The company’s senior VP of strategy explains what he believes sets Philips apart from the competition

Born and raised in Jakarta, Indonesia, Paul Smit now makes his home in Best, the Netherlands, where he is senior VP of strategy and business development at Philips Medical Systems. This world traveler is res-ponsible for, among many other things, the mergers and acquisitions of this multi-billion-dollar company. Smit has held numerous other positions within Philips, including member of the corporate planning and strategy group, general manager of security activity, and product manager and specialist in analytical X-ray equipment. He began in Philips’ research department in the fields of pattern recognition and solid state magnetic effects. Smit recently spoke with Medical Imaging about acquisitions, service models, increased efficiencies, and how Philips Medical Systems handles the competition in such an aggressive market.

Philips is touting a patient-centric focus in its design, especially with the Ambient Experience, which was unveiled at RSNA 2003. What has the response been?
At RSNA, the response surpassed our expectations. People were very excited and wanted to schedule meetings to discuss details.

Has the system been installed anywhere?
Not yet, but we are in discussions with a number of hospitals. The Ambient Experience is not an off-the-shelf product; it is a means for a hospital to express its uniqueness in the way it configures its inner rooms. The first step is to discuss what the hospital wants to express and how to capture it in design. We then use electronics and content management tools in order to reflect that. It’s similar to an IT project: The customer says what he has in mind, and we come back with proposals.

Technology advancements produce more images at a quicker pace. But the number of radiologists hasn’t increased at the same rate. How does Philips Medical tackle the variance in efficiencies?
We systematically try to do two things. One is to make our machines faster and simpler, which means less time needed per patient. These machines are quickly becoming more productive. If you take machines like CT or MR, we’re easily talking factors of 5 to 35 times faster over a 5-year period. So, we emphasize enabling patient management to be done more quickly and simply.

The second thing is automation and clinical decision support. Automation is very much about supporting the clinician in setting up the whole procedure—not only the management of the procedure, but also in capturing the images. Specifically if a PACS system is in place, you can see significant productivity enhancements by allowing the PACS to capture all the data that is relevant for the analysis. In addition to the data, we’re trying to add intelligence in the system that points out where certain lesions or suspect areas are so that the radiologist can spend less time interpreting the images.

And this goes beyond mammography. Many companies have algorithms to point out where possible lesions might be. That’s now extending into the lung with CT, and it will be going in other modalities as well. With cardiovascular X-ray and ultrasound, for example, we’re trying to make the images sharper so that intervention can be done more reliably and quickly. In the case of ultrasound, which is now used to guide biopsies, the sharper the images are, the better the chance that you actually hit the lesion and get the sample from the right tissue. It’s with measures like these that we’re trying to raise clinician productivity.

The past few years have been big for Philips in terms of acquisitions, including Marconi’s medical systems business, Agilent Technologies’ Healthcare Solutions Group, ADAC, and ATL Ultrasound. How have these acquisitions been integrated into Philips, and what is the benefit to end users?
The companies have been integrated in terms of sales forces and back-office systems. Product road maps have been aligned, and all of the companies are moving to the same IT, finance, and administrative systems. We believe the integration is behind us, and now we’re on a path of never-ending improvements.

The benefit to the end user is in a broad product offering and speed of innovation. For example, we had an algorithm developed for MR to speed up MR management. In some procedures, a patient needs to hold his breath for 20 to 30 seconds in order to see the heart. However, using the algorithm will reduce the time. And that’s important if you’re a weak patient, when even 20 or 30 seconds can be an extreme task. We developed the MR algorithm and started using it in ultrasound to dramatically sharpen the images. And now we’re using it on our cardiovascular X-ray to achieve the same results. Leveraging new technology across product lines will lead to faster time to market of new products.

Another benefit is that customers want to buy from fewer vendors. If a customer is building a new hospital, he doesn’t want to deal with 10 or 15 different vendors. He would prefer to use a limited number of vendors. Before we did the acquisitions, we could fill in part of the portfolio. Now we can fill in a very broad part of the portfolio. And that has led independent hospitals to order everything we can offer.

What is Philips’ view on the sense of unbalance in the industry, where the largest quantities of products and technologies are coming from a small number of companies? Are the bigger companies—like Philips, GE Medical Systems, and Siemens Medical Solutions—buying up the smaller organizations to eliminate competition? How are end users expected to participate with such a “triopoly?”
I cannot speak for our competitors, of course. But in the case of Philips, we have not bought competitors. We have bought companies that had a product portfolio that we did not have. For example, we bought ATL Ultrasound because we were not in ultrasound. We bought ADAC’s nuclear medicine, because we were not in that business at all. When we bought Agilent, we bought cardiac ultrasound, which ATL didn’t really have, and we bought patient monitoring. And finally, when we bought Marconi, we bought it because of the CT business. I think we can honestly say that we have not eliminated competitors. And the reason we were doing that was because we could see that customers wanted to buy more equipment and services from fewer vendors. So for us, the question was, “Do we want to be serious about the imaging business, or do we want to get out?” The decision from Philips was, “Let’s get serious.”

In this market, it’s one thing to have a full portfolio. It’s another thing to have a competitive portfolio per modality. The burden upon the three main companies is to keep innovating and to keep proving to the market that their modalities are better than any others. I feel, and data supports it, that competition actually is intensified, and customers are benefiting from that. More and more leading hospitals and healthcare providers want to innovate the way they do business, the care process. They believe that technology plays an important role.

We’re also entering into partnerships that include research programs, for example, with large academia, like Johns Hopkins, NIH, and Stanford. The academic sites want to move healthcare forward and see companies as their partners. In order to pay for those investments, we need a certain scale. So that’s another benefit for our customers: We can help them with innovation in the care process.

Philips claims a “collaborative approach” when it comes to cardiovascular care. How is this approach different from your competitors?
Of the top 100 American cardiology hospitals—as published by US News & World Report—Philips supplies 70% of their imaging and patient monitoring. We have built a strong position in cardiology over time, and the reason we can is twofold. One is that we listen to our customers. We first ask what the problem is and then collaborate with the customer to reach a solution.

The other aspect is that we are driven by clinical innovation. Our people on the R&D side are less excited by the technology development itself and more excited by how they can apply the technology to detect disease earlier or image a beating heart better. Whatever it is that the cardiologist needs in order to do his job better, that’s what we focus on. The combination of what we call collaborative customer relationships and clinical innovation explains why we are successful in the cardiovascular market.

With constant advancements made in technology, a product purchased today could be obsolete within a year. What kind of upgrade program does Philips offer its customers?
We design a life-cycle guarantee into our products. In other words, over the life cycle of the product—be it MR, CT, cardiovascular X-ray, or nuclear medicine—we built in the capability that the system can be upgraded with the latest technology on an annual basis in order to be state-of-the-art during its life cycle. Essentially, we have a platform design, which will remain stable over a long period—say 5 to 7 years—and then we innovate on that platform. Then, we often offer 5- to 7-year contracts during which we commit to maintain state-of-the-art performance of the equipment. The typical life cycle of the large imaging modalities is 5 to 7 years. Yes, they’ll continue to operate after that time, but that’s when a new platform will be introduced, which is the moment to buy a new system.

On a related note, Philips set the record for highest overall service performance in IMV Ltd’s 2003 annual ServiceTrak survey of more than 4,400 users from healthcare facilities nationwide. What do you think sets your service apart from your competitors?

The attitude of our people is to never let customers down, and that’s the difference. Some competitors say that you get what you pay for—the contract has certain conditions, and that’s what you get. In our case, yes, of course we have contracts, but the customer comes first. If there’s a problem that isn’t covered in the contract, we’ll still solve it. Also, many of our service people stay on the job for a very long time. They get to know their customers very well and vice versa. I think that helps the service techs in terms of spotting problems very early and handling them before they’ve escalated or even become problems at all.

With a stronghold on most of the modalities in medical imaging, what are Philips Medical’s competitive edge and distinguishing factors?
Our competitive edge has two pillars. One is the collaborative customer attitude, which really starts with the attitude of our employees and then is instilled in programs and relationships. Our people do that very well. The other thing is the passion for clinical innovation. Our technical staff and clinical science staff really try to understand the clinical problem and then come up with the best possible solution. And that’s not dependent on the modality or even the geographic location. The combination of those two factors has given us the position in which we are right now. And it’s something we’re not going to change. We have training programs to make sure that we maintain that attitude, mentality, and passion.

What’s next in medical imaging?
If you think about imaging today, it’s symptomatic diagnosis. You’re being imaged if you have a problem, if something hurts, or if something doesn’t work properly. I believe that the future of imaging will be in screening for people who are at risk for certain diseases. We can identify them early through genetic tests; then with imaging, we’ll be able to find out whether a certain disease is actually happening or not. Imaging will be used during therapy for minimally invasive procedures, and it will be used increasingly for follow-up monitoring. For example, think about cancer. It used to be an acute disease with a very high risk of dying. Now, cancer is becoming more of a manageable disease that you need to keep under control and can manage with drugs and other treatment. Imaging will play an important role to check that the management of the disease is successful. So, I see the industry spreading out from symptomatic and some intervention to screening and follow-up monitoring.