Fisher & Paykel Healthcare: A Pandemic Study in Embracing Change
How does a Knowledge Leader handle a global pandemic? By adapting.
Consider New Zealand-based Fisher & Paykel Healthcare, a top 10 manufacturer in the global ventilator market, a company one could argue was already prepared for the unknown by its disciplined approach to investing in the future.
The firm’s long-term innovation footprint is easy to spot: since 2001, Fisher & Paykel has invested over $750 million cumulatively in R&D, a core value is “to be relentless in the pursuit of healthcare innovation,” and management commits 10% of each year’s revenue to R&D. As a result, according to our intangible-adjusted data Fisher & Paykel Healthcare is the No. 1 most innovative Health Care Equipment company in New Zealand and No. 3 in developed Asia, behind Cochlear Unlimited (Australia) and Olympus Corp (Japan), as measured by R&D as a percent of sales.
It was from this intellectual property-rich position that the company went about its business as usual at the end of 2019, celebrating a 50th anniversary milestone and hailing the recent launch of a new respiratory humidifier for intubated neonatal patients. To be clear, Fisher & Paykel does not manufacture the mechanical ventilators being used to treat COVID-19 patients in ICUs today around the world. Rather it manufactures the associated humidifiers and breathing circuits paired with ventilators that mimic the body’s natural humidification process to protect airway and lung function while a patient is on artificial breathing support. In 1971, Fisher & Paykel introduced the first respiratory humidifier based on a prototype made from a glass jar. The idea was to use warm, humidified air to maintain the natural balance of heat and moisture in the airways. Today the firm has extended that technology into product lines for the range of respiratory care. Sixty percent of revenues come from hospitals, for ventilation support, nasal oxygen delivery and surgical technology. The rest come from home care products, like CPAP machines for chronic conditions like sleep apnea and COPD.
In a sign of how fast times change, the firm released an interim annual report in November of 2019. Ironically, management’s major observation then was, “our results were also assisted by the extended flu season in the United States.” Major initiatives included the rollout of a new SAP enterprise database, the opening of a new manufacturing facility in Mexico and a new certification of its products for hospitals in Canada. In hindsight, each of these incremental results of the firm’s normal innovation engine can be viewed as investment in a future into which the company had no visibility.