'I'm not a politician or an economist,' says the quietly spoken F&P Healthc' />

2009 New Zealander of the Year: Business

Mike Daniell

Fisher & Paykel Healthcare
Chief Executive

So how do we catch up with Australia by 2025? Don't ask Mike Daniell.

"I'm not a politician or an economist," says the quietly spoken F&P Healthcare boss. "So I don't really know what the answer is there."

Daniell, who has headed F&P Healthcare for almost 20 years and been with the company for 31, is genuine in his desire to stay out of the political debate.

But his answer is ironic because what New Zealand really needs is more companies like F&P Healthcare. And more business leaders like Daniell who are prepared to dedicate themselves to building them.

F&P Healthcare is a technology company. It reinvests more than 6 per cent of its revenue on research and development. It is a growth company - doubling in size every four or five years.

And it is an exporter - pulling in 98 per cent of its $500 million revenue from overseas. It employs 1700 people locally in skilled design and manufacturing jobs and that number is on track to grow, even as it expands its production facilities abroad.

F&P Healthcare is the world leader in the specialist medical field of heated humidification devices and systems for treating respiratory conditions with ventilation.

While those sound like niche products it is worth considering that they are life saving for thousands of sufferers of respiratory illness including many of those facing dangerous complications from the H1N1 (swine flu) virus.

The company has a market share of between 75 and 80 per cent in the production of heated humidifiers.

"We've actually got a big obligation to make sure we that can provide the necessary equipment because we have such significant market share," Daniell says.

As the Northern Hemisphere winter kicks in and healthcare systems the world over stock up for an expected influx of swine flu, the pressure to maintain supply goes on. "We're running seven days a week, 24 hours a day ... to make sure we're able to meet demand and making a big capital investment this year in growing capacity both here and in our new facility in Mexico."

The company says it will double manufacturing capacity in the next five years, spending $30 million in capital development at its East Tamaki site and $18 million developing a new plant in Tijuana, Mexico.

Devices for surgery and treatment for acute illness account for about half of the company's revenue.

The bulk of the rest comes from the manufacture of breathing devices designed to be worn in bed by chronic snorers.

Chronic snoring - or obstructive sleep apnoea (OSA) - might sound like something trivial. But studies show it can stop sufferers breathing for long periods.

As well as the problem of disrupted sleep, the condition is now recognised as a factor in strokes and heart disease.

The increase in acceptance and diagnosis of OSA and the fact that it is more prevalent among the elderly and obese makes it one of the fastest growing medical conditions in the western world.

It is still an under-recognised condition, Daniell says. "There could be 60 million people in the developed world with OSA. We estimate fewer than 10 million of those have been diagnosed and treated so far. So consequently the market is growing at about 15 per cent a year."

There is no doubt F&P Healthcare has demographics on its side. Daniell is the first to acknowledge the western world's fatter, ageing population provides fair winds.

But the pace of growth at F&P Healthcare is impressive, not just because it has been rapid, but because it has been steady and well managed.

"We've had an objective for 15, probably even 20 years, to double the size of the business every four or five years," Daniell says.

"If you look back over the last 20 years our compound annual growth rate is about 17 to 18 per cent. For the last six years its been 18 per cent ... that's in US dollars. So the whole business is geared up for growing at that quite rapid rate."

Unlike plenty of New Zealand companies, it has resisted the temptation to accelerate growth to levels which it can't sustain.

Could they grow faster?

"We do ask ourselves that question, but we also like to balance the expense growth, revenue growth and earnings growth, and we think that we're in about the right place."

Daniell says it is always on the lookout for opportunities and some parts of the business do grow faster - particularly off a lower base.

"I think as a whole team we approach this business in a very methodical way ... not just the engineers but the people involved in sales and marketing are a very thorough bunch, very analytical.

"[They have a] very good understanding of what our opportunities are and how we are going to get from here to there."

Growth at F&P Healthcare is underpinned by a clear four point strategy, Daniell says.

Point one is to develop the technology and make it better. Point two is to do more for each patient.

Daniell offers an example."We started with the humidifier ... which is a device that heats water and creates humidity, we then began to offer a single patient version of the chamber that heats the water, then began to offer the tubing that connects the humidifier to the ventilator and the patient, then filters to prevent bacteria getting down to the patient ... so more of what each patient needs."

Point three is to take the technology and develop it so it can be used by more patients. For example, the way the company took what it was doing for surgical and acute treatment and converted it for use in treating obstructive sleep apnoea.

Point four is to grow geographically and to get more and more of its staff based in those new markets.

The company now has about 500 staff around the world. Daniell himself has to spend a lot of time travelling. He heads overseas six or seven times a year. He reckons he has spent about five years of his career at F&P on the road.

When Daniell is back at the East Tamaki headquarters, he isn't hard to find. He doesn't have an office and his unremarkable desk is one of many in an open-plan space where engineers, accountants, sales and marketing staff sit together.

He is proud of his team, many of whom have also been with the company for decades, and downplays his own role in its success. "My contribution is relatively small."

Daniell will be drawn on some economic issues. He is concerned about the nation's ability to keep its brightest brains. He sees wages and housing affordability as key issues.

He highlights a "catch 22" the nation needs to resolve. Although it New Zealand needs more technology-based exporters, the reality is that if there were a lot more like F&P Healthcare there just wouldn't be enough skilled staff to go around.

"So it is important that the education system has the capacity to bring through people in the areas that we are particularly interested in.

"And probably equally important, since we are not going to change the birth rate, is that we have to be an attractive destination for skilled people internationally.

"That's a matter of having good infrastructure and New Zealand being an attractive place to come and live and work, right down to affordable housing."

There is no easy solution but the methodical, long-term growth strategy followed by F&P Healthcare might provide a blueprint.

"Ultimately productivity per person is what drives increasing incomes for everyone," Daniell says.

"So we need to add more value. Certainly the kind of business we have, that's exactly what it does."


F&P Healthcare

Age: 52.
Born: Hastings.
Education: Hastings Boys High School, Auckland University BE in Electrical Engineering.
Family: Married to Glenys, 20-year-old son and 16-year-old daughter.
Hobbies: Tramping, photography.
Revenue: $459m
Operating profit: $102m
Net profit:$62m
R&D spend:$28.3m
June 2009 annual report