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Three steps to global domination: cut, focus and invest

In just five years, Danish supplier of intimate healthcare products and services Coloplast has become the global market leader. At PA Consulting Group’s executive seminar in Copenhagen on 22 August, CEO Lars Rasmussen spoke about the road to success and the management principles that have formed the basis of Coloplast’s approach. PA’s strategy expert Mark Thomas spoke about how companies become the winners within their respective business areas.

Only a few companies managed to create a return on investments during the financial crisis; however, this is exactly what Lars Rasmussen did, when he joined as CEO of Coloplast five years ago and initiated a turnaround of the company:

“The first step I took, together with my management team, was to decide that we wanted to become the world’s best medtech company. And we stayed true to our decision, which was a prerequisite to reach that target,” said Lars Rasmussen.

After the decision had been made, Coloplast initiated a process, which in many ways resembles the three-step process, which PA’s strategy expert Mark Thomas elaborated on during the seminar. According to Mark Thomas, the first step is to make a realistic analysis of the company’s financial situation. Secondly, the ‘bleeding’ must be stopped, and the management must prioritise the business areas that truly offer a market advantage. Thirdly, management should focus on the areas in which growth can be created.

Stop the bleeding

Coloplast removed the areas that didn’t create long-term value, and the next step was an extensive focus on sales and marketing. Then three years ago, Coloplast centralised parts of the business that didn’t focus on sales and marketing, eg HR, in its subsidiaries. At the same time, Lars Rasmussen reduced the number of managers. In 2012, Coloplast started investing massively in growth, first in Europe, then in the US and also in emerging markets, especially China.

Innovation and new management principles

Coloplast used to work with innovation as part of the R&D department; however, today it’s a discipline that is supported by marketing. Through anthropological studies, Coloplast has gained a thorough understanding of clients’ feelings in relation to having ostomies, and today Coloplast focuses on design, resulting in the Reddot Design Award for a new catheter.

Moreover, Coloplast has developed a series of new management principles: open and honest communication, rating of managers’ performance and a constant focus on creating business results.

“I haven’t been worried about the tough decisions I had to make as much as about which impact these decisions would have on the motivation among the sales people. Our sales people are more engaged with our customers rather than the organisation itself, so our aim was to maintain their motivation throughout the changes we made,” said CEO Lars Rasmussen, Coloplast.

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