Stryker’s new CEO: Innovation teams now asking, “Who is going to pay for this?”

Stryker’s new CEO: Innovation teams now asking, “Who is going to pay for this?” (MedCityNews)

Just one month ago, Kevin Lobo took over the top spot at medical device maker Stryker Corp.  On Monday, he explained the $8.5 billion corporation’s innovation strategy moving forward in his first public appearance as CEO at Cleveland Clinic’s Medical Innovation Summit.

Formerly president of J&J company Ethicon Endo-Surgery and then head of Stryker’s orthopedics unit, Lobo replaced chief financial officer Curt Hartman, who served as interim CEO following the resignation of Stephen MacMillen in February.

According to Lobo, the innovation culture at Stryker has changed dramatically over the past several years as providing clinical and economic evidence for new products has become critical. “We’re starting to broaden our lens from just looking at products to thinking about the overall procedural efficacy, to thinking about the customer experience and the patient experience,” he said. “And we’re starting to collaborate with customers and trying to understand what role can we play in assisting along the continuum of care.”

Stryker is also placing an emphasis on internal collaboration. The makeup of the innovation teams at the company has changed, he noted, from groups of R&D engineers to groups of engineers, plus IT and supply chain personnel and health economists.

In the past, the model was to stay focused on the customer. “We’re now changing that paradigm, realizing that if the capital equipment part of the business collaborates with disposables, the customer can really get a benefit,” he said. “We have health economists on our innovation teams now saying, ‘so if you add this, who’s going to pay for this?’ That wasn’t even a thought five or six years ago.”

And how will these plans for innovation affect Stryker’s business strategy with Lobo at the helm?

Orthopedics, which makes up about half of Stryker’s sales, will remain at the heart of the company. Lobo sees great opportunity for orthopedics in emerging markets, which represent only about 6 percent of the company’s sales today. “We really have to push global growth; it will be part of my agenda without question,” he said.

That doesn’t just mean emerging markets, but also in Europe and other places where sales aren’t as strong as they are in the U.S.

That might also mean snatching up more companies. Over the past few years, Stryker has gone on a bit of an M&A spree, making acquisitions including Israeli stent technology company Surpass Medicalmedical device company Concentric Medicalspecialty spine company Orthovitareprocessing/remanufacturing company Ascent Health and the neurovascular division of Boston Scientific Corp.

“We’re going to (look at) a company that has a new procedural approach […] or something that has high clinical evidence,” Lobo said, noting the purchase of Orthovita as an example of one in which the company was willing to pay a little more for a company with more clinical evidence behind it.

Rather than approaching innovation as adding new features to a product and charging higher prices for those features, Lobo said Stryker is now thinking about how it can make a simpler solution that is easier, more reproducible and more consistent.

“I think we’re going to continue to look at new materials — materials that can last longer and are easier to implant,” he said. “But I think product innovation as a percent of innovation is definitely going to go down, and we’re going to be looking at other areas where we can improve more efficiency and other aspects of the continuum of care.”

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