Building a House in a Hurricane
Charting the future of public relations
Holmes Report
CEO

Building a House in a Hurricane

uidant would have to raise awareness of emerging therapies, create new markets for the products in its pipeline, and shed the perception that it was only “a stent company.” Communications would have to become an important competitive tool.

Paul Holmes

Guidant Corporation is one of the world’s leading medical device companies, with close to $3 billion in annual revenue and long-standing market leadership in coronary stents.  Since its spin off from Eli Lilly in 1994, the company posted 23 consecutive quarters of sustained growth and profitability, never once missing analyst estimates.  Their technology and financial statements virtually did all the talking for the company.

Yet at the close of the decade, management realized the company needed to adopt a new marketing and communications paradigm.  Guidant would have to raise awareness of emerging therapies, create new markets for the products in its pipeline, and shed the perception that it was only “a stent company.” Communications would have to become an important competitive tool, and the company began to build the core competency. It would be the job of the corporate communications department to maintain loyalty and confidence in the company and its reputation as it entered a new, more uncertain era in its evolution.

Guidant entered 2001 optimistic and redirecting itself, but by July, it was in serious trouble.  A series of unexpected events and disappointments had sent the stock tumbling to its lowest point in years – down 41% since January.  Takeover rumors circulated the Street.  A hurricane had arrived. Yet the nascent corporate communications function was able to provide shelter for the company to weather the storm and subsequently shape a turnaround. By year’s end, the goal of the publicity program – to maintain confidence in the company as it made the transition to a new era – was realized. This is the story of how, amidst all the twists and turns of the year, this was accomplished.

Laying the Foundation: Securing Operational Buy-in

Guidant’s corporate culture was historically biased against communicating publicly and proactively.  The company’s decentralized, matrix-based management had little experience with strategic communications planning, and did not understand how a company could shape public perception or why it would want to.

Therefore, in January, Guidant and Rowland Communications partnered to create a road show to educate key company decision-makers on how to use communications as a powerful tool to claim, own and demonstrate leadership. The core content of the interactive sessions, delivered in person and via videoconference over an intense six-week period, was contained in a Powerpoint presentation of “winning” and “losing” case studies. It became apparent to Guidant executives that the company wasn’t even in the game.

The result of the road show was a profound paradigm shift. Within weeks, every business unit had developed strategic planning matrices to track key communications opportunities, counter competitive activity, and prepare for the crafting and delivery of key messages to various important but discrete audiences. This planning pointed to a key event – the American College of Cardiology meeting in March – and the opportunity to create a unified presence for the entire company and all its businesses. The plan also called for giving particular focus to its investigational heart failure device, which was expected to cross an important clinical hurdle. The device was to be the company’s flagship pipeline product of the year, expected to propel Guidant to dominance in another category besides coronary stents.

The Skies Darken: Challenges Threaten The Company and Its Reputation

Just as the company intentionally began to take a courageous step into the limelight, the skies were darkening and a storm was gathering. The first quarter brought a series of damaging developments.
· For the first time ever, Guidant misses its earnings estimates for the second quarter in a row.
· A competitor publishes a groundbreaking article in a key peer-reviewed journal. The clinical data threatens Guidant’s core business by putting the company way behind in the race to capture a major emerging market (drug-eluting stents).
· Guidant announces a voluntary and total recall of a promising minimally-invasive vascular graft
· The Food and Drug Administration recalls a batch of one of the company’s defibrillators

Throughout these events, Guidant and Rowland Communications contained the damage, and continued with proactive initiatives to burnish the company’s reputation and underscore its diverse portfolio by:
· Empowering a corporate spokesperson, accessible and responsive to media, equipped with strategic insight and prepared messages
· Developing a comprehensive media briefing book, distributed at the ACC meeting, which for the first time fully represented all of the company’s business franchises
· Issuing a video news release to proactively promote a new option for open heart surgery
· Commencing a first-ever media tour that introduced Guidant executives to key business media, including The New York Times, Business Week and FORTUNE, and initiating proactive outreach to a select group of key business reporters who cover the medical technology industry. 

The company was indeed behaving differently, but the change was not enough to stave off the hurricane. The pivotal clinical trial for the company’s promising heart failure device failed. Despite agonized attempts to showcase positive results of the study’s sub-groups, Guidant watched as an FDA panel voted to deny approval of the product on July 10th. . The stock tumbled to its lowest point in years, dipping below $30. Serious takeover rumors began to circulate.  On July 17, Bloomberg News quoted analysts who questioned the company’s ability to come back from the setbacks, and reported:  “This organization is in a serious slump… They have to get out of it.”

The Turnaround:  Recovery into a New Stature

This was not the “coming out” that Guidant had expected, and there was a temptation to retreat to a quiet foxhole and let the storm blow over. Instead, the company stood its ground and quickly presented a positive outlook – communicating that the July 10 panel outcome was a bump in the road, not the end of the road, for the heart failure product. Management maintained its support of public communications so that as the company staged a comeback, it relied upon corporate communications to actively and successfully promote key milestones. These included:
· Re-launch of the company’s recalled vascular graft and re-entry into a billion dollar emerging therapeutic market
· An astute strategic agreement that allowed Guidant to reclaim leadership and actively compete in the highly competitive drug-eluting stent market
· Launch of a state-of-the-art intravascular radiation product for the treatment of restenosis 
· Announcing the early halt of a Guidant-sponsored landmark clinical trial in the defibrillator arena. Results will likely lead to a doubling of market size.

Throughout the comeback, Guidant leveraged its burgeoning relationships with the media to promote the positive events. Media recognized that Guidant was no longer just a stent company – it was a company well positioned to compete in four markets collectively worth $20 billion. The stock had recovered as well, up more than 60% since the July low of $28, and through the $50 barrier. Johanna Bennett of Dow Jones summed up the company’s turnaround in a “Tale of the Tape” story that ran on December 4th : “Just a few months ago, Guidant Corporation seemed unable to get anything right… Boy, have things changed.”

 

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