The Medtronic medical device company was founded in 1949 by Earl Bakken and Palmer Hermundslie. From its beginnings in a converted garage, it has grown into a multi-billion-dollar enterprise and one of Minnesota’s leading businesses.
In the late 1940s, electrical engineer Earl Bakken saw an opportunity for starting a business that specialized in repairing medical equipment. He discussed this idea with his brother-in-law, Palmer Hermundslie, and in 1949 they founded Medtronic.
Medtronic’s first office was a converted boxcar garage in Minneapolis. In their first month, Bakken and Hermundslie made eight dollars for repairing one centrifuge. To make more money, they took side jobs selling medical equipment for the Sanborn Company. They also started taking contracts to build custom-ordered devices for local physicians.
In 1954, Bakken began to assist with equipment during surgeries performed at the University of Minnesota. There, he met open-heart surgery pioneer Dr. C. Walton Lillehei, who in 1957 asked Bakken to create a portable, battery-powered pacemaker. Bakken created a prototype by adapting a metronome circuit from Popular Electronics and altering its voltage to match the human heart’s. After this prototype was tested, Lillehei began using Medtronic pacemakers the next day. The devices became a key part of Medtronic’s business.
After it introduced a line of new, implantable pacemakers, Medtronic saw its sales grow rapidly—from $180,000 in 1960 to $518,000 in 1962. The company moved into a fifteen-thousand-square-foot building and increased its staff to fifty-four people. It also expanded its product line by adding a new heart monitor and other devices.
This rapid expansion, however, caused problems. New devices were expensive to research and manufacture. Bakken saw himself as an engineer, not a businessman. He was more interested in making useful devices than in profit. Sales had increased, but Medtronic still nearly went bankrupt.
In response, Bakken shifted his attention to Medtronic’s business side. He reduced the product line, attempted to limit costs, and focused the company on pacemakers and other profitable products. The move was a success, and Medtronic grew throughout the late 1960s. By 1968, it brought in almost 10 million dollars in sales per year. The company’s pacemakers made up 65 percent of the worldwide market by 1970.
Bakken’s approach up to this point had been to offer simple and reliable products. He believed doctors were wary of innovation and preferred medical devices they knew they could trust. This trust suffered a blow in 1975 when some of Medtronic’s Xytron-model pacemakers began to short out early. These pacemakers featured older mercury batteries rather than the latest lithium ones, which promised longer battery life. Although the several hundred Xytrons that failed did not cause any deaths, they seriously damaged Medtronic’s reputation.
By 1980, Medtronic’s earnings were on the decline. The company needed to develop more innovative and diverse products to restore their reputation and compete with newer firms. They launched a line of programmable pacemakers but were no longer the technology leaders. When Winston Wallin took over as CEO in 1985, he doubled the company’s research spending to push innovation.
As Medtronic entered the 1990s, acquisition became the key strategy for growth. By this time, it had acquired Johnson & Johnson’s cardiovascular division, as well as several European pacemaker producers. In 1998, Medtronic began the process of buying in succession five companies that manufactured leading medical products.
In 1999, fifty years after Medtronic’s founding, the company was serving customers in more than 120 countries. It projected sales of $5 billion for the next year, coming from not only their heart-rhythm business but from the neuro-, vascular-, and cardiac-surgery markets as well.
In the twenty-first century, Medtronic faced criticism from the animal rights group PETA for testing its medical devices on animals. After talks with PETA in 2005, 2008, and 2010, Medtronic agreed to improve the lives of its test animals and to avoid unnecessary testing when possible.
Medtronic continued its aggressive acquisition plan in the 2010s. In January of 2015, it closed a $49.9 billion deal to acquire the Irish hospital supplier Covidien PLC. This merger renamed the company Medtronic PLC and moved its corporate headquarters to Ireland for tax purposes. Minnesota was no longer its official home, but Medtronic kept its operational headquarters in Minneapolis.