For a man who took a company from $17 million in sales to a $4.5 billion publicly traded juggernaut listed at #307 on Forbes 400 billionaires, John Brown is a remarkably humble man.
He’s also, for all intents and purposes, the man who put Stryker on the map during his 32-year tenure as CEO, which stretched from 1976 to 2009. Today, the Kalamazoo, Mich.-based medical device company nets nearly $10 billion in annual sales and is considered one of the largest and most important orthopedic players in the world, in large part thanks to moves Brown made.
Brown took over at Stryker following the death of company president Lee Stryker, who was killed in a plane crash with his wife while on vacation in Wyoming. Brown was recruited to join the company but initially turned the offer down, worried that he wouldn’t be able to duplicate his predecessor’s style of mingling business and personal relationships. However, after being assured by the Stryker family that he would be able to run it in his own style, Brown accepted the position.
Brown’s initial goals were to take Stryker public, grow earnings per share by 20% and expand via acquisitions. He achieved all those goals – and then some. Stryker went public in 1979 and entered the orthopedic implant market the same year by purchasing Osteonics, a New Jersey-based company. Brown says his best acquisition was Howmedica, the orthopedic division of Pfizer, which Stryker bought for $1.65 billion in 1998. The deal doubled Stryker’s sales and put it in a leadership position in the orthopedic industry. Brown retired in 2009 and still serves as an advisor to the company; he also sits on the board at St. Jude Medical.
In this episode of DeviceTalks, recorded at the AdvaMed 2015 conference, Brown tells Medical Design & Outsourcing publisher Brian Johnson how he built such impressive results during his tenure.
“Most people don’t realize I’m very competitive,” Brown told us. “I can’t stand to lose.”
Brian Johnson: Is it sometimes a mixed blessing to be called a legend?
John Brown: Yes. That’s an understatement.
Brian Johnson: You’re a humble guy, and the company is kind of a humble company, so I imagine that you’re not used to or welcome all the attention. But over the past couple of years, it seems like the industry has done a good job of honoring your contributions. How does that feel for you?
John Brown: I’m happy about it. I’m, I guess, more happy about the recognition the company gets out of it, because so many people have been involved in the company’s success. It’s nice to see the company get recognition for that.
Brian Johnson: When you took over Stryker, it was still a relatively small company.
John Brown: It was private. Revenue the previous year was 17 million dollars.
Brian Johnson: You took it from $17 million to more than a billion in sales, right?
John Brown: When I left, it was about four and a half billion.
Brian Johnson: That’s not a bad run.
John Brown: Today, it’s about almost ten billion.
Brian Johnson: It was primarily still a hospital bed company at the time?
John Brown: The product line when I joined the company was primarily stretchers – emergency room stretchers and powered instruments and [a] cast cutter. Pretty mundane products.
Brian Johnson: And now they’re in everything. Was there a moment that you felt like it was working?
John Brown: Early on, I was insistent on making all of the decisions on everything, and then it struck me about three or four years down the road that I was the obstacle.
Brian Johnson: Really?
John Brown: That’s when we set up the divisions and started forming divisions around markets. We formed a division for patient handling and another division for the powered instrument OR products. Then give those people a lot of flexibility in product development. As long as they met their financial standards, they were free to go.
Brian Johnson: You went from sort of a top-down, “I make all the decisions” model to more of a silo-ed decision-making process?
John Brown: Yes, although the monitoring of the numbers was frequent. Pretty tough.
Brian Johnson: I wonder what it was like to work for a company that had such involvement from the founding family.
John Brown: They never interfered with anything that I did. Not once did I ever have the family say, “I need to meet with you and talk to you about what you’re doing wrong,” or anything like that. No confrontation. No disputes.
Brian Johnson: But did you feel some obligation to continue the legacy of the Stryker name?
John Brown: I wanted to protect it. My focus primarily was on the company being successful financially, and if it were successful financially, it meant that it had to take care of patients, it had to meet the needs of physicians and caregivers and the hospitals. It’s driven really by those objectives.
Brian Johnson: Did you know Homer Stryker?
John Brown: Yeah. Lee Stryker was the president and CEO when he was killed in 1976, July 25th ‘76, and I joined the company then February 1st the following year. Homer was still alive. His wife was still alive, and his mind was failing a little bit, but his wife then passed away the next year. Then he died three months later.
Brian Johnson: So you really were picking up that name and carrying it forward. It must be really interesting to see it now. It’s so prominent and large. You must feel pretty proud of that.
John Brown: I am. I’m proud of the fact that Stryker has now gone from this company in a funny, little place called Kalamazoo to being highly respected by competitors and everybody.
Brian Johnson: Did you have philosophies that guided you while you were leading the company, or was it more common sense and then afterward you came up with words for what you did?
John Brown: I guess common sense is probably the correct answer, although most people say there’s not much common sense [in me]. But anyway, that’s what we were trying to do. We were really focusing on trying to come up with innovative products that filled the needs of the patient and the caregivers, and would turn a profit.
Brian Johnson: What product do you think really was the biggest winner for you?
John Brown: I would say probably when we entered the implant market. We acquired a company up in New Jersey called Osteonics, which was owned by a couple of engineers. They forged the path for us to go and join in the implant business.
Brian Johnson: What was that business like before you guys jumped into it? What year was that?
John Brown: It was dominated by really Zimmer, DePuy, and I guess Howmedica, which was owned by Pfizer at the time. Zimmer was owned by Squibb. I think my sense at the time was that Howmedica might have been the leader, certainly in innovation. All three companies had a good reputation.
Brian Johnson: How did you attack that business?
John Brown: Our stylings had a unique hip design called a UHR, and it was innovative. There was nothing quite like it on the market, so that gave us a niche.
Brian Johnson: When you saw how that implant business was going, that was hip, or was it knee as well?
John Brown: It was the hip. Just the hip. These engineers then designed the knee three or four years later.
Brian Johnson: Was that the best acquisition that you made while you were there?
John Brown: It was one of the best. Probably the best was the acquisition of Howmedica. We doubled our size.
Brian Johnson: What’s your background?
John Brown: I’m an engineer. Chemical engineer.
Brian Johnson: How did you end up at Stryker?
John Brown: I’ll give you a one-minute history. I started out in the aluminum business, and then went to Vycol, the solid propellant business. Then into Squibb pharmaceutical company, and at Squibb, the last five years there I was president of the division called Edward Weck, which wouldn’t mean anything to you, but Weck made all the shiny stainless steel instruments that you see if you’re watching a TV scene, the scissors, tissue forceps, retractors, and all that stuff. I ran that for five years. Doubled their sales and tripled their profits during that period. Then I was recruited to come to Stryker.
Brian Johnson: Were you a Michigan guy then?
John Brown: No. I was living in New Jersey, but working in Long Island City.
Brian Johnson: Was it a tough stretch to get you to come out to Michigan?
John Brown: Yeah. They offered me the job and I turned them down. They thought it was a negotiating strategy, but it was just I was very concerned because Lee Stryker, the owner, deceased owner, had commingled the business in social activities, and I didn’t feel I was capable of doing that. I was very apprehensive that they were looking to replace their friend, Lee. I knew I couldn’t fill that role. I turned them down, but they kept coming back to me, and finally I agreed to come.
Brian Johnson: Smart decision, I guess.
John Brown: I moved from New Jersey to Kalamazoo, Michigan. We’re still official residents of Michigan, and still have a home there.
Brian Johnson: You’re chairman emeritus, and you still stay in touch with the company. But you’re there in no official capacity?
John Brown: I have no official capacity. It was my request that I step down as an advisor, because I wanted to be free to do whatever I wanted to do. I didn’t want to be treated as an insider. Not that I was going to do anything, I just wanted the freedom. At my age, it seemed appropriate, so they agreed. We have a very amicable relationship.
Brian Johnson: In terms of advising, is it just the sort of executive coaching, or are you actually in there saying, “Maybe you want to think about this deal or that deal?”
John Brown: If they ask me, I’ll come. I try not to impose my will on them. The trick is just your ambition and how much you’re willing to sacrifice and how much you’re willing to give it.
Brian Johnson: You seem like a guy who doesn’t wear his ambitions on his sleeve, but that’s probably not true.
John Brown: I am, but I’m deceptive. Most people don’t realize that I’m very competitive. I can’t stand to lose.
Brian Johnson: Then the orthopedics space is probably a pretty good fit for you – incredibly competitive market.
John Brown: That characteristic served me well.
Brian Johnson: Are you involved in any other medtech ventures at this point?
John Brown: I’m on the board of St. Jude, the heart valve pacemaker company out of Minneapolis-St. Paul. I like the way they’re approaching business.
Brian Johnson: There’s a long history in medtech of people, post-retirement, starting companies. You ever thought of maybe starting another one?
John Brown: No. Not at my age. I’ve done it all, and I don’t want to do that again.
Brian Johnson: Do you think it’s harder now to start a medtech company?
John Brown: Yes. It’s just there’s so many different agencies and organizations and bodies of influential people that impact the industry, so it’s more treacherous today than ever, I think.
Brian Johnson: It seems like people are having a hard time with CMS now; Medicare reimbursement seems to be the real trick.
John Brown: Right. I would say, in my day, it was primarily the FDA was the most difficult hurdle that we had to get over, but CMS is becoming equally potent as far as being able to get reimbursements. The medical devices were put under the FDA on May the 28th, 1976, by Paul Rogers, a congressman from Florida. And Ted Kennedy.
Brian Johnson: You guys all remember the exact date.
John Brown: You do. It was really derived because of a failure of a product the previous year. I think the Dalkon shield had failed, and so that gave the congressmen an incentive to really bring medical devices under the control of FDA.
Brian Johnson: Do you think it’s an over-regulated industry at this point?
John Brown: It’s hard for me to say. I’m sympathetic to my CEO friends and the difficulties they have in getting through the FDA. On the other hand, I think the FDA feels that they have a holy mission to protect the public, so you have to understand all of it.
Brian Johnson: Obviously the medical device companies want to protect the public too – you’re not in the business of hurting patients.
John Brown: Absolutely. Because the trialers are waiting with bated breath to descend upon you if you make one tiny mistake.
Brian Johnson: Has that changed a lot since you were there?
John Brown: Yes, they’re much more aggressive. I saw recently that there was a firm that makes beds, or sheeting I guess it was, for hospital beds, and the trialers were going after them. I don’t remember now what the claim was, but if they can do that, they can do anything.