ESMT–421–0190–1

ES1901
January 20, 2021

ESMT Case Study

Lea Block at Seuzach AG: Initiating digital

transformation
Urs Müller (SDA Bocconi)
Ulf Schäfer (SDA Bocconi)
Nora Grasselli (ESMT Berlin)

Introduction
On January 22, 2019, Lea Block, marketing director of the German sales organization of Swiss-based medical device
supplier Seuzach AG, was stirring her breakfast coffee while in a depressed mood. The day before, a group of senior
executives had cut her proposal for a fundamental revision of the marketing strategy. Her peers and bosses just
did not seem to understand the importance and urgency of the proposed change. German and global health
industry trends were demanding fundamental transformation. Digital technology offered opportunities for
innovation, but Seuzach’s executives back in rural Switzerland did not seem to understand the extent to which the
world was changing—in Germany and in other places.

This case study was prepared by Urs Müller, Ulf Schäfer of SDA Bocconi, and Nora Grasselli of ESMT Berlin. Sole responsibility for
the content rests with the authors. It is intended to be used as the basis for class discussion rather than to illustrate either
effective or ineffective handling of a management situation.
Copyright 2021 by ESMT European School of Management and Technology GmbH, Berlin, Germany, https://esmt.berlin/.
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 ESMT–421–0190–1 Lea Block at Seuzach AG: Initiating digital transformation

The German healthcare industry

Since the 1990s, the German healthcare system has undergone a substantial economization. In 2018, 30 percent
of hospitals were still unable to generate an annual net profit and many expected their financial situation to
substantially deteriorate over the coming years. Shrinking revenue streams, consolidation among hospitals and
other types of medical facilities, as well as exploding costs has led to a stronger focus on economics. In addition to
the quality of medical care, economic aspects such as liquidity, investment security, and overall profitability has
become more and more important.

In 2017, spending on medical technology in Germany reached a high of an estimated €36 billion, equal to €435 per
capita, making Germany a highly important market for any player in the industry. In 2017, the German medical
device market was estimated to include more than 400,000 different products across 8,000 categories.

On average, analysts forecasted revenue of large medical device companies to grow with a compound annual
growth rate (CAGR) of 4 to 5 percent globally over the next years, considerably more than the 2 percent CAGR
recorded between 2011 and 2016. Yet despite its size, the German market had one of the lowest expected growth
rates. This was driven by a combination of factors, including an already high level of spending for medical devices,
a widespread political desire to limit further increases in healthcare spending, slow population growth, and low
GDP growth. Germany was already a market battlefield. All global players had a strong presence there, but the
medical devices business was expected to become even more competitive. Government funding of hospitals in
recent years had remained flat, with hospitals maintaining existing equipment rather than investing in new devices.
Two large healthcare reforms in the early 2000s had major effects. Despite a recent hospital reform, the financial
pressure on clinics was expected to continue. Even with restructuring measures already underway in many places,
the path to financial recovery was often still very long. Hospitals started to look into the potential of taking a more
disruptive perspective and pushing forward with digitization as a management priority.

Each of these factors began to drive a fundamental shift in decision making and purchasing behavior. Until recently,
the purchase of sophisticated medical equipment had been initiated and implemented by clinicians. A radiologist,
for instance, would identify the need for a new MRI (magnetic resonance imaging) machine, explore available
products and suppliers, get a live demo of all available systems, and discuss the functions and features with
potential vendors. Once budget and confirmation from the hospital administrator was received, clinicians would
then receive the system of their choice. Under the emerging scenario, however, hospital administrators and
purchasing departments were increasingly influential in the purchasing process.

Seuzach AG
Seuzach AG, headquartered in the beautiful city of Seuzach outside of Zurich, Switzerland, was one of the world’s
largest suppliers to the healthcare industry. It was a global leader in advanced diagnostic imaging systems,
molecular and in vitro immunodiagnostics, as well as healthcare IT systems. Diagnostic systems of all types were

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 Lea Block at Seuzach AG: Initiating digital transformation ESMT–421–0190–1

increasingly central to the practice of medicine in developed economies, with a growing emphasis on early
detection and prevention. Given its technological strength and engineering focus, Seuzach was able to continually
push the limits of diagnostic feasibility. This was particularly true in the field of medical diagnostic devices such as
x-ray machines, ultrasound equipment, or computed tomography scanners. Seuzach also had a strong heritage in
Swiss precision engineering. The company had always focused on developing the best technology money could
buy. Everything involved in the innovation process—from R&D to marketing and sales—was focused on realizing
technological benefits and their related clinical potential.

Seuzach AG was a CHF 12 billion business with a global presence and more than 36,000 employees. Quite typical
for a globally operating company of this size, Seuzach was organized in a matrix structure (see Exhibit 1). Seven
independent business units were responsible for the global development, production, and marketing of a single
product line (e.g., computed tomography scanners), and each had overall profit and loss responsibility. Each of
these seven business units also had independently operating marketing teams. Sales and services, however, were
organized along geographic lines. In every market, salespeople were expected to sell products from all business
units to hospitals, private practitioners, and university clinics.

Germany played host to large local players like Siemens and Fresenius, as well as international companies like
General Electric, Philips, Baxter, and Seuzach. Given the geographical proximity, Seuzach had managed to be among
the top four suppliers of medical devices in Germany with market shares of more than 40 percent in individual
product categories. Traditionally, the German business played a major role for Seuzach, though its overall share for
Seuzach was shrinking. Based on a high sales force density, Seuzach had managed to establish a large customer
base and long-lasting customer relationships, mostly among clinical users like radiologists, oncologists, and
cardiologists. These users seemed to appreciate the quality of Seuzach’s technology and products.

Seuzach had a long success story to tell. It was also still performing well, with revenues increasingly slightly and
consistent profitability (see Exhibit 2). Nevertheless, the marketing manager for Germany, Lea Block, felt that the
global and German markets and—more importantly—the customers were changing. In the future, medical
treatment would be supported by a range of diagnostic tools and data provided by smart pills, sensors, and
metabolite patient profiling. Better provision of healthcare, as a result of the careful and comprehensive
implementation of powerful digital technology, was exactly what health providers needed. Already by 2020,
experts expected the value of digital healthcare products and services to exceed €38 billion in Germany only. Lea
saw an urgent need for Seuzach to respond.

Lea Block initiates digital transformation

Lea Block, 32, studied business administration while simultaneously living as a semi-professional snowboarder. She
joined Seuzach AG in 2010 as a marketing specialist and was responsible for the promotion of service solutions on
a worldwide basis at Seuzach headquarters. In 2013, she was promoted to lead a global advertisement team for

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 ESMT–421–0190–1 Lea Block at Seuzach AG: Initiating digital transformation

one of the seven product-related business units. In December 2017, she transferred to Seuzach’s German office in
Düsseldorf, becoming the marketing director of the German sales organization (see Exhibit 1).

After taking over her new responsibilities, she quickly realized the shift in customer decision making:

When I discovered the change in decision-making structures at our customer’s side, I wanted to change
the way we do marketing. Until that time, marketing was focusing on features and benefits of individual
systems addressing the needs of clinical users. I was convinced that, in the future, we should spend less
marketing budget on targeting clinical users and start addressing the needs of the “C-level”—CEO, CFO,
and CIO—through marketing.

I realized that C-level marketing of digital offerings would not work on an individual business unit level,
but that it had to be integrating all business units on a broader scale. While clinicians may discuss x-ray
machines from vendor A or B, an administrator will talk about strategic decisions to make and evaluate
potential industry partners. I wanted to establish a more digital C-level-focused sales and marketing
approach talking to the pain points of administrators.

I am convinced that Seuzach can only make the leap into the future players in the industry through the
application of digital innovations which allow for data driven, cloud-based digital services, and business
models that integrate data across the whole product range.

Seuzach AG was traditionally seen as technology- and engineering-driven. As long as clinicians remained the key
decision makers for purchasing these new devices, this was the ideal perception. Now, however, Lea saw a need
to demonstrate that the company could also deliver value to its clients in another way; by providing integrated
digital solutions, using sensor technology, real-life evidence, artificial intelligence, and digital diagnostics combined
with cloud-based data storage and analysis that would help to improve overall hospital efficiency. Lea had looked
at the situation for some time. She felt that she had compiled enough evidence to justify and initiate the necessary
changes (see the case supplement, Lea’s presentation to the Marketing Board):

My strategy was to sensitize and convince a group of people—the vice presidents of marketing of the
seven business units—to adapt their marketing strategy and to invest a small portion of their budget
into digital C-level marketing. For that purpose, I presented hard facts in a quarterly meeting of the
Marketing Board, a board where all marketing VPs discussed cross-business unit topics on a regular basis.
I visualized my perspective with charts and graphs, listed the pain points of the C-level, mentioned the
lack of benefits and messages that Seuzach could not provide to those customers, and I pointed out that
digitalization was changing healthcare business dramatically. I argued how we, as a team, could create
content and communicate it to them. I was able to present clear and convincing facts and figures that
aroused the audience. The message of my speech was clear and loud: we have to do something!

Because digital C-level marketing was new to the organization—and in order to ensure buy-in among all business
units—Lea planned to launch a small cross-business unit project that would define vision and objectives for digital
C-level marketing in Germany:

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 Lea Block at Seuzach AG: Initiating digital transformation ESMT–421–0190–1

The first response was quite positive; everybody agreed, in general, that this was an important topic that
had to be reviewed and worked on. The VPs supported the idea in general, but hesitated to approve a
dedicated budget.

Despite her disappointment regarding the rejected budget, Lea returned to Düsseldorf that day with the strong
conviction that Seuzach had understood both the major market challenge and opportunity, and that it was ready
to act. She had a clear plan and the will to drive the change. She initiated a task force that would involve
representatives of all business units on a working level and issued invitations to the kick-off meeting. The first
meeting of the task force was the turning point in Lea’s efforts to bring change to Seuzach:

During the first meeting, only half of the people I invited and who confirmed showed up. Some joined
the team reluctantly, others did not bother to attend at all. A lot of excuses were brought up and it
became obvious that the topic was not prioritized very high by their bosses, the marketing VPs.
Additionally, still nobody wanted to make extra budget available, although everybody agreed on the
importance of the topic in the first place.

Three months later, on January 21, 2019, Lea readdressed her arguments in the next Marketing Board meeting.
She repeated her story and complained about the lack of progress. She reminded the marketing VPs of their
commitments from the last meeting and how they had supported the topic. She was, however, not prepared for
the opposition she suddenly faced:

The marketing heads got into a defensive mode and explained why other things were more important
right now. A general cost reduction, accompanied by a painful cut in marketing budget, killed my already
half-dead, cross-business unit project finally.

Lea had initiated the digital transformation she felt was necessary for Seuzach. She had entered the meeting full
of hope. She left, however, feeling alone and rejected. “How could I get it so wrong? Don’t they see that this change
is urgently needed? What should I do now?” she asked herself, hoping that the coffee would fill her with new
energy to help her through the day.

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 ESMT–421–0190–1 Lea Block at Seuzach AG: Initiating digital transformation

Exhibit 1: Simplified organizational chart of Seuzach AG

Source: Seuzach AG.

Exhibit 2: Seuzach AG performance 2017–2018

(in million CHF) 2018 2017 Change

Sales 11,936 11,044 8.1%

Profit 1,528 1,403 8.9%

Profit margin 12.8% 12.7%

New orders 13,148 12,332 6.6%

Source: Seuzach AG Annual Report 2018.

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