Businessmodel of Medtronic

Customer Segments

Medtronic provides medical devices and medical treatment solutions to patients – including sufferers of more than 30 chronic diseases, caregivers, medical professionals, hospitals and healthcare organisations. The Company operates in more than 460 locations across more than 155 countries.

Medtronic has provided medical and hospital solutions to a number of healthcare facilities, primarily in Europe, since its 2014 acquisition of Italian hospital services company NGC Medical. This includes long-term contracts with Imperial College Healthcare NHS Trust and University Hospital South Manchester in the UK, Maastricht University Medical Centre and the Cardiac Centre of Excellence in the Netherlands, the Sacco Hospital in Italy, and the Cardiance Clinic in Switzerland.

Value Propositions

Medtronic’s key value is in its line of products and solutions – one of the largest and most diversified portfolios in the medical technology industry – which it is continually seeking to improve and develop. The Company purports to provide innovative and effective medical products and treatments that it produces from start to finish and that are not available from other manufacturers. The Company promotes a collaborative approach the healthcare and medical solutions and has a number of active partnerships that seek to develop new products and solutions.

Medtronic also provides healthcare data management and reporting software solutions which the Company claims can improve clinical outcomes and reduce overall costs for hospitals and healthcare facilities. Medtronic also provides education and training resources free of charge and has a reimbursement policy in place for customers that are not satisfied with the quality of the Company’s products and services.

Channels

Customers can browse Medtronic’s products and services on its mobile and desktop websites at www.medtronic.com. The Company also operates regional online stores for the sale of its diabetes products and solutions.

Other products and services can be purchased from Medtronic by contacting the Company’s sales team directly, or via third-party distributors and authorised resellers. Medtronic also provides several mobile apps that are available on iOS and Android platforms.

Customer Relationships

Medtronic operates several online stores that allow customers to purchase products on a self-service basis. Other products can be purchased from the Company directly, via its sales team.

Customers of the Company’s data management and clinical outcome solutions packages receive a greater degree of personal care as their individual needs are met.

Customers can access personalised after-sale support by contacting Medtronic’s support team either over the phone or through an online contact form. Customers can also interact with Medtronic directly through its Facebook, Twitter, YouTube, and LinkedIn profiles.

Key Activities

Medtronic is a medical technology company and medical device manufacturer. It produces and sells a range of products to hospitals, physicians, clinicians and patients in over 155 countries worldwide.

The Company’s activities are divided into four operating divisions: the Cardiac and Vascular Group, which produces and sells products designed to treat cardiovascular conditions and provides a range of technology-based clinical outcome solutions products; the Restorative Therapies Group, which produces and sells products related to spinal and musculoskeletal conditions; the Diabetes Group, which develops and markets treatments and devices for the management of diabetes; and the Minimally Invasive Therapies Group, which develops procedures that that treat a range of conditions with minimal disruption to the patient’s body.

This last business segment was added to the Company’s business model following Medtronic’s acquisition of healthcare product manufacturer Covidien in January 2016.

Key Partners

Medtronic partners with a range of companies, including medical device manufacturers, healthcare organisations and facilities, technology companies, educational institutions and non-profits. This includes a partnership with Singapore Health Services to develop a center to treat diabetes in Southeast Asia, a partnership with Samsung to develop neuromodulation implant apps for smartphones, a partnership with Qualcomm to develop disposable, connected Type 2 diabetes continuous glucose monitors, and a partnership with Ford and WellDoc to develop in-car diabetes management solutions.

In 2013 Medtronic launched its Global Non-Communicable Disease Initiative, which aims to assist in the development of solutions to treat chronic non-communicable diseases worldwide. Through this initiative Medtronic has partnered with a number of research organisations and charitable foundations, including Bienmoyo Foundation, Madras Diabetes Research Foundation, Save the Children, Rwanda Heart Foundation and University of Cape Town. The Company also manages a network of suppliers and has a number of manufacturing partners, including local governments in China.

Key Resources

Medtronic’s key resources are its products, its software platforms, its manufacturing facilities, its IT infrastructure, its personnel and its research facilities.

The Company states on its website that it has more than 53,000 patents worldwide. This includes patents filed with the US Patent and Trademark Office entitled ‘Adjustable catheter for ostial, septal, and roof ablation in atrial fibrillation patients’, ‘Diagnostic guidewire for cryoablation sensing and pressure monitoring’, and ‘Patient specific data driven safety interlocks for medical devices’.

Cost Structure

Medtronic incurs costs in relation to the research and development of its products, the maintenance of its software platforms and IT infrastructure, the operation of manufacturing facilities and acquisition of supplies, the distribution and storage of products and the retention of its personnel.

The Company’s research and development costs are particularly significant, amounting to $1.6 billion in 2015, around 8.1% of the Company’s total sales.

Medtronic also operates a network of offices across and education centres which incur costs in relation to rental and utilities.

Revenue Streams

Medtronic generates revenue through the development and sale of medical devices and treatments. Its revenue is divided into four business groups: the Cardiac and Vascular Group, the Restorative Therapies Group, the Minimally Invasive Therapies Group and the Diabetes Group.

Medtronic’s largest revenue generator is the Cardiac and Vascular Group, which sells products designed to treat cardiac diseases, provides fee-based data management and reporting solutions – namely its HEARTmark Service, Rethinking Blood Conservation Initiative and Connect HF Solution – and medical operations optimisation services. This business segment generated $9.4 billion in 2015, accounting for around 46% of Medtronic’s total annual revenue. Medtronic’s Restorative Therapies Group – which develops and sells medical devices and implants used in the treatment of the spine and musculoskeletal system, implantable neurostimulation and targeted drug delivery systems, and products and therapies designed to treat ear, nose, and throat diseases – accounted for approximately 33% of the Company’s annual revenue in 2015, generating $6.7 billion.

Medtronic’s Minimally Invasive Therapies Group and Diabetes Group accounted for 12% and 9% respectively, generating $2.4 billion and $1.8 billion in annual revenue. These proportions may change, however, as 2015 revenue figures covered only one quarter of operations following Medtronic’s acquisition of Covidien, which now operates as the Company’s Minimally Invasive Therapies Group.