Executive Interview Series on Growth

Andreas Knaack

Andreas Knaack, Incoming President Invetech (starting January 1, 2016)

Winning at Innovation — With Andreas Knaack

By Colin White, PhD

It is with mixed feelings that I introduce my final interview for Invetech’s Executive Series on Growth. As of November 1, I have been appointed to lead the Advanced Staining business unit in Leica Biosystems, and am currently in the process of handing over the reins of Invetech to Andreas Knaack. Andreas has built his career around developing and launching new products. To introduce Andreas to a broader audience, I am delighted to be speaking with him today about “Winning at Innovation” as my final interview for Invetech’s Executive Series on Growth.

Colin: Andreas, good morning and congratulations on your appointment. It’s great to catch up.

Andreas: Thanks Colin, good morning. Yes, great to catch up indeed, thanks for having me.

Colin: Andreas, I would like to start by asking you to give us a thumbnail sketch of your career. What companies and roles have brought you to this point?

Andreas: I’m originally from Germany, where I studied Computer Engineering, completing my degree in Hamburg.

After that, I joined Draeger Medical in Northern Germany first as a software engineer, then worked my way through various ranks in the R&D organization until heading up one part of their R&D for neonatal warming therapy. There, I learned much about medical devices, life-sustaining devices and the like.

Having done that for several years, I decided that I needed to sharpen my business skills and knowledge, so I joined a small venture capital firm where I learned a lot about what it takes to drive a business, raise funds, write a good business plan and also de-risk a venture. The capital venture firm unfortunately went out of business. That was the right time for me to relocate to Australia and find myself a job with Invetech in early 2004, where I started as a program manager.

Ultimately, I ended up heading the Instrument Design and Development team at Invetech for several years. All in all, I was with Invetech for nearly nine years until I got the opportunity to head the core histology business unit in Leica Biosystems in late 2012. For that position, I relocated back to Germany where I am right now, and we are just in the transition of heading back to Australia in the coming weeks.

Colin: It is very relevant that in your last role you were running an IVD company. Many of our clients, as you are aware, also run IVD companies. I think the experience that you have gathered, the direct experience, will be very relevant to leading Invetech. A two-fold question for you: What challenges did you face as you were leading core histology and driving growth; and what approaches and strategies did you employ to overcome some of those challenges?

Andreas: The starting position within Leica Biosystems and core histology is that you have a relatively broad portfolio: we’ve got around about 40 instruments and over 4,000 consumables. But it is also a market that is slow-growing with a handful of very strong competitors who are working in this market. At Leica Biosystems, we had in some parts of our portfolio over 50% market share. Driving growth with those factors is hard enough, as is protecting your market position, so we embarked on a two-fold strategy. On the one hand, we had a strong focus on high-growth markets—China is one of those where we are very strong, but also others. Then, considering limited funds for R&D, it was critical to focus on our core segments and to drive strength there while following more of an OEM strategy in adjacencies and secondary parts of the portfolio. In a capital-focused and very broad portfolio—where we struggled with our R&D execution, as well as the fact that, with such a broad portfolio, you can’t work on everything at the same time—it was really important for us to shift the business towards high value-add, customer-driven solutions that deliver a continuous revenue stream for us. For histology in its nature is capital-driven. They are mostly open solutions and for us it was important to get closer to closed systems, or semi-closed systems, when delivering additional value to customers.

We conducted quite a complex strategic assessment of the portfolio, then looked at the different niches in which we were able to play, then offered this additional value through some good degree of innovation. This allowed us to then prioritize the projects and the engineering efforts that we needed to apply. At the same time, we did a lot of work on reshaping our R&D towards more focus on the application of lean principles and re-use. All this to become more efficient in the set-up of a very broad portfolio, given that you can’t work on everything, and that which you do work on, you need to do as efficiently as possible.

Colin: Yes, an excellent point that we have to be very efficient in an increasingly competitive world where commercial returns from investment in new product development are often far from assured. From your experience both in running core histology but also more broadly, what are the elements that you have to get right in the innovation game to tip the odds in your favor?

Andreas: It goes back to the principles that I learned at Invetech: it’s about being very pragmatic and realistic regarding the risks that you are facing in new product development. We need to be very open to the technical and commercial challenges that go with it. Invetech has to have a very high degree of integrity in illustrating these risks and challenges and being open with our clients, and in working together on how we manage those challenges. Clients need to know what we are facing and what to expect on the journey. As Invetech does a lot of work with start-ups, it is particularly important to focus on communicating expectations.

Our focus needs to be on driving continuous improvement of Invetech's capabilities and processes, whether that's in advance for reliability, or a continued focus on quality.

In terms of Invetech itself, Colin, I would say we would do best to continue the journey that you have taken the company on. Our focus needs to be on driving continuous improvement of Invetech’s capabilities and processes, whether that’s in advance for reliability, or continuing the journey that you have started with the team with a focus on quality. And then lastly, looking at where Invetech’s clients are as a global presence, with proximity to clients becoming more and more important. We need to continue to strengthen our presence in San Diego; that will be of absolute importance to the success of the business and also clearly important to our North American clients.

Colin: Yes, I think what you are describing fits very well with my own experience: as leaders, there are many things that we can control to tip the odds in our favor, and it’s beholden on us to do so.

One of the changes I have seen over the past 20 years is the notion that success in new product development really comes down to two fundamental things: process and people. On the process side, what new ideas have you seen in recent times to improve the effectiveness of new product development? On the people side, hitting timelines is always challenging, and the likelihood of success is often directly related to the level of engagement of the team. What are some of the ways you have personally seen that can positively impact the engagement of the team and provide what is needed to succeed?

Andreas: Colin, I couldn’t agree more on your observations. I would say however that you can’t really take the people and process apart. They are so strongly related and need to be managed, observed and seen together. The best methods that I’ve seen make a difference in both those domains through pragmatic ways of utilizing lean principles in product development. In software development, through agile scrum and similar lean methods, methods that have been around for a while; in hardware development, they are probably not quite as present, but my experience has shown me that you can apply these principles in hardware, both electronic and mechanical, and quite a few improvements can be achieved through those.

When you have the buy-in of the whole team, through transparency and visibility, you get a much stronger ability to countermeasure any deviation from that plan.

With these lean principles, when we do them well, we involve the cross-functional team very early in the process and keep the whole team involved throughout the daily visual management in this process. From that involvement, we achieve buy-in, schedule and objectives right from the beginning, as well as getting a better understanding of the team (where they stand today, what is their progress, what’s the status of the development, where are the risks), and we also get more execution on the backlog of work that still needs to be done.

When you have the buy-in of the whole team, through transparency and visibility, you get a much stronger ability to countermeasure any deviation from that plan. Your team comes with a much stronger buy-in on those plans, and then your engagement will improve. Now it’s a learning exercise, of course, when establishing that. It doesn’t happen overnight, but it’s very clear that we should have a far more co-operative and communicative style and approach to setting up and executing our development projects.

Colin: Good insight and reflections. I would like to change tack a little bit. It was announced just last week that Invetech will be separating from Danaher with a group of other Danaher companies that includes Tektronix, Fluke and Gilbarco, into another publicly traded entity which is currently called “Newco”. (Editor's note: the new company name was recently announced as Fortive.) Can you please give some background to this decision and why you see it as a positive strategic move for Invetech?

Andreas: Yes, certainly. I am actually quite excited about this move. It brings to Invetech both opportunities and skills that we haven’t had prior exposure to. Firstly, we are joining a group of companies that have been incredibly successful (Fluke, Tektronix, Gilbarco, among others). There is a lot to learn from them as they have been much further on the lean journey. At the same time, I have been made aware that Invetech will be a growth driver for Fortive. That’s a great opportunity for us, especially when we are talking on the organic front, but also inorganically there are great opportunities. The separation from Danaher, and with that, the transition to Fortive has advantages for Invetech and its clients.

In addition to continuing to focus on growth, leveraging our world-class scale with our sister companies in Fortive; we will eliminate potential doubts regarding Invetech’s autonomy or impartiality in its core segments. One of those core segments is Diagnostics Life Sciences, where the proximity to Danaher companies such as Beckman Coulter may have caused some concerns on behalf of some of Invetech’s clients. With the transition to Fortive, we will be clearly separated, standalone and surrounded by great sister companies. That is a very good outcome for everybody.

In addition to continuing to focus on growth, leveraging our world-class scale with our sister companies in Fortive, we will eliminate potential doubts regarding Invetech's autonomy or impartiality in its core segments.

Colin: You have summarized that very well. It’s a very exciting strategic move for Invetech and therefore also for its clients.

Back to the final question: as you think about starting at Invetech in early January 2016, I’m interested in what themes and topics you will be particularly investing your own personal energy in as you take over Invetech?

Andreas: Having been away for three years and not having seen much of Invetech, it will be important for me to re-learn Invetech. Understand who are the clients, what are their experiences when working with Invetech, what works and what doesn’t work. I will do that by spending a fair bit of time on the road and visiting as many clients as possible.

Based on what you started Colin, the focus must be around further driving Invetech’s ability to deliver world-class quality designs and products. We will certainly want to achieve that through application of reliability management systems, as well as the lean principles that I spoke about earlier—design for reliability, supplier quality management—so as to continue on the journey that you have taken the team on. My job will be to continue to provide the differentiated quality design products and services as Invetech has done now for quite some time.

The focus must be around further driving Invetech’s ability to deliver world-class quality designs and products.

Andreas: But Colin, let me turn that question around. As you transition to your new role, if you reflect back over the last four years at Invetech, what are the key achievements that you are most proud of that I should build on?

Colin: I think there are two things which immediately come to my mind. First of all, I would say that the business of developing breakthrough products—and supporting the launch of breakthrough products—is fundamentally a people business. I am incredibly proud of the talent that we have recruited to Invetech, and the skills and the expertise that the new blood has brought. We have been very fortunate to recruit a range of people in different roles, from organizations like Toyota and others, which have really brought a different perspective to what we’ve been doing.

The second thing that I am very proud of is something which came to me from the customer side, when many customers were saying to me that their expectations of Invetech had changed. They had always viewed Invetech as a very strong innovation house, a very strong design house, but it wasn’t just innovation and design that they were looking for. What they were really looking for was a product, and they were looking for a company and a partner that could provide the full spectrum—from clean sheet design, right through to products rolling off the production line—and to have excellence, absolute excellence in every stage of that entire journey.

The work that we have done inside (repositioning our mindset and building our backend capabilities around transfer to manufacture), the quality of our manufactured products, having that quality recognized through supplier awards, and the metrics we track regularly (defect rate and complaint rate) on the products we ship. The shift in the performance of those products has been very pleasing and reflection of a lot of hard work by the team at Invetech once they were pointed in the right direction. I would say those two things: the team that has been built and the expertise, and the expansion of Invetech’s sense of what it is doing to provide quality products off the production line, rather than just an innovative design.

Colin: Andreas, thank you for your time today. You are joining Invetech at a very exciting time. There are many things going on, many exciting projects, and some corporate moves as well. There is the opportunity to build Invetech at a faster rate than has been possible in the past. I look forward to seeing how you and the team write the next chapter in the Invetech story. It’s very exciting.

Andreas: Thanks, Colin. It’s great to chat with you and I also want to thank you for the fantastic and terrific work that you have done over the last four years at Invetech. From somebody who left the company three years ago, and has seen what you have achieved and established is incredibly encouraging. It’s great to see what has been brought forward for Invetech itself, but particularly for Invetech’s clients. I wish you well in your new role. You are joining a great team in Leica Biosystems.

Colin: Thanks Andreas, we will stay in touch and it has been terrific talking to you today.

Andreas: Thank you, Colin.