The tough times every company eventually faces can be met with retrenchment, or, said Hugo F. Villegas, president of Latin America for Medtronic, seen as an opportunity to find new markets, attract talent and position itself for when the clouds clear.
That is the approach medical device maker Medtronic has pursued in the last year-and-a-half as the region has faced a series of upheavals, from currency devaluations and a drop in commodity prices to political instability.
“My objective was: it was the right time for investing,” said Villegas, who spoke Sept. 9, 2016, at WorldCity’s CEO Club roundtable discussion, titled “Upbeat: Leveraging an economic downturn to differentiate and win,” held at the Hyatt Regency Coral Gables. “We talk about investing when other companies talk about divesting.”
It was not a new situation for Villegas, who, before joining Medtronic had a 25-year career with Johnson & Johnson that took him around the world, from Australia to Peru, Venezuela to Spain. As the economy began to teeter after 2006, Johnson & Johnson focused on restructuring, which meant downsizing. Villegas found that approach “a significant misalignment between what I thought it took to face a crisis.”
Move to Miami
Leaving that company, Villegas and his wife moved to Miami, vowing his corporate days were behind him. But then, Medtronic came calling. Still, Villegas wouldn’t budge until he felt sure Medtronic was in harmony with
his conviction that the downturn was a signal to invest, not retreat.
Villegas broke down the philosophy into key guiding principles:
- Protect and grow the core business
- Move closer to your customer (especially, in Medtronic’s case, the big hospitals)
- Capture the margins to raise income
- Move from indirect to direct marketing (in his region, Medtronic expects to go from 35 percent direct to 60 percent direct in the next five years).
- And, Villegas said, “You need to control spending. I hate downsizing.”
Medtronic, which does 50 percent of its business in the United States, is headquartered in Dublin, Ireland. It was started in 1948 in Minneapolis, Minn., by an engineer and a cardiologist. The first product was a battery-operated pacemaker. Today, Medtronic is a $30 billion multinational with more than 85,000 employees in 155 companies. The company moved its headquarters to Ireland after announcing in 2014 it would acquire Dublin-based Covidien.
Providing capital and services, not just products
Integrating the two companies was part of the firm’s recent challenges. Meanwhile, Villegas said, the company pursued a regional approach tailored to Latin America’s economic terrain. “We created Service and Solutions,” he said. “We knocked on the door of our customer and said ‘let me help you and share the risk,’ while improving efficiencies in hospitals.”
In practice, that means offering capital to build or refurbish operating rooms and emergency departments, and then running those back office functions. To sweeten the deal, if savings didn’t add up to 20 percent to 25 percent, Medtronic would pay the hospital.
To date, there are 15 deals with hospitals in the region.
“How did your management team react to that?” asked Lorena Keough, a managing director in the Life Sciences, Chemical, Industrial and Diversity Practices at executive search firm Diversified Search.
“Your biggest enemy is inside the company,” Villegas replied, saying that having everyone on board is key – starting with the CEO. Listen to the doubters and try to convince them, but don’t accept negativity for too long, he added.
“What about the market?” asked Nestor D’Angelo, managing partner, Latin America at Caldwell Partners.
“It’s not been easy, we are still not perceived as a service seller,” Villegas replied, noting that building trust takes time.
Sharing risk with customers to grow
“Have you been successful in the risk-sharing arrangement with public hospitals?” asked Jorge Vasseur, president and region head, Latin America Region, Baxter International.
Striking deals is easier with private hospitals, Villegas replied, due in part to regulations that, among other things, might require tenders in public facilities.
Roberto Mendez, president for Latin America at Duracell Latin America & Global OEM, asked what products in the surgical category the company is focused on.
“Robotics,” Villegas replied: making them thinner and smaller. “Our big thing is less invasive.” Yet, even with devices, the focus has shifted from pure product selling to a more comprehensive approach. His example was the insulin pump – which costs about $17,000. “We don’t sell pumps anymore, we sell health to diabetes patients.”
As discussion of the Medtronic’s innovations went on, Villegas’ own story was not forgotten.
“On a personal level, what would you change when you look back at your career?” asked Marta Clark, VP of Sales Latin America and Caribbean, Wacom Technology.
“I probably would have made the call earlier in my career,” Villegas replied.
CEO Club is one of four event series put on by WorldCity to bring together executives in greater Miami on international business topics. CEO Club is sponsored by the University of Miami School of Business Administration, Berkowitz Pollack Brant and The Conroy Martinez Group. The next CEO Club is scheduled for Oct. 7.