medical Consumables. The Philips Medical Systems family of businesses had been dramatically enlarged in November 2000 when Agilent Technologies agreed to sell its Healthcare Solutions Group (HSG) to Philips in a cash transaction valued at $1.7 billion dollars. The purchase of HSG was a pivotal point in a three year $4 billion dollar string of key acquisitions that Philips began in 19981 with the goal of becoming the global market leader in medical systems devices worldwide. Agilent itself had been born of changes at its former parent, Hewlett-Packard, which had spun out the HP Medical Products group along with other non-computing product lines to create the new public company in 1999. DiSanzo had navigated through all these corporate changes and now she was faced with yet another challenge. Deborah DiSanzo had worked at Hewlett-Packard Medical Products since its 1989 acquisition of her former employer, Apollo Computers (see Exhibit 1 for a complete career history). At Apollo and in the initial years at HP she was part of the healthcare information business, working on electronic medical records and even participating in President Clintons healthcare taskforce. In 1996, with a change in HP senior management, the healthcare information business was closed and her boss offered her the opportunity to move to the Cardiac Care business, where he was going. He told her he expected that they would be buying a company and that it could be an exciting time. DiSanzo took the role of marketing manager, anticipating that maybe shed stay for another year and then move on. The cardiac business had a range of product offerings from defibrillators to diagnostic machines such as echocardiograms. In 1998 HP agreed to buy HeartStream, a small Seattle-based automated external defibrillator (AED) manufacturer with 95 employees for $139 million. Defibrillators provide treatment for ventricular fibrillation, the most common cause of sudden cardiac arrest. HeartStream was a venture capital backed start-up whose five founders dreamed of creating a defibrillator so small and simple that anyone could safely and easily use it. HeartStream was founded in 1993 and received FDA clearance for commercial use of its product in 1996. Shortly thereafter American Airlines became an early customer, training its staff and deploying HeartStream ForeRunners on its aircraft. In 1998, the first persons life was saved on board a flight. HP viewed the acquisition of HeartStream as a new niche for market penetration and growth. Sudden cardiac arrest was a leading cause of death in the United States, claiming approximately 340,000 lives each year. For each elapsed minute before defibrillation of
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a heart attack victim, the chances for survival were estimated to decrease by about 10 percent. In a typical community It took an average of nine minutes for emergency professionals to reach a victim2. DiSanzo had been assigned to the acquisition integration team by then Cardiac Care General Manager Steve Rusckowski. Two dizzying weeks after the acquisition was finalized in early 1998, HeartStreams General Manager resigned and the promise of the acquisition was in peril. DiSanzo stepped into the breach and led the integration ultimately winning the role of manager for the HeartStream business. She temporarily moved to Seattle to ensure a happy marriage between HeartStreams product technology and HP Medical Products manufacturing, marketing, sales and distribution capabilities. Under DiSanzos leadership, from 1999 to 2006, HeartStream revolutionized the automatic external defibrillator market with the introduction of HeartStart, the first automated external defibrillator for use in homes and private businesses. In 2002, HeartStart was given clearance for prescription use by individuals for home use and by September 2004 it became freely available overthe-counter without any need of prescription. HeartStreams success in creating and tapping a new market fueled the Cardiac Care units annual revenue growth. DiSanzo found she had a true passion for the defibrillator business, she believed, as the HeartStream founders had, that her products were truly saving lives. In 2000, Deborah DiSanzo succeeded Steve Rusckowski as general manager for Cardiac Care when Rusckowski was himself promoted within the Agilent Medical Systems business unit. DiSanzo stepped into the role with ease, inheriting a strong team of folks she already knew well. Working with that senior management group, she focused the Cardiac Care group around the vision of saving lives. The business unit soon lived by the vision statement developed under DiSanzo: We design and produce every defibrillator as if the life of someone we love depends on it. By March 2006, Cardiac Care revenues had reached over $500 million, from $4 million at the time of the HeartStream acquisition.

A Titan of Industry
When the GM position opened up Werner H. was not surprised to hear that DiSanzo was being considered to fill the vacancy. Within the Philips Medical Systems division she had already earned a reputation as a skilled manager who was effective at capitalizing on new market opportunities and leading integration efforts without losing the cohesion and uniqueness of either team. He had first become aware of DiSanzo in the mid 1990s when she was with the Cardiac Care unit and was impressed with how she had handled the integration of HeartStream. I have had the opportunity to see quite a few acquisitions and integrations over the years and hers was by far the best from both a business and cultural perspective Werner H. explained. Werner H. was asked to meet with DiSanzo to discuss the position in April of 2006 and he travelled from Bblingen, Germany to Andover for the meeting. What started out as a casual interview quickly turned into a strategic session, Werner H. recalled. In the meeting DiSanzo asked him about what he was doing in R&D and what his vision was for the future of patient monitoring. When Werner H. shared his vision of moving patient monitoring beyond the physical confines of the emergency room (ER) and intensive care unit (ICU), DiSanzo became interested. At Cardiac Care I had been successful in bringing defibrillator technology to the masses she explained. The idea of expanding the patient monitoring devices market excited her. Ubiquitous remote monitoring also had the potential to enhance care by detecting problems in patients earlier. The idea that patient monitors could be transformed from boxes

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that sit on a wall into predictive, life-saving resources for caregivers gave DiSanzo hope that she could find a real passion for her work at Patient Monitoring.

Evaluating the Patient Monitoring Opportunity

In 2006 Royal Philips Electronics N.V. (Philips) was amongst the worlds largest companies, employing over 120,000 people in 60 different countries. Founded in Eindhoven, the Netherlands in 1891 by brothers Gerard and Anton Philips, the company originally manufactured carbon filament light bulbs. Within a decade Philips had become one of the largest producers in Europe and the largest employer in the Netherlands. In 1914, Philips established its first research and development laboratory. This marked the beginning of an innovative streak at Philips that became a mainstay at the company. In the thirty years that followed, Philips successfully diversified into x-ray and vacuum tubes, radios, televisions, and electric razors. By 1932 Philips had manufactured and sold over a million radios and was the largest radio manufacturer in the world. From 1960 until the end of the twentieth century Philips played a significant role in shaping commercial and consumer audio and video markets with the introduction of the compact audio cassette in 1963, videocassette recorder in 1972, compact disc (CD) in 1982 and the digital video disc (DVD) in 19973. By the early 21st century, the company was structured around four primary business units: Medical Systems, Domestic Appliances, Consumer Electronics and Lighting. 2006 revenues were 26.9 billion (See Exhibit 2 for a breakdown of 2006 revenues by business unit and region). The Patient Monitoring business unit consisted of 1,500 employees based in two locations in the US (Andover, MA) and in Germany (Bblingen). Patient Monitoring (PM), a sister unit to Cardiac Care, had also been acquired through the HP acquisition. In 2006 Patient Monitoring was among the largest and most profitable business units within the Philips Medical Systems (PMS) corporate division with a leading global position, higher than industry average EBITDA, and annual revenue growth in the 4-5% range. Philips patient monitoring devices enjoyed tremendous brand recognition and were well regarded and widely used by doctors and nurses in operating suites, intensive care units, and emergency rooms of middle and upper tier hospitals around the world. By 2001 Philips had achieved a 29% global market share in Patient Monitoring, putting it in a head to head tie with GE Healthcare in the race for market leadership (See Exhibit 3 for a list of primary competitors and market shares). With the 2002 launch of its IntelliVue line of patient monitoring products Philips moved ahead of GE. David R., vice president of marketing for Patient Monitoring recalled [IntelliVue] took the patient monitoring world by storm. From 2002 to 2006 IntelliVue sales pushed PMs revenue up significantly per year establishing Philips as a leader in the global patient monitoring market. IntelliVues market success lay in its revolutionary design. Boasting wireless network connectivity with portal technology, Intellivue devices allowed caregivers to access data stored on central servers from remote monitors. Hospital administrators could also access patient monitor information remotely, increasing communication flow within hospital networks and enhancing patient monitoring capabilities.

2006 Challenges and Change

With the launch of IntelliVue, Patient Monitoring had become one of the largest business units in the Medical Systems division and one of the most profitable business units in the entire Philips
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corporate family. Despite this tremendous product development and marketing success, Patient Monitoring had been plagued in its history with revolving leadership. Going back to its HP days, the business had seen 13 general managers come and go since 1987 with none staying more than a few years. IntelliVue had been launched while a former Bain consultant, had been general manager. He had brought terrific strategic skills to Philips but lacked deep knowledge of the medical systems industry. A former vice president of sales and marketing for PM had been promoted to Patient Monitoring General Manager in 2003. By 2006 revenue growth, while still exceeding the industry average of 3% per annum, had slowed to 4-5% per year and Medical Systems CEO Steve Rusckowski began searching for a successor who could reenergize the future of Patient Monitoring. Werner H. described the companys growth prospects at the time: With nearly 50% market share and a saturated market, growth prospects beyond market growth rates seemed a difficult challenge. A move into the lower end of the market seemed a plausible strategy, but there were concerns about low margins in that part of the market. There was no clear path to growth and increased profitability.

Taking the Helm

In June of 2006 DiSanzo assumed the role of general manager at Patient Monitoring. Lynn G., Senior Director of HR recalled, Deborah had a real sense entering the department that there was no easy way up from here only an easy path down. The challenges facing DiSanzo in her new role were many, according to Lynn G.: At the time I was the only new member of DiSanzos staff. Some staff members had been with Patient Monitoring for 25 years. These were incredibly successful, bright and strong minded individuals who were good at running their business unit and confident about their leadership abilities. Those in Patient Monitoring were apt to talk in highly technical jargon and had an air of invincibility that telegraphed their belief that they controlled the paradigm. As the chief systems architect Dale W. expressed it, many believed we had perfected the box replacement business; we could stay on top of the competition and build solid applications and equipment to stay on top of that market. Adding to the challenge was the fact that the General Managers office seemed to have a revolving door, with a succession of 13 different GMs over 19 years. Leslie S., Chief Financial Officer of Patient Monitoring since 2004, recalled the joke amongst the leadership team was how long will she stay? and what DiSanzo could do that they hadnt seen before. Building credibility was Deborahs greatest initial challenge. DiSanzo went to work by setting up one-on-one meetings with each member of her leadership team (See Exhibit 3). Her goal was to get to know them individually, learn their story and background, and learn their vision for the business. I do this in every business Ive worked in, DiSanzo explained. I go in and ask [people] What is your purpose? What is your strategy? She sent personal notes after each one-on-one saying she was looking forward to working with the manager and thanking them for their ideas. With each meeting, DiSanzo began to piece together what was really happening in the company and the marketplace. Chief product architect for Patient Monitoring, Dale W., shared his initial concerns about DiSanzo.

At Cardiac Care she was manufacturing hardware products that had little software content. I was concerned that she wouldnt agree with the strategy that we were trying to build up around our clinical information systems. But [DiSanzo] approached me and told me about her history and about her ideas for the unit. This aligned with what my goals were and so I was no longer concerned. She also backed up her words with action so I knew she was being authentic. In addition to making time for meetings with her leadership team, DiSanzo began hosting all hands meetings at both PM locations. For DiSanzo, the purpose of these meetings was to introduce herself to her employees, increase communication throughout the company, share strategic initiatives and concerns, and to allow employees the ability to share ideas, issues and concerns with DiSanzo directly. Werner H. recalled: When Deborah took over she started all hands meetings in Germany every other month. This was the most that a GM had ever visited Germany, and her presence and contact with that location gave her instant credibility with and appreciation from the team there. In her first few months DiSanzo had to walk softly so as not to make too big waves remarked Lynn G. But DiSanzo was also compelled to be seen as a leader who was working to right the ship. She approached the job with a sense of humility, a sense of humor, and a likeable personality that allowed her to connect to her employees and establish credibility. Walking into her first all hands meetings in Andover and Bblingen she greeted each group with the words Thank you for allowing me to be part of your awesome team. See Exhibit 4 for the text of her first meeting in Andover.

Internal Problems
From her initial conversations with staff, DiSanzo learned that there were several issues affecting the organization. Given the succession of leadership, it was not overly surprising to find a lack of cohesion among the senior managers. Bill P., General Manager of low acuity monitoring, which focused on special and emerging markets within PM, explained that there was a lack of senior staff connection and communication. We werent working together nearly as well as we could. DiSanzo discovered functional silos between departments and geographies and confusion about firm strategy and objectives. This disconnect was no more obvious than in the R&D department. There were R&D labs in Andover and Bblingen. The labs operated independently and had little interaction and often different strategic goals Werner H. noted. One focused on ubiquitous monitoring while the other worked on clinical decision support. DiSanzo saw the lack of a unifying strategy across the organization as another major issue. I asked 85 people [what our strategy was] and got 87 different answers she recalled. Without a unified strategy DiSanzo knew the organization could not compete successfully in the global marketplace.

External Challenges
DiSanzos initial conversations also brought her up to speed on the challenges Philips faced across the global marketplace. The issues seemed to vary by country economic development phase. Dale W. highlighted one set of issues prevalent in mature developed country markets:

The business was very countercyclical, in that sales were driven primarily by the depreciation of existing equipment. We had perfected the box replacement business; we could stay on top of the competition and build solid applications and equipment to stay on top of that market. But what we needed was a way of creating sales in the interim period between buying cycles. Another challenge that Philips faced in developed markets was the recent addition of hospital Chief Information Officers (CIOs) as key decision makers in the sales process. David R. explained: In the classic patient monitoring business the customer was the CRN [Chief Registered Nurse] or head caregiver. Three to five years ago this paradigm began to change in the developed world as hospital IT [information technology] networks exploded. At this point in time the CIOs began to have more say in the purchase of PM equipment. These CIOs started demanding that the equipment they purchased worked on their proprietary hospital networks and that they could communicate with their IT systems. This presented a challenge to Philips as their sales force was geared towards selling to CRNs. Additionally IT networks from one customer to another were often quite different, so designing network ready equipment was quite a challenge. DiSanzo saw that Philips would need to realign both its sales force and its product development strategy in order to respond to the changes taking place in developed world markets. Philips faced challenges in emerging world markets as well. Unlike developed economies, markets in BRIC (Brazil, Russia, India, China) countries and Africa were expected to grow at higher rates in the coming decades and become the largest global markets for patient monitoring products. Yet Philips products were not designed to compete in these markets. Philips monitors had features that were often seen as more advanced than was required in emerging market hospitals and were delivered at price points that often exceeded the purchasing budgets of resource strapped emerging market institutions. A plethora of smaller competitors were putting cheaper and less complex products on the market. MindRay, based in China, had developed a line of good enough patient monitors that offered fewer features than the premium Philips models at lower cost and were often a better fit for the needs and budgets of emerging market customers. Many health care settings in these markets were characterized by lower intensity patient care with reduced electric and information infrastructure availability and medical staff with less advanced medical training. With the acquisition of Agilent, Philips had inherited patient monitor manufacturing capability in China and developed the SureSigns product line over time as a lower cost Philips quality monitor. Nonetheless, by 2006 MindRay was the market leader in China4, and had carved out just over 5% global market share by units sold (see Exhibit 5).

Catalyzing the Business: The Bblingen Meeting

In October of 2006, DiSanzo announced a three day leadership team meeting to be held the following month offsite in Bblingen, Germany. Her goals for the November meeting were to improve working relations within her leadership team, establish a clear purpose for the business, and start crafting a unified strategy for the firm. All fifteen members of her leadership and senior management teams were invited to attend. Day one of the agenda was set aside for a comprehensive review of the business; day two was devoted to vision and strategy; and day three targeted immediate business

Frost & Sullivan Award 2007

planning. Prior to the meeting DiSanzo asked five invitees to each prepare a 30 minute presentation for day two which would outline their personal visions for the future of the patient monitoring business. The meetings were held at a downtown hotel. Lynn G. and DiSanzo drove to day two together, with DiSanzo doing the driving and Lynn navigating. The two were animatedly talking en route and Lynn quickly became distracted from her navigation duties. What should have been a 10 minute ride turned into a 40 minute detour. They drove around and around in circles unable to find the hotel, or parking. Finally, as Lynn recalled, Deborah turned to me and said Can I have the directions? with a big smile on her face. What could have been a meltdown moment was lightened as a result of Deborahs good nature and sense of humor. We walked in 20 minutes late to a meeting filled with punctual Germans and Deborah jokes, Lynn got us lost with another one of her smiles. The group relaxed after that. The day began with the presentation of the individual vision statements. To assist in their documentation, DiSanzo asked Lynn G. and Leslie S. to stand at flip charts during the presentations and sketch what they heard. Within a few minutes of starting the first presentation it became apparent they would have to turn the flip charts to the walls the pictures were so funny they were making people laugh. Once they got over this distraction, each of the presenters pitched their visions back to back, with DiSanzo allowing questions only for clarification. Dale W. shared his thoughts on the format: The challenge of presenting was that it forced people to put all of their cards out on the table and share a complete vision of the company before there was any group discussion. This forced presenters from holding back ideas and brought out a lot of interesting ideas that we might not have heard otherwise. This was an interesting meeting format and one that was unique for Philips at the time. Meeting the Needs of Changing Markets During his presentation, David R., Vice President, Marketing, highlighted the market trends that would most affect developed and emerging markets in the coming decade. In developed world countries the most concerning trend facing the healthcare industry was an aging demographic. The demographic shift resulting from the baby boom that occurred in the mid 20th century was expected to result in the near doubling of the elderly (65+) population in the United States by 2025. Similar increases in elderly populations were expected to occur in other G6 nations as well. The impact of this growing elderly population on healthcare systems would be tremendous (See Exhibit 6 for G6 Demographic Information). David R. described a future in which a growing patient population would be cared for by a shrinking pool of caregivers and rapidly escalating healthcare costs. Philips, he argued, would need to supply patient monitoring solutions for this future state that reduced the burden placed on caregivers and diminished overall costs for healthcare providers. In consideration of emerging world markets, David R. spoke of the importance of emerging markets and of China in particular, as a major driver of industry growth in the future. He argued that Philips needed to play and win in China to maintain its position as a world leader in patient monitoring (See Exhibit 7 for BRIC market growth projections). Ubiquitous Monitoring For his presentation, Werner H. shared his vision for wireless, ubiquitous patient monitoring. Making monitors wireless, smaller and easier to use would allow for the monitoring of patients outside

of ERs and ICUs, he explained. Monitoring a wider population of patients in less intensive hospital settings would assist caretakers in identifying problems earlier in patients: reducing demand on critical hospital resources, lowering overall treatment costs, and saving more lives. Winning in Emerging Markets Bill P. shared his vision for what Philips would need to do to win in emerging markets. He spoke from his years of experience in running R&D and manufacturing in China and touched on the importance of emerging markets and on the differences between typical developed and emerging market customers. Small emerging market hospitals and clinics, he pointed out, were often infrastructure poor. Hospital wards often had a single electrical outlet and no network connection. Monitoring equipment often needed to be shared between rooms and transported within and between buildings. Rural caregivers were often not as well trained as their urban and developed world contemporaries on the use of monitoring equipment. Hospitals and clinics in emerging markets could also not afford Philips premium products. Bill P. made a case for a differently designed product that could run on batteries, was highly portable, had a minimum set of proven features, a low cost structure, and was designed to support less trained caregivers in delivering high quality care. A Convergence of Patient Monitoring and Informatics Dale W., Chief Architect, shared a vision of the pending convergence of patient monitoring and medical informatics. Dale W. believed that when properly applied informatics could help physicians make better informed decisions about patients and identify problems earlier. He believed that informatics would be a disruptive force in the market in the coming years and that if Philips didnt move into the informatics space first someone else would, resulting in Philips loss of leadership in patient monitoring. Clinical Decision Support Carol X., Vice President, R&D, Systems in Andover, spoke about the needs for improved clinical decision support. She argued that medical practice had historically been more art and perception rather than a true science but that patient monitoring with better clinical data could help change the paradigm. Equipment needed to get smarter. In the developing world where care is often dispersed, caregivers might see patients less frequently and also be at a distance from the highest level expertise for a particular ailment. In the developed world, where there was growing pressure to bring down the cost of care, it seemed possible that intelligent patient monitors could also play a role. Carol X. imagined a vision in which patient monitoring devices would get smarter, transforming from being a dumb box that sat on the wall and beeped into a resource that caregivers could rely upon to provide early warning and more easily interpretable data. Such monitors might help caregivers catch deteriorating patients early and might provide treatment suggestions based on informatics and science. Finding Purpose After the presentations DiSanzo asked Leslie S. and Lynn G. to post their drawings of the presentations on the walls of the conference room. Using the drawings as a point of departure DiSanzo then led the team through a K-J5 brainstorming exercise that she had learned during her years at HP. The team focused on the question: What is the purpose of Philips patient monitoring? Individual team
The K-J Method is a technique originally devised by Japanese anthropologist Jiro Kawakita and enables groups to rapidly develop insight into themes or relationships among qualitative data, suggestions or ideas. Through the simple technique, groups can rapidly achieve consensus on priorities.
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members were asked to write what they thought were important components of a purpose statement on sticky notes and post them onto the conference room wall. Once a significant number of ideas had been posted, the team was then asked to silently group similar ideas together. Lastly, individuals were asked to vote for the three themes that resonated most with them. Deborah didnt sit back; she wrote and posted her own sticky notes even as she was facilitating the process. Some of her team members were surprised, having become used to leaders who held back at meetings. Deborahs participation was disarming to some but she pursued the interactive approach, pushing the team to identify the ideas and themes that were most crucial to Patient Monitorings purpose. The team worked hard to craft a purpose statement for the business that incorporated the selected themes. Every word was important DiSanzo explained, and a healthy debate ensued. There was a big discussion about saving lives. Bill P. recalled. This had previously been a taboo concept at Patient Monitoring. A lot of people didnt feel it [was] appropriate for us in patient monitoring to say that we saved lives. Deborah disagreed with this saying we absolutely save lives. In supporting her argument she used a personal example of when a patient monitoring device had saved one of her relatives. Saving lives, DiSanzo believed, was a central component of a compelling purpose statement for the business. Employees need to know why they are coming into work every day. Bill P. then shared his experience from when he had been rushed to a rural Chinese emergency room in 2001 suffering from acute appendicitis. Hed been unable to communicate well with his doctors and was scared of being operated on in an unknown hospital. But when he was taken into the operating room and found that it was equipped with HP (now Philips) patient monitors he suddenly relaxed and realized that he was going to be okay. One of the biggest things we can do, he told the group is to provide trust to patients and caregivers. He argued that Philips should aspire to become the most trusted brand for patient monitoring devices in the world. These themes of saving lives and creating trust prompted the group to imagine the business as patient care versus patient monitoring. After an hour of deliberation the team arrived at a purpose statement which read: We help improve and save lives everyday by innovating the worlds most trusted patient care solutions. Everyone was in on it and could restate it. Lynn G. noted. Strategy Development With the purpose statement drafted, the team changed gears and spent the rest of the day working to develop a firm strategy. This time DiSanzos brainstorming question was what does Philips need to do to win in the global marketplace? To begin DiSanzo had the team review the flip charts and the future industry trends they portrayed. Next she had team members focus on the obstacles that stood in Philips path to success moving forward. Team members were asked again to populate sticky notes, this time with obstacles and challenges. Once a significant number of notes had been posted to the wall the group was asked to group ideas thematically and vote for the most important. By the time the group adjourned for the day the new firm strategy was not complete, but a clear understanding of the most important obstacles and opportunities the business faced had been clarified and a solid foundation had been laid. The Bblingen meeting was seen as a turning point for the leadership team and a success for DiSanzo. Werner H. remarked she has a keen ability of getting buy in, and keeping the attention of people whose ideas may have fallen to the cutting room floor along the way. Dale W. added Deborah doesnt sit back; she is a facilitator that gets her hands dirty, writing on Post-its and driving the discussion forward. This is different from a lot of other leaders who hold back at meetings.

Finalizing the vision

After the Bblingen trip DiSanzo returned to Andover where she continued to develop the strategy. She maintained constant connection with the Bblingen team via teleconference calls and emails to keep them involved and updated on her progress. Back in Andover, DiSanzo reconstructed the sticky notes into a digital format and sent the output to the team virtually for approval and verification. Using virtual give and take she and the leadership team developed a new four point strategy for the business unit which they would use to move the business forward. We will drive the market for Monitors Everywhere. Simple to use, seamless, un-tethered, everywhere, and appropriate. It will provide mobility for the patient and mobility for the caregiver. It will provide personal monitoring across the care cycle. We will lead in Clinical Decision Support. Providing an intuitive presentation of meaningful information driven from accurate and comprehensive data; through an intense focus on a multitude of measurements for the care giver. We will lead in designing, selling, implementing, and servicing Clinical Information Systems. Providing an intuitive presentation of meaningful information driven from accurate and comprehensive data. Focus on rich and deep clinical data We will win the Emerging Markets race. Through solutions designed in, and for, emerging markets in BRICABrazil, Russia, India, China, and Africa. The strategy focused on competing in emerging markets, developing a leadership position in medical informatics, and continuing innovation in patient monitoring with the goal of supporting caregivers and saving lives. (See Exhibit 8 for a copy of the document.)

Deploying the Strategy

To deliver on the new strategy DiSanzo began making adjustments to the organizational processes and structure. She and the team developed specific objectives for the one and five year timeframes moving forward. These objectives included establishing a manufacturing presence in China, moving Philips more boldly into medical informatics, and realigning Philips product development operations. Individual strategic objectives were assigned to members of the leadership team who became responsible for their completion. To promote transparency DiSanzo created performance dashboards for each team member that outlined the top 10 objectives for which they were collectively responsible. Additionally, the dashboards listed individual objectives current statuses and due dates of important upcoming milestones and deadlines. DiSanzo made the dashboards available to the entire team and asked for monthly updates on their statuses (see Exhibit 9 for an example). This motivated individuals to get things done and promoted communication and cooperation amongst the team and an understanding of what different team members were doing. Use of the objective dashboard concept was rolled out to the entire organization in 2007. DiSanzo hoped to use the tool to achieve organization

wide realignment of projects and priorities. To ensure widespread adoption, employee performance and compensation packages were tied directly to the objectives outlined on their dashboards. DiSanzo also made some organizational moves to erase some of the silos that had previously arisen. Further, to deliver on the emerging markets strategy, a cross functional task force was charged with looking for strategic partners and acquisition targets in emerging markets. The strategic objective was to find companies that had a strong presence in emerging markets. In additional to strategic fit cultural fit was emphasized as a critical factor for consideration. A similar task force was created and charged with finding companies that could move Philips further into wireless monitoring and medical informatics. Acquisition targets were to be based in developed markets and have a compelling technology that could expand Philipss wireless and medical informatics offerings. Spreading the word was another critical factor for deploying the strategy. Beginning in December 2006 DiSanzo started rolling out the newly defined PM mission and business strategy to her employees at her monthly all hands meetings in Germany and the U.S. She used the annual meeting in Orlando, Florida in early 2007 as an opportunity to roll out the new initiatives to the entire Patient Monitoring sales force. To ensure that the focus was maintained after the meetings, DiSanzo became the primary ambassador, living and breathing the mission and strategy wherever she went. [She] would begin and end every meeting with a review of the Patient Monitoring strategy. Lynn G. recalled. New and existing projects and proposals were judged based on their connection and relevance to the Patient Monitoring mission and strategy. People learned quickly that ideas and presentations that failed to incorporate the business strategy were questioned and abandoned.

Looking Ahead
A little over a year into her new role at Patient Monitoring, Deborah DiSanzo had a measure of pride and satisfaction. Since the meeting in Bblingen, Patient Monitoring had come a long way. DiSanzo had positioned Philips for the convergence of patient monitoring and medical informatics and the business was better focused on the emerging markets of the world. Her acquisition task forces had found several promising strategic targets. Negotiations had been going well with two companies and plans were currently being laid to announce a deal in the coming quarter. If everything went according to plan, the business would be on an exciting new growth path. She had found new purpose and passion at the helm of Patient Monitoring.

Exhibit 1: Deborah DiSanzos Career History

Education:

Bachelor of Science in Business Administration, Merrimack College, 1982 Master of Business Administration, Babson College (evening program), 1989

Positions Held: 1982 Medical Sales Representative, electrocardiographs and spirometry equipment, company went bankrupt one year later 1983 Sales Representative, Simplex, time clocks, territory was North Dakota; promoted into product management; laid off one year later 1985 Director of Marketing, Texet Electronic Publishing Co., software start-up, liquidated three years later 1988 Product Marketing Manager, Apollo Computer, bought by Hewlett-Packard 1990 Healthcare Information Management, Hewlett Packard, sales, marketing and operations positions 1996 Marketing Manager, Hewlett-Packard, Medical Products Group, Cardiology Products Division 1998- General Manager, Hewlett Packard Medical Products Group, HeartStream 1999 General Manager, Agilent Technologies, Healthcare Solutions Group, Cardiology Products Division 2001 General Manager, Philips Medical Systems, Cardiac Resuscitation 2005 Senior Vice President and General Manager, Philips Medical Systems, Cardiac Care

Source: Case writer interview

Exhibit 2: Philips Revenues by Business Unit and Country

Revenues by Sector (in millions of Euros) 2004 5,584 2,044 9,919 4,526 2,482 2005 6,343 2,194 10,422 4,775 2,041 2006 6,742 2,645 10,576 5,466 1,547

Medical Systems Domestic Appliances Consumer Electronics Lighting Other

Revenues by Main Countries (in millions of Euros) 2004 2005 2006 Netherlands United States Germany France United Kingdom China Other 1,144 6,594 1,972 1,804 1,172 1,545 10,624 1,036 7,133 1,916 1,680 1,126 1,816 11,068 1,088 7,447 1,985 1,626 1,186 1,740 11,904

Revenues by Main Countries

14,000 12,000 Millions of Euros 10,000 Netherlands United States Germany France United Kingdom China Other 2004 2005 2006

8,000
6,000 4,000 2,000 -

Source: Philips 2006 Annual Report

Exhibit 3: Patient Monitoring Leadership Organizational Chart (Abridged)

Steve Rusckowski CEO

Deborah DiSanzo General Mgr

Dale W. Chief Architect

Leslie S. CFO

Werner H. VP, R&D Mment

(Bblingen)

Carol X. VP, R&D Systems (Andover)

David R., VP, Marketing

Bill P., GM, Low Acuity Monitors

Lynn G., Director, Human Resources

Source: Case writer interviews

Exhibit 4: Text for Deborah DiSanzos First All Hands Meeting in Andover
Thank you for allowing me to be part of your awesome team. It is a privilege to be able to work in Patient Monitoring, and I am looking forward to working closely with all of you. It will take time for us to know each other well. I can start with a brief story that means a lot to me, a couple of quotes that I keep on my desk, and four questions for you. In 1990, we had a technology fair in Waltham. Many of you were there, and we were fortunate because Dave Packard and Bill Hewlett came to the fair. At the time, I was working with the University of Pittsburgh on a software solution that they developed. The solution ran on Apollo Computer workstations and monitored activity in the neurological operating rooms. It took physiological measurements, evoked potentials, video, and voice from the OR and made this available to neurophysiologists and neurosurgeons across the University of Pittsburgh campus and 7 hospitals for consultations and review. The network was real time, and the Director of Neurophysiology credited the system with saving time and improving care. When Bill Hewlett came by, he asked me what the system did. I responded the first time by describing its features... He said "but what does it do?" I responded the second time by describing the great Apollo Computer networking technology... He said, more frustrated the second and third time, "BUT, WHAT DOES IT DO?" Finally, after the fourth time, I blurted out "It saves lives." Bill said, "OK then, carry on." I have other quotes in my office. When Lew Platt [former CEO of HP] was asked about a particular management style, he said. "What is it? It is simply treating people with dignity and respect." When Gerard Kleisterlee [President and CEO of Royal Philips] remembered Fritz Philips he said He did the things he did, not only because he saw them as good business sense, but also because he had a vision about the role of business in society that was years ahead of its time. Many of the beliefs he held, such as the importance of protecting the environment, on the necessity of communicating with each other, on the importance of our employees' welfare, on the role of business in society are reflected in the programs we are developing and deploying today. Saving lives. Treating people with dignity and respect. Remembering the vital role that our business has in society. These are important. So that I can get an idea of your view of our business, will you provide me with thoughtful answers on the following four questions? Your answers should be in an e-mail, and please, no more than one page in length. 1. What is your view of the vision, purpose, or mission for the Patient Monitoring business? 2. What should Patient Monitoring focus on in the next 3 years? 3. What should not change in Patient Monitoring? 4. Is there something that you would like to change in Patient Monitoring? I will keep your individual responses confidential, and if I share the results, I will only share the combined (no names) view. Thank you for your time and support. I am looking forward to working with you.

Source: Deborah DiSanzo personal notes

Exhibit 5: Competitors and Estimated Market Shares

Estimated Global Market Share 2 2 2 001 002 003 3 3 3 GE Healthcare 0.6% 1.6% 0.2% 2 3 3 Philips 6.8% 0.6% 2.7% 5. 4. 8. MindRay 6.0% 7% 7% 0% 6. 5. 4. Draeger 6.9% 2% 0% 9% 6. 6. 6. Nihon Kodon 5.7% 0% 1% 5% 29.1 2 2 1 Other % 4.7% 2.0% 7.7% Source: Frost and Sullivan Market Report 2000-2006 Company 2000 26.9 % 25.4 % 2 004 2 7.2% 3 5.0% 6. 9% 7. 1% 4. 3% 1 9.5% 2 005 2 5.1% 3 8.6% 7. 5% 7. 0% 5. 0% 1 6.8% 2 006 2 5.2% 3 8.9% 7. 4% 7. 0% 5. 0% 1 6.5%

Estimated Market Share % (based on F&S data above)

45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% GE Healthcare Philips MindRay Draeger Nihon Kodon Other

10.0%
5.0% 0.0% 2000 2001 2002 2003 2004 2005 2006

Exhibit 6: G6 Demographic Information

G6 Population Growth
Population (millions) 400.0 France 300.0 200.0 100.0 2006 2010 2025

Germany
Italy Japan UK US

G6 Population Age Distribution

100% 16% 80% 60% 40% 20% 24% 0% 2006 0-19 2010 20-64 65-65+ 2025 23% 22% 60% 60% 17% 21%

56%

G6 Elderly (65+) Population Projections

70.00 Millions of people 60.00 50.00 40.00 30.00 20.00 10.00 2006 2010 2025

France
Germany Japan Italy UK US

Source: US Census Data www.census.gov

Exhibit 7: BRIC market growth projections

BRIC Patient Monitoring Device Market Sizes and Growth Projections (millions of $US) Yea 20 20 20 r 07 08 09 2010 2011 2012 2013 2014 Bra 359. 385. 409. 440. 32 37 29 315. zil 0 0 0 0 3.0 2.0 0.0 0 Chi 76 1,06 1,15 1,25 1,34 1,46 88 96 na 6.0 5.0 8.0 0.0 3.0 7.0 3.0 5.0 Indi 21 23 245. 259. 273. 288. 303. 22 a 2.0 3.0 0 0 0 0 0 2.0 Rus 71 76 54 557. 590. 628. 668. 696. sia 7.0 9.0 1.0 0 0 0 0 0

BRIC Patient Monitoring Device Market Sizes and Growth Projections (millions of $US)
1,600.0 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 2007 2008 2009 2010 2011 2012 2013 2014 Brazil

China
India Russia

Source: Espicom Business Intelligence. The Medical Device Markets for Brazil, Russia, India and China, 2009

Exhibit 8: Patient Monitoring Strategy document

Source: Philips

Exhibit 9: PM Top 10 Objectives Q4 2007 Performance Dashboard

Staff

1)Solution Launch

2)Lowend Growth

3) CDS Strategy

4) Next Gen

5)IM&A

6) ICIP

7)Invivo

8)Industl Emerging

9) Service Growth

10) EES

MM-Werner SYS-Carol LA-Bill CTO-Dale

Mktg-David

G G G G
G

G NA G NA
G

G Y NA G
G

G Y NA G
G

NA NA G G
G

NA Y NA Y
Y

NA NA NA NA
NA

NA NA G NA
NA

NA NA NA NA
NA

Y Y G G
Y

SC-Luis Fin-Leslie HR-Lynn QR-Peter

CS-Michael

G G NA G
G

G G NA G
G

NA G NA NA
N/A

G G NA G
G

G G G NA
NA

NA NA NA NA
NA

G G G G
G

G G G N/A
N/A

NA G NA NA
G

G G G G
Y

SBD-Marc GSSI - Eva GSSNA - Steve Overall

NA G G G

NA G G G

G NA NA G

NA NA NA G

G NA NA G

NA Y Y Y

NA R G Y

G NA NA G

NA G G G

G G G Y

Patient Monitoring 2007 Objectives: 1. Achieve successful Q1 solution launch (MP5, VS3, System J, ROW telemetry) and successful Q3 solution launch (MMS+, MP2, System K). 2. Grow x% in low-end business from xx million euro in sales to xxx million euro. 3. Define the CDS business strategy. 4. Complete phase 0 exit on Cableless Patient, Next Generation Information Center, and Next Generation telemetry by Q3. 5. Drive execution of at least one non organic growth initiative. 6. Make IntelliVue Clinical Information Portfolio successful, which includes release of D.0, progress to plan in E.0 and F.0, and 5 million euro in sales in ICU/CCU. 7. Successfully integrate Invivo into PM. 8. Implement an industrial solution and make investments in emerging markets. 9. Develop and deploy new Services and Programs to meet services 2007 growth goal of x% (comparable). 10. Increase PM EES scores: 10-15% in leadership. Continue to build and strengthen the leadership pipeline for key position holders/ key leader roles through targeted development programs, assignments and projects.

Source: Philips; Specific targets are not disclosed for competitive reasons.