Robert W. Hall Medtronic Xomed User Manual

Process improvement routine; eliminates
waste from all-new processes very early.

Autonomous improvement;embedded in
the culture.

Integrated core operations; directed
improvement; still coaching the tools.

Unified by social mission; serves

all

stakeholders well; resilient to
change/surprise.

"Outside in;" much more customer
focused.

Serves customers well; great quality,
efficiency, and delivery.

Capable of transforming its
industry; can adapt business
model to innovate.

Innovate by collaborating;part
of everyone's job.

Structured new product/ service
development;some collaboration.

FUNDAMENTALS

Medtronic Xomed:
Change at "People Speed"

Robert W. Hall

7

First Issue 2004

Background on Vigorous Companies

Medtronic Xomed is the fourth in a series of top performing companies called "vigorous," a term coined to describe a
business unit that in total seems to be thriving in tough global competition. As many companies have found, sustained lean
manufacturing, while essential, is not all that is required. Customers must be impressed enough to pay for fair treatment of all
other stakeholders, and environmental responsibilities should not be neglected. To endure in this status, the leadership must
build a culture that is always pushing the envelope in many directions, never satisfied with the status quo, and never compla­cent.

Postulated is that a vigorous company must do well in three performance categories: process improvement ("lean every­thing"), innovation, and external responsibility. Trying to think about all this at once hurts the head, but it is achievable. To do
it, the capability has to build up over time by developing the total workforce and its working culture, reducing the seemingly
impossible and conflicting demands to rules for work, and a way of life that integrates many best practices into something
relatively simple. Real people can actually do it. One reason for this series is to find vigorous operating companies that embody
striving for a "B rating," or better, on the cultural scale shown below. The Medtronic Xomed story is best interpreted in that
context.

In Brief

Medtronic Xomed has won both a Shingo Prize and an

IndustryWeek

Best Plant's Award. By regarding it as a cultural
change, conversion to lean man ufacturing has been a change "from the heart as well as the head." Also proficient bring­ing new products to market, Xomed works with physicians to improve medical practice while carefully developing its field
force to avoid blurring the line between science and commerce.

Class Process Improvement Innovation External Responsibility

A

C

B

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Target Volume 20, Number 1

About Medtronic Xomed

The Medtronic mission statement well captures why its Xomed Division exists:

"To contribute to human welfare by application of biomedical engineering to alleviate pain, restore health, and extend life."

Headquartered in Jacksonville, FL, the Xomed Division's devices primarily work on peoples' heads: ear, nose, and throat (ENT),
and ophthalmology (eyes). The Jacksonville operation produces about 3200 end items and distributes 6000 more — 900 orders
a day to about 30,000 customers in 120 countries. Most sales, promotion, and R&D are in Jacksonville, but there are two other
operational locations; Mystic, CT for surgical sponges and MicroFrance in St. Aubin le Moniel, France for specialized micro-surgical
handheld instruments.

By expanding its offerings, Xomed now believes that it is the only full service ear, nose, and throat (ENT) company in the medical
device business. Some of the more innovative products in Xomed's lineup are:

M

edtronic Xomed specializes in
medical devices for the ear, nose,

and throat (ENT), as well as niche
ophthalmic (eye) products; many are for
surgery; some are for diagnosis or treat­ment. Well known for trying to experience
the needs of doctors and surgeons first
hand, Xomed gives them what they want,
and helps them devise something better —
sometimes building custom orders for
those with a little different technique in
mind. Consequently, the ENT product line
has greatly expanded over the past ten
years. Xomed's strategic objective is mar­ket leadership in devices used "above the
torso," relying on three core competencies:

• Direct sales and distribution in the
United States.

• Speed and quality in manufacturing to
"out-service competitors."

• Research and development of new
products and variations.

On the way to market, new medical
devices must jump many hurdles.
Someone, somewhere — often a surgeon —
must develop a new device, or at least be a
partner in development. If experimental
use shows promise, device modification
may be necessary before other physicians
and surgeons can learn to use it. Before
offering it for general use, a new device
must have FDA approval in the United

States, and approval by comparable agen­cies in other countries. Xomed tries to
work closely with approval agencies, plus
ECRI, an independent health services
research agency that tracks the perform­ance of medical devices in use, and which
is very influential in the field.

External Responsibility

Medtronic Xomed's field, medical and
surgical devices, is tightly regulated, and in
addition, filled with ethical minefields. To
negotiate this terrain, Xomed complies with
Medtronic's strict Code of Conduct and
Business Conduct Standards, thoroughly
training its field representatives to conduct
their activities according to it. What can and
cannot be done for customer enticement
and interpreting clinical trial results is care­fully proscribed.

Everyone who deals with customers
and other external parties is annually
retrained using scenarios depicting situa­tions in which what you should do is not
obvious. Much more than merely reading a
code, scenarios engrain ethical judgment in
how people behave.

To develop or discover new devices,
Xomed is active at the forefront of treat­ment. For example, they invested in a focus
group of doctors and patients to review
sleep apnea, a condition that has no known
cure or effective alleviation, trying to

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First Issue 2004

Nerve Monitoring Equipment: The NIM-Response™ Nerve Integrity Monitor™ System, along with its associated line of dispos­able electrodes and nerve stimulators, allows surgeons to monitor nerves during surgery, dramatically improving patient safety
and recovery by reducing the chance of unnecessarily compromising or severing nerves.

Powered Systems for Sinus Surgery: The XPS

®

2000 Microresector System, and recently introduced XPS 3000 System, (flexi­ble, powered systems) improves the precision of least-invasive surgery, decreases surgical time, and improves post-operative
recovery. Most of these units, including control boxes and the disposable micro-shaver blades, are produced in Jacksonville.

Fluid Control: The Merocel

®

surgical sponge is used for surgical packing and for various applications in ophthalmology.

sponges originate in the Mystic, CT plant and are finished and packaged in Jacksonville.

Image Guided Surgery, or IGS: Surgeons have many applications for the LANDMARX EVOLUTION™ ENT Image Guidance
System. Obviously, performance improves when a surgeon can guide from a screen an internal procedure that cannot be seen
directly.

Otology: Ventilation tubes and middle ear prostheses for the treatment of chronic ear infection and disease continue to see
improvements. Notably, Xomed now offers the Meniett

®

20 Pressure Pulse Generator for treatment of Ménière's Disease, a par-

ticularly debilitating disease of the inner ear.

Ophthalmology: The primary line is equipment for tonometry, measurement of the inter-ocular pressure of the eye, but also
includes several devices for cauterization, corneal transplant surgery, management of ocular hypertension caused by glaucoma,
and LASIK surgery.

Timeline history of the Medtronic Xomed Division:

1970 Company is founded in Cincinnati as "Xomox," making ear ventilation tubes, the bread and butter of the business for

many years.

1978 Bristol-Myers Squibb buys Xomox, intent on broadening the product line into medical instruments as well as expendables.

Operation moves to Jacksonville.

1982 Move into the present plant location. In the 1980s, Xomed attempted, with limited success, to implement elements of

Total Quality Management and lean manufacturing.

1989 Bristol-Myers merges Xomed with Treace Medical and moves production of ear ventilation tubes into the Jacksonville

facility.

1994 Warburg Pincus buys Xomed from Bristol-Myers Squibb. Xomed is merged with Merocel

®

(surgical sponges).

1996 Warburg takes Xomed public. The Treace brothers assume management and begin an aggressive program to develop

and introduce new products.
1997 Introduce the XPS 2000 powered surgical system line (micro-shavers), which revolutionizes ENT surgery.
1998 Enter the Image Guided Surgery (IGS) and the biomaterial markets. These too take off, and Xomed starts to become

what it is today.
1998 Acquire MicroFrance (better entrée to European markets).
1999 Acquired by Medtronic; becomes Medtronic Xomed. The Mentor ophthalmic line is merged with Xomed and moved to

Jacksonville.
2000 Development of lean manufacturing begins to accelerate.
2001 Purchase the Meniett™ portable pressure-pulse generator for Ménière's Disease symptoms from Pascal Medical AB.
2002 The Medtronic Xomed plant wins both a Shingo Prize and one of

IndustryWeek's

10 Best Plants Awards.

Today the Xomed Division expects to grow revenue at a rate of about 15 percent annually. It serves nearly 50,000 physicians and
22,000 hospitals, and is clearly the market share leader in a market dominated by a large number of small companies. Some of
them create innovative products, but lack resources to take them to a global market, so there is opportunity to grow by acquisi­tion as well as through internal development.

As a division of Medtronic, Xomed is relatively low-to-medium in volume and high mix in product. Most other Medtronic divi­sions are higher volume and lower mix.

The core of operations is the Jacksonville headquarters, with 150,000 square feet and 550 employees. Jacksonville production
occupies only 50,000 square feet of the facility and 300 of the employees, but accounts for about 80 percent of all Xomed rev­enue. Organization of complex production operations is based on 48 different value streams; non-production operations are
organized more functionally. Simplification of the burgeoning complexity of offerings is critical to Xomed sustaining itself as a
full service provider in the ENT field.

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Target Volume 20, Number 1

understand sufferers' true needs. They
concluded that present technology cannot
do much better alleviating the condition,
but that Xomed might be able to field a
device to improve its diagnosis.

Culture Building

Inside Xomed, the component of
Xomed's working culture with the greatest
longevity is the operating people at
Jacksonville and elsewhere, often called the
"money earners" because they create the
billable shipments. Among senior man­agers, ten years is a long tenure; ownership
changes and several acquisitions took a
toll. But some of the "money earners" can
remember moving into the Jacksonville
facility in 1982 — and earlier. Despite all
the changes, no managerial regime ever sub­jected Xomed workers to broken promises,
pay reductions, or layoffs. Consequently,
their reservoir of trust in management was
never drained.

"Money earners" are pleasant, open,
eager to talk, and very serious assuming
responsibility. Any of them will say that
peoples' health and sometimes their lives
depend on the quality of their processes.
They seldom rush; doing everything just
right is more important than speed — qual­ity before output, always.

However, as can be seen from the
timeline in the box copy, change is a way of
life for Xomed's money earners. Everything
— products, managers, ownership —
changed for them more than once in the
past decade. No one is "hung up in the
past," longing for bygones.

In the 1980s, under Bristol-Myers
Squibb, Xomed attempted to install various
techniques for process improvement:
Teams, Total Quality Management (TQM),
JIT, and other buzzwords of that time.
These were pushed, not from the top, but
by middle managers without long tenure,
so disjoint programs appeared and disap­peared. TQM, for example, lasted about a
year. Although the operative workforce
learned to doubt the staying power of these
programs, each of them stimulated team­work, so that over time the working culture

became more collaborative. In contrast
with the more cosmopolitan managers, this
"stable" workforce shared a long cultural
apprenticeship prior to managers begin­ning a push toward integrated, sustained
lean manufacturing.

When Jerry Bussell, now vice-president,
global operations, arrived in 1992, he
immediately began work to build a culture
of trust. His first confab with upper man­agement stressed culture change — no
swift transformation, but a gradual
increase in empowerment to those doing
the work, making change fun, not a threat.
Jerry's first themes were derived from
Stephen Covey's Seven Habits, followed by
stimulating people to create skits and open
up. But the most important ingredient
solidifying trust was making sure that man­agement commitments to the workforce
were upheld.

As this cultural migration proceeded,
more and more managers began to see the
value of lean manufacturing. One objective
was to achieve market dominance by hav­ing customer service unmatched by the
competition. Another was to offset the
complexity of product line proliferation
with process simplification. Xomed fre­quently refers to two plants, one for prod­uct, and one for paperwork. The paper­work satisfies QSRs (FDA Quality System
Requirements), and allows any field prob­lems to be traced, but the paper factory
need not be inefficient.

By 2000 a critical mass of lean thinking
managers had formed, ready to aggressively
implement an integrated version of lean
manufacturing. They started in classic fash­ion, mapping value streams. Process
changes came rapidly: cells, pull systems, 5S
visibility, failsafe methods, and of course,
grassroots problem solving methods.

Soon Jacksonville operations were
organized into value streams, and by 2003
there were 48 of them. Each value stream
had a manager responsible for processes
supplier-to-customer. Previously many of
them were called business unit managers.
Team leaders for each value stream handle
most of the daily work, freeing the value
stream managers to interact with cus-