Guidant Corp. is an Indiana-based spin-off of pharmaceutical company Eli Lilly. It is a successful IPO start-up selling pacemakers and defibrillators. In April 1996, Guidant’s leadership must determine if the systems that were put in place during the past year shape the culture that is necessary to implement their intended strategy — specifically, they must determine if the current systems will allow Guidant to double its market value by 1999.
Robert L. Simons; Antonio Davila
Harvard Business Review (198076-PDF-ENG)
April 01, 1998
Case questions answered:
- Identify the issues in this Guidant Corp. case.
- Analyze and evaluate the situation.
- Provide a recommendation and alternatives.
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Case answers for Guidant Corp.: Shaping Culture Through Systems
Identification of Issues for Guidant Corp.:
At Guidant Corp, increasing shareholder value shapes every decision made by corporate leadership. The Indiana-based spin-off of pharmaceutical company Eli Lilly had been operating as five independent medical device and diagnostic companies in the years since its creation in January 1994. The five entities united in March 1996 in an effort to generate value by reducing costs through economies of scope in management functions and sales efforts.
In April 1996, Guidant’s leadership must determine if the systems that were put in place during the past year shape the culture that is necessary to implement their intended strategy — specifically, they must determine if the current systems will allow Guidant Corp. to double its market value by 1999.
- Ron Dollens, President and CEO of Guidant Corp: Responsible for business operations. Motivated to consolidate Guidant’s success as a leader in the high technology segment of the healthcare industry.
- Keith Brauer, CFO: Retains oversight of financial policy. Adamant that business units deliver on the six financial goals that he sees as necessary to double market value by 1999. Believes meeting detailed and challenging targets is critical to building Guidant’s reputation in the capital markets and that all employees should be aware of the financial pressure coming from the market. Designed a long-range planning system to reinforce Guidant’s new culture.
- James Cornelius, Chairman of the Board: Plays an active role in the day-to-day management of the corporation. Supports long-range planning generally, but is cautious about going ahead with Brauer’s system because he thinks a well-executed planning system requires an environment stable enough to look further into the future than is currently feasible. Also unsure if the long-range planning system will constrain strategy definition at the business units where market knowledge resides.
- Investment community: Expects Guidant Corp. to double market value by 1999 and is motivated by the company’s future financial success.
Analysis and Evaluation:
Three key strategic levers support Guidant Corp’s strategy of focusing all efforts on creating shareholder value.
The first lever…