ESMT–410–0112–1

ES1121
November 29, 2010

ESMT Case Study

Anna Frisch at Aesch AG: Initiating

lateral change
Urs Müller
Ulf Schäfer
Aesch A passion
Medical Devices
for health

Introduction
On August 8, 2007, Anna Frisch, marketing director of the German sales organization of Swiss-
based medical device supplier Aesch 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 in the marketing strategy. Her peers and bosses just did not seem to get the importance
and urgency of the proposed change. German health industry trends were demanding
fundamental transformation. But Aesch’s executives back in rural Switzerland didn’t seem to
understand the extent to which the world was changing in Germany and in other places.

The German healthcare industry

Since the 1990s, the German healthcare system had been undergoing a substantial
economization. Two-thirds of all German hospitals were running deficits, with 15 percent of them
facing bankruptcy. Shrinking revenue streams, consolidation among hospitals and other types of
medical facilities as well as exploding costs had 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 became more and more important.

This case study was prepared by Urs Müller and Ulf Schäfer of ESMT European School of Management and
Technology. 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. Even though the case is based on a real situation individual names of persons, the company, and
places, as well as the industry were changed.
Copyright 2010 by ESMT European School of Management and Technology, Berlin, Germany, www.esmt.org.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a
spreadsheet, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording,
or otherwise - without the permission of ESMT.

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 ESMT–410–0112–1 Anna Frisch at Aesch AG: Initiating lateral change

The total spent on medical devices in Germany was estimated at $11.8 billion, equal to $145 per
capita. With a share of about 6 percent of the total world market, Germany, after the United
States and Japan, was the third-largest market for medical devices. This made it a highly
important market for any player in the industry. In 2006, the German medical device market was
estimated to include more than 400,000 different products across 8,000 categories.

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, no
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. The ongoing
discussions on healthcare reform would also depress investments in the near term. A large
healthcare reform in 2004 had already shown major effects. The next wave of reform – planned
for late 2007 – would have an equally strong impact.

Each of these factors began driving a fundamental shift in decision-making and purchasing
behavior. In the past, clinicians were the main decision makers. In fact, until a few years ago, the
purchase of 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. She
would then explore available products and suppliers, get a live demo of all available systems,
and discuss the functions and features with potential vendors. Once she received budget
confirmation from the hospital administrator, she would then purchase the system of her choice.
Under the new emerging scenario, hospital administrators and purchasing departments were
increasingly influential in the purchasing process. They were no longer relying solely on user
preferences.

Aesch AG in Germany
Aesch AG, headquartered in the beautiful city of Aesch 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 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, Aesch was able to continuously 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. Aesch 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.

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 Anna Frisch at Aesch AG: Initiating lateral change ESMT–410–0112–1

Aesch AG was a CHF10 billion business with a global presence and more than 33,000 employees.
Quite typical for a globally operating company of this size, Aesch was structured in a matrix.
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, sales people 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 GE, Philips, Baxter, and Aesch. Given the geographical proximity, Aesch 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. Based on a high sales force density,
Aesch 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 technological quality of Aesch’s products.

Aesch had a long success story to tell. It was also still performing well, with slightly increasing
revenues and consistent profitability (see Exhibit 1). Nevertheless, Anna Frisch felt that the
German market and – more importantly – its customers were changing. She saw an urgent need
for Aesch to respond.

Anna Frisch initiates change at Aesch

Anna Frisch, 35, studied business administration while simultaneously living as a semi-
professional snowboarder. She joined Aesch AG in 1999 as a marketing specialist and was
responsible for the promotion of service solutions on a worldwide basis at Aesch headquarters. In
2002, she was promoted to lead a global advertisement team for one of the seven product-
related business units. In December 2005, she transferred to Aesch’s German office in Düsseldorf,
becoming the marketing director of the German sales organization (see Exhibit 2).

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 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

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 ESMT–410–0112–1 Anna Frisch at Aesch AG: Initiating lateral change

C-level-focused sales and marketing approach talking to the pain points of

administrators.

Aesch 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. But now Anna saw a need to demonstrate that the company could also deliver value
to its clients in another way: by providing integrated solutions that would help to improve overall
hospital efficiency. Anna had looked at the situation for some time. She felt that she had
compiled enough evidence to justify and initiate the necessary changes (see Exhibit 3 – Anna’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 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 Aesch could not provide to those customers; and 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 C-level marketing was new to the organization – and in order to ensure buy-in among all
business units – Anna planned to launch a small cross-business-unit project that would define a
target state for C-level marketing in Germany.

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 provide a dedicated budget.

Despite her disappointment regarding the declined budget, Anna returned to Düsseldorf that day
with the strong conviction that Aesch had understood this major market challenge 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 that task force was the turning point in Anna’s efforts to
bring change to Aesch.

During the first meeting, only 50 percent of the people 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 August 7, 2007, Anna readdressed her arguments in the next marketing
board meeting. She repeated her story and reported on the small amount 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:

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 Anna Frisch at Aesch AG: Initiating lateral change ESMT–410–0112–1

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.

Anna had initiated the strategic change she felt was necessary for Aesch. 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–410–0112–1 Anna Frisch at Aesch AG: Initiating lateral change

Exhibit 1: Aesch AG performance 2005–2006

(in million CHF) 2006 2005 Change

Sales 9,876 9,144 8.0%

Profit 1,260 1,164 8.2%

Profit margin 12.8% 12.7%

New orders 11,148 10,332 7.9%

Source: Aesch AG Annual Report 2006.

Exhibit 2: Simplified org chart of Aesch AG

Source: Aesch AG.

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 Anna Frisch at Aesch AG: Initiating lateral change ESMT–410–0112–1

Exhibit 3: Anna Frisch’s presentation to the marketing board, May 11, 2007

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 ESMT–410–0112–1 Anna Frisch at Aesch AG: Initiating lateral change

This document is authorized for use only in Prof. S. Jeyavelu's Leadership and Change Management., at Indian Institute of Management - Kozhikode from Mar 2022 to Sep 2022.
 Anna Frisch at Aesch AG: Initiating lateral change ESMT–410–0112–1

This document is authorized for use only in Prof. S. Jeyavelu's Leadership and Change Management., at Indian Institute of Management - Kozhikode from Mar 2022 to Sep 2022.