Agilent Technologies is one of the world’s largest providers of laboratory solutions, with $4.5 billion in annual revenues. Agilent is the second largest supplier of analytical and life science instruments, according to IBO’s list of the top 30 industry companies in 2016 (see IBO 4/15/17).
IBO named Agilent its Company of the Year for 2017 (see IBO 1/15/18) based on the company’s financial, strategic and product achievements during the year. The results were the outcome of a fundamental reorganization, operational review and cultural change that began at the company in 2014. Among the major undertakings: the creation of three new divisions, the consolidation of sales channels, and the restructuring of the company’s central research lab to focus on life science and diagnostics.
Informing the change process were two initiatives: Agile Agilent, described as a cost reduction and rationalization program, and One Agilent, designed to change the company’s culture to better align with its customers, including a greater external focus.
One Agilent was a particular challenge, according to Patrick Kaltenbach, senior vice president of Agilent and president of the Life Sciences and Applied Markets Group. Asked about the most important lessons Agilent learned as a result of its three-year transformation, he told IBO, “The first was how best to work together as One Agilent, across groups and functions. This was and is a cultural transformation.” This was a widespread change, he explained. “We had to learn how to shift our mindset and approach, from operating in a largely siloed or group-only mindset, to looking for better ways to work together across the company to leveraging expertise and innovation, and ultimately drive good business solutions for our customers.”
“Initially, as one might expect, there was quite a bit of skepticism whether the ´One Agilent´ approach would drive results.“
This cultural change was also a surprise in terms of the challenges the company faced in completing the transformation. “As in many mature companies, there were pockets of the organization who had always had the limited perspective of operating within an isolated product line or division,” said Mr. Kaltenbach. “Initially, as one might expect, there was quite a bit of skepticism whether the ´One Agilent´ approach would drive results. Once we could show the success of this approach, like with our efforts in the corporate-wide Biopharma program, this sentiment began to change and continues to do so.”
In addition to One Agilent, the restructuring itself, which spanned many operations and functions, was also a lesson learned from the transformation. “The second lesson is really based on the theme ‘structure follows strategy’. For LSAG, for example, we reorganized the Mass Spec organization into one group, and with the realignment of the sales team, we were able to unleash real innovation and momentum to drive growth,” highlighted Mr. Kaltenbach. “This allowed us to treat our customers´ businesses holistically and support their operations more effectively/efficiently.”
Congruent with these changes was a portfolio review, and realigned product and end-market investments. As Mr. Kaltenbach stated: “Lastly, but by no means less importantly, the third lesson we learned, was that although it was a difficult decision for us to shut down unprofitable and underperforming parts of the business, like the NMR group, this action released more funding opportunities for us to focus our investments on high-growth areas, bring new technology into play and focus on where we could make the biggest difference to customers in our key markets.” Targeted areas include clinical diagnostics, LC/MS and food safety.
Product development is also designed to address all of the company’s core markets. “Using the company’s technologies across markets enables Agilent to enjoy growth broadly, and without the limitations of success in only one or two,” explained Agilent President and CEO Mike McMullen. “Having this breadth of application also allows Agilent to leverage development and production investments across a much larger scale. Greater growth and profitability also gives us the opportunity to reinvest more back into the business to serve our customers even better.” As example of this leverage he pointed to the company’s LC and MS product lines. “Both generate revenue across all of Agilent’s markets (pharmaceutical, academia and government, diagnostics and clinical, food, environmental, and chemical and energy).”
At this month’s JP Morgan Healthcare Conference, Mr. McMullen highlighted three areas of emphasis for future sales growth: cancer diagnostics, biopharma and cancer research, each of which utilize multiple Agilent technologies. In the cancer diagnostics markets, the expectation is that further research techniques will migrate to the market.
“Being the leader in metabolomics, Agilent is also in a great position to capture the evolving opportunity of omics-based diagnostic testing.”
By participating in both the research and diagnostics markets, Agilent joins many of its peers. Regarding how Agilent differentiates its strategy for this growth opportunity, Mr. Kaltenbach told IBO, “Agilent has a much broader portfolio of solutions, from sample prep to analysis and reporting, that allows us to build differentiated and complete solutions for our customers worldwide.” The company’s current participation in evolving markets is also significant. “Being the leader in metabolomics, Agilent is also in a great position to capture the evolving opportunity of omics-based diagnostic testing,” he said. As he emphasized, Agilent currently has a foothold in diagnostics. “With the former Dako organization, acquired in 2012, we have a very strong diagnostics business already, and are well positioned to leverage that knowledge for our analytical product lines.”
For fiscal 2018, ending October 31, Agilent forecasts core revenues to grow approximately 4.3% to between $4.72 billion and $4.74 billion.