14 March 2017

Agfa-Gevaert: sees disruptive innovation as a balancing act

How would you have reacted if one of your colleagues had come and told you, in 1975, that he had invented the digital camera? That is what Steven Sasson did at Kodak. The managers did not believe his invention would be successful and the project stopped there. Or at least that was what Kodak thought. In fact, Agfa-Gevaert found an answer to the digital revolution. Thanks to the diversification of their market and products, maintaining a long-term vision and innovation and focusing on the real needs of the market, this major company, active in the chemical industry, has expanded to become an IT-oriented player.

Change or lose

Christian Reinaudo, CEO of Agfa-Gevaert: “Thanks to globalisation, digitisation and the internet of things, knowledge is now being applied at lightning speed. Anyone who slows down is signing their own death warrant. Agfa did not want to curb the revolution. That is why, in 2004, it sold its photography subsidiary to free up resources with a view to investing in healthcare and the graphics industry. We even went further by connecting “globalisation” with “environmental sustainability”. Ultimately in just 10 years Agfa-Gevaert has transformed from a business active in the chemical industry to an IT-oriented player. The knowledge and culture have been obtained mainly through acquisition. “This change has saved us, because anything that has not yet been digitalised, will be very soon.”

Disruptive innovation, a balancing act
Geographic diversification can reduce the impact of disruption.

How did Agfa-Gevaert deal with this disruptive innovation in 2016? “Disruptive innovation is primarily a balancing act: firstly, it is about progressive innovation within our mature market segments and, secondly, we are leaving our comfort zone in markets where we do not have any conventional competitors”, explains Mr Reinaudo. “

“In mature markets where a plethora of conventional players are active, we innovate relentlessly in terms of product quality, service and profitability. Equally we cannot overlook the fact that some traditional activities are booming in the emerging economies. As long as these traditional activities remain profitable, we shall not reject them. The reason is obvious: the profits they generate can be invested in a new market.” To sum up, geographic diversification can reduce the impact of disruption.

In sectors with less traditional activities, growth is progressing at a frantic pace. “Consequently disruptive innovation goes hand-in-hand with quick decisions, execution and strategy. The fastest way to break into new markets is to invest in the players in the disruptive technologies: start-ups. By becoming shareholders, we keep control over strategy.”

Customer’s needs, a guiding principle
To turn disruptive innovation into an opportunity, you need to change your own behaviour as well as that of your customers.

Disruptive innovation is adapted according to customers' behaviour. "That is why we adapt our innovation to market needs. We do not innovate for the sake of innovation. It takes more attention and discipline than that. For example: we allocate our R&D resources in a way that targets applications which are relevant for larger target groups. Instead of having nine different software protocols or codes, we still use just two codes, even today. This provides a dual advantage: our own efficiency in terms of research and development increases (R&D efficiency) and the customer has the new versions faster”.

The customer also needs to be convinced about this win-win situation. In Belgium, within the fragmented hospitals market, many hospitals want “specific” software solutions. “The fact that an application can be used more widely does not harm its effectiveness. On the contrary, as it is more compatible and it increases the level of service which is an advantage to the patient even outside the hospital.” In other words, Agfa-Gevaert supports and encourages its customers to opt for better and more innovative ways of working.

Cultural revolution
Quarterly results really do not keep me awake at night.

According to Mr Reinaudo, the technological transformation is equally causing a cultural revolution. “Retail sales are effectively becoming obsolete. In future, manufacturers will be selling and supplying their solutions directly to the end user. In turn, this model needs to be transformed in terms of management.”

“I am young enough at heart to understand new developments, but I need to surround myself with young talent to be able to predict what will happen.” To do this, it is essential to have a wide range of profiles. “It is impossible to do business “globally” if you do not think “globally” or if you are not “global” yourself. You have to adapt to trends. That goes much further than the mere fact of being “multinational”. Creative minds must have the opportunity to be creative.

For Agfa-Gevaert, this cultural turnaround is one of the main challenges. “And the quest for new ideas”, confirms Mr Reinaudo. “Start-ups are besieging us with innovative concepts. But you have to pick out what might really prove valuable. This type of approach requires extremely thorough business knowledge. Furthermore, a long-term vision and strategy is required to enable the company to undergo a complete transformation which constitutes a prerequisite for survival. In all honesty, quarterly results do not keep me awake at night. The main issues which stop me from sleeping are the following: what will happen with raw materials, the dollar, the euro, the new product we are launching tomorrow...?”

The future of Agfa-Gevaert
A market which adapts slowly also has its advantages

For Agfa-Gevaert, D-day has arrived, i.e. the day on which the company must choose to take the healthcare path or that of the graphics industry. Camera film was our warhorse for decades. Nonetheless, over time this direction became less and less important. “In 10 years, Agfa will either be excelling in healthcare IT or the industrial ink-jet market. By that time, camera film will have disappeared almost entirely.” Christian Reinaudo thinks that by 2030, it is more likely that Agfa will have been transformed into an international player in the field of Healthcare IT.

It is true that healthcare is not classed as the most innovative sector in terms of adoption speed. And this aspect offers some advantages. Doctors do not change their habits on a whim. Anyone who manages to introduce a new technology is therefore safe for a certain amount of time. Moreover, this is a very complicated and highly regulated sector. It makes sense to have to wait even longer for a patient file which is integrated and exceeds the expectations of the discipline to be accepted. “It would not be a sinecure to introduce that kind of integrated solution into a market which is considerably fragmented. An all-in-one solution impacts on the very crux of a hospital establishment's IT architecture. Obviously medical institutions are not very keen on this change.”

“Bearing in mind that our B2B clients will have to forego some autonomy.” Patients are becoming demanding customers and healthcare is personalised and customised. “The new world exceeds hospital perimeters and is developing into an integrated care model in which all of the players (from patients to clinicians, and from the carers to physiotherapists and pharmacists) are sharing data and knowledge live, online and from worldwide.”

Traps, Tips and Tricks
  1. Do not focus solely on the needs of your customers, but also on those of the end-users.
  2. Surround yourself with a range of different profiles.
  3. Everyone in a company must understand the technology behind its own products to be able to predict changes as quickly as possible.
  4. The fastest way to have the opportunity to penetrate new markets is to invest in start-ups. Become a shareholder to keep control over strategy.
  5. Anyone working with young, skilled people will be more equipped to predict what will happen. Do not try to slow down certain inevitable development.
Know more?

Is disruption an invisible threat?

Discover the answers of Christian Reinaudo, CEO Agfa-Gevaert

What now?