The heart of innovation Featured

8:00pm EDT August 26, 2007

Mike Mussallem has been watching his company move toward transforming a critical heart valve replacement procedure by offering a much less invasive method that could prove to be safer and speed recovery.

Mussallem, chairman and CEO of Edwards Lifesciences Corp., knows the advancement is a bold step that was driven by innovation, something that wouldn’t have been possible without a corporate culture that encourages risk-taking and avoids the blame game.

“In the past, we would have been working on making heart valves more durable or have more blood flow or be easier for the surgeon to implant but not on such a transforming procedure,” Mussallem says. “If people felt like they couldn’t take a risk or they felt like they would be blamed for reaching in a broad way, we wouldn’t be enjoying the kind of progress and success we’ve enjoyed so far in this program. I think there’s a direct correlation.”

Since Edwards Lifesciences was spun off of Baxter Healthcare in 2000, Mussallem and his team have fostered a risk-taking orientation that has driven innovation and growth. In 2002, the company posted $704 million in revenue. By 2006, its annual revenue was $1.04 billion. Net income increased from $55 million to $130 million in that same time frame.

Operating as part of Baxter Healthcare provided a certain level of security for employees, but it also watered down the feeling of ownership and the sense among them that their contributions mattered, thus stifling incentives for innovation.

“We felt like the greatest challenge was to get Edwards really going again. And to drive that growth in this space, we felt like the most important thing we could do was to apply technology to address unmet patient needs, which spelled innovation,” Mussallem says. “That was going to be the way that we profitably, positively grow the company for our customers, for our employees, for our community and, most importantly, for patients. Having said that, we felt like the culture here had become conservative, and we had become slow-growing, so we did several things here to generate the internal climate to drive the growth.”

The first step was to create a culture of ownership by giving all of its employees a share in the company.

“It started out with an ownership culture in which we put stock in the hands of every employee,” Mussallem says. “We asked employees to behave like owners, and we impressed on them the importance they have in the success of the company. Even though we were 5,000-plus employees here, it’s a lot different than being a 40,000- or 50,000-plus-person company. Each individual had so much more impact on the company, and driving that message of ownership was key.”

Don’t blame, learn

Mussallem encourages the ownership attitude to go beyond simply a financial stake in the company. For Edwards Lifesciences, taking ownership also means taking on risk and stretching past the comfort zone.

He says encouraging employees to take risks to achieve big advances means being not only willing to accept that there will be failures, but being able to handle them in a constructive way so as not to discourage future risk-taking. Mussallem adopted a slogan, “Don’t blame, learn,” to communicate the way the company should treat its failures.

“It’s so easy to shoot the messenger,” Mussallem says. “Somebody delivers the bad news or somebody shares an unpopular message or somebody doesn’t really believe in what we’re doing or where we’re going, they have the courage to stand up and be vocal about it. The way we handle that every single time is going to reinforce the notion that it’s safe and it’s appropriate to speak up.”

Shooting the messenger can have a severe negative effect on the culture of a company that is trying to encourage innovation and open, creative debate.

“Every time you make a misstep, you have to do 12 positive things to overcome that, so we remind ourselves of it, and we talk about it,” Mussallem says. “Trust me, we’re not without mistakes. I’ll make a mistake now and then and say, ‘Aw, shoot, I shouldn’t have done that,’ and I’ll go through the effort of circling back with the person and say, ‘You know what? You were really right to bring that up. Thanks for doing that. I probably overreacted there,’ and take enough care to try to instill this in the culture and set that example for the rest of our leadership.”

When initiatives don’t go as intended, Mussallem and his team retrace the company’s steps to find out how things might have gone awry. It’s not designed to place blame, but rather emphasizes finding out where the process failed. The rationale is that the decisions were made by the team, not by any individual, and so it’s the process that should be examined and learned from.

“We go through that process in a way that we aren’t pointing the finger at people but looking at the broad set of assumptions, because frankly, when we do our planning, we do it with a team, so it’s not just one person who’s right or wrong, it’s the team’s attitude that was right or wrong along the way,” Mussallem says.

A kind of corporate soul-searching, the process is meant to be a learning experience.

“We’ll do a post-mortem or a look back at what we went through,” Mussallem says. “This is where the learning part comes in. We’ll take an unemotional, unbiased factual look at all the events that occurred along the way. What did we think four years ago, what did we think three years ago, two years ago? What turned out to be the learning along the way that changed the situation? What was our general thinking, and why did it go wrong? Was there some leap forward, did the environment change substantially, or did one of our core assumptions about how successful we were going to be change?”

Mussallem says making the process objective and avoiding blame allows employees to continue to be willing to stretch and take risks.

“If we want people to reach out and be willing to be optimistic, then we don’t want to discourage them from being positive about what might have happened or what could happen,” Mussallem says. “We say, ‘OK, what was wrong with our assumptions, how do we learn from that and then move on and find new ways to apply the talent that was in these programs?’”

For example, the company had pursued a repair system for aortic aneurysms and had put substantial resources into trying to come up with an innovative approach to address the problem. Mussallem says the company abandoned it while it was in the final regulatory approval stage because Edwards Lifesciences judged it to not be substantially better than some technologies already available in the marketplace. It was a painful experience for the company, but had it been handled in a way that assigned blame for the failure, it would have been even more damaging to the corporate culture.

“When we went through that process, people looked at how we behaved as we decided to walk away from that, how we dealt with failure, whether we blamed people and people were punished for that or not,” Mussallem says. “We like to think we came out of that as a stronger company.”

Mussallem says the “Learn, don’t blame” approach affects the company’s financial performance by not allowing problems to be papered over because of fear of admitting that a project isn’t going well or pointing out that it probably won’t be successful.

“One of the things that (is) beneficial about this kind of culture is that you can find your problems early before they turn into disasters,” Mussallem says. “So you can actually head them off when they’re smaller problems for the company financially that we can handle, instead of somebody keeping a problem under wraps, and it turns into a big issue, and the company is forced to deal with it in a much more meaningful way with Wall Street, and we haven’t had those kinds of issues.”

The right traits

Mussallem says that not everyone is cut out to work in an environment like that of Edwards Lifesciences. Even some employees who came in via the spinoff from Baxter Healthcare didn’t find the culture that Mussallem was building a comfortable fit.

He says that beyond technical skills, employees need additional traits to function well in the culture, and the interview process for both internal and external candidates looks for those traits.

“We find if people are passionate about the job that we’re asking them to do, and they’re passionate about the company, and they’re passionate about the impact they’re going to have on saving people’s lives, then it’s going to have a tremendous impact on their leadership, and we look for that,” Mussallem says. “Even though someone might be technically the most perfect fit for a job, if we don’t feel like they have a passion for this, we don’t think they’re the right person for the job.”

While a culture where employees are encouraged to speak their minds requires individuals who are strongly self-confident, it also requires people who possess what he calls an “in-check ego.”

“There are a lot of smart people out there, and you have to be pretty self-confident to be successful, and we love self-confidence,” Mussallem says. “But if it ever gets to the point where the ego gets so out of bounds that it turns to arrogance, it doesn’t fit very well in our culture. Having an in-check ego is one of the things we screen for.

“We’ll have the candidate describe a particular work success and how they achieved that success. As an example, if they say, ‘I did this, I did this, I did this’ and never mention anybody else on the team, you might get a sense that the in-check ego isn’t there.”

An in-check ego is tied to another trait that the company looks for — the ability to engage in creative debate, the process that puts the important issues on the table and allows them to be hashed out in an open manner.

“We think it’s so important to have debate inside a company to make whatever ideas and strategies we have robust,” Mussallem says. “And it means that we need to create a culture where people are willing to speak up, where it’s safe for people to speak up, where you can have some mavericks that will fit in because regardless of your level or your function or your expertise, your voice will be heard. It means that if somebody puts a tough issue on the table, that the experienced people, as well as the inexperienced people, will speak up and listen, that the experienced people will make room for the beginners to share their views, because there’s so much value that comes out of that. We think it’s all part of creating the innovative culture.”

HOW TO REACH: Edwards Lifesciences Corp., www.edwards.com