After 85 years, change is inevitable.
Such was the case last year, when Picker International Inc. became a name of the past after 8-1/2 decades, and Marconi Medical Systems Inc. (Highland Heights, Ohio) was born from parent company Marconi plcs (London) corporate makeover. The changes, however, proved more than cosmetic.
With its new name came a new strategic direction a greater emphasis on information technology (IT). Marconi Medicals raison d?tre became its technological focus on melding medical imaging with IT to help facilities do more with patient images and improve the quality and efficiency of healthcare delivery.
Enter Fred B. Parks in September 1999, five months after Cary J. Nolan stepped down as Pickers president and CEO. Prior to joining Marconi, Parks served as president and COO of St. Jude Medical Inc. (Minneapolis) for 18 months before leaving the implantable cardiovascular product maker in the spring of 1999. Prior to St. Jude, Parks held similar positions with diversified high-technology company EG&G Inc. (Wellesley, Mass.). In his two decades at EG&G, Parks led the companys growth in X-ray imaging, CCD and medical diagnostics operations.
Parks arrived after Pickers parent company formerly known as General Electric Co. plc (GEC of London) began to focus increasingly on its medical equipment unit. In January 1999, GEC sold its defense business Marconi Electronic Systems to British Aerospace (London), giving GEC more cash to implement its strategy to become a high-growth, high-margin company and help its business units such as Picker gain industry-leading positions.
A year ago at RSNA 99, Marconi Medical Systems debuted its new name and new strategic direction, which coincided with the transformation of GEC to Marconi plc and from defense-related products to communications, IT and medical products.
In FY2000, ending March 31, Marconi Medical posted revenues of $1.67 billion, up from $1.5 billion in FY99.
Medical Imaging spoke with Parks about his first year with Marconi and the companys plans for the near future.
You joined Marconi at a time of significant changes the new company name and new strategic direction. How do you evaluate your first year at the helm?
I have had so much fun that I didnt realize it had been a year until I received an email recently that asked How did the first year go? It seems like it only has been about three months.
When I first arrived, the most important thing was to get a clear understanding of the mission and then establish the priorities. In the first 90 days, the mission was clear to me and to the parent company. That long-term mission is to recognize that while creating the image will continue to be important, over the next five to 10 years, what we will do with images after they are created will become more important. Where will we transport them? How fast will we reconstruct them? Will doctors be able to read the images at home and interpret them?
So, we made a decision that the future of this company is not only in the creation of those images, but also in how we manage them after they are created.
Given that mission, a high priority for us is which products we will make available for our customers and how will we deliver them. There has been a concerted effort to make sure that the mission is understood inside Marconi Medical and to make sure key portions of the management team believed in that mission. The majority did, at that time. There were a couple who didnt agree with that and we made those adjustments as required.
Would you describe the new plan as a dramatic shift in direction or more of a fine-tuning of the company?
It was not a matter of fine-tuning. I think it was inevitable that this would have had to be done if not a year ago, our customers in the near future would have absolutely demanded it.
Inside the company, it was much more dramatic than that. We all can recite the mission statement, but there is a difference between giving the statement and being committed to it. Thats what we have been able to accomplish. In the last 12 months, we have embraced the mission and built a management team and a company committed to executing it.
It is a drastic shift. Imagine working somewhere in Marconi and you have been a superlative performer in delivering hardware over time. It does not insure that those same people will be the ones who carry us to the successful completion of the second mission. For many of the people inside this company, we did have to make some changes, but the game has changed. Our customers need us to do that. We need to do that for them or somebody else will.
What would you say has been the most significant change inside the company?
I think the recognition inside our company that the importance of IT software in clinical applications is surmounting the importance of the hardware itself.
An image, where it arrives and ones ability to reconstruct it is what our customer-radiologist wants from us. Supporting this new emphasis are some very important functions, such as engineering, deciding what products to make. Those are internal decisions.
In the last 12 months, we went back and said What is it that will become a commodity in this business? And what will bring added value?
We are a final assembly and test organization and those functions are extremely important, because those are the things that we make sure when we deliver a scanner to a customer that it works immediately upon arrival.
Some of the pieces the commodities that go into that manufacturing we dont need control of, as we have maintained in the past. We have formed some alliances and well form more that give us access to more of the pieces, so we can focus on where we think the value-added is and that is in the clinical applications and software side of creating and managing images.
We implemented a new business model and structure in the company to capitalize on this change. For example, we used to have an engineering department in every one of our modalities. We now have a single engineering function. We are implementing a common workstation for each one of our scanners. We are trying to make our scanners easier to use for our customers all the time.
Is Marconis plan to meld IT with the imaging modalities still on track at this point?
Yes, it is, although wed love to have another 100 software engineers as would everybody else in this industry to work on the plan. The RIS and PACS area also is going forward.
One of the interesting revelations in the last 12 months has been the interest of Marconi in this play. We have gone to some other organizations within Marconi to make sure we can build our expertise and build mass to serve the customers. I discovered a large selling effort in our Marconi Communications Group (Pittsburgh) to many of the same customers we have [in Marconi Medical].
We are in the midst now of making sure we approach customers more as a singular unit of Marconi, rather than just as Marconi Medical.
How do you rectify and eliminate the duplication of effort between the two Marconi divisions?
That gets to an issue I think about often. The hardest thing for us to do in succeeding is to make sure we put the focus of Marconi on the customer.
Last year, we [Marconi Medical] reported record profits and revenues and well do the same this year. At Marconi Comms, they are succeeding, growing at a double-digit rate. Now we are trying to pull these busy people all with growth markets in front of them together in an effort to approach the customer uniformly. That is the challenge at Marconi to bring all the resources together for the customer.
One thing that has changed for us in the last 12 months is that we thought in Marconi Medical that we had to create the image, build our own software to move it and have our communications experts service the customers. What we learned is that we dont have to do that. Marconi Comms already sells broadband networks and has fiber cable, so we can make common customer calls. Marconi Medical can do what we do best and get the support from the rest of Marconi to complete our customer requirements. We are doing that at some locations now and we saw that last year when Marconi Comms wired the annual RSNA show.
What is the role of the Internet and the creation of Marconihcp.com in the companys future?
Marconihcp.com is just the seed start of our digital business strategy. It will go much broader than that. We receive approximately one-third of our supply orders electronically. That needs to go to at least twice that over the next 12 to 18 months. Sometimes, our customers think we are underestimating that amount. We think it will make us more efficient, help us grow the business and become a more attractive supplier.
If you step back because Marconi HCP [Health Care Products Group] is only one-third of our business at Marconi Medical and look at the other two-thirds, we will have completed our e-business strategy and will be well into implementation of our e-business strategy before the end of this fiscal year [ending March 31, 2001].
There are a couple of other things we clearly need to do with it. One of those things is to change the way our account executives work. They handle the full, 100 percent cycle on the selling side. If you look at our customers M.D.s, radiologists, technicians, administrators they are a very sophisticated group. We think we can handle as much as 40 percent of the selling cycle before they [customers] need to see a face. We hope to do that by the end of next year.
It also will make our account executives more value-added to the customer. When they meet the customer, the customer knows what products we have. They still will want to see an account executive when they place a seven-figure order and they [customers] deserve to, because they are putting their careers on the line.
The other number we carry in our minds is how far into the unit selling price can we go with electronic commerce. At what point does our customer need to see an account executive? We think that number is around $100,000. We think that for items less than $100,000, much more of the purchase and selling cycle can be handled electronically.
Can the Internet be a viable tool to sell big-ticket medical imaging equipment?
I think for those items, people want to look you in the eyes. Once again, we will make available all the specifications of our equipment, so when we walk in, they [customers] will know already what equipment they want.
We are making a significant investment in e-commerce. Weve put in $35 million in backbone in the last two years in a new IT system. This year, we spent another $3 million making sure were beefing up the support system. We want to make sure there are no outages. Ninety-eight percent reliability on an e-commerce system is not going to cut it. We are shooting for a substantially higher number.
With these strategies in place, how is Marconi looking to differentiate itself from the competition?
We believe that Marconi offers the marketplace a compelling choice. All of the strengths of our past are now combined with the unique assets of our newly directed parent. You know us, and you know our competitors. There are some very fine companies out there. Our backbone will continue to be our full range of offerings in CT, MR and nuclear medicine, combined with the reliability and dependability that our customers have always favored us for. CT is a business in which we stand not only toe-to-toe with our competition, but we like to think we are technically a little bit in front. We will continue to build our position in our modality business, while building our image management offerings as well.
What is your outlook for the potential of the modalities?
We think CT will be a multislice play, and I think it will keep going that way with technology advances. We will have at least two significant statements about that technology at RSNA.
In MR, we have a 3.0T scanner that is coming to market. Youll see more about that this year. In terms of the mass MR market, we see a 1.5T [MR] as important and in the mid- or high-field depending on what you think is more important on the open MR side.
MR is an extremely important area, but I think in MR probably more than CT it will be the clinical applications that are important, rather than just the hardware itself.
I would be remiss if I didnt ask about ultrasound. Is there any interest for Marconi in this area?
I think ultrasound is one of the most effective and valuable clinical technologies for the patient. For the investment, a facility gets tremendous medical information about the patient but thats a different statement than saying it is an attractive business.
I think there are plenty of companies out there in the ultrasound business. Considering the prices I see paid for ultrasound companies, we cant imagine that being attractive to our investors. While I think the technology is extraordinary, I dont see us going into that business. It is a distraction from the synergies that CT, MR and nuclear medicine offer our customers.
We are moving as many people as we can downstream to work on what we do with the images after they are created, where do we move them and how do we reconstruct them. We would rather take our resources and go that way than expand into other modalities.
For us to be a significant contributor to our parent company and our stockholders, we need to have near double-digit growth. We can create some of that organically, but in large part, this is not a double-digit growth industry. I think you will see us doing some partnering and other activities that will insure over the next five years that we are near a double-digit growth number.
What will be the biggest challenge in going in this direction with IT?
Fortunately, our style is that we dont try to persuade customers. We try to listen to them and let them tell us where the market is going. In this area, we dont have to convince customers that IT is the way to go.
We think we have superior imaging technology, but I am the first to concede that there are many good imagers out there. They are different and there are reasons why customers buy one [product] over the other.
I think over the next five years, the singular differentiator of success will be the final stage of creating that image and what one can do with it. Hospitals that are not going into image management and PACS will have an extremely hard time recruiting. You take a bright, young M.D. or radiologist coming out of medical school and he or she may not have seen film during his or her career. So, hospitals will have to go in that direction.
What are your observations of medical imaging since joining this segment of the healthcare industry?
From a personal standpoint, you always ask yourself, If I knew what I know today, would I have done what I did 18 months ago? The answer is yes. Not only the company, but the industry has met my expectations. It is fun to go into an industry that is in transformation. This one clearly is.
When I came to Marconi, I said that I was going to see three customers per week because I want our decisions to be based on the customer value system. I have lived with that; it is really no change with this company. It has long had a unique customer focus; thats why I am comfortable with Marconi Medical.