High Tech en de medische wereld Roel Fonville Bestuursvoorzitter Philips Medical Systems Nederland.

High Tech en de medische wereldHigh Tech en de medische wereld

Roel FonvilleRoel FonvilleBestuursvoorzitter Philips Medical Systems Nederland Bestuursvoorzitter Philips Medical Systems Nederland

Philips Medical Systems, Roel Fonville, 2006-03-08. 2

High Tech and Healthcare

The benefits of technology in healthcare

Business characteristics of Philips Medical Systems

Requirements to secure continued success

Conclusions


Our Mission in Healthcare

To improve people’s lives with advanced technology that is easy to experience and designed around you


Healthcare Expenditures will grow from ~8% of worldwide GDP to ~10% in 2010

49%

28%

8%

2%

13%

North America

Western Europe

Japan

China/Hong Kong

Rest of the World

Worldwide Healthcare Expenditure: US$3,300 bln in 2002

North America makes up 49%of the worldwide spent

Source: Medistat

0%

2%

4%

6%

8%

10%

1950 2000 2010Source: WHO

Healthcare is the world’s largest service sector


Various technological trends enhance each other in medical technology

• Moore’s law will continue beyond 2010:– Increasing computing power– Increasing network bandwidth– “Unlimited ” data storage– Intelligent systems

• New generations detector technology• “Smart Software” (Computer aided decision support)• Genomics, Proteomics, Bioinformatics• Miniaturization• Wireless and Internet technology


Healthcare’s huge benefits:$1 more invested in Healthcare creates $2.5 of value

• Benefits from increased spendings since 1980, USA:

• From a human perspective: – 470,000 less deaths– 2,300,000 less people with disabilities– 206,000,000 days less spent in hospital

• From an economic perspective:

– Delivering $ 1600 bln of economic value

Source: Medtap report, The Value of Investment in Healthcare, 2005

Iron lungs during Polio epidemic in the 1950’s

Philips Medical Systems, Roel Fonville, 2006-03-08. 7Sources: Russ Coile, Futurescan 2003, SG-2

Imagingearlier diagnosis saves lives and reduces costs

Minimally invasive surgeryreducing patient trauma and costs

Healthcare IT Right Information at the right time

enables better treatment and lower costs

Molecular MedicinePreventing disease from happening

Medical technology continues to transform Healthcare

Around 70% of the survival improvement in heart attack mortality is a result of changes in technology.” Cutler & McClellan, 2001


Technological innovation enables early and fast diagnosis

• Fast diagnosis– Total body scan for trauma

patient in 21 seconds

• Early diagnosis– 3-D Ultrasound enables early

detection of heart dysfunction


Image guided minimal invasive technologies reduce the integral costs drastically

35% reduction of the initial costs for a coronary procedure

$32,300

$21,100

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

CABG

Capital investment$ 50.000

PTCA

Capital investment$ 1.000.000


• Institute of Medicine: 98,000 US deaths due to avoidable medical mistakes: reduced human errors by decision making tools

IT benefits in Healthcare

Healthcare IT is the enabler to get the right information at the right place at the right time


Molecular Medicine

Translational Research

Imaging Technology

Agent Development

CollaborationPartnerships

Molecular imaging:• Images the cells at work

inside the living body

• Allows earlier detection and characterization of disease

• Early assessment of treatment

• With Molecular Diagnostics leading to personalized medication


.Positron Emission Tomography

CT Scan

Morphology:Physical

properties of the body

PET Scan

+Function:

Display e.g. sugar consumption of tumor

PET/CT Scan

=Multi-Modality:

Tumor detection and localization


1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

50%

40%

30%

20%

10%

0%

12%

20%

30%

1950 2000 2050

% of people over 60 years, Western World

Sources: United Nations, Victor R. Fuchs (Stanford University)

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

50%

40%

30%

20%

10%

0%

12%

20%

30%

1950 2000 2050

% of people over 60 years, Western World

Sources: United Nations, Victor R. Fuchs (Stanford University)

Demographics and economic developments add to long term healthcare growth….


Medical Service Centre

Hospital Heart Failure Clinic(e.g., Rotterdam Thorax Centre)

General Practioner

Patient

Telemedicine Equipment & Infrastructure

Medical Support

Healthcare at a distance






Conclusions


Business requirements for Philips Medical Systems

• In depth clinical application knowledge is crucial for proper system development

• Need for continuous innovation to provide new functionality, improve workflow and reduce cost of ownership

• Ability to manage a high value, low volume, highly diversified supply chain

• Maintain long lasting customer relationships, providing continued customer support and service

• Serve a world wide market with major regional differences


Developments in technology influencing our business model

We are moving from an analogue world in which we had….

–Analogue - Integrated – systems

–High costs of processing and memory units

…and as a result….

–High level of vertical integration in hardware and software

–New product introductions through completely new systems


Developments in technology influencing our business model

…..to a digital world in which we have…..

– Standard software & hardware components

– Low cost of computing power and storage capacity

– Well developed standardized design flows and related tooling

– Easy interfaces with external partners

…resulting in a decreasing need for vertical integration!

Where value in the system industry is created by the quick combination of (existing) components to fit new customer

needs


Resulting themes from “digitalization” in PCP

• Steep increase of the use of software– To increase functionality– To enable flexible & cost effective customer specific configuration

• Re-use of hardware modules and software blocks

• Commoditization of components (CCD’s, computer components)

• Open innovation; increased utilization of the development capabilities of the supply base and other partners

System design changes: from “Woodcarving” to “playing with Lego blocks”


Enabling continuous renewing of product portfolio….

% PMS Revenues based on products < 2 yrs old

40%45%

58%65%

70%

2002 2003 2004 2005 Target


Resulting themes from “digitalization” in supply chain of complex high tech system industries

Full vertically integrated assembly operations

Phase 1: Full configuration and test

center

Module operations

Strategic Module

operations

Non Strategic Module

operationsOutsource,

when profitableKeep in house,

off shore if efficient

Phase 2: Limited testing facilities;

bundling center; final configuration at hospital

Phase 3: Integral logistic control center; drop shipments to the

hospitals

Syste

m a

nd

sup

ply

base

matu

rity


A Faster, More Efficient Supply Chain…..

Equipment Direct Deliveries as % Sales (world)

73%79% 80%

26% 32%

0%

20%

40%

60%

80%

100%

2002 2003 2004 2005 Target


A more Integrated Supply Base….

No. of Suppliers (80 % of BOM spend)

150135

110 100

0

50

100

150

200

2003 2004 2005 2006

Supplier Owned Inventory (%)

12

3949

60

0

20

40

60

80

2003 2004 2005 2006






Conclusions


We need top class knowledge infrastructure

• A limited number of focused entrepreneurial Institutes performing at world class level

– Top class hospitals and clinical institutes to build clinical application knowledge

– Biochemical and pharmaceutical companies to co-develop Molecular Medicine solutions

– Technical institutes for technology required in our systems

– Supply chain management knowledge and models

• Issues– Lack of concentration & focus

– Valorization of knowledge vs. Humboldtian principle


We need close cooperation with competent partners

• Suppliers that are a sound partner in a co-development & supply chain processes from a global perspective

• With a clear understanding of the business models

• We & our partners need to be open for fast mutual learning • Aligned processes, ways of working and defined responsibilities

• Clear agreements on handling Intellectual Property issues

• Partners, able to educate and manage specialized top second tier suppliers


We need competent people!

• High-tech has too little appeal in the Dutch society

• The government puts far more emphasis on trade then on (technical) innovation

• The (high tech) industry has a too low profile. The image is dated.– Many have the false idea that manufacturing is dirty, heavy and dull.

– High tech companies like ASML, FEI and Philips Medical Systems are quite the opposite.

– Many high tech module suppliers changed over the last 25 years. A lot of machining is done now by CNC equipment

• As a result, the inflow of students in technology and science studies is too low.

• The image of a difficult study combined with the “Tempo beurs” does not stimulate the inflow of new students in science and technology. Drastic measures like a total exemption of school fees for Beta studies would be a clear signal


We offer the competent people interesting challenges

• A stable business with growing market perspectives

• Work at the frontiers of converging technologies in medicine, biology, chemistry, software and mechatronics

• Opportunity to build on the cumulative knowledge in the company on the application and technology of our modalities

• Excellent development opportunities






Conclusions


Many conditions for continued success in Healthcare are present

• We have excellent opportunities in the healthcare markets because they require

– Strong application knowledge– A large cumulative expertise – Management of high diversity and complex system configurations– Compliance with strict quality and regulatory rules

• The diversity in Europe and the tradition of cooperation and long standing relationships are a source of competitive power for complex system industries

• Many specialized companies in the Netherlands are very well able to compete in their area with the best in the world

• The recent investments in new initiatives like the Center for Molecular Medicine


High tech in Healthcare offers compelling opportunities! • Technology has improved healthcare performance and saved

lives and costs• The influence of technological innovations on breakthroughs in

healthcare is accelerating and creates a wealth of opportunities for– Clinical and Knowledge institutes

– Supply base

– New talent

– Our customers

– The patient

– Society

Provided we create conditions and show entrepreneurial behavior


•The Golden Age was deserved! – Technology was available (Tsar Peter did not visit Zaandam without

purpose!)– Willingness to take risks ( willing to sail the Oceans and to fight other

nations)– Utilization of the geographical situation in the delta of some main rivers of

continental Europe– Culture of saving & investing

• If we want a new Golden age we will need to deserve it again!– We will need the technology, world class institutes and enough new talent– Knowledge & expertise in the area of complex supply chain management– Availability of financial means– Courage & entrepreneurship

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High Tech en de medische wereld Roel Fonville Bestuursvoorzitter Philips Medical Systems Nederland.

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