The CEO of Abbott on Revamping Its Breakthrough Diabetes Device

Today more than 500 million people have diabetes, an autoimmune disease that causes the pancreas to produce little or no insulin, leaving sufferers unable to regulate the glucose in their bodies and bloodstreams. It’s one of the most prevalent and fastest-growing chronic medical conditions in the world, expected to affect more than 740 million people by 2045. And when it’s unmonitored and untreated, it can quickly become life-threatening.

In 2008 Abbott introduced a revolutionary new device, FreeStyle Navigator, designed to improve the lives of people with diabetes. Before its launch they had to check their glucose levels up to 10 times a day with painful finger-stick blood draws. Navigator instead offered continuous monitoring using wired enzyme technology that could translate an electrochemical signal from the body into precise, real-time glucose data via a sensor attached to the arm and connected to a separate receiver.

The doctors and people who tried the device appreciated it. One mother of a child with Type 1 diabetes told us that Navigator had given her enough peace of mind to sleep through the night for the first time since his diagnosis, knowing that if a problem occurred, the system would sound an alarm. But Navigator was bulky, hard to manufacture, and expensive. And without widespread adoption, it wouldn’t have the impact we had hoped. Within a year we knew we needed to go back to the drawing board.

It’s difficult to scrap a product that you spent years developing and that many customers have come to rely on. But that’s just what we did. Our core enzyme technology would remain, but we needed to design a delivery device that was simpler, more user-friendly, and affordable.

In 2014 we launched FreeStyle Libre, a reimagined continuous glucose monitoring (CGM) system in which a much smaller sensor applied to the back of the upper arm sent data to a handheld reader—now a smartphone app. Retailing today at around $140 a month (although the cost is widely reimbursed, so most people pay nothing or a small co-pay), it is used by millions globally. Last year it generated more than $5 billion in revenue, making it the most successful medical device—as measured by usage and sales—ever.

Our pivot from Navigator to Libre was one of Abbott’s most consequential decisions in recent history, and we believe that others can learn from the principles we followed to arrive at and then execute on that choice. We started with candid, collaborative discussions that helped us reach a consensus. We anticipated disruption of the CGM market that we’d created and opted to disrupt ourselves before competitors could. We turned our focus to customers and listened deeply to their feedback and concerns. We found ways to eliminate complexity without sacrificing technical excellence. And, perhaps most important, we insisted on putting out a product that would have a broadly positive impact not just on our bottom line but on as many people with diabetes as possible.

Committed to Innovation

Abbott’s founder, too, wanted first and foremost to help people. In 1888 Wallace Abbott, a physician and proprietor of People’s Drug Store in Chicago, began making medicines from plants and herbs in formulations that he believed were more effective than previous remedies. Customers agreed, and six years later the enterprise was renamed the Abbott Alkaloidal Company.

By the early 20th century it had expanded to Europe and produced the first synthetic medicine: a breakthrough antiseptic used to treat wounded soldiers in World War I. It continued to grow as a public company, even through the Great Depression and World War II, pioneering vitamins, intravenous solutions, and more antiseptics and antibiotics. By the 1960s Abbott had also become a leader in the nutrition market through the acquisition of M&R Dietetics, the maker of Similac baby formula. By the 1970s we had expanded into diagnostics, with the introduction of blood chemistry analysis and hepatitis detection. And in 1985, amid the AIDS crisis, the company won approval for the first licensed test to identify HIV in blood.

This century has seen equally rapid development, change, and growth in our portfolio of products and technologies and in our operations, which now span more than 160 countries. Following several big launches—including that of Kaletra, for HIV, in 2000, and Humira, the first human monoclonal antibody drug, in 2002—Abbott decided in 2013 to spin off its proprietary pharmaceutical division into what is now a Fortune 100 company, AbbVie, while retaining its core medical devices, diagnostics, nutritional, and generic pharmaceuticals businesses. Over the past decade, in addition to launching FreeStyle Libre, we have introduced a new family of diagnostics and informatics systems and made two key acquisitions: Alere, for its leading point-of-care testing technology, and St. Jude Medical, to add cardiovascular and neuromodulation innovation and expertise. During the pandemic we were also able to quickly create and deploy multiple new Covid-19 tests, including the market-leading BinaxNOW.

I joined Abbott in 1996 as a manager of a diagnostics business unit and then worked my way up in various positions and divisions around the world. Over the past 28 years I’ve grown ever more committed to the company and its mission of doing work that enhances people’s lives. That’s why I found FreeStyle Navigator’s failure to gain traction so frustrating.

A Disappointing Launch

In 2008 I had been working in our diabetes care division for a decade. We knew that finger-stick glucose monitoring was a huge pain point (literally and figuratively) for people with the disease. In 2004 we had acquired a company—TheraSense—specifically for its wired enzyme technology, which we knew could revolutionize the process. We created a separate group within our unit to focus on building a device around it, from R&D to clinical trials and marketing. The group’s members were set off in their own silo and hailed as saviors. Expectations were high.

I was promoted to manage the commercial side of the diabetes business just as Navigator was being launched in the United States. As I’ve mentioned, the doctors and patients who gained access to it saw it as a vast improvement over previous systems. The readings were very accurate, and the device was indeed life-changing for some. But its design was clunky and the interface was unintuitive. Manufacturing was complicated and difficult to scale. And the high production costs resulted in a retail price of around $7,000 a year, which was rarely covered by insurers, making it prohibitively expensive for most people.

As a long-term manager in the business, with affection for our people and technology, I was at first hesitant to call out those issues. But I benefited from the perspective of my boss, the division president, who had come from a different area of the company and pushed us to confront the problem head on: Why was this technology with such great promise going nowhere?

We met as a management team to discuss the issue. One camp immediately suggested that we scrap Navigator and start again. Another worried that doing so would devastate the thousands of people who were content with it. Initially I was in the latter group. But as I listened to my colleagues make their cases, and I began to weigh the pros and cons of minor revisions versus total revamping, I realized the solution was clear. Although we had failed on our first try, the business growth and impact opportunities were still there. So we owed it to ourselves and to our customers to give it a second shot—and to get it right this time.

After about four months of meetings, we agreed on a plan and presented it to corporate leadership. We acknowledged our collective mistakes in developing Navigator. We explained what we wanted to do differently for version two and where we intended to take the design. We emphasized how much we still believed in our mission. And we got approval.

Our next task was communicating this shift to key opinion leaders in the industry and to our customers. At a call center outside Philadelphia we trained 70 or so team members on how to have the difficult conversation about discontinuation with the 3,000 or so people who were using the device (or their parents). We offered full refunds and suggested alternative systems, but people were still understandably upset. I listened in on some of those calls because I knew that hearing customers’ frustration would motivate me. We promised that we would come back with a better device. I had previously called my counterpart at our leading competitor to warn her that she should get her customer service team ready, because we were about to start referring our users to her product. But I also told her that we intended to reclaim those customers soon—and to win over many more.

Our Successful Second Try

The good news was that our technology was sound: We already had a sensor that could give us accurate glucose data from interstitial fluid in the arm. What we needed to fix was the product design, so we brought in people with that specific expertise to engage in deep customer and market research and to collaborate directly with our scientific and manufacturing teams. We then moved on to rapid prototyping: showing proposed models to people with diabetes, getting their feedback, working overnight on changes, and presenting new versions. We shrank the sensor to the size of a coin and designed it to be manufactured cost-effectively at scale. Our user-experience goal was to make the device “Fisher-Price friendly,” meaning as easy to “play” with as that company’s toys. As for cost, our goal was to charge no more than the equivalent of “a latte a day.”

Operating in this way, we reached huge milestones. I remember the day the project lead told us that his team had succeeded in increasing the longevity of the sensor from five to 14 days, essentially reducing our costs by two-thirds. Next he reported that they’d figured out how to bypass the onerous chore of users’ needing to calibrate the sensor each day; it could be done once at the factory. Soon we got word that the group working to streamline production had managed to fully automate the process. Every month, on a Friday, we’d meet with the division president from 8 AM to 5 or 6 PM for a full-day review of the project, including all the decisions that had been made and the intersectional ramifications of each.

Once FreeStyle Libre was ready, we had to set a price. In health care high margins are typically the reward for innovation that your competitors can’t match. Premium prices also suggest high value. But if our new device was to be accepted by people and insurers around the world, we would need to price it affordably. Competing CGM systems, like Navigator, were priced around $7,000 a year. We could have charged $3,000. Instead, after much internal debate, we settled on $1,000 to $1,200—high enough to yield a return on our years of investment but low enough to immediately accelerate adoption.

Our go-to-market strategy began in 2014 in Europe, and health care providers, typically governments, immediately picked up the new device. For them, an accurate, user-friendly, and affordable CGM was a no-brainer, and sales quickly cascaded from France to England to Germany to Italy. The U.S. market was more of a challenge because it involves so many intermediaries and gatekeepers: private and public insurers, physicians, and pharmacists, some of whom were already loyal to existing, higher-priced products. One payer even told us that our price was too low! However, we eventually began to make inroads—not least because we started marketing and selling directly to consumers and then helping them work through the insurance claim process. We built our own online shop and advertised in traditional media.

Soon we began to see the kind of uptake we’d dreamed of. Before 2014 only tens of thousands of people worldwide had CGM systems. By 2016, 250,000 people around the globe were using FreeStyle Libre. Today that number is more than 6 million people in more than 60 countries, and as we continue to improve the device each year, we expect sales to double to $10 billion by 2028.

Lessons Learned

Our organization learned a great deal during the transition from FreeStyle Navigator to FreeStyle Libre—as did I. After leading the Libre launch from my senior position in the diabetes care group, I was tapped to manage our entire medical devices business, which also encompasses our cardiovascular and neuromodulation businesses. I then stepped up to be COO and later CEO; now I’m also chairman of the company. In each of these roles I’ve pushed our teams to focus on not just breakthrough innovation but also accessibility, affordability, and sustainability for long-term impact.

We start with strategic discipline: Where are you going to compete? And how will you do it? Abbott is a diversified company with positions in many segments of the health care market and many geographies; our portfolio varies according to local market needs. But for each business and for the organization as a whole, we constantly ask ourselves those key questions.

I also want us to keep disrupting ourselves, which means that some of our teams will be selling existing products and technologies to fund colleagues who are working on new offerings that will kill off the old ones. Employees may specialize, but leaders know they must manage ongoing operations and transformation in tandem and celebrate both sides equally. Across units and within them, our mantra is “All for one, one for all.” A big part of my job is to maintain this culture of collaboration while continuing to drive innovation. Yes, we applaud our accomplishments. But we also stay paranoid. We joke that we give one another high fours instead of high fives. There is always something to improve—or change.

Our successful CGM pivot could not have happened without a shift to more open, cross-functional teamwork and more consumer-led innovation. That’s how we eventually found a path to delivering a high-quality device that was also simple to use and extremely cost-effective.

The Navigator-to-Libre journey proved unequivocally that failure is a definitive state only if you let it be. If you have a big problem that needs to be addressed but your first solution is so-so, resist the urge to stick with what you’ve got. Try again from a different angle. We saw another case in point at Abbott when a new drug-delivery technology for stents to improve heart health yielded poor results in beta testing. We could have shelved it. But someone on the medical devices team observed that the innovation might instead be applied to another challenge: unblocking arteries below the knee. When the head of the medical devices unit presented the idea to me as the CEO, I saw myself back in 2010, with the diabetes care team, pitching the CGM switch. And my verdict was just like my predecessor’s: “I don’t know if this will work, but this team seems inspired, and I’m willing to bet on that passion.”

Because we’re pursuing innovation in the service of human health, we never stop. We have to keep pushing, evolving, and having the courage to disrupt ourselves. How do you do that with the most successful med-tech product in history? You see it as a platform and think even bigger. So we announced the creation of Lingo, a biowearable that helps healthy people stay in tune with their glucose levels, allowing them to improve their overall health and wellness and retrain their metabolism.

Abbott’s commitment to sharp strategy, continual disruption, deep teamwork, consumer connection, and relentless problem-solving is aimed at delivering the best and biggest impact we can. Yes, we want to create financially successful products and technologies. But the higher-level reward is that people all over the world tell us we’ve changed their lives.

Copyright 2024 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

Explore AAPL Membership benefits.