Agfa promotes individuality among new corporate members

Managers resist urge to impose old bureaucracy

Changing the name of Agfa's medical imaging business last year to Agfa HealthCare was more than a cosmetic move. The unit, which traditionally focused on imaging, is undergoing a metamorphosis, broadening its customer base, modifying distribution channels, and repackaging products.

Driving this change is an aggressive strategy aimed at boosting revenues and improving the company's position within the healthcare IT marketplace. The recent acquisition of long-time Agfa ally Mitra and a minority equity stake in MediVision Medical Imaging reflect this strategy.

Mitra now provides in-house expertise in critical software development. MediVision, a developer of digital imaging devices for ophthalmic applications, exemplifies Agfa's hunger for expansion into complementary healthcare arenas. Following acquisition of Talk Technology, a creator of speech recognition tools, and medical patient record developer Quadrat, strategists began to position Agfa Healthcare as a key provider of informatics products that extend well beyond the traditional bounds of radiology.

To get to this point, however, Agfa has created as many challenges as it has opportunities. The acquisitions bring a need for integration into the much larger whole of Agfa, which marshals commercial initiatives in far-flung ventures including nondestructive testing, motion pictures, and photography. Bureaucracies that rule such varied businesses often create generic governance that can stifle creativity. John Glass, general manager of Agfa HealthCare, argues that his unit will not fall prey to such an approach. Agfa HealthCare, he said, can determine its own fate because its sales account for most of Agfa's gross revenues. Glass' election last fall to the Agfa-Gevaert board of directors bears witness to the importance of the healthcare business unit.

"Within our company, we are the favored son," Glass said. "We get a lot of attention from the board and from investors."

To protect this status and the autonomy that comes with it, Glass and his colleagues have constructed a fire wall between informatics, exemplified by Mitra, and the general Agfa bureaucracy.

"The integration (of this company) will not be to the point where the Agfa culture is dominant," he said. "We will maintain the Œsoftware' culture and not put our own shadow on that."

Glass characterizes this culture as "California casual"‹staff wear colored shirts with company logos and meet for barbecues, cubicles are the same size, regardless of rank, and employees have a vested interest in their company's success. Agfa owns 93% of Mitra, and employees own the rest.

To help insulate Mitra from bureaucratic forces that might slow down progress, Glass wins board approval for the concepts behind informatics projects, then works the operational issues, such as interim approvals based on milestones, among his own staff within the HealthCare unit.

Preserving the native environment of acquired companies, especially those of software developers, makes sense intuitively. But whether it breeds continued productivity is hard to say. Agfa managers know how to measure productivity in film and equipment manufacturing but not software development, Glass said.

"I can't tell you that this (environment) enhances productivity," he said. "But it has always been there, and we need to have some benchmarks."

Coping with unique circumstances is part of the challenge of making the transition from a business focused on medical imaging to one that addresses the broader venue of healthcare. Although Agfa's roots extend to photography, as do those of competitors such as Kodak and Konica, Agfa has tried to tap other resources‹other core technologies‹that will promote the long-range goal of integrating information islands within medical practice.

Through acquisitions and internal development, the company has assembled a product portfolio that spans PACS, speech recognition, hospital and radiology information systems, and the electronic patient record. Getting all these pieces to work together is an integration challenge as well as a prospecting one. Agfa managers need to find other, still missing pieces to make all the right connections. Acquisitions, therefore, will continue to play an important role in the company's growth strategy. But the process is laborious and time-consuming, Glass said.

"For every (prospect) that comes along, we have to kick the tires," Glass said. "We have been kicking a lot of tires."

In the meantime, integrating the pieces already in hand is a high priority. More is involved than just bringing the new companies into the corporate fold. Strategic plans and tactics must be adjusted to make the most of opportunities. Horizontal expansion requires corporate exploration into unfamiliar ground such as pathology, ophthalmology, cardiology, and orthopedics. These forays require solutions to unique workflow problems. The company is also looking to move vertically, to tie together operations within and among various medical departments.

Increased productivity by medical practitioners is a primary objective. This might be achieved by forging links among "medical content areas," said Robert E. Cooke, global general manager of IMPAX Solutions. The company has created, for example, a "PACS watch" subsystem that gathers statistics and compares them with benchmarks, allowing the customer to make informed decisions about modifying workflow. Another example is the development of productivity tools that are sensitive to the content within images. Agfa engineers have developed an electronic atlas of the body to replace the hard-copy reference that commonly accompanies diagnostic workstations.

"Physicians interpreting exams can pull up content dynamically and, in the context of the image being viewed, gain additional information that may be useful in differential diagnosis, planning treatments, or gaining CME credits," Cooke said.

These products need to be effectively launched into the market. Agfa must leverage and modify existing distribution channels to fit these new needs. Distribution channels designed to address academic institutions will be used to address group purchasing organizations. In adjusting the distribution channels, new opportunities will arise to sell products that might not otherwise have been created. A single scaleable system, for example, might give rise to several other products tailored to specific needs and price points.

"In this way, we put the right products into the right distribution channels so we can be sure we are touching all the markets and leveraging our resources appropriately," said Douglas M. Tucker, Ph.D., vice president of IMPAX Solutions.

The Agfa strategy accounts for threats as well as opportunities. These threats may be competitive, economic, or technological, Glass said. Ink jet printing addresses all three forms of threat. Institutions looking to get more for less in economically challenging times will be tempted to buy into this technology, which promises cost savings in both its acquisition and its operation. Ink jet technology is not yet accepted as part of a diagnostic solution, but that day is coming, Glass said.

"We can already demonstrate, through our photo division, color ink jet technology that delivers hard copy that is very hard to distinguish from photographic prints," Glass said. "We have to assume that it can be done eventually in diagnostics."

Agfa has a development program under way to create high-resolution ink jet printers. But when medical ink jet printing arrives, the competitive landscape of the industry will change, he said. New companies, ones based predominantly in Japan, will be jockeying for position in this emerging segment of the market. And Agfa will have to battle a whole new wave of competitors.

As with ink jet printing, informatics presents competitive challenges. Managers must read the market carefully, recognize the potential of technology, and respond to threats in a timely fashion.

"I think the biggest threat is making sure we invent the future fast enough," Cooke said. "To do that we need to be efficient; we have to react quickly to trends in the market and trends in technology."

Under some circumstances, that will mean developing new technologies. Or it may mean stopping activities that will no longer provide a good return on investment.

"We have to be prepared to make tough decisions‹to stop activities that don't make sense in a new environment and to start activities that do, because you can't do everything," he said.