CV shows quality without quantity

Mike Daniell

For a chief executive of one of New Zealand's largest companies, Mike Daniell's CV seems a bit thin.

His first and only employer has been Fisher & Paykel. The home appliance-makers took him fresh from university in 1979 to work in its fledgling medical products division.

Twenty-seven years later, he still has no plans to leave.

Daniell started out in the design laboratory as an assistant design engineer and remembers celebrating annual sales of $200,000 from its first line of respiratory humidifiers.

Now, as an independently listed company - Fisher & Paykel Healthcare - it is heading towards annual sales of $300 million for its patient-care products: heated humidification systems for respiratory care and the treatment of obstructive sleep apnoea (a sleep disorder which sees people stop breathing during sleep), patient-warming devices and neonatal care products. These are sold in more than 90 countries, with 61 per cent of revenue earned in US dollars.

Healthcare's terrific success overseas was reaffirmed last week with its half-year result: a record $31.6 million net profit, up $3.5 million, or 12 per cent, on last year, with full-year sales expected of between $278 million and $285 million.

Demand in the estimated $1.2 billion global market for devices to treat sleep apnoea is rising, after studies linked the condition to other illnesses, including heart disease, says Daniell.

Sleep apnoea causes chronic tiredness as sufferers can be woken up to 200 times a night. This is due to a narrowing of the airway, which sucks flat when they inhale.

Healthcare's flow generator blows low pressure air into the airway all night to keep it inflated, a solution many prefer over surgery.

An estimated 60 million people in the developed world and 12 million in the US suffer from the condition, but with as few as 10 per cent of those diagnosed, Healthcare is confident there's a lot of room to build on its 8 per cent share of the market.

Older people are more susceptible, so as the baby boomers age, says Daniell, the rate is only going to increase.

To meet the demand, Healthcare is doubling its factory space by building a second plant, the size of four rugby fields, on its East Tamaki site. This will boost capacity for the sleep apnoea product group and improve research and development facilities.

A quiet achiever, Daniell says the company has stuck hard to its growth strategy since splitting off from Fisher & Paykel Appliances in 2001.

"The business is all about making devices that will improve patient care and make it more efficient so they get better quicker."

It has built on its core technology - humidifiers and flow generators - by making the high-margin consumables such as breathing tubes and masks to go with it, so it can supply more products to each patient.

It has then broadened the range of patients using them, moving from critical care to home care and now the operating theatre, developing humidifiers for use in laparoscopy, or keyhole surgery.

Beyond that, the focus is on gaining more customers around the world.

The business skills to co-ordinate all this have been learned along the way by Daniell as he has risen through the ranks of technical manager, general manager of the healthcare division and then chief executive four years ago when it split off from Fisher & Paykel Appliances.

He won't underestimate the importance of plant set-up to encourage innovation, efficiency and the ability to explore new ideas.

The site, housing 900 staff, is all open plan, with office and factory spaces side by side, separated only by glass, to enable maximum interaction between manufacturing and research and development.

Each product group, such as neonatal, is operated as a mini business, with its marketing, purchasing, manufacturing and administration staff all working together, rather than as separate departments.

Daniell chooses to work in an open office, sitting alongside the sleep apnoea team, rather than from an office of his own.

"I do have an office, it's just that it's with 56 other people."

Even though New Zealand provides only 2 per cent of the company's revenue, Healthcare is committed to keeping its manufacturing here, for now. Spending $60 million on the new plant is evidence of this, and there's room for about three more of the same size on the site.

"Most of the value in the products is intellectual property, so the absolute cost of making them is a relatively small part of their value and New Zealand's well set up for that," says Daniell.

Another point in New Zealand's favour is the emphasis Healthcare puts on keeping its research and development and manufacturing tightly integrated.

"There would have to be clear advantages if we were to separate the two by 10,000km," he says.

"However, we are always aware of the need to remain competitive and are forever assessing what the right thing to do is. But right now, New Zealand looks good to us. It will be even more helpful if the currency comes off a bit."

And how long before Daniell decides to make a change to his CV?

"Well, I'm not too old yet," he says. "The plan is to keep doing what we're doing. Over the next 10 to 15 years, we have the opportunity to double this business two or three times over, at least, - that's the goal."

Mike Daniell
Age: 48, born Hastings
Education: Hastings Boys High School; Bachelor of electrical engineering, Auckland University
Career: 27 years with Fisher & Paykel, culminating in being chief executive of Fisher & Paykel Healthcare.
Family: Married with two teenage children.