Danaher’s Instruments of Change

Distinctive capabilities have been central to Danaher’s success since the mid-1980s, when Mitchell Rales and Steven Rales, two brothers who owned a commercial real estate business, discovered they had a knack for buying and turning around ailing manufacturing companies. Over the years, the company had evolved from a highly leveraged startup to a profitable family of ventures with a market capitalization of more than US$40 billion in 2013. The Raleses, who had named Danaher after a Montana creek where they often fished, had invested heavily in the management skills of the people who ran it and its member firms. They and the other company leaders had developed a unique approach they called the Danaher Business System. This intensive continuous improvement program, derived from the Japanese quality movement, was augmented with homegrown approaches to innovation, commercialization, and leadership development that involved every level of management and were led directly by the company’s successive CEOs.

At strategy+business, we have covered Danaher’s prowess with acquisitions, but it wasn’t until we researched the book Strategy That Works that we realized how far Danaher’s capabilities have taken the company. The executive interviews in this roundtable were conducted in 2012 and rechecked and updated for this article. They show how an enterprise that organizes itself around what it does best can generate a long-term track record of consistent success.