Independent, innovative as always, Gore makes a move to grow

August 25, 2008

By hammersmith

By Matt Ellsworth
Flinn Foundation

It would be hard to find a company with a product line more eclectic than that of W. L. Gore & Associates: fuel cells and bagpipes, hazmat suits and electrodes, industrial gaskets and vacuum-cleaner filters. Plus dental floss that won’t shred, window screens you can’t see, guitar strings that don’t break, and rain jackets guaranteed to keep you dry.

The variety of industries in which Gore operates–extending far beyond textiles, where it is known best for its Gore-Tex outerwear–certainly demonstrates the extraordinary versatility of the polymer PTFE (polytetrafluoroethylene), the key ingredient in most of the company’s products, which last year brought in over $2 billion in sales. But Gore’s capacity to engineer both the strings on the Prince Recoil tennis racket and fiber-optic cables for military helicopters is just as much a consequence of an unusual corporate culture where employees own the company, out-of-the-box thinking is expected, no one has a job title, and getting bigger means splitting up.

In Arizona, Gore is a quiet, independent, and major force in the biosciences. The company’s medical-devices facilities in Flagstaff employ around 1,700 people, more than 20 percent of the firm’s global staff of 8,000. Gore has brought to market hundreds of medical products, primarily implantable devices such as vascular grafts, surgical meshes, and sutures. As the company has grown to become Flagstaff’s largest private employer, the city has emerged as an industry hub–Battelle’s most-recent assessment identified Flagstaff as owning the third-highest location quotient in medical devices and equipment among small metropolitan statistical areas nationwide. Globally, 25 million Gore devices have been implanted in patients.

Originally, though, Gore’s business in Flagstaff wasn’t in the biosciences at all. The Delaware-based company, founded by Bill and Vieve Gore 50 years ago, was at first an electronics manufacturer. Gore used PTFE—elsewhere marketed by DuPont as Teflon–to engineer high-performing insulated wire and cable, which quickly found demand in aerospace and defense applications. Flagstaff, where product development began in 1971, was an expansion of the electronics effort.

The shift in Flagstaff to medical devices occurred after a crucial breakthrough by Bill and Vieve Gore’s son Bob, who would eventually become the company’s president and CEO. In 1969, Bob Gore discovered that when PTFE was rapidly stretched, it achieved important new properties. Most notably, expanded PTFE contained astonishing numbers of tiny pores—pores just large enough for water vapor to pass through, but too small to permit passage of water droplets. It was simultaneously waterproof and breathable.

Bob Gore’s innovation reached the market as Gore-Tex. Its first applications were in pipe-thread tape and coaxial cable, and Gore engineers soon saw its value in many other industries, including outdoor clothing and medical devices. The Flagstaff campus made a wholesale shift to focus on medical products, for which expanded PTFE was particularly well-suited, since it is chemically inert, durable, and biocompatible. The company made its first sale of Gore-Tex vascular graft in 1975, a year before selling its first Gore-Tex raingear.

Gore’s headquarters remain in Delaware, and 17 of its facilities are clustered in the vicinity of Newark, Del. and Elkton, Md. Flagstaff is the company’s center for its medical-products division, the site for development and manufacturing of a multitude of implantable devices. Additional facilities are in China, Germany, Japan, and the United Kingdom.

Now Gore is doubling down on Arizona. Last year, the company purchased 40 acres of land in north Phoenix for a new medical-devices campus. Today, the first complement of new Phoenix employees is working in leased space, while the company proceeds with initial development of its property, sited near Interstate 17 and the Carefree Highway. Ultimately, Gore expects to hire 800 staff to work at the location.

“Our basic operational philosophy is that we’ll have four or five smaller facilities on the property, for the purpose of having fully integrated teams,” says Gore’s John Sininger, who leads the company’s medical-products division. Each team will be responsible for every step of bringing new innovations to the marketplace.

“We develop, manufacture, and sell virtually all of our products,” Sininger says. “Associates at each facility will do the basic research, run the clinical trials, put together the marketing materials, and manage the interfacing with the Food and Drug Administration.”

Sininger’s description of product development highlights two of the defining characteristics of W. L. Gore & Associates. One is the company’s idiosyncratic way of identifying its employees: every new hire and every 20-year veteran, whether an engineer, or a human-resources specialist, or a lawyer, is called an “associate.” And while each employee’s aptitudes, interests, and experience determines an area of responsibility–Sininger is responsible for leading the medical-products division–precise job descriptions are absent, as are hierarchical lines of authority. No associate formally reports to any other associate.

“The fundamental principle of the organization is people knowing one another,” Sininger explains. “It only works when people know one another–literally on a first-name basis. When you know one another, know each other’s skills and abilities, you don’t need job descriptions and titles.”

To ensure that associates do know each other on a first-name basis, Gore’s several facilities on its Phoenix campus will each max out at around 200 staff. The company, willing to sacrifice some economies of scale for the benefits of more personal teamwork, employs that model at each of its roughly 45 facilities around the world, including those in Flagstaff.

“We have grown up with this concept of small facilities rather than one big one since the beginning,” Sininger says. “The way we get bigger is to keep splitting things up. And the challenge, then, is simply communication between those facilities.” Even as each facility’s team proceeds with its individual products’ development, the company must track the broader division’s activities and align those with corporate strategies.

Typically, Gore tries to expand its operations in proximity to existing facilities in order to ensure smooth communication. In the case of the new Phoenix campus, Sininger says, one of the challenges was finding a site sufficiently close to the Flagstaff campus for those staff who will be moving between campuses frequently, while maintaining the advantages of a big-city location, such as quick access to freeways and airports and a deeper labor pool.

Its minimal hierarchy and careful attention to team functioning explains, in part, Gore’s excellent reputation as an employer. (For 11 consecutive years, Fortune has named Gore one of its “100 Best Companies to Work For.”) Also bolstering the firm’s reputation is its standard of employees receiving shares of the private company’s stock as part of their compensation. And Gore encourages employees to follow their interests and act in entrepreneurial fashion, inviting them to spend 10 percent of their time on projects not necessarily related to their main responsibilities.

Sometimes those projects pay huge dividends, as with Glide dental floss or the long-lasting, PTFE-coated Elixir guitar string, which was dreamed up by a Flagstaff medical-products engineer who had already invented the smooth-shifting RideOn bicycle cable. When such off-the-map innovations–or those in existing product divisions–succeed, Gore has the opportunity to launch a new unit and grow.

Although each industry in which Gore is active poses unique challenges, taking new medical devices from the design stage to the hospital operating room is particularly complex. For good reasons, says Eve Ross, Gore’s corporate counsel, the medical-devices industry is pervasively regulated.

“FDA regulation is not an event, but a cradle-to-grave process,” she says. “The development process is regulated, the clinical-trials process is regulated, first sales and continued sales are regulated. For us, the FDA and other government entities around the world are customers–they need information about our processes, our products, and those products’ efficacies. It’s our job to provide information in a timely manner to them.”

Ross notes that the relationship between a medical-devices manufacturer like Gore and the FDA differs profoundly from what a pharmaceutical company experiences as it interacts with the same regulator. “The similarity is that both pharmaceutical and medical-device firms need to articulate the value of technologies they bring to consumers and healthcare institutions,” she says.

“The difference is that we develop products through incremental innovation–we do the development, get the product approved, and then it’s in the field. Physicians use it, give us feedback, and we tweak it, then go through the approval process again. We’re developing ‘A+2’ through ‘A+4’ by the time ‘A+1’ is in the field,” she explains.

“The other distinction between the drug and device industries,” Sininger adds, “is that our business is much more engineering intensive–we need more mechanical engineers than molecular biologists. Principally, our devices are mechanical devices to repair mechanical structures of the body, and there’s a great deal of work in terms of the mechanical and structural durability of the device in the body. It looks much more like aeronautical engineering,” he says.

“I think the hope is that for many of the disease states we’re treating mechanically today, such as a blocked artery, someday there will be a preventive drug therapy or genetic modification,” Sininger continues. “For the most part, the device industry is treating the byproduct of the disease state. We do expect, though, that over the decades our business will continue to evolve toward more biologically active products–mechanical devices enhanced with biological agents.”

While they track and forecast the shifting technology landscape, Ross and Sininger also keep tabs on the business climate in which their company operates. In Arizona, much attention has recently focused on the roiling housing market–which in Flagstaff remains too expensive for many new arrivals–but Ross says the two areas on which she focuses most intently are education and transportation infrastructure.

“Usually in Arizona, the conversation about education divides into two parts–K-12 and university. But we see them together,” Ross says. “Of course, the quality of university education matters, since we need to hire a well-educated staff. But we recruit nationally as well as in Arizona, and we need to compete with firms in Boston, Raleigh-Durham, and the Bay Area. When you try to recruit and retain these people, the education system is a crucial factor–they want their children to be well-educated, as they are.”

“Something of which I’ve become aware,” Sininger says, “is that not only do we as Arizonans want our children to grow up with a great education, we also need it to bring in the kind of talent we need to make this place thrive.”

Ross notes that Flagstaff perhaps has an advantage over other parts of Arizona in terms of education. “Flagstaff has a slightly different geography around charter schools than the rest of the state,” she says. “There are some excellent charters in northern Arizona, and that has helped alleviate some potential candidates’ concerns.”

Transportation infrastructure presents its own set of challenges. Ross notes that Flagstaff has recently completed an expansion of its airport runway, and that direct flights have begun from Flagstaff to Los Angeles. Gore’s partnership with the city of Flagstaff has been positive, she says, but more broad-based statewide infrastructure improvements are vital.

“If you conduct a global business out of Flagstaff,” Ross says, “you spend a lot of time flying in and out of Sky Harbor and driving up and down I-17. Gore has been engaged in making sure there are adequate resources to maintain the roadways we have. As you look at future-growth estimates, though, it’s apparent that we need to increase capacity.”

Gore’s advocacy on issues like education and transportation typically occurs quietly, in keeping with the company’s apparent preference for understatement. Sininger says that when individual Gore staff become involved in their communities–he is a former board chair for the United Way of Northern Arizona, and Ross is a former board chair for the Greater Flagstaff Economic Council and a member of the Governor’s Council on Innovation and Technology–they do so of their individual volition; the company grants employees eight hours in paid volunteer time per month, but otherwise doesn’t angle to put its stamp on its community.

“Bill Gore didn’t believe that it was the responsibility of a corporation to be philanthropic; he saw philanthropy as the responsibility of individual,” Sininger explains. “And no one lived that more eloquently than Bill and Vieve Gore and their children. They were the most generous people you’d ever meet.”

The Gores’ penchant for privacy and doing things their own way is perhaps reflected most in the fact that they never sought to take W. L. Gore & Associates public. Sininger says that model has held up well, though he allows that the company will necessarily change in some respects as it continues to innovate, take big chances, and grow with new endeavors like the expansion to Phoenix.

“Being privately-held allows us to make long-term investments that will compromise this quarter’s results. There are publicly traded companies out there that do that, but they aren’t necessarily valued as highly,” he observes. “We are focused on doing things for the long-term benefit of the organization. And we’re ever-changing and evolving. Some day, when we’re 10 times the size we are today, we’ll certainly look different.”

For more information:

The Fabric of Creativity,” Fast Company, 12/19/2007

Very highly stretched polytetrafluoroethylene and process therefor,” U.S. Patent No. 3962153, Robert W. Gore, 06/08/1976