Client Forum – Stryker Corporation
The Stryker Corporation is one of the world’s largest and most successful medical devices companies, having achieved an average of 20% growth per annum in earnings for over 20 years. Its product portfolio extends from Endoscopy and Orthopaedic Implants to Hospital Beds to name but a few. This has enabled the company to deliver comprehensive solutions to healthcare providers. HBS Consulting spoke to Mr. Stephan Epinette about Stryker’s approach to the European Endoscopy Market.
Mr. Epinette joined Stryker Europe in 1994 as Marketing Assistant for Osteonics products. In 1995, he was promoted to International Marketing Associate for Stryker Instruments and was named European Product Manager for Instruments in 1996. In these positions, he was influential in promoting the success of the Instruments products in Europe, mainly through the development and implementation of focused training programmes, efficient sales support, product launch packages and proactive involvement in product development.
In 1999, he became Sales and Marketing Manager, Instruments & Arthroscopy, Stryker France and was then promoted to Marketing Director (Europe), Stryker MedSurg Group. In July 2002, he became Assistant to the President, Stryker Europe. He has now been promoted again to Director of Business Development and Market Intelligence, Stryker Europe.
HBS:
Would you say that your success is based on innovation in products, quality of product or service?
Mr. Epinette:
I think that things are changing. We have been able to gain significant market share thanks to product differentiation, as we have been ahead of our competitors in terms of innovation and technology. We set differentiation as our key strategy. Think of Endo-Suite. We have sold Endo-Suite since 1991, achieving unit sales of over 1000. If you compare that to the competition which came into this market much later and has a very limited number of installations and very little penetration in the US - which is still the largest market - the difference is clear. Other examples are cameras and image capture, we were the first ones to launch the technology of the SDC Pro - an image capture device which can record medical images and films on CD or DVD.
Our endoscopy research is based at the heart of Silicon Valley. Nowhere else in the world can you find so many talented people. We hire only the best – endoscopy is more and more software driven. We invest heavily in new technology first and we implement it first. In our core businesses, we are definitely leaders in technology.
However, now it is becoming more difficult to launch innovative and unique technology only for its own sake. New technology needs to clearly bring value added in terms of cost/benefit. Budgets are decreasing, and thus it is always a trade off between still being the number one and launching new products and not going too fast and losing your customers. If you are too innovative, then you might be leaving everyone else behind, including your customers.
Nowadays, concepts such as on-time service, reasonable price and building on your customer loyalty are extremely important. Much more than they used to be.
Service has become a very important part of our overall strategy. For instance, we have our own repair department in every country with its own certified technicians. We also have field engineers working only with our products and a very large network of representatives in Europe, excluding product managers. We want to know every time that there is a problem before it is too late so we can be proactive and react before there are any complaints. A lot of companies outsource their repairs and they lose control of the quality of the repair and there are a lot of implications if you lose control. You become liable for things that you don’t really have any control over. In Europe we repair 99% of all our products. We also have a European team in charge of training our European technicians on new products. As soon as we launch a new product, we organise training on how to service it.
HBS:
Coming back to the question of product quality. Are there still major perceived differences by the customers between competitors in the Endoscopy market?
Mr. Epinette:
In some cases, certainly. I think that customers will prefer a Stryker camera for quality, for instance. Stryker is seen as the Rolls Royce of cameras in Europe and in the US, although needless to say, some other companies have good products too. People can increasingly rely on buying quality, but service and other factors are becoming more and more important, and this is where Stryker is different. I think that customers want to be linked to strong companies. It is not only about the product, it’s about the service, the image and the activities - the dynamism. For instance, they want to be more and more involved in product development, they want to have the right to have a say about their own needs. Stryker has done an excellent job at achieving this objective.
HBS:
The way you are looking at services, you are investing more money than some other companies.
Mr. Epinette:
It is not the way we look at it. We see this as an opportunity. We see service as a product line on its own, our service lines mean extra revenue, not extra cost. So, if we invest, it is because we know we can generate revenue out of it. In capital equipment sales we often bundle in Service Contracts. Thus we create a very wide product offering: From instruments to repair contracts to financial services. It is a very attractive package for customers to buy. We are one of the few suppliers able to provide innovative solutions, and to customise those solutions across a broad spectrum of product categories. Healthcare systems are different from country to country, so one of the issues with Europe is the complexity of all these systems, so that is why our decentralised approach works so well in Europe.
HBS:
You were talking about financial services. Obviously with financial pressures on the increase, how important are financial services. How are you developing them?
Mr. Epinette:
They represent an ever-increasing part of our business. We have been leaders in financial services in Europe and the US for many years. In that way, hospitals can be assured of attracting the best surgeons because they always have top of the range equipment. Surgeons like to work with good quality equipment. It also projects a very good image of the hospital and improves the recruitment of patients, because they know that the hospital uses good equipment. At the same time they don’t have to worry about renewing it and obsolescence, because every 3 to 4 years they are going to have brand new equipment for an affordable price, without having to worry about how to finance it. It allows them to control the costs.
HBS:
Talking of costs, ever increasing budget pressures that will be accelerated by initiatives like DRGs will put further pressure on the industry. Are you thinking about this when you offer your financial services, saying we want to respond to that?
Mr. Epinette:
Again, our financial services are different from country to country; we customise this towards the local healthcare systems, to DRGs and other initiatives. We also have different products for public or private hospitals and clinics - different packages. We offer numerous solutions which are customised, we can thus help to save money, because we know the medical device environment, we know what is effective, productive and how to save money. We are very much focused on following the same route as healthcare authorities.
For example, there are huge waiting lists for operations in countries such as Spain, Italy and the UK. Endo-Suite is the perfect example in which Stryker is becoming the solution provider. We are able to really help to increase efficiency and cut costs. Our strength with the
Endo-Suite is that we are building up based on the huge experience that we have had in the US, where it was launched in 1991 against the background of Managed Care initiatives.
HBS:
So you are taking the partnership approach?
Mr. Epinette:
If you have a customer you try to develop your business relationship with him. We have such a large range of products that for us it is much more cost effective to develop customer loyalty. We try to maximise penetration within each hospital, each clinic, and each customer. We have tailor-made solutions for each one. We really want to develop partnerships with our current customers in addition to looking for new ones. We are not an endoscopy-only company. This gives us the advantage that we can see problems from every different angle and consequently we are very versatile in the solutions packages that we offer. An Endoscopy company will only be able to offer products or solutions related to endoscopy. We look into the surroundings and all medical related issues and problems to get the whole picture.
HBS:
On another subject, there seem to be a trend in which the purchasing decision is going away from the user to the purchasing manager. Would it be true to say that actually that makes services and financial packages more central than in the past?
Mr. Epinette:
I think that this is true but mainly for capital equipment. I don’t think that this is true for products like implants. It is very difficult for a purchasing manager to change the implant that a surgeon might be using. Ultimately, the surgeon is responsible for the quality of care of his patients. With capital equipment yes, that is where a hospital director can put pressure to save money. On the other hand the fact that we have so many products, allows us to develop a very complex net of relationships within a hospital not only with the surgeons but also with hospital directors and other decision makers. A customer can be using several of our products. That is why it is important for a hospital director to do business with a large company that can offer you more than one product, because they will have more options and more solutions.
HBS:
The European Endoscopy market is more or less divided between Stryker, an American company, and the rest such as Smith & Nephew, Wolf and Storz being Europeans. Do you think that there is a cultural difference on how the market is tackled?
Mr. Epinette:
Exactly. As an American company, Stryker has a strong customer focus. In addition, Stryker is unique in the way it is organized. Although we are a global company we are very decentralised - we might be an American company but Stryker France, Stryker UK, Stryker Germany have their own identity, albeit with Stryker ethos. They are responsible for their own markets and I think that this serves customer needs better than vertical organised companies. I think that we have the best of both worlds. On the one hand the customer focus of an American company and on the other the local knowledge and development to meet local customer needs.
HBS:
Do you see any major changes in how your products are going to be sold in the next few years?
Mr. Epinette:
I see the increasing development towards customer relationship managers who sell fully integrated product and service solutions. You will not be selling a product any more. You will be selling an innovative product and the solutions and services that come with the product. Increasingly, any downtime of equipment is unacceptable for healthcare providers and thus the emphasis will be more and more on buying a product that does not break down and if it does, on having a seamless top quality service organisation behind you. This is where Stryker is leading the market and will continue to do so.
HBS:
Mr. Epinette, thank you for your time.