1
NORTHWELL
INSTRUCTOR’S MANUAL
Case Synopsis
Northwell is a 25 year old medical products firm that was the class of its field for the first
15 years of its existence. Though still successful, it has been dealing with issues of
maturity, drift and decline over the last 10 years. The Board has demanded significant
performance improvements and approximately 2 years ago Claudia Leung’s (CFO)
responsibilities were expanded to include the development new business opportunities.
The key new initiative that Leung has spearheaded involves a joint venture with
Medichek – a high quality, successful internet services firm. The core of the venture is a
virtual health products mall that will be accessible to health care professionals and
Teaching Objectives
This case is designed to motivate students to consider:
• Why good firms get into difficulty and why turnaround during a period of decline
is difficult
• Issues and challenges involved in the development and launch of a joint venture,
including matters related to fit, complexity, ambiguity, culture and size
• Leadership, management, and structural issues involved with the development of
Courses and Levels for Which the Case is Intended
o An intermediate to senior level course in organizational behavior
o An elective course in change management
Discussion Questions
2
1. What has been key to Northwell’s success in the past? What key events have
occurred and what is its current business model? What challenges does it face
with its current model?
Northwell’s past success was predicated on providing exceptional client service, product
innovation and support to health care professionals and their institutions with respect to a
wide range of high quality medical products. Their closeness to their customers drove
product innovations that addressed recognized needs. Together these resulted in very high
levels of customer satisfaction and allowed Northwell to command a modest premium
price in the marketplace for their quality products.
A major Board housecleaning of certain senior executives occurred a couple of years ago,
in an effort to initiate change and return Northfield to its former position as a highly
profitable market leader. The CEO, V-P Sales, and V-P Manufacturing all either departed
or retired, and were replaced by individuals from outside the firm – something that was
culturally foreign to members of this firm (they had always grown their own
management). Northwell has now recommitted itself to the development of new products,
new business initiatives, sales growth, superior levels of customer satisfaction, and
acceptable levels of profitability through specific targets and goals. There is some risk
that the diversity and magnitude of the goals and initiatives will dissipate attention in too
many different directions, but firm targets, assigned responsibilities, and executive
3
sales growth and a return on equity of 18%, a return to profitability in line with the rates
of a decade ago, and 15% of sales coming from products created within the last 4 years.
By the most recent year end (the first year since the targets were established),
improvements were beginning to show (profitability = 10% of sales; 8% ROE; 12% sales
growth; 9% of sales from products introduced in the past 4 years). In essence, they seem
to be moving in the right direction in at least the short term, and the approach of the
Board appears to demonstrate a longer term commitment to the course of action.
As the above points out, Northwell faces the challenge of regaining and enhancing its
reputation for market leadership, service and quality. It is attempting to do so at a time
when competitors have caught up with it on quality and service, buying groups have
become more common, products have become more generic, competition has become
much more price sensitive, and staff have become less certain of what the future holds for
Northwell. As Northwell moves to embrace new technologies to support these initiatives,
it must do so in a manner that does not alienate current customers, personnel, or the sales
distribution network that services and supports them.
Though growth and profitability have flattened in recent years, Northwell is still fairly
successful and staff seems to have been buoyed by the improvements to their website and
4
2. Where are growth and profits currently coming from now? Are there
implications from this analysis that should be attended to? How is this likely to
change with the launch of the “Virtual Northwell”?
Northwell Medical produces a wide range of medical products for institutional usage at
dedicated factories in Canada, the U.S. and Mexico. Products range from consumable
patient supplies such as wound dressings, bandages, and disposable surgical supplies to
more durable products (e.g., IV units, walkers, canes). In addition to its own production,
Northwell uses its sales network to distribute a few high quality, higher margin products,
Most Recent Year End
% of Products Listed
% of Sales
% of Profits
Manufactured at Northwell’s U.S.
Facilities
40%
30%
15%
Manufactured at Northwell’s
Canadian
Facilities
20%
25%
30%
Manufactured at Northwell’s Mexican
Manufactured
20%
15%
10%
European Imports & N. American
Specialty Firms
10%
15%
25%
Asia-Pacific Imports
10%
10%
15%
Exports Sales of Northwell’s Products
5%
5%
From the above analysis, we can see that the consumable self manufactured medical
products are less profitable than the durable self manufactured products, the outsourced
specialty products from Europe and North America and Pacific imports. This suggests
that there may be value to Northwell in looking to outsource more of its manufacturing of
5
The above also demonstrates the lack of attention to off shore sales possibilities. In the
increasingly global market place for products such as those Northwell offers, they need to
consider how they want to position themselves relative to foreign competitors (i.e., from
competitor to formal ally), whether or not they want to be a global player, and what risks
they run by staying in North America versus taking a run at high value foreign markets.
The case lacks sufficient information for a detailed analysis in this area concerning the
options, but at minimum students should recognize the importance of giving
consideration to issues in this area when evaluating opportunities and risks.
Most Recent Year End % of Sales % of Profits
Sold Directly by Northwell
75%
70%
Sold Through Distributors
25%
30%
When the question of distributors versus the use of direct sales is considered relative to
their current business model, the above chart shows little difference in the apparent cost
effectiveness of the two approaches, suggesting Northwell has done a good job sorting
out who is best served by which channel. However, management recognizes that their
6
current website, as the organization goes through this transition. The removal of
ambiguity concerning roles, responsibilities, the acquisition of needed competencies, and
the identification of what happens to individuals who become redundant due to the
changes needs to be addressed. Further, the identification and development of needed
systems and processes that fit and support the emergent business model, and a transitional
plan that will promote the successful launch of the virtual mall while supporting
Northfields capacity to continue to effectively service existing clients and institutions
needs to be developed and acted upon.
3. What are the opportunities, costs, benefits, risks and strategic implications of
developing the virtual mall internet site?
In addition to supplying a new revenue source (due to Northwell’s 50% ownership
position of the website venture), the virtual health mall has the potential to increase
Northwell’s reach in national and new international markets, if they choose to develop
the international aspect of the mall. It will also spur Northwell to ramp up its use of
7
channels when dealing with competitive bids, the placement of orders and sourcing
service. If the mall does not demonstrate its ability to generate additional sales or value in
other ways (e.g., cost of customer service savings) for vendors, they will likely become
unwilling to continue to pay for the right to be present at the mall. Currently Northwell
lacks concrete data with respect to how customers will respond and as a result is in need
If uncertainty, ambiguity, and performance pressure continue to rise, increasing levels of
political behaviour are likely to be observed, along with declining employee satisfaction
levels, more voluntary resignations, etcetera. In addition, Leung’s capacity to manage the
situation (e.g., power and credibility) is likely to become increasingly impaired over time,
4. What do you think of partnering with Medichek? Assess its strengths and
weaknesses?
8
Leung and Daniels explored a variety of opportunities that embraced new technologies,
including e-commerce and web-based applications. In the process, they discovered
Medicheck as an opportunity worth pursuing. Medicheck is a successful internet-based
organization that specializes in the health care area. It designs and manages web-sites for
Given the above analysis, and assuming the virtual mall venture makes economic sense,
then a partnership or a joint venture with a firm like Medichek is a reasonable way for
Northwell to proceed. Northwell simply lacks the capacity to act on its own in this arena.
Given the nature of this new channel, it is also highly unlikely that Northwell would find
a competent partner with that would not be very culturally different from it. At least in
the case of Medichek they appear to have found a firm with whom they share some
9
5. What should she do?
Leung needs to undertake action on two fronts. The first involves the joint venture itself
and the second involves internal operations.
Northwell has advanced $7.5 million thus far (its maximum commitment is $10 million),
the marketing of the mall is going very well, appropriate product and service suppliers
had been recruited, the beta version has been tested, and customers were anxiously
anticipating the full launch. However, relations between Northwell and Medicheck are
becoming strained because the launch is 4 months behind schedule due to technical
difficulties with the platform. The Northwell Board has placed pressure on Leung and
Teaching Plan
55 Minute Class 75 Minute Class
5 minutes
10 min.
Introductory comments,
learning objectives and
agenda for the class
What has been key to
Northwell’s success in the
past and what is its current
business model?
5 minutes
15 min
Introductory comments,
learning objectives and agenda
for the class
What has been key to
Northwell’s success in the past
and what is its current business
model?
10