Mindray innovates to produce quality medical equipment

By Kwaku Atuahene-Gima and Raymond Xu

Mindray Bio-Medical Company was founded in 1991 by 29-year-old Xu Hang with a modest investment of 900,000 Chinese yuan (about 160 million won). With Xu and a handful of his colleagues at the helm, Mindray initially began as an importer and distributor of medical devices such as patient monitors.

The young company had to find a way to break into the domestic and international markets ― and stay there. In its fight for turf, the upstart firm had to go head-to-head with big name players such as GE and Philips.

Four years after founding the company, Xu became determined to focus on the research and development needed to transform Mindray into a manufacturer known for cutting-edge, innovative products.

Some of the early founders thought this was too big a gamble and left the company. Xu pressed on, confident in his team’s technical ability. In 2006, Mindray caught the eye of competitors after its hugely successful domestic and international launch of China’s first ever all-digital fully patented color ultrasound imaging product. Xu was left wondering whether his company could maintain its competitive edge.

As it turned out, it could.

The consistent theme throughout Mindray’s success has been innovation and a clearly defined strategy through which it could achieve its goals.

Almost immediately after the company’s launch, Xu and the other founders put their savings and a special 1-million-yuan grant from the Shenzhen municipal government into R&D of clinical patient monitoring products.

Mindray’s mission was to improve the health and well-being of people across the globe by providing the highest quality medical equipment and services at the most competitive prices.

The key values that guided the company were “to earn the respect and trust of our customers worldwide by continuously finding better solutions across all aspects of our business and to create a performance-driven culture that values integrity and constant improvement.”

To achieve its goal, the company adopted a cut-in-strategy ― building technology competence to develop products for the mid-tier markets as a springboard to enter the bottom of top-tier and top of bottom tier markets.

The key to this strategy’s success was an in-depth understanding of not only the functional benefits of medical diagnostic products but also their emotional benefits to doctors and patients. This allowed the company to focus its innovation on customer value _ what the customer wants the product to do and what its use means to the customer ― rather than on enhancing a product’s capability with more and more features.

The company was also extremely shrewd in the marketing and positioning of its products. For the China launch of its color ultrasound, Mindray invited local musicians to play traditional Chinese instruments in an attempt to strike a patriotic chord among customers and to enhance national pride. Follow-up launches across the country’s provinces were billed “Chinese Brand and Independent Innovation” sessions.

In rolling out the product, Mindray also stressed its “High Performance Price Ratio” positioning, which they believed resonated with doctors, specialists, purchasers and hospital administrators.

In international markets, Mindray avoided big or sophisticated medical or health institutions. In Asia, Africa, and Eastern European markets, the target customers for the company’s color ultrasound were medium- or small-sized hospitals while in Western Europe and the U.S., private clinics and small private hospitals were the major target customers.

By 2008, Mindray had over 5,500 employees worldwide _ 29 local sales and service offices in China along with offices in Boston, Istanbul, London, Mumbai, Seattle, and Vancouver. By then, the company had introduced more than 50 new products to both local and international markets.

It had established the largest R&D team in the Chinese medical devices industry with more than 1,500 engineers ― around 30 percent of the total staff. It increased investment in R&D activities from 8.8 percent of the net profit in 2004 to 9.6 percent in 2007. And over the years it had successfully staved off GE’s multiple takeover attempts.

The key to the company’s success: its ability to constantly innovate on customer value rather than on product capability.

When its competitors began to fight back by entering the Chinese market and slashing prices, Mindray relied on what it does best ― it rolled out three new products in 2008, and new award-winning products in 2010. This May, it announced the upcoming launch of a new ultrasound system.

Innovation on customer value is a highly effective approach to building a successful company in an emerging economy in the face of technologically superior competitors. It also helps that Mindray has a clearly defined methodology for understanding what functional and emotional benefits their products could have for customers and end users.

Kwaku Atuahene-Gima is professor of Marketing and Innovation Management at China Europe International Business School (CEIBS) and Raymond Xu is a research fellow at CEIBS.