When your core business strategy is to cultivate a product line through a series of acquisitions, you'd better have a talent for making the newly-merged companies run as one. Just ask ev3 Inc., a medical device manufacturer that, since its founding in 2001, has snapped up five smaller firms in its quest to deliver a variety of niche technologies that help doctors prevent and detect strokes.
ev3 has a tight process for integrating these smaller firms into its corporate IT backbone. In two short months, business processes are tweaked, buy-in is sought, data is mapped and the acquired company is fully transitioned from whatever they were running to ev3's standard enterprise platforms.
The company's integration tactics are highly disciplined for a number of reasons. Moving acquired companies to standard IT platforms-in ev3's case, QAD Inc.'s ERP package, PeopleSoft Inc.'s CRM and MatrixOne Inc.'s PLM suite-is preferable to custom integrations between disparate systems because the approach is scalable and can deliver a centralized view across what were once separate entities.
Moreover, by establishing common processes and a single data repository, ev3 is better situated to meet regulatory requirements. The approach is also instrumental in reducing ev3's operating costs and improving the speed and volume of new product initiatives across its global supply chain, officials say.
"We have a playbook for integration," says Bob Straub, director of business systems for ev3 (Plymouth, MN). "With the nature of our business model, we couldn't move as quickly and implement common services in finance, distribution and quality without having common processes and common systems. By having a single infrastructure ... it's more cost effective to manage," and everyone is using the same platform.
Manufacturers in industries outside of medical devices can learn from ev3's rigorous integration roadmap. Granted, not every company is best served by tossing out the legacy systems of acquired companies in favor of a standard platform. But all manufacturers pursuing a growth strategy hinged on acquisition need some sort of formal agenda for creating an IT infrastructure capable of delivering business information to the proper stakeholders.
Disconnects between systems-for example, where a product change order is not relayed to manufacturing-can impede a company's ability to compete, especially when you're dealing with a regulated and complex market.
REVERSE ORDER
That's certainly the situation ev3 set out to avoid, especially since the young company was coming at the highly-competitive medical device market from a rather unique angle. Unlike most startups in this field, which focus on developing, then launching a single technology to the U.S. market using third party distribution channels, ev3's charter was to first create a robust, international distribution network, then pinpoint specific technologies in the niche areas it defined, for possible acquisition.
Its mission: To build an extended portfolio of niche endovascular technologies for cardiovascular, neurovascular and peripheral use-products like guidewires, snares and stents-that could be sold in global markets, including Europe, Japan and Asia. By having its own, established distribution channels overseas, ev3 would have an avenue to market its products even as it awaited FDA approval for sales in the U.S., which typically takes longer in Europe and other countries, officials said.
"You couldn't execute ev3's strategy with just one product because [it] wouldn't be economical," says Richard Emmitt, general partner with The Vertical Group (Summit, NJ), who also sits on ev3's board of directors. "So you have to go out and acquire [companies and technologies]. It's a strategy that's never been done before."
But ev3 needed to have a number of things in place to execute on this approach. Experience in establishing international distribution was key, and the company had that through its founders, who are veterans at starting up and running mature medical device companies. Capital was also critical, and ev3 was well positioned on that score thanks to investments by equity partners Warburg Pincus LLC and The Vertical Group. Finally, ev3 needed a game plan to make sure each of the acquisitions would be merged based on its standard IT architecture and soup-to-nuts integration plan.
Another linchpin in the strategy was the decision to implement a PLM (Product Lifecycle Management) platform. That would help the various players in ev3's global supply chain better collaborate and meet FDA and EU regulatory requirements.
"A PLM system is important to control design and allow concurrent development and information sharing," says Pete Schaubach, ev3's CIO. "It helps ensure we are designing product as efficiently as possible, that we're getting regulatory approval as efficiently as possible and that we're being as efficient as we can in R&D and delivering product to manufacturing." PLM, Schaubach notes, is also essential for driving quality while ramping up product volume and speeding time to market.
The company chose the Matrix10 platform to build a global data repository for design and manufacturing information in part because MatrixOne (Westford, MA) offered the Accelerator for FDA Compliance. This version has specific templates, workflows and business processes for seeking regulatory compliance. That helped the ev3 family of companies get up and running much faster.
ev3 is deploying three modules in the Matrix10 platform: Engineering Central, Program Central and Document Central. In stage one of the deployment, the company is using the platform to manage elements like engineering documents, assembly instructions and device master records (containing records of a product's bill of materials, and other documentation) across its global supply chain. It is also using Matrix10 to facilitate engineering change orders and for electronic review and approval on design changes.
"With PLM, we can do concurrent reviews whereby anyone, anywhere in the world, can follow a link and get access to all the documents they need," Schaubach says. "With PLM, a single copy of everything is served out for different people to view. It improves visibility on the review process and helps our iteration cycle go faster."
NEXT STEPS
In phase two of the rollout, ev3 will get users up and running on Program Central to create the same structure around all of the diverse groups' R&D processes. This will enable dispersed development teams to collaborate more easily and provide a framework for managing the product development process. "Instead of having files stored on different file servers or local computers, everyone will work out of what's essentially the same file cabinet, and have the tools linked together, for things like revision control or project management," he says.
Along with PLM, the other pillars in ev3's enterprise software platform include QAD Inc.'s (Carpinteria, CA) ERP package, which provides a standardized way to consolidate financials across the integrated business, and PeopleSoft CRM, which helps ev3 leverage customer data. Instead of creating specific application-to-application integrations between these core enterprise packages, ev3 keeps systems "loosely coupled," using data warehouse technology to bring information together in a timely fashion. Microsoft SQL Server serves as the underlying data warehouse platform where data from the various enterprise foundations is integrated. Reporting tools from Cognos Inc. help turn that data into actionable business information, explains Straub. Users are able to access information from the data warehouse at any time via a Web interface.
This loosely-coupled architecture is a key element helping ev3 to fully integrate merged companies in that very specific two-month window. "In this way, we don't have to spend time integrating between systems," says Schaubach. "We also can keep them as out-of-the-box software implementations, which helps us maintain a lower overhead and staff." Eventually, ev3 may pursue some tighter integration between the Matrix10 Accelerator for FDA Compliance and the QAD ERP system, but that effort is down the road.
Intra-Therapeutics was one company that was acquired and integrated according to ev3's roadmap. The 100-person company, which makes peripheral stents, was purchased in October of 2002 and went live on QAD in January of 2003, replacing an existing ERP system. After an initial kick-off meeting and analysis of the company's data, key Intra-Therapeutics users were selected to be trained on the pilot system and work with ev3's IT group to make any required modifications. That group, in turn, trained the rest of Intra-Therapeutics' employees on the new system.
"It went very fast and, for how fast it went, it was rather smooth," says Kelly Tie, network administrator for Intra-Therapeutics at the time and now senior network administrator at ev3. "I felt part of the team right from the beginning."
Schaubach believes in implementing this kind of standard architecture in pieces rather than in a big-bang approach. Matrix10 Program Central should be up in initial pilots within the next couple of months, and eventually the Matrix10 platform will be expanded to all areas of the 500-plus person organization. "Little by little, these onesie, twosie projects will lead to others that will make the company even more efficient outside of product development," he says.
Getting the different players within the ev3 organization to embrace the technology-even those in the acquired companies-has not been difficult. People who work at ev3, Schaubach maintains, are hungry for the tools that help them be as efficient as possible. "This organization is on a mission," he says. "We've brought so many people together. The big concern is that we don't do anything that will slow us down."