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Stryker Recipe For Market Leading Growth Starts With Its Culture and Learnings · Vanguards of Healthcare by Bloomberg Intelligence

0:21
Speaker 1: Welcome to another exciting episode of the Vanguards of Healthcare series.
0:24
Speaker 1: My name is Matt Henriksen, the Medical Technology Analyst at
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Speaker 1: Bloomberg Intelligence, which is the in-house equity research platform of
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Speaker 1: Bloomberg LP. We are pleased to have with us today
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Speaker 1: the executive team from Stryker, including CEO Kevin Lobo and
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Speaker 1: Chief Operating Officer Spencer Stiles. Stryker is a medical device
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Speaker 1: company with a diversified portfolio of products and services across
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Speaker 1: the orthopedic, neurovascular, and medical-surgical markets. You can dive deeper
0:50
Speaker 1: into the financials by typing in SYKEQUITYGO on.
0:53
Speaker 2: Your Bloomberg terminal. Kevin and Spencer, thank you for joining
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Speaker 2: us today.
0:57
Speaker 3: Thank you for having us.
0:58
Speaker 4: Thanks for having us, Matt. We're honored to be here.
1:01
Speaker 1: Yeah, I was doing my little research beforehand and, you know,
1:04
Speaker 1: I've started MedTech coverage over 10 years ago. And you
1:10
Speaker 1: two are kind of the only executive team, you know,
1:13
Speaker 1: maybe there's one or two other companies, but that has
1:15
Speaker 1: been there since my day one.
1:17
Speaker 2: But maybe we'll go.
1:18
Speaker 1: With the list, you know, give the listeners a quick
1:20
Speaker 1: overview of, you know, your career path that got you
1:23
Speaker 1: to Stryker. And just kind of a quick overview of
1:26
Speaker 1: Stryker just because of how diversified it is. you know,
1:29
Speaker 1: some of the key, you know, products and, you know,
1:33
Speaker 1: sectors that you guys cover.
1:35
Speaker 3: Okay, sure, Matt, I'll start. And so I'm a little
1:37
Speaker 3: unusual that I've only been a striker about 15 years.
1:41
Speaker 4: Only Kevin, only.
1:43
Speaker 3: Only because if you look at Spencer, the other group
1:46
Speaker 3: presidents and all our division presidents, they're all more than
1:50
Speaker 3: 20 years and some pushing 30 years. And for me,
1:54
Speaker 3: I'm a non-traditional MedTech CEO because I started in finance.
1:58
Speaker 3: not sales and marketing. I was born in India, grew
2:01
Speaker 3: up in Canada, and this is my fourth industry, including
2:05
Speaker 3: consumer products, chemicals, pharmaceuticals, and a fourth different country where
2:10
Speaker 3: I've lived and worked. And just thrilled to be part
2:13
Speaker 3: of Stryker, joined as the group president of orthopedics and
2:16
Speaker 3: have been the CEO going on almost 14 years.
2:19
Speaker 4: Nice. And you, Spencer?
2:21
Speaker 5: Yeah, you can imagine what an amazing marriage to have
2:24
Speaker 5: Kevin's diverse experiences come into our organization and really push
2:27
Speaker 5: our thinking and how we've grown over the last decade
2:31
Speaker 5: plus with Kevin at the lead. I've been with the
2:34
Speaker 5: organization for 27 years. I entered in as a marketing
2:37
Speaker 5: associate once upon a time, an entry-level role, and probably
2:41
Speaker 5: the most– impactful role that I had early on in
2:44
Speaker 5: my career as a sales rep at Stryker. And that's
2:46
Speaker 5: really important to us because selling is such an important
2:49
Speaker 5: differentiator in our organization, our specialized sales forces we have all.
2:53
Speaker 4: Over the world.
2:53
Speaker 5: I then went back into sales and marketing management on
2:56
Speaker 5: and off and general management and have.
2:58
Speaker 4: Led a variety of our businesses, most all of them.
3:01
Speaker 5: The only business I haven't led or was in was
3:03
Speaker 5: the medical franchise, but I've spent a lot of time
3:05
Speaker 5: obviously staying close to that organization. And stepped into the
3:08
Speaker 5: CEO role in January. It's just been outstanding. Our scale
3:11
Speaker 5: and scope and allowing me to spend more time on
3:14
Speaker 5: our commercial.
3:14
Speaker 4: Strategies, M & As, things like that. But a great
3:17
Speaker 4: partnership with Kevin.
3:18
Speaker 5: Maybe a little bit, you asked about the operating model
3:20
Speaker 5: of the company, just high level. We have eight divisions
3:24
Speaker 5: and then we have 22 business units underneath those eight divisions.
3:28
Speaker 5: And then we have a variety of functions that enable
3:30
Speaker 5: and support companies. for manufacturing, HR, finance, et cetera. But
3:34
Speaker 5: we think that's a real differentiator of our organization, sort
3:36
Speaker 5: of the operating model. This is something that Kevin and
3:40
Speaker 5: I have the opportunity to shape and influence, but it's
3:43
Speaker 5: been this way as a decentralized.
3:46
Speaker 4: Organization for now over 47 years.
3:49
Speaker 5: And so it's really a great opportunity for us as
3:52
Speaker 5: we think about staying close to our customers.
3:54
Speaker 3: Yeah, just a little bit more on the company. So
3:57
Speaker 3: 25 billion in revenue last year, And so a little
4:00
Speaker 3: bit over a billion dollars on average per business unit.
4:03
Speaker 3: When I started as CEO, it was 8 billion with
4:06
Speaker 3: 14 business units. So we continue to expand and we
4:09
Speaker 3: are in capital equipment. We have disposables and then we
4:12
Speaker 3: have a lot of implants, whether they're orthopedic implants or
4:15
Speaker 3: implants that are used in the brain to treat stroke.
4:18
Speaker 2: Yeah, interesting.
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Speaker 1: And, you know, the comment that I just heard, which
4:22
Speaker 1: is the decentralized business model, especially when you have, you know,
4:28
Speaker 1: you know, eight divisions, 22 business units. Is that maybe,
4:35
Speaker 1: am I connecting the dots between, you know, the longevity
4:38
Speaker 1: of some of these senior executives and that decentralized business model?
4:44
Speaker 4: Yeah, wholeheartedly.
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Speaker 5: This is a, it's a part of the secret of
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Speaker 5: our success, allowing our division presidents, the people that lead
4:51
Speaker 5: these eight divisions, that entrepreneurial spirit of making the majority
4:55
Speaker 5: of the decisions about the products and how they go
4:58
Speaker 5: to market with the customer, their M & A strategies.
5:02
Speaker 5: That's all at their hands and their disposal to allocate
5:05
Speaker 5: capital to make those decisions and to drive growth in
5:08
Speaker 5: their marketplace. That's been a great part of our culture,
5:11
Speaker 5: a great part of our success formula for sure. And
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Speaker 5: I think that creates retention. We are one of the
5:16
Speaker 5: very unique leadership teams that have longstanding executives that sort
5:21
Speaker 5: of love, obviously, our culture and mission, but that opportunity
5:24
Speaker 5: to be empowered as a leader and drive their businesses.
5:28
Speaker 4: Interesting. Yeah.
5:28
Speaker 1: And I think that, you know, that kind of goes
5:30
Speaker 1: into the next part of our conversation about the big
5:33
Speaker 1: striker business model here is your ability to acquire new
5:41
Speaker 1: innovative technology to kind of help accelerate that growth and
5:44
Speaker 1: to reach these unmet business needs within the healthcare segment.
5:50
Speaker 1: Just when you're evaluating these acquisition targets, I mean, what
5:54
Speaker 1: are some of the most important characteristics or factors that
5:56
Speaker 1: you're looking for in How do you prioritize those over time?
6:00
Speaker 3: Well, listen, we've done about 65 acquisitions. During my time
6:04
Speaker 3: as CEO, we'd become a serial acquirer. And we always
6:07
Speaker 3: do this make-buy kind of analysis within the core call
6:11
Speaker 3: points that we call on. And we will sometimes buy
6:14
Speaker 3: things because they have capabilities we don't have, for example,
6:16
Speaker 3: fluorescence imaging and endoscopy, or because it's time to market.
6:21
Speaker 3: We could do it ourselves, but it would take us
6:23
Speaker 3: a lot longer. And our R & D people are
6:26
Speaker 3: actively involved with our M & A teams in helping
6:28
Speaker 3: choose whether we make or buy. So that's like a
6:31
Speaker 3: bulk of the deals we do are tuck-in acquisitions that
6:34
Speaker 3: fit inside one of our business units. And then every
6:37
Speaker 3: once in a while, because we generate a lot of cash,
6:39
Speaker 3: we'll branch out into a new area, such as the
6:43
Speaker 3: smart hospital area or peripheral vascular. But those are infrequent.
6:47
Speaker 3: Every three or four years, we'll jump into a new space.
6:50
Speaker 3: And then the follow-on acquisitions become tuck-in acquisitions. But we
6:54
Speaker 3: really try to play to our strengths, clinically preferred items
6:59
Speaker 3: that play in these specialties that you had mentioned at
7:01
Speaker 3: the beginning. We sort of stay close to our knitting
7:03
Speaker 3: and then occasionally we'll branch out. I don't know if
7:05
Speaker 3: you want to add anything to that, Spencer.
7:07
Speaker 4: It's spot on, Kevin.
7:08
Speaker 5: I think it's a great way to describe how we
7:10
Speaker 5: think about our M & A strategy.
7:12
Speaker 3: It's kind of like external R & D, how we
7:16
Speaker 3: think about it.
7:17
Speaker 5: Maybe the other thing, the numbers always sound big when
7:20
Speaker 5: you say 65, but it's like anything you do, you
7:22
Speaker 5: have to practice.
7:23
Speaker 4: If you do something and you repeat that, you get
7:25
Speaker 4: better at it. There's learnings.
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Speaker 5: You take those learnings, you put those into the future decisions,
7:30
Speaker 5: the insights that you gain. And that's been a really
7:32
Speaker 5: important part of how we've thought about M & A
7:35
Speaker 5: and then on the integration side as well.
7:37
Speaker 1: Well, that's the interesting thing, because, I mean, in MedTech
7:41
Speaker 1: in general, a lot of large cap companies acquire a
7:44
Speaker 1: lot of private and small cap companies. And, you know,
7:48
Speaker 1: it just makes me think of Seinfeld and, you know,
7:51
Speaker 1: The large cap companies may know how to buy a company,
7:55
Speaker 1: but they just sometimes don't know how to integrate the company.
7:59
Speaker 2: And so what is that secret sauce for you guys?
8:02
Speaker 4: Matt, admittedly, I don't remember that. I watched some Seinfeld.
8:06
Speaker 4: I don't remember that one.
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Speaker 2: It's the rental car one. Remember when they reserved the
8:10
Speaker 2: rental car?
8:11
Speaker 1: And it's like, oh, you know how to take the reservation,
8:13
Speaker 1: but you just don't know how to keep the reservation.
8:16
Speaker 1: So you know how to buy the company. You just
8:18
Speaker 1: don't know how to integrate. you maybe beyond just the
8:23
Speaker 1: fact that you've done 65 of these and, you know, you,
8:26
Speaker 1: you've learned from those 65. And so when you go
8:29
Speaker 1: to your 66 acquisition, you've got all that experience, but
8:33
Speaker 1: is there anything else there that kind of allows you
8:35
Speaker 1: guys to be able to just get right in and
8:37
Speaker 1: be able to get those companies into that kind of striker, um,
8:41
Speaker 1: you know, the culture of the striker?
8:44
Speaker 4: Sure.
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Speaker 5: Well, I do think I'll go first here, Kevin, and
8:48
Speaker 5: have you pile on. But the acquisition itself is really
8:50
Speaker 5: only the beginning. You know, value is created after the close.
8:54
Speaker 5: So once you close, that's when a lot of the
8:55
Speaker 5: heavy lifting comes into place. Yes, we do a ton
8:58
Speaker 5: of assessment up front and culture fit and time over
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Speaker 5: target and But the integration itself is extremely critical in
9:04
Speaker 5: value creation.
9:05
Speaker 4: And we build a.
9:07
Speaker 5: Center-led integration team that sort.
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Speaker 4: Of drives the process.
9:12
Speaker 5: And then we partner with the commercial businesses and the
9:15
Speaker 5: functional experts that are thinking about how do we create
9:17
Speaker 5: value over time. And again, part of that is the
9:20
Speaker 5: repetition of doing this over and over and over. So
9:23
Speaker 5: you take these learnings from that centralized team and they.
9:26
Speaker 4: Go on to the next acquisition.
9:28
Speaker 5: They partner with the businesses and they're taking that in
9:30
Speaker 5: a decision making process.
9:32
Speaker 4: And we have a variety of things. We say this
9:35
Speaker 4: has to happen in the first year.
9:36
Speaker 5: And then there are other things that we allow the
9:38
Speaker 5: business still to make the decisions on new products, the flow,
9:41
Speaker 5: things like this. But we might say a building, for example,
9:44
Speaker 5: in six months, it has to say striker on the side.
9:47
Speaker 5: And Kevin will even go as far as saying, hey,
9:48
Speaker 5: I'm going to come visit in, you know, month seven.
9:51
Speaker 5: So better stay striker on the side. But these are
9:54
Speaker 5: the type of learnings that we built in and that
9:56
Speaker 5: helps us repeat our success formula. Gavin, I'm sure you
9:58
Speaker 5: have something to add.
9:59
Speaker 3: Yeah, what I'd add is, look, we were not great
10:01
Speaker 3: at this at the beginning. When we started doing our acquisitions,
10:03
Speaker 3: I would say our integration success rate was pretty mixed.
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Speaker 3: And eventually we would create value from the deals, but
10:11
Speaker 3: not always early on. And what changed is we created
10:15
Speaker 3: that centralized integration group. that has the repetition, that built
10:19
Speaker 3: the playbook on integration versus letting each business unit eat
10:23
Speaker 3: what they kill and learn over and over again. So
10:26
Speaker 3: creating that centralized group was really important and moving with
10:29
Speaker 3: speed to make them part of Striker. We used to
10:31
Speaker 3: leave the acquisition alone for a little too long. And
10:35
Speaker 3: that was a mistake that we sort of learned. So
10:37
Speaker 3: there have been learnings. And as Spencer mentioned, it's like exercise.
10:41
Speaker 3: The more repetition you do, the better you get at it.
10:44
Speaker 3: And now it's become a core strength of our company. Before,
10:47
Speaker 3: it wasn't so much. I think we picked the right companies.
10:49
Speaker 3: I think we paid the right price. But we would
10:51
Speaker 3: wait a little too long to create the value that
10:53
Speaker 3: we should be creating. And we've gotten much better at that.
10:56
Speaker 5: Matt, I think the other thing that if we go
10:58
Speaker 5: back to that model again, those 22 business units, there
11:02
Speaker 5: are M & A leaders dedicated in each one of
11:04
Speaker 5: those that are out assessing assets at all times. And
11:07
Speaker 5: so the time over the target, the relationships they build
11:11
Speaker 5: with these businesses, I mean, there are some deals that
11:14
Speaker 5: We'll have been in the process of knowing, assessing, building
11:17
Speaker 5: relationship for five, six, seven, eight years before it's ready
11:22
Speaker 5: to go and they're ready to transact. So sometimes we
11:24
Speaker 5: have a really long time over target, which also really
11:27
Speaker 5: helps us understand the cultural fit, the leadership, what decisions
11:30
Speaker 5: need to be made. So part of that model itself
11:33
Speaker 5: supports a success rate that we've.
11:35
Speaker 4: Been very fortunate to have with our M & A. Yeah.
11:38
Speaker 2: And, you know, the.
11:39
Speaker 1: Kind of the takeaway I take about all this is
11:41
Speaker 1: when you're talking about the, you know, put up the
11:44
Speaker 1: striker sign in six months, Kevin's going to come here
11:46
Speaker 1: in month seven. But it just shows a type of
11:51
Speaker 1: that you guys are invested in this company and you
11:54
Speaker 1: are actually going to visit the company and be able
11:56
Speaker 1: to be willing to take the time to look into
11:59
Speaker 1: those companies. And I think that's when you're talking about
12:02
Speaker 1: that muscle memory. being able to be able to participate
12:06
Speaker 1: with them and know that they are part of the
12:07
Speaker 1: Striker team that you're going to come see seems to
12:10
Speaker 1: play out well.
12:11
Speaker 3: I think we've developed a good brand as a company
12:14
Speaker 3: that you want to sell your company to because we've
12:17
Speaker 3: grown the companies that we've acquired and really had their technologies.
12:22
Speaker 3: A lot of these are founder-led organizations, as you said,
12:24
Speaker 3: private companies. They're going to make money regardless of who
12:27
Speaker 3: they sell to, but what they want to see is
12:29
Speaker 3: a legacy of their product being used around the world
12:33
Speaker 3: and scaled. It's something they couldn't do on their own.
12:35
Speaker 3: And I think we've developed that reputation because we do
12:38
Speaker 3: prioritize growth and, and we have a terrific decentralized commercial
12:43
Speaker 3: offense and we plug these products in and, and light
12:46
Speaker 3: them on fire.
12:46
Speaker 1: And so let's, let's just jump into, you know, one
12:49
Speaker 1: of probably the most major acquisitions you ever made, which
12:52
Speaker 1: was Mako. Um, the first big one, um, your, your
12:57
Speaker 1: robotic company. And at that time, um, You know, it
13:02
Speaker 1: was always the questions of where is robotics going, if
13:05
Speaker 1: it was going to take off. You saw something that
13:08
Speaker 1: before everyone else did. And so how did you see
13:12
Speaker 1: that vision? And I mean, I'm imagining even though you
13:17
Speaker 1: saw the adoption of robotics in the future, it took
13:20
Speaker 1: off more than you even expected. So when you did
13:24
Speaker 1: that and you took that deep dive into makeup, What
13:27
Speaker 1: was your thought process? How were you envisioning how that
13:30
Speaker 1: was going to play out in the knees and hips overall?
13:32
Speaker 3: Yeah, I think a couple things. First, I had the
13:34
Speaker 3: advantage of not having grown up in medical devices and
13:38
Speaker 3: in orthopedics. So I came in as a head of
13:39
Speaker 3: orthopedics having not really been involved in orthopedics. So I
13:42
Speaker 3: had a bit of a fresh view that wasn't colored
13:46
Speaker 3: by 20 years of history in orthopedics. So that's the
13:49
Speaker 3: first thing. The second thing is I had seen what
13:52
Speaker 3: Intuitive had done in general surgery because I was running
13:55
Speaker 3: a minimally invasive laparoscopic surgery business for Johnson & Johnson
13:58
Speaker 3: prior to joining Stryker. And I'd seen what robotics could do.
14:02
Speaker 3: And then the third thing I'd say, the Mako organization
14:05
Speaker 3: took 20% of the market in partial knees in four years,
14:09
Speaker 3: which is something Stryker never did. None of our competitors
14:13
Speaker 3: had ever done before. And I went out and interviewed
14:15
Speaker 3: surgeons who loved Mako. I didn't talk to anybody that
14:17
Speaker 3: didn't because there were so many of those. including our
14:20
Speaker 3: own surgeon consultants and our own sales forces. So this
14:24
Speaker 3: deal was actually not very popular inside Stryker among our
14:28
Speaker 3: surgeons and our own sales force initially. Now, many of
14:32
Speaker 3: those have revisionist history now, but I would tell you
14:35
Speaker 3: it was very, very tough sledding inside the company initially,
14:40
Speaker 3: but it just felt like this was one of those
14:42
Speaker 3: chances for asymmetric upside in a deal that we had
14:46
Speaker 3: such financial strength, we could afford to be wrong. And
14:49
Speaker 3: if we were wrong, we would have written off a
14:50
Speaker 3: billion dollars of the 1.6 billion. But if we were right,
14:53
Speaker 3: we would be right. I'd said to the board at
14:55
Speaker 3: the time, we'd be right for a decade. Turns out
14:57
Speaker 3: we're 13 years in and there's still blue sky in
15:00
Speaker 3: front of us. I kind of missed it by probably
15:02
Speaker 3: another decade. But yes, it has exceeded my expectations without question.
15:07
Speaker 3: But there were enough proof points that I saw that
15:12
Speaker 3: said this could be something great. But was it a
15:14
Speaker 3: risky deal? Absolutely not. They don't always play out well.
15:18
Speaker 3: Not all of our deals have gone perfectly, but this
15:20
Speaker 3: one has certainly been an amazing success story.
15:22
Speaker 1: Yeah, and then, I mean, from there, though, now as
15:24
Speaker 1: you're looking through, I mean, we're, you know, 20 years
15:28
Speaker 1: now of, you know, robotics and orthopedic procedures. And we're
15:34
Speaker 1: on the fourth generation Mako. When we think about the future, though,
15:38
Speaker 1: of robotics is how much of that new innovation is
15:41
Speaker 1: new hardware, you know, the actual robotic arm, Versus kind
15:45
Speaker 1: of software, when you think about like pre-planning, navigation, interoperative features,
15:51
Speaker 1: things like that.
15:52
Speaker 5: I think the answer is actually it's increasingly both the
15:56
Speaker 5: hardware and the software. And interestingly, even in the hardware
16:00
Speaker 5: for our listeners, remember there's the robotic arm, but then
16:02
Speaker 5: there's also the implant itself that we consider hardware that
16:05
Speaker 5: you constantly have to be innovating on. So you have
16:07
Speaker 5: the arm, you have the implant, and then you have
16:09
Speaker 5: the software that connects all this together. We're seeing significant
16:14
Speaker 5: advances in our pre-planning capabilities, utilizing AI technology for more
16:18
Speaker 5: efficient procedures to take some of the burden off the
16:21
Speaker 5: surgeon in the planning. So that changes are happening right
16:25
Speaker 5: now in our new Mako platform. You're also seeing an
16:29
Speaker 5: incredible amount of advancement in the type of procedures you
16:31
Speaker 5: can pre-plan and then facilitate with Mako. Something like a
16:35
Speaker 5: revision procedure, which historically has put a lot of burden
16:38
Speaker 5: on a physician to think about. They might lose sleep
16:40
Speaker 5: the night before, making sure that they have all the
16:43
Speaker 5: right things at the right place. And when they get
16:46
Speaker 5: in the procedure, this is when they take an old
16:48
Speaker 5: implant out and put a new implant in. That implant
16:50
Speaker 5: might have failed due to time or something like this.
16:53
Speaker 5: They may not understand until they open it up. Well,
16:56
Speaker 5: Mako allows them to know ahead of time to plan
16:58
Speaker 5: for that case. And all of a sudden, now they're
17:00
Speaker 5: doing these procedures faster, more efficiently, better for the patient outcome.
17:04
Speaker 5: That's an investment that takes software and the hardware together
17:07
Speaker 5: that we see this great patient outcome. So it's really,
17:10
Speaker 5: you know, it's really a belief of having both that
17:13
Speaker 5: they need to work together. And we'll see that marriage
17:16
Speaker 5: exist for quite some time.
17:17
Speaker 3: Yeah.
17:17
Speaker 1: And, you know, one of the newest hardware that you
17:19
Speaker 1: guys have just launched is your Mako RPS, which is
17:22
Speaker 1: your handheld system. how does that create a potential inflection
17:28
Speaker 1: point for the adoption of robotics for knee procedures?
17:31
Speaker 3: Basically, this is just a new way to attract a
17:35
Speaker 3: segment of the population that's not quite ready for the
17:37
Speaker 3: full MAKO transition. There's a big change management to go
17:40
Speaker 3: all the way to MAKO, where you stand, the way
17:44
Speaker 3: you do the procedure is a significant amount of change management.
17:47
Speaker 3: And a lot of surgeons find it intimidating or they
17:51
Speaker 3: just don't feel like they need it. And so this
17:54
Speaker 3: is the beautiful part of this is this whole software
17:56
Speaker 3: portion of this is exactly the same as for Mako,
17:59
Speaker 3: the screen, the camera, the images. And then, but instead
18:02
Speaker 3: of using the robotic arm, you're using now handheld, which
18:05
Speaker 3: is very similar to the power tools they use today.
18:07
Speaker 3: So very fast, easy change management. It's only for knees.
18:11
Speaker 3: So it's not as capable as Mako is, which does shoulder,
18:16
Speaker 3: which does hips, which does, you know, more broader range
18:19
Speaker 3: of procedures. This is only one procedure, but if you're
18:22
Speaker 3: a knee specialist and you don't want to go through
18:24
Speaker 3: all the change management, small form factor, easy to convert
18:28
Speaker 3: from manual to robotic. So we look at this as
18:31
Speaker 3: expanding the market for robotics by attracting a segment of
18:34
Speaker 3: the population that would not have gone all the way
18:37
Speaker 3: to Mako. Some of those people, once they get comfortable
18:41
Speaker 3: with the screens and how it all works, will potentially
18:44
Speaker 3: migrate to the full Mako robotic arm. Others will just finish...
18:49
Speaker 3: by doing this and then retire from their careers. But
18:51
Speaker 3: this will increase the overall use of robotics in orthopedics.
18:55
Speaker 3: I don't know if you want to add anything, Spence.
18:57
Speaker 4: I would just emphasize this market expansion. It really expands
18:59
Speaker 4: the market.
19:00
Speaker 5: Those that are utilizing and enabling technology, this is the
19:03
Speaker 5: right entry point for some. And again, some might migrate
19:06
Speaker 5: all the way to the Mako platform. Others might stay
19:08
Speaker 5: on the RPS over time. But we're really pleased with
19:12
Speaker 5: having a platform in both spaces to meet customers' needs.
19:15
Speaker 5: And we're going to see a lot of people that
19:17
Speaker 5: are manual users that are going to go to a
19:19
Speaker 5: robotics solution because of this.
19:22
Speaker 1: And I think the expansion process story is very interesting
19:25
Speaker 1: because of how also orthopedic procedures, the environment is transitioning
19:31
Speaker 1: from kind of that inpatient hospital setting to the ASC setting.
19:35
Speaker 1: So how much of that kind of, you know, the
19:38
Speaker 1: introduction of a handheld robotic system helps that adoption into,
19:43
Speaker 1: you know, that ASC setting and maybe just kind of
19:47
Speaker 1: for listeners who are kind of new to what ASC
19:49
Speaker 1: is actually are, why are we seeing more orthopedic procedures
19:53
Speaker 1: being moved into those ambulatory surgical centers?
19:56
Speaker 4: Sure.
19:56
Speaker 5: Maybe I'll start with the second part of your question
19:59
Speaker 5: and then back into what I sort of think is
20:01
Speaker 5: what's turning into a standard of care. But in outpatient setting,
20:04
Speaker 5: this is a freestanding a lot of times. Sometimes it's
20:06
Speaker 5: connected to a hospital. But it's a place where you
20:09
Speaker 5: go that has a faster, more efficient way to provide
20:11
Speaker 5: the surgical procedure and outcome. A lot of it's day surgery.
20:15
Speaker 5: So you might show up in the morning, have your
20:17
Speaker 5: knee replaced, and you're leaving later that day. Pretty remarkable
20:20
Speaker 5: if you think about it. There's been reimbursement advantages to
20:24
Speaker 5: move more patients to the outpatient setting to get them
20:26
Speaker 5: out of the hospital, create capacity in the hospital. for
20:30
Speaker 5: sicker patients for other disease states. So it's been a
20:32
Speaker 5: really important shift, and I think everyone likes it. The
20:36
Speaker 5: surgeons are happier working in these places. Patients that are
20:39
Speaker 5: generally healthy rather go to the surgery center. It's a
20:42
Speaker 5: less intimidating environment, sometimes sort of spa-like, if you will,
20:45
Speaker 5: when you show up there, and it's much more efficient.
20:48
Speaker 5: So that's sort of the transition that's happening. There's economic
20:51
Speaker 5: and clinical benefits to move these procedures to the outpatient setting.
20:55
Speaker 5: And it's a phenomenon that's really been mainly in the US,
20:58
Speaker 5: but we're starting to see it now in some of
20:59
Speaker 5: the countries in Europe as well. So we're seeing some
21:02
Speaker 5: growth in the outpatient setting. Going back to the technology,
21:06
Speaker 5: what I've been really pleased with and quite frankly delighted
21:10
Speaker 5: is thinking about the standard of care and sort of
21:13
Speaker 5: the standard of care that enabling technology robotics has brought
21:16
Speaker 5: in the hospital is now being expected in the surgery center.
21:20
Speaker 4: It's not a luxury item.
21:22
Speaker 5: It's something they say, I have to have my enabling
21:24
Speaker 5: tech for the good of the patient and that patient outcome,
21:27
Speaker 5: that pre-planning that we discussed earlier. So both Mako 4,
21:33
Speaker 5: our premium platform, and Mako RPS solve these needs in
21:37
Speaker 5: the surgery center. We're seeing great adoption of both. Actually,
21:40
Speaker 5: Mako 4 has really been a strong driver in adoption
21:47
Speaker 5: and surgeons asking for this in their surgery center, willing
21:50
Speaker 5: to actually sacrifice other parts of their preference items to
21:54
Speaker 5: ensure that they have the enabling tech with Mako to
21:57
Speaker 5: do their procedures.
21:58
Speaker 4: It's been a really powerful move for us.
22:00
Speaker 5: In particular, the other thing on outpatient surgery we've seen
22:03
Speaker 5: is a lot of new builds. So when new construction happens,
22:06
Speaker 5: Stryker's breadth of its portfolio is so broad and differentiated
22:10
Speaker 5: that we're involved in all of those conversations. And one
22:13
Speaker 5: of the lead driver is how do I ensure that
22:15
Speaker 5: I have a Mako or a Mako RPS that's enabling
22:18
Speaker 5: technology in my facility? It's something we're really proud to
22:21
Speaker 5: offer and make sure we're supporting those customers.
22:23
Speaker 3: Yeah, the other thing I'd add is this trend is
22:25
Speaker 3: really an undeniable trend for the future. So it was
22:28
Speaker 3: less than 5% of hips and knees were being done
22:31
Speaker 3: in these ambulatory surgery centers prior to COVID. And now
22:34
Speaker 3: we're pushing 20%. So it's a pretty rapid climb. And
22:38
Speaker 3: I don't see any end in sight, by the way.
22:40
Speaker 3: It'll continue to go. Now, obviously, if you have a
22:42
Speaker 3: lot of comorbidities, if the patient's quite ill, if they're
22:45
Speaker 3: morbidly obese, if they're doing a revision, very complex procedures
22:51
Speaker 3: in patients that are not as healthy will probably remain
22:54
Speaker 3: in hospitals. But more and more, we're seeing new procedures
22:58
Speaker 3: being done. We're even seeing some total ankles being done
23:00
Speaker 3: in the surgery centers, obviously total shoulder. So this is
23:03
Speaker 3: a trend that will absolutely continue. And because of the
23:06
Speaker 3: breadth of portfolio we have, which Spencer mentioned, we're beautifully
23:11
Speaker 3: positioned to win in the surgery centers.
23:13
Speaker 1: You know, what's interesting is the fact that you go
23:18
Speaker 1: in same day and out and you have a new knee.
23:21
Speaker 1: And my father-in-law had that a few years ago. And
23:24
Speaker 1: when he just told me he was out of the hospital,
23:27
Speaker 1: You know, that same day, it was amazing with how
23:30
Speaker 1: quickly that you were able to be able to get
23:32
Speaker 1: the good fit and be able to, you know, be
23:36
Speaker 1: able to recover enough so you can actually walk out.
23:38
Speaker 5: Matt, we think that actually opens up, you know, the
23:40
Speaker 5: pipeline of patients, too, that are candidates. A lot of this,
23:44
Speaker 5: you know, you're intimidated to go to the hospital and
23:47
Speaker 5: it's going to be a long recovery.
23:48
Speaker 4: I'm going to be out.
23:48
Speaker 5: Well, all of a sudden they learn. that they can
23:51
Speaker 5: go in on a Tuesday morning and be back out
23:53
Speaker 5: Tuesday afternoon. And a lot of times walking, they might
23:57
Speaker 5: have a cane or a walker, depending on the protocols
23:59
Speaker 5: that are set up.
24:00
Speaker 4: But it's pretty remarkable to see that recovery.
24:02
Speaker 5: And it's also strengthening, you know, more people that have
24:06
Speaker 5: pain that need these interventions.
24:08
Speaker 4: Are now saying, OK, it's time for me to go
24:09
Speaker 4: in and have my hip or knee replaced. Yeah.
24:11
Speaker 2: And then kind of just going with that.
24:13
Speaker 1: I mean, it's a good fit, you know, because, you know,
24:15
Speaker 1: what you need is you need the knee has to
24:16
Speaker 1: have a good fit. The hip needs to have a
24:18
Speaker 1: good fit. We're getting into the stage now of these
24:21
Speaker 1: personalized implants and you're using AI capabilities to design and
24:27
Speaker 1: 3D print these implants. How do you see that as
24:30
Speaker 1: being part of the future overall when you combine the
24:33
Speaker 1: robotics and just the other features that are being included
24:37
Speaker 1: into your portfolio?
24:38
Speaker 3: Yeah, look, personalization is a trend in healthcare, not just
24:41
Speaker 3: within orthopedics, but just broadly. People want to make sure
24:44
Speaker 3: they're being treated in the way that their body should
24:47
Speaker 3: be And so what we're seeing, the best example I
24:52
Speaker 3: can think of is a blueprint for shoulder for Stryker.
24:55
Speaker 3: So we have this pre-planning using AI that actually presents
24:59
Speaker 3: a plan for the surgeon and tells the surgeon, for
25:01
Speaker 3: this patient with this anatomy, with this morphology, they should
25:05
Speaker 3: have an anatomic shoulder or a reverse shoulder or a
25:08
Speaker 3: short stem or a stemless. And it presents the plan. Now,
25:11
Speaker 3: the surgeon can change it if they don't want to
25:13
Speaker 3: do an anatomic and they like to do a reverse
25:15
Speaker 3: or they can change the plan, but they rarely do.
25:18
Speaker 3: They really look at what we've suggested because it's an
25:21
Speaker 3: AI algorithm. It's not just one surgeon's lived experience. It
25:24
Speaker 3: takes the data from thousands and thousands of cases and
25:27
Speaker 3: different surgeons and kind of creates this algorithm for a
25:31
Speaker 3: personalized plan for the patient, which is tremendous. And we're
25:34
Speaker 3: now going to expand that to other large joint procedures.
25:37
Speaker 3: But in addition to that, we even have a product
25:40
Speaker 3: called Shoulder ID, which is a personalized glenoid. So the
25:43
Speaker 3: glenoid is a very difficult part of the shoulder procedure.
25:46
Speaker 3: And Because everyone's anatomy is a little different, if you
25:49
Speaker 3: took a standard size glenoid, you'd have to sometimes use
25:51
Speaker 3: what we call an augment or a little kind of
25:53
Speaker 3: filler to jam it in or wedge it in to
25:56
Speaker 3: help it be perfect. Now, with shoulder ID, you get
25:59
Speaker 3: an implant that's personalized to your shoulder that fits perfectly
26:04
Speaker 3: in the joint and takes a very difficult part of
26:06
Speaker 3: the procedure and makes it simple and makes it easy
26:09
Speaker 3: for the patient. So that's a trend I only see
26:12
Speaker 3: continuing going forward.
26:13
Speaker 1: Yeah, I agree with that too. I feel like it's
26:16
Speaker 1: going to be more personalized, allows quicker recovery, allows even more.
26:20
Speaker 1: We talk about 20% of being in the ASC for
26:22
Speaker 1: the knee and hip procedures. I mean, being able to
26:25
Speaker 1: get out same day and eliminating the hospitalization stay, I
26:30
Speaker 1: think that's just a sign for where it's going to
26:32
Speaker 1: go in the future.
26:33
Speaker 3: 3D printing helps enable that personalization with hardware, with implants.
26:37
Speaker 2: And you've made a lot of investments in 3D printing
26:39
Speaker 2: over the years.
26:40
Speaker 4: We have hundreds of these machines.
26:43
Speaker 5: Yeah.
26:44
Speaker 1: And so I feel like we could spend another half
26:46
Speaker 1: hour just on Mako and Ortho. But I kind of
26:49
Speaker 1: want to, we talked with one of your early acquisitions
26:52
Speaker 1: with Mako. Let's just talk about some of the more
26:54
Speaker 1: recent ones, because this is opening up a new area
26:58
Speaker 1: of expertise for Stryker. And that's the, you know, the
27:01
Speaker 1: Inari acquisition and then the ABS acquisition. And now you're
27:04
Speaker 1: jumping into a vascular and potentially a cardiovascular acquisition. market
27:10
Speaker 1: segment that you really weren't in beforehand. So maybe let's
27:15
Speaker 1: just start with the Inari acquisition. Small cap company, publicly traded, acquired,
27:22
Speaker 1: had a product already out there, had revenue growth. And
27:26
Speaker 1: then AVS, private company, no revenue yet. FDA approval is
27:32
Speaker 1: still in the process. Compare and contrast those type of acquisitions.
27:36
Speaker 1: And when you see the What did you see in
27:39
Speaker 1: both that allowed you to kind of just jump in
27:42
Speaker 1: and say these are the right acquisitions for us?
27:44
Speaker 5: So maybe I'll start and I'll begin by saying that
27:47
Speaker 5: this investment in growth in cardiovascular is not a departure
27:51
Speaker 5: from our strategy. You know, we look for these high
27:53
Speaker 5: end growth markets. where there's physician preference items, where we
27:57
Speaker 5: can bring our scaling capabilities. And that really was attractive
28:01
Speaker 5: for us, both in the peripheral vascular and RE and
28:03
Speaker 5: then the add-on of ABS. There are two different options here,
28:07
Speaker 5: two different offerings, but they're very complimentary. You know, our
28:12
Speaker 5: assessment of the peripheral vascular space was a few years
28:14
Speaker 5: of looking and what's the right way. And we were
28:16
Speaker 5: so pleased with the portfolio that And the selling organization,
28:20
Speaker 5: the manufacturing organization that, you know, we said, OK, this
28:23
Speaker 5: is going to be our beachhead in the peripheral vascular space.
28:26
Speaker 5: And that positions us with a venous thromboembolism, the DTE
28:29
Speaker 5: space with mechanical thrombectomy solutions for both deep vein thrombosis
28:34
Speaker 5: and then pulmonary embolism. So the leadership there slightly different
28:38
Speaker 5: from ABS. ABS is an add on. And this is
28:40
Speaker 5: something also we've done. With previous M & A, where
28:42
Speaker 5: we buy a beachhead, and shortly thereafter, we say, what
28:46
Speaker 5: else can we do in this space to leverage the scale,
28:50
Speaker 5: the infrastructure, the selling organization, and some of the innovation
28:53
Speaker 5: that we have? And that led us to buying ABS.
28:56
Speaker 5: They have the Pulse IVL product, it's called, but it's
28:59
Speaker 5: intravascular lithotripsy. It has a really novel CO2 delivery mechanism
29:04
Speaker 5: for the pulse actuation to treat peripheral arterial disease, or
29:08
Speaker 5: that acronym is PAD. And so you have these two
29:12
Speaker 5: complementary products. They call on the same endpoint in three
29:16
Speaker 5: different specialties, vascular surgeons, interventional cardiologists, interventional radiologists. And interestingly,
29:22
Speaker 5: a couple of those, interventional radiology in particular, we have
29:26
Speaker 5: other businesses that call on those, such as our interventional
29:28
Speaker 5: spine business. So we know a little bit about the
29:31
Speaker 5: endpoint as well. So you might imagine you bring these
29:34
Speaker 5: two products together, this portfolio together.
29:36
Speaker 4: We're still starting to build a really competitive business in
29:39
Speaker 4: this space.
29:40
Speaker 5: We're really excited about the disease state, the customers we're
29:43
Speaker 5: calling on, and ultimately these patient outcomes. These are life-saving
29:46
Speaker 5: products many times. And it's really fulfilling our mission each
29:50
Speaker 5: and every day as we grow this business.
29:52
Speaker 4: Yeah.
29:52
Speaker 1: And I think that's interesting because you already were with
29:55
Speaker 1: the interventional radiologist. So you've had those call points already
29:58
Speaker 1: But the interventional cardiologists and the vascular surgeons, those are
30:02
Speaker 1: kind of newer. So how do you get in and
30:05
Speaker 1: just say, hey, we're Stryker. We're going to be joining
30:09
Speaker 1: you guys for the next 20 years.
30:12
Speaker 4: We do get a few questions. We show up like,
30:14
Speaker 4: wait a second. Why are you here? And then they're like, oh,
30:15
Speaker 4: that's right. That's right.
30:18
Speaker 5: This is one of our strengths, our access and our
30:21
Speaker 5: brand and our ability to meet the needs of these customers.
30:25
Speaker 5: And that's why buying assets that already have a KLL group,
30:29
Speaker 5: a followership, an established position in the marketplace is so important.
30:32
Speaker 5: That's what Inari provided, what we call Striker PV now,
30:36
Speaker 5: and AVS is a build-on. You might imagine, even with
30:39
Speaker 5: that customer set, The acquisition, they were happy that Stryker,
30:43
Speaker 5: a large-scale.
30:43
Speaker 4: Multinational that continue to invest, grow, scale it.
30:46
Speaker 5: Globally, then follows that up with a deal like AVS,
30:49
Speaker 5: shows our commitment to the space and to those particular physicians.
30:53
Speaker 5: We also run, and these businesses are deep into their
30:56
Speaker 5: clinical trials as well, and so it's another way that
30:58
Speaker 5: we build credibility with and expertise. One other sort of
31:03
Speaker 5: tangents that's related to this is, you know, many years ago,
31:06
Speaker 5: it's been about 15 years now, we bought our neurovascular business.
31:09
Speaker 5: That gave us similar technology. So we have an understanding
31:12
Speaker 5: of the innovation. It's clot removing for the brain. The
31:16
Speaker 5: thrombectomy devices are smaller and some nuances in the technology,
31:19
Speaker 5: but that opened up our doors on the innovation, on
31:22
Speaker 5: clinical trials, on the investments that are needed.
31:24
Speaker 4: And it's given us a little bit of a playbook.
31:26
Speaker 5: And a pathway to make sure that we can be
31:28
Speaker 5: successful in an RE-PV and ABS.
31:31
Speaker 1: Yeah, that's interesting because it is a different component. And,
31:34
Speaker 1: you know, we'll talk, you know, I'm kind of spoiler
31:37
Speaker 1: for like the rest of the portfolio of Stryker. But
31:41
Speaker 1: especially cardiology, neurovascular, peripheral vascular, there's a lot of clinical
31:45
Speaker 1: data that needs to be generated. And therefore, there's a
31:47
Speaker 1: lot of attention from the cell side and the bi
31:50
Speaker 1: side about that clinical data. So, I mean, you kind
31:55
Speaker 1: of answered the question already, though, with saying that you
31:57
Speaker 1: already had that expertise with the neurovascular side with your
31:59
Speaker 1: Surpass and the other technology you have there. Is that
32:06
Speaker 1: going to mean, though, that you– I mean, you have
32:08
Speaker 1: to stay committed to investing in the R & D.
32:11
Speaker 1: And we talked about earlier a combination of internal R &
32:13
Speaker 1: D and external R & D with the acquisitions. Is
32:16
Speaker 1: that something where we may be able to see some–
32:19
Speaker 1: you know, increase in the internal R & D, maybe
32:21
Speaker 1: it's a percentage of sales as you have to be
32:23
Speaker 1: able to finance those kind of clinical trials.
32:25
Speaker 2: In the future?
32:26
Speaker 4: Yeah, definitely.
32:27
Speaker 3: I would say the peripheral vascular and neurovascular, their R &
32:30
Speaker 3: D percent of sales is higher than strikers.
32:33
Speaker 4: No question.
32:34
Speaker 3: And so what we want to do is have competitive
32:36
Speaker 3: levels of R & D spending based on the type
32:38
Speaker 3: of business that it is. So medical as a division,
32:41
Speaker 3: its percent of sales in R & D is the
32:43
Speaker 3: lowest of striker. And then these vascular businesses, neurovascular and
32:46
Speaker 3: peripheral will be the highest. And everything else will be
32:49
Speaker 3: somewhere in the middle. So yes, this is what's required
32:53
Speaker 3: in this space is a higher level of R &
32:54
Speaker 3: D spend. But the acquisitions will happen in all of
32:58
Speaker 3: our businesses. And we look at that as we're pretty
33:00
Speaker 3: agnostic about if we can create financial value and provide
33:03
Speaker 3: value to our customers and help solve their problems, we're
33:06
Speaker 3: an equal opportunity acquirer. All the businesses can come and
33:09
Speaker 3: pitch their deals that they think can strengthen their business.
33:12
Speaker 3: But this does require a higher level of R & D.
33:14
Speaker 3: We know that. That's part of it. And whenever you
33:17
Speaker 3: look at these adjacencies, as we call them, air spaces
33:19
Speaker 3: we're not in, I talked about peripheral vascular about for
33:22
Speaker 3: five years before we did it. I've talked about other
33:25
Speaker 3: ones like neuromodulation and soft tissue robotics and a bunch
33:27
Speaker 3: of other areas that we explore. We're not going to
33:30
Speaker 3: do them all, but these are areas that we think
33:33
Speaker 3: plays to striker strengths. We have some innate know-how or
33:38
Speaker 3: some ability to be able to think to win with
33:40
Speaker 3: our commercial offense and the way we're organized. And so
33:44
Speaker 3: we aren't doing everything, right? We're not in diagnostics. We're
33:46
Speaker 3: not in diabetes. There are spaces that we are not
33:49
Speaker 3: as sure would play to our strengths, but these are areas,
33:52
Speaker 3: health IT, getting into the smart hospital area. That's something
33:55
Speaker 3: that is new for us. And we talked about it
33:58
Speaker 3: years before we got into the space. And now that's
34:01
Speaker 3: become a new adjacency as well. So this is kind
34:03
Speaker 3: of how we look at these spaces And as I say,
34:06
Speaker 3: every few years we get into a new space. We
34:08
Speaker 3: don't do it all the time. And then it becomes
34:11
Speaker 3: part of the core business. And we do, like Spencer said,
34:13
Speaker 3: add AVS. We're going to add other things by acquisition.
34:16
Speaker 3: And we can now branch out into cardiology because we're
34:19
Speaker 3: now calling on an interventional cardiologist, learning about their struggles,
34:23
Speaker 3: learning about what challenges they have and how we can
34:25
Speaker 3: potentially help them solve their problems.
34:27
Speaker 4: Yeah.
34:28
Speaker 1: And we'll definitely jump into the smart hospital because that
34:30
Speaker 1: caught my attention over the last six months. But just
34:33
Speaker 1: kind of closing out on that cardiovascular side, I mean,
34:36
Speaker 1: you just, you know, you've mentioned all comers, you know,
34:39
Speaker 1: you listen to all, you know, potential opportunities. As you
34:44
Speaker 1: expand into the cardiovascular, though, is there any specific sub-segment
34:48
Speaker 1: within cardiovascular that you find most interesting right now? Or
34:52
Speaker 1: is it still just kind of you're listening to everyone?
34:54
Speaker 4: I'll jump in.
34:55
Speaker 5: I'd say first off, our focus is continue to ensure
34:58
Speaker 5: that we are successful in peripheral vascular and with AVS.
35:00
Speaker 5: That's where all of our attention is right now. I'm
35:03
Speaker 5: looking at other areas throughout cardiovascular. It is a significantly
35:07
Speaker 5: scaled market. It's got a lot of scale, a lot
35:09
Speaker 5: of big disease states, still unmet needs that we can
35:12
Speaker 5: play a big role in over time. But we're not
35:14
Speaker 5: in a hurry. We'll remain very disciplined as we assess
35:17
Speaker 5: this market. It's not about being everything to everyone in cardiovascular.
35:20
Speaker 5: We'll be very thoughtful about where we invest, and we'll
35:23
Speaker 5: build on our learnings from peripheral vascular and that connection
35:26
Speaker 5: with the interventional cardiologists. But it's a really exciting space
35:30
Speaker 5: with a lot of growth potential and doing really important work.
35:33
Speaker 5: And so it's one we'll stay very close to, but
35:35
Speaker 5: we'll be really thoughtful and disciplined over time.
35:37
Speaker 1: Yeah, definitely looking forward to seeing how that expands over time.
35:41
Speaker 1: Moving on to that smart hospital, though, because caught my
35:45
Speaker 1: attention is, you know, during your investor day last year,
35:50
Speaker 1: you talked about how Beaucera, which is the communication system
35:55
Speaker 1: you acquired, the Care AI, which is the software company
35:57
Speaker 1: you acquired, how they all fit in. And my perspective
36:02
Speaker 1: This is maybe where I need to relearn the business
36:05
Speaker 1: model because my thought was that, you know, Care AI
36:08
Speaker 1: is a software. It was additive to the products that
36:11
Speaker 1: you're already selling, but you would sell those products. But
36:15
Speaker 1: when you reorganize your business units within your segments, Smart
36:19
Speaker 1: Care now is a business unit within that segment. Where
36:24
Speaker 1: am I thinking wrong in kind of how Care AI, Vocera,
36:28
Speaker 1: all that software technology is is kind of its own
36:33
Speaker 1: standard business unit within those segments.
36:37
Speaker 5: Matt, maybe I'll jump in here and I'll start just
36:40
Speaker 5: talking about the environment itself.
36:43
Speaker 4: Hospitals definitely don't need more noise.
36:45
Speaker 5: Instead, they need systems that work together, they're connected, that
36:48
Speaker 5: reduces friction, all about improving safety, efficiency, and that patient experience.
36:54
Speaker 5: It's a complicated environment in healthcare these days, and we're
36:57
Speaker 5: trying to bring solutions forward that reduce that friction and
36:59
Speaker 5: create more connectivity with useful information and data. SmartCare is
37:03
Speaker 5: about turning this disconnected technology into connected care.
37:08
Speaker 4: And what we originally did.
37:10
Speaker 5: Is we embedded, after we bought Vocera in one of
37:12
Speaker 5: our business units that's in our big bed franchise, and
37:18
Speaker 5: after time and with the acquisition, the add-on of Care AI,
37:21
Speaker 5: we said it needs its own dedicated focus. And that's
37:24
Speaker 5: where we pulled it out and started this SmartCare business unit.
37:28
Speaker 4: In the beginning of this year. And it's really for
37:30
Speaker 4: two reasons. One, to focus on the needs of the.
37:33
Speaker 5: Customer and bring these technologies together. And remember with Care AI,
37:37
Speaker 5: it's software, but they also sell a hardware. It's a
37:40
Speaker 5: sensor that has ambient intelligence that utilize AI to continue
37:45
Speaker 5: to utilize the data insights that it gets from its sensors.
37:48
Speaker 5: And you couple that with Velocera, this workflow technology. This
37:51
Speaker 5: is the foundational aspect of what we're calling the smart
37:54
Speaker 5: hospital and the smart care platforms. Interestingly, bringing these together,
37:59
Speaker 5: that's the one aspect. The second is we wanted a
38:02
Speaker 5: business unit that's looking across connecting across other products in Stryker,
38:07
Speaker 5: but even within the hospital, if there's competitive products or
38:09
Speaker 5: not competitive products in Stryker, how do we ensure that
38:12
Speaker 5: we have the right foundation set up they can connect in?
38:16
Speaker 5: We want to take this disparate information and create, you know,
38:19
Speaker 5: workflows that are streamlined, providing more information at the right
38:21
Speaker 5: time to the right people to improve that patient outcome,
38:24
Speaker 5: that patient efficiency and that overall standard of care. And
38:28
Speaker 5: so that business unit is dedicated to this, how to
38:30
Speaker 5: create that foundation and strengthen it, how to create the
38:33
Speaker 5: connections both in our portfolio and with other.
38:36
Speaker 4: Technologies that are in the hospital. And so far, so good.
38:38
Speaker 4: I mean, yeah.
38:40
Speaker 5: A lot of demand. You might imagine every hospital we
38:43
Speaker 5: walk into, the administration in particular, says we want to
38:46
Speaker 5: talk about this. They have bits, pieces, disparate workflow challenges,
38:51
Speaker 5: a shortage in nursing.
38:51
Speaker 4: And they say, how can we help? How can we
38:53
Speaker 4: prevent never events?
38:54
Speaker 5: How can we make sure we have a safer environment.
38:56
Speaker 4: For our patients and for our employees?
39:00
Speaker 5: And so that's something that is top of mind for
39:01
Speaker 5: us at all time. We're having significant success so far
39:04
Speaker 5: with Close Air and Care AI.
39:06
Speaker 4: Yeah.
39:06
Speaker 1: And I mean, it sounds like you played the long
39:08
Speaker 1: game here because these are all little acquisitions that were
39:11
Speaker 1: announced over the last five, six, 10 years, even, you know,
39:15
Speaker 1: you got the beds, you know, that the smart beds,
39:18
Speaker 1: you get the care AI, you got the communication system
39:21
Speaker 1: all in. Was this something when you guys started with,
39:24
Speaker 1: you know, Vocera first as the acquisition, this was the game,
39:28
Speaker 1: the long-term plan, or was this something where you kept
39:31
Speaker 1: buying these acquisitions and you kept buying these small pieces
39:34
Speaker 1: and you realize as they started forming together that there
39:37
Speaker 1: was this larger plan?
39:38
Speaker 3: Yeah, look, this is part, this was part of a
39:40
Speaker 3: larger plan. We never just do one thing and stop.
39:44
Speaker 3: We're not a one and done company, as you already
39:47
Speaker 3: heard with peripheral vascular. We're going to keep building upon that.
39:50
Speaker 3: Once we got into this health IT world, we were
39:52
Speaker 3: in the hospital, we could see the workflow challenges that
39:55
Speaker 3: they had, and they're immense. And we thought, who better
39:58
Speaker 3: than us to be able to do this? Because if
40:00
Speaker 3: they all have ERPs, right, they'll have Epic or Cerner,
40:03
Speaker 3: but Epic or Cerner is not automating workflows in the hospital.
40:06
Speaker 3: They're ERP systems, just like we have SAP in our
40:09
Speaker 3: company at Stryker. But we also have services like ServiceNow,
40:14
Speaker 3: Salesforce.com and Workday, and those are the automation of workflow
40:19
Speaker 3: in our companies. We're trying to do that for hospitals
40:21
Speaker 3: to provide the layer of software that automates their workflow.
40:25
Speaker 3: And as an example, if you think about Care AI, Vocera,
40:29
Speaker 3: and our bed, they're all connected. So if a patient
40:31
Speaker 3: lowers their bed rail, the Vocera nurse, sorry, the Care
40:35
Speaker 3: AI nurse, virtual nurse can come on the screen and say,
40:37
Speaker 3: I see you lowered your bed rail. They can either
40:39
Speaker 3: raise the bed rail or tell the patient to sit tight.
40:42
Speaker 3: An alert goes to the Vocera badge. The nurse says, hey, Spencer,
40:45
Speaker 3: I see you've lowered your bed rail.
40:47
Speaker 4: What's going on?
40:48
Speaker 3: And there says through the speaker of the bed, Spencer says, oh,
40:51
Speaker 3: I need to go to the bathroom. The nurse says,
40:52
Speaker 3: hang tight. I'm just around the corner. I'm going to
40:54
Speaker 3: help you there and make sure you don't fall. So
40:56
Speaker 3: that type of integration exists right now just to make
40:59
Speaker 3: it real for you. And we're going to continue to
41:02
Speaker 3: look at other areas of opportunity. And the hospitals just
41:05
Speaker 3: love this because it definitely prevents errors. It takes the
41:10
Speaker 3: cognitive load off the nurses. They can focus the nurses.
41:13
Speaker 3: We did surveys to say, are nurses going to be
41:16
Speaker 3: intimidated by virtual nurses? They love virtual nurses. These virtual
41:19
Speaker 3: nurses are super capable. They got burnt out during COVID
41:22
Speaker 3: and they're at home sitting at home and they're very happy,
41:24
Speaker 3: but they're very capable. And they do the routine things
41:27
Speaker 3: so that the nurse on the ward can actually focus
41:30
Speaker 3: on the patients that are of highest need, not doing
41:33
Speaker 3: these kinds of routine things. Or if you have, if
41:35
Speaker 3: you need a medication dispension, you need a second nurse. Today,
41:38
Speaker 3: they're calling and screaming and trying to find another nurse.
41:41
Speaker 3: Now they just hit the button, the virtual nurse comes
41:43
Speaker 3: on and they can do the second sign-off. So those
41:46
Speaker 3: are some examples and I could go on and on,
41:48
Speaker 3: but we see this as, we're not finished with Vosera
41:51
Speaker 3: and Care AI. We're going to continue to look for
41:53
Speaker 3: additional acquisitions that can feed in, or as Spencer said,
41:57
Speaker 3: more products from within or outside Striker to connect into
42:00
Speaker 3: this ecosystem to make the hospital smart, more efficient, less errors,
42:06
Speaker 3: less cognitive burden, and frankly, these hospitals are demanding this
42:11
Speaker 3: and something that's going to make them more effective.
42:13
Speaker 1: And I expect that's going to continue given the shortages
42:16
Speaker 1: in doctors, shortages in nurses and everything as we still
42:19
Speaker 1: try to get that level of the physicians and professionals there.
42:23
Speaker 1: You need something to kind of allow them to be
42:25
Speaker 1: able to do more with less. We've talked a lot
42:28
Speaker 1: about robotics, peripheral and cardiovascular, the smart hospitals, but there's
42:34
Speaker 1: so many other different segments and business units that just
42:37
Speaker 1: seemed to get glossed over. But, you know, when I
42:39
Speaker 1: reviewed the first quarter call again, you know, you talked
42:42
Speaker 1: about double digit growth and interventional spy. You talked about
42:46
Speaker 1: your Neptune waste management, sports medicine. Sage was double digits.
42:51
Speaker 1: Emergency care had life, you know, with the LifePak 35.
42:54
Speaker 1: You know, in the quick few minutes, like what other
43:00
Speaker 1: segments should these listeners be paying attention to?
43:02
Speaker 4: Yeah.
43:03
Speaker 3: Listen, I think The beauty of Stryker is our diversity
43:06
Speaker 3: and that we have all of these different businesses growing
43:08
Speaker 3: extremely quickly. I think what gets underestimated at Stryker, the
43:12
Speaker 3: two divisions that are the most underestimated are medical and
43:17
Speaker 3: trauma extremities, which grow at very double-digit growth. They've been
43:20
Speaker 3: the fastest growing divisions over the last five, six years,
43:24
Speaker 3: even instruments to some degree. These are products that are
43:27
Speaker 3: just constant innovation flow. For example, within instruments, we have
43:32
Speaker 3: our next generation Sonopat product later this year to remove
43:36
Speaker 3: tumors in the brain. You mentioned LifePak. Sage has new
43:40
Speaker 3: products that they're launching. And we have the Pangea product
43:43
Speaker 3: within trauma and extremities that's just taking off the shoulder
43:48
Speaker 3: products we talked about already, part of upper extremities. But
43:51
Speaker 3: I can go on and on. We have innovation all
43:53
Speaker 3: over this company. And that's why our growth is so durable.
43:57
Speaker 3: And we've been growing double digits now for... almost four
44:00
Speaker 3: years in a row now. This will be the fifth
44:01
Speaker 3: year approaching double digits. So that's durable, sustainable. Even as
44:06
Speaker 3: we're getting bigger, we're still maintaining very high growth. I
44:09
Speaker 3: don't know if you want to add to.
44:09
Speaker 4: That, Spence.
44:10
Speaker 5: Matt, the thing I'd add is that we have category-leading
44:14
Speaker 5: leadership positions in the majority of our businesses that we
44:16
Speaker 5: play in with world-class innovation, with amazing world-class leadership. You
44:21
Speaker 5: add all that and that specialized approach and how we
44:24
Speaker 5: show up to the caregiver, it's a formula for double
44:26
Speaker 5: digit success. I mean, that's how the expectation we set
44:29
Speaker 5: in our company, that's how they're thinking about their portfolios.
44:32
Speaker 4: And there's that demand in the marketplace.
44:34
Speaker 5: A lot of times market growth plus market share taking
44:37
Speaker 5: opportunities gives them that position. So it's hard for us
44:40
Speaker 5: to share just our favorites because we like them all
44:43
Speaker 5: and all for different reasons.
44:45
Speaker 4: And they shine through.
44:45
Speaker 5: I mean, these are, as Kevin mentioned, medical, trauma extremities,
44:50
Speaker 5: endoscopy instruments. These are multi-billion dollar franchises with incredible portfolios
44:55
Speaker 5: that have a lot of demand that will continue to
44:57
Speaker 5: grow well into the future as new innovation comes year in,
45:00
Speaker 5: year out.
45:01
Speaker 4: And it's really balanced that way.
45:03
Speaker 5: So As we've scaled, although we're much bigger and there's
45:06
Speaker 5: concern always about how do you keep this going? Well,
45:09
Speaker 5: part of that is that operating model. If you're in
45:11
Speaker 5: some of these businesses, they feel like speedboats that are
45:15
Speaker 5: driving great innovation, that are going like crazy, that are
45:18
Speaker 5: meeting the customer's needs, that are winning against the competition.
45:21
Speaker 5: And it really differentiates our model and then our performance
45:24
Speaker 5: as well in the marketplace.
45:25
Speaker 1: Yeah, and you've definitely, like I said, it's shown that
45:29
Speaker 1: success with that double-digit organic revenue growth, especially as you're
45:32
Speaker 1: over $ 25 billion in sales.
45:34
Speaker 2: Could have been fifth year.
45:36
Speaker 1: There was the cyber event that took place earlier this year.
45:39
Speaker 1: We don't need to go into the details of what happened,
45:45
Speaker 1: the impact. You've been able to maintain a guidance level
45:50
Speaker 1: that is still high end of med tech still. I'm
45:54
Speaker 1: more interested in learning more about what skill sets were
46:00
Speaker 1: required to handle that type of event and how you
46:04
Speaker 1: to rectify it. I mean, how much of that was
46:07
Speaker 1: just experience from other jobs, other companies you had? How
46:11
Speaker 1: much of that was just you had to improvise or adaptation?
46:16
Speaker 1: Just how much of it was just simply grit?
46:18
Speaker 3: Well, it's a great question because you do tabletop exercises
46:21
Speaker 3: for cybersecurity and And most of the time you're preparing
46:24
Speaker 3: for some type of ransomware attack. We were not prepared
46:28
Speaker 3: for what's called a wipe attack, where they just wipe
46:31
Speaker 3: your laptops and wipe your phones. They're not asking for
46:35
Speaker 3: a ransom. It was a type of attack I frankly
46:38
Speaker 3: never even heard of before. And so the need for
46:41
Speaker 3: the attack was completely different. It was debilitating. And I just,
46:48
Speaker 3: the leadership team and I just drew upon our our
46:51
Speaker 3: prior experience in other types of crises or big business challenges,
46:55
Speaker 3: whether it's a product recall or some kind of incident
46:58
Speaker 3: at a manufacturing facility. And what you do in these
47:00
Speaker 3: kinds of circumstances, you stay calm, you gather your team,
47:04
Speaker 3: you gather facts, you, and in this case, Spencer created
47:08
Speaker 3: a business response team, which he led cross-functional group of
47:11
Speaker 3: people that met every single day. And that was reacting
47:15
Speaker 3: to what's happening and planning for the next day and
47:18
Speaker 3: planning for the next day. And what do we tell
47:20
Speaker 3: our customers? And customers are of course worried about, can
47:22
Speaker 3: we connect a striker? Can our sales reps come into
47:26
Speaker 3: their hospital? But it was not something we were really
47:30
Speaker 3: well prepared for, but we got.
47:32
Speaker 4: It either quickly.
47:32
Speaker 3: Spencer did an amazing job with his business response team.
47:37
Speaker 3: And right now I'm getting frankly accolades from a lot
47:40
Speaker 3: of our customers in terms of how we handled this. Now, fortunately,
47:43
Speaker 3: all of our backups worked and we were able to
47:45
Speaker 3: go back to our backups and You never know until
47:48
Speaker 3: we test them, but you don't know for sure because
47:50
Speaker 3: you can't test all of them. But they all performed really,
47:53
Speaker 3: really well. And it ended up being, frankly, a pretty
47:57
Speaker 3: remarkable recovery. Obviously, our factories were out for three weeks,
48:02
Speaker 3: which was really tough, but really a really great performance.
48:06
Speaker 3: I don't know if you want to add, Spencer, since you.
48:08
Speaker 4: Maybe two comments.
48:10
Speaker 5: One, my public service announcement for everyone listening is make
48:13
Speaker 5: sure your organizations have a system to detect and contain.
48:17
Speaker 5: Because it's not a matter of if it's when somebody
48:20
Speaker 5: shows up in your systems that shouldn't be there. So
48:22
Speaker 5: how do you detect that? How do you contain it?
48:24
Speaker 5: And then make sure, as Kevin said, you have to
48:26
Speaker 5: be prepared. So that's on my public service announcement side.
48:30
Speaker 5: I think on our response side and our recovery, we
48:33
Speaker 5: do have to credit our culture and the type of
48:37
Speaker 5: employees that we have that believe in our mission and
48:40
Speaker 5: that partnership together with our customers that shine through or
48:43
Speaker 5: our customer support of us. They showed empathy. They were understanding.
48:46
Speaker 5: They said, how can we help? Obviously, the power of
48:49
Speaker 5: our selling organizations that have these relationships in the hospital
48:53
Speaker 5: to make sure they have the products they need to
48:54
Speaker 5: make sure the cases still went safely and effectively.
48:57
Speaker 4: That was really important.
48:59
Speaker 5: But our culture of resilience, adaptability, we really have so
49:04
Speaker 5: much to be thankful for in our workforce and how
49:07
Speaker 5: they responded. I mean, Kevin and I saw incredible feats of,
49:10
Speaker 5: you know, work and effort and coming in on the
49:13
Speaker 5: weekends to ensure all the laptops got built right away
49:16
Speaker 5: in that first weekend and running down the street to
49:20
Speaker 5: somebody's gym to track down an employee that's phoned in at.
49:23
Speaker 4: Work to say, hey, we need you. We need your help.
49:25
Speaker 4: This took place. We heard all these incredible stories.
49:28
Speaker 5: So maybe, Matt, there is a little grit in there
49:29
Speaker 5: for sure that you have to be ready for.
49:31
Speaker 4: That's part of our organization.
49:32
Speaker 5: When there's a challenge, we rally behind making sure that
49:35
Speaker 5: we're taking care of each other and our customers and
49:37
Speaker 5: that shined as bright as ever.
49:38
Speaker 1: Yeah, and I think that just then goes in line with,
49:41
Speaker 1: you know, a comment I made note of at the
49:44
Speaker 1: AOS meeting, and it was the details of execution. Is
49:48
Speaker 1: that in the same grain of that kind of grit,
49:51
Speaker 1: that kind of working together, all that aspect? And then
49:55
Speaker 1: is that, you know, going back to all those acquisitions
49:58
Speaker 1: and all the learnings you've had, is that also a
50:00
Speaker 1: reason why you're able to deliver and successfully integrate, you know,
50:05
Speaker 1: these acquisitions as they come in?
50:07
Speaker 3: Yeah, listen, our company has an incredible focus on execution.
50:12
Speaker 3: It executes like no other. And those details of execution
50:16
Speaker 3: are how you plan, how you work, the day-to-day rituals.
50:19
Speaker 3: We do our engagement surveys every year. Every team with
50:23
Speaker 3: four or more employees does a debrief session. We have
50:26
Speaker 3: these kind of routines built into our culture, the quota
50:29
Speaker 3: and having your quota and achieving your quota and then
50:32
Speaker 3: making sure that when you hit your number, try to
50:34
Speaker 3: get your manager to hit their number and that rallying,
50:37
Speaker 3: I call it the rallying behind performance, is in the
50:42
Speaker 3: DNA of Stryker, was there before I arrived at Stryker.
50:45
Speaker 3: And it'll continue long after I go on, because it's
50:50
Speaker 3: just in the sauce of the company, how we hire people,
50:52
Speaker 3: the type of people we hire, as Spencer mentioned.
50:55
Speaker 2: It's in the DNA.
50:57
Speaker 3: This culture of execution is unlike anything I've ever seen before.
51:00
Speaker 3: And I mean, Spencer thinks it's normal because this is
51:02
Speaker 3: what he's done his whole career. But I've worked elsewhere
51:05
Speaker 3: and you just don't see that sort of drive for
51:08
Speaker 3: performance that I call a performance edge. That's part of
51:13
Speaker 3: our company. We actually love the details of execution and
51:17
Speaker 3: the rituals of business reviews. And it's just an amazing
51:21
Speaker 3: thing to see in these beautiful routines that we have
51:26
Speaker 3: that really deliver incredible results year after year.
51:29
Speaker 4: Matt, just one thing to build on. A lot of
51:31
Speaker 4: credit goes to Kevin.
51:33
Speaker 5: When he came in, he helped pull a group of
51:35
Speaker 5: leaders together to talk about our mission and set up
51:37
Speaker 5: our new mission. And this has been an incredibly unifying
51:40
Speaker 5: force for our work, our teammates all over the world.
51:42
Speaker 4: It's been incredible.
51:44
Speaker 5: We also then define values that we will live by
51:47
Speaker 5: each and every day and their integrity, accountability, people and
51:50
Speaker 5: performance values. But that one accountability leads to this discipline
51:54
Speaker 5: and execution. You know, everyone starts with accountability, looking at
51:57
Speaker 5: themselves in the mirror going, what more can I do
52:00
Speaker 5: to ensure that I'm serving if you're a leader or
52:02
Speaker 5: I'm delivering if I'm a sales rep, I'm innovating if
52:05
Speaker 5: I'm an R & D person. That accountability is just,
52:08
Speaker 5: it's so strong throughout our organization. They don't want to disappoint.
52:11
Speaker 5: They don't want to disappoint each other. They don't want
52:13
Speaker 5: to disappoint the customer. And that's a real driving force
52:17
Speaker 5: in the behaviors that show up in our organization each
52:20
Speaker 5: and every day. a testament to decades of, of a
52:24
Speaker 5: learned behavior that's now, you know, shines bright in our organization.
52:27
Speaker 1: I was about to say, yeah, I was about to
52:29
Speaker 1: say though, that sounds like something that you learn from
52:31
Speaker 1: day one in your early career.
52:33
Speaker 4: Yeah. Yeah.
52:34
Speaker 3: We hire, we hire for it. And we, we, to summarize,
52:37
Speaker 3: we call it a culture of execution, not a culture
52:39
Speaker 3: of excuses. Yeah.
52:41
Speaker 1: And so, you know, that sounds like the culture sounds
52:45
Speaker 1: like the differentiating feature at Striker. So kind of with
52:48
Speaker 1: that differentiation kind of, What excites you about for the
52:52
Speaker 1: future of Stryker now with that differentiation?
52:55
Speaker 4: Maybe I'll go first. I couldn't be more excited about
52:58
Speaker 4: our future.
52:58
Speaker 5: And I'll start with thinking about our workforce and our culture.
53:02
Speaker 5: Our foundation is so strong with our operating model, these
53:05
Speaker 5: specialized businesses, the innovation that constantly is going on in
53:09
Speaker 5: our organization of solving some of the biggest problems in healthcare.
53:12
Speaker 5: Our brightest days are ahead. And I couldn't be more
53:15
Speaker 5: confident in the trajectory of our businesses, coupling our Our
53:18
Speaker 5: innovation with our M & A and our specialized model,
53:21
Speaker 5: it's an exciting time.
53:22
Speaker 4: And healthcare needs us.
53:24
Speaker 5: And we need healthcare to continue to provide such a
53:26
Speaker 5: great service to our communities everywhere we serve across the
53:29
Speaker 5: world that it's a very exciting time to be at Stryker.
53:33
Speaker 3: Yeah, I'd summarize it as I'm excited about the growth potential.
53:36
Speaker 3: So as fast as we have grown, the potential for
53:39
Speaker 3: future growth is still incredible. All of our business units
53:42
Speaker 3: are looking at how can they split their sales forces.
53:45
Speaker 3: What new technologies can they acquire? That new product pipeline
53:48
Speaker 3: is incredible across our portfolio. The cadence of innovation will continue.
53:53
Speaker 3: We have all these global opportunities. We're starting to really
53:55
Speaker 3: take off. Mako is kind of in Japan and India
53:58
Speaker 3: and some countries kind of where it was in the
54:00
Speaker 3: United States six years ago. So to me, the thing
54:03
Speaker 3: that excites me is growth. And growth is like oxygen
54:06
Speaker 3: inside a company. It creates opportunities for people's careers. We
54:10
Speaker 3: serve more customers. We are now serving over 150 million
54:13
Speaker 3: patients a year. with our technologies and that's growing every
54:17
Speaker 3: single year. So that's what really excites me. And it's
54:20
Speaker 3: not new. It's been exciting me from the day I
54:22
Speaker 3: got to Stryker. But what's amazing is even as we've
54:24
Speaker 3: gotten larger, frankly, our growth rates accelerated from the mid
54:28
Speaker 3: single range now up to double digit growth. And I
54:30
Speaker 3: just see more growth ahead.
54:32
Speaker 1: Yeah, no, I'm excited to see just the type of
54:35
Speaker 1: innovation that Stryker can deliver as well. But Kevin and Spencer,
54:39
Speaker 1: thank you so much for joining us today. It was
54:42
Speaker 1: a great conversation.
54:43
Speaker 4: Matt, thanks for having us.
54:45
Speaker 3: Thank you so much.
54:46
Speaker 1: And thank you to our producers, Aditya Samani and Mariam Thawele,
54:50
Speaker 1: for all the behind-the-scenes work and to our listeners for
54:53
Speaker 1: tuning in today. We hope you join us for future episodes.
54:56
Speaker 1: And if you'd like to stay up to date, you
54:57
Speaker 1: can click the subscribe button on Spotify or your favorite
55:00
Speaker 1: streaming platform.
55:01
Speaker 4: Take care.