In our first posting here, we introduced the Four models of Corporate Entrepreneurship. Today, we describe how new business creation happened at Zimmer, a rare example of a large company—2009 sales of 4.1 billion—where innovative new business ideas may come from anywhere in the company, and there’s a good chance that promising ones will get support and attention from top executives.
In 1997, trauma surgeon Dana Mears explored an idea with Zimmer for minimally invasive surgery, for which the product implications and business model were unclear. By 2001, the procedure was ready for clinical trials, and top management gave the go-ahead to develop the business approach to leverage this emerging new capability. To persuade surgeons to learn the procedure and begin to apply it preferentially—and therefore drive sales of implants and surgical tools—Zimmer conceived an innovative training program where surgeons shared patient demographics, operative details, and complications for each of the first 10 procedures they performed after training. The Zimmer Institute, established in March 2003, incorporated further innovations in the training process itself, such as interactive online learning and virtual reality. By 2006, more than 6000 surgeons had been trained there in a dozen different types of minimally invasive surgical procedures. Improved patient functionality and recovery times using the minimally invasive procedure meant lower total medical costs for hip and knee replacement procedures. These long-term savings allowed Zimmer to persuade certain private insurers to pay a premium for these procedures, which itself was a business innovation.
So what works at Zimmer? The essential element in the minimally invasive surgery example was a willingness to establish quasi-autonomous entrepreneurial teams to focus on the disruptive innovation, with top leadership support for investigating new ways of doing business. The concept was not subject to ordinary new product development processes or reviews, but rather was allowed to evolve on its own terms. This kind of flexibility was facilitated by the fact that Zimmer focuses on internal talent development and has many people in the ranks who have worked with the company for a decade or two. These veterans have learned how to find what they need around the organisation, based on long-term relationships. They know how to move ideas forward based on informal communication and tacit approval. Finally, the U.S. medical device industry has been centered for many years in Warsaw, Indiana, creating a special industrial network in that area that over the years has maintained a delicate balance of collective support for the industry as a whole while engaging in intense competition within specific segments.
In general, the Opportunistic Model works well only in trusting corporate cultures that are open to experimentation and that have diverse social networks behind the official hierarchy. In other words, there need to be multiple executives who can say yes to a new business concept. Without that type of environment, good ideas can easily fall through organizational cracks or receive insufficient funding to prove feasible. Clearly, such an environment can be hard to sustain; consequently, the Opportunist approach is not dependable for many companies in the long term. In some companies, an ad hoc innovation culture flows down from the very top and dissipates when a new CEO comes in. For other companies, their success in corporate entrepreneurship leads them to grow to a size where informal innovation management does not continue to work as well as it did when the company was smaller. Likewise, in some industries, the nature of competition may change from a locally dominated cluster to a globalized network in which an informal culture of innovation does not work reliably.
When organisations get serious about organic growth, executives realise that they need more than a diffused, ad hoc approach. For instance, Zimmer has instituted more formalized development practices for bringing new businesses to market, partly in response to the increasingly global nature of its business. It has instituted practices to synchronise the development of new technologies with the new product development projects in the company’s development pipeline, so that there is a better flow of new technologies into new products and potentially new businesses. Scrutiny of the entire medical devices industry by the U.S. Department of Justice may make it difficult to maintain some of the informal communication and coordination practices that characterised industry competition in the past, which could lead to further changes in how Zimmer competes. As a result, while still fundamentally following the Opportunist Model, the company has begun to evolve beyond it.
Robert C. Wolcott and Michael J. Lippitz are leading authorities on innovation and corporate entrepreneurship at the Kellogg School of Management at Northwestern University, and co-authors of Grow From Within: Mastering Corporate Entrepreneurship and Innovation (McGraw Hill, 2009). In the past seven years, they have studied more than 30 companies across industry sectors and developed an ongoing dialogue with them about corporate entrepreneurship through the Kellogg Innovation Network (KIN)
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