11. Big Bets, Big Rewards with Stan Rowe

How do you sell a startup for over $100MM to a publicly traded company? How do you retain your most entrepreneurial and creative minds if you are a F1000 Executive? And, how do you give “freedom to fail”, while keeping innovative leaders accountable? Get the answers to these questions and more in this week's episode of HiPERleadership with guest Stan Rowe, former Chief Scientific Officer for Edwards Lifesciences (NYSE: EW) and current CEO of NXT Biomedical.

Transcript

David Morris  00:09

Hello, and welcome to the HiPER leadership Podcast. I am your host, David Morris, CEO and founder of HiPER solutions, where our mission is to bring positive change to the world. Today, our guest is Stan Rowe. I got to know Stan a couple of years ago when we were researching career patterns of game-changing high-impact leaders, or as we call them, HiPER leaders. At the time, Stan was Chief Scientific Officer at Edwards Life Science. Stan's story stood out not just for the incredible innovation he brought to the medical field, which we'll hear a lot more about, but because of his ability to innovate and create within a large corporation, Stan emerged as a true intrapreneur. And like many of his fellow HiPER leaders, Stan had to learn how to navigate create innovate within a corporate environment, which was not always easy, and yet his ability to focus on the mission, and rebound from adversity at Edward Life science helped propel the company from a split-adjusted stock price of $3 to over $50. Really an amazing, amazing story across a 14-year period of time. Well, hello, Stan, welcome to HiPER leadership.

Stanton Rowe  01:27

Thank you very much, David. It’s a pleasure to be here.

David Morris  01:31

As we get into the story here, when Edwards acquired you, what business were they in? And what business were they counting on you to help them evolve into? What was the intent?

Stanton Rowe  01:46

So, Edwards was the leading company, selling surgical heart valves around the world, which at the time was maybe an $800 million business. It's a very healthy business. And it takes a long time to build up that kind of capability for manufacturing and distribution and technology. They had a smaller business and critical care. And then they dabbled in a few other areas. But that was really their two key product lines, critical care products and surgical heart valves. The technology we were developing was disruptive to surgical heart valves, so disruptive that most people thought it wasn’t possible to actually build or make these new products because they were a non-surgical approach, replacing heart valve.

David Morris  02:42

Putting yourself in the shoes of the company, was that change clear and in their mind that that's what they needed? Or did you have to convince them of it?

Stanton Rowe  02:53

Probably my best answer to that is when I called up Mike Masala is a just an amazing guy, he remains the CEO of Edwards Life Sciences. I called him up right before a medical device meeting that I knew he was going to attend. I said, Mike, “Let's have breakfast.” And he knew who I was so, he agreed to have breakfast. And after we had some cordial discussions, I said, “Well, you know, Mike, PVT, my company should be an Edwards Life Sciences company. And Mike said, “Why is that?” I said, “Well, I mean, it's clear to me that PVT offers both the biggest risk, and the biggest opportunity to Edwards, as the leading surgical heart valve company. If this works, and you don't own it, it could be entirely disruptive to the company. And if it doesn't work, well, you may find a niche for it or something, but at least you would have control. And if it works, and you do own it, it could open up a much larger opportunity for heart valves around the world.” And so, we had that discussion. And I think that, to his credit, he was open to this idea, despite the fact, by the way, David, that his scientific advisory board advised him against purchasing PVT because they were cardiothoracic surgeons, who were the experts in surgical treatment of aortic stenosis. And Mike went against their guidance to buy this and I'll always give him huge credit for really embracing the innovators dilemma, which is disrupting your own your own market.

David Morris  04:46

So, here's Mike, CEO of a publicly traded company, providing medical devices to surgeons, to heart surgeons. And you have a market cap of about a billion, all of a sudden, he's prepared to take a big bet. He doesn't come up with the idea, but you knock on the door, you share the idea. And in fact, people are suggesting he doesn't do it, but he makes the bet. Okay, a company whose market cap now is over $40 billion. And this constitutes probably over 70% of the business. To your point, so much of this change is a leader who can see that opportunity and more importantly, see the leader they can bet on like you to make it happen. So, the company is acquired for what $100 and what million?

Stanton Rowe  05:33

Well, $125 million, and then we earned another $10 million in earn outs, so $135 million.

David Morris  05:40

So, imagine this, you're paying $150 million or so for something that ultimately adds over $30 billion to the market cap. But even more importantly, is saving millions of lives or hundreds of thousands of lives around the world.

Stanton Rowe  05:57

Yeah, it's had a tremendous impact. For sure. Hundreds of thousands of patients have now received transcatheter heart valves. It's pretty, pretty daunting to even think about that.

David Morris  06:08

Completely, and it's one of these classic stories of doing well by doing good. And what can we learn? What advice can you provide, from what you experienced on what it's like to be an intrapreneur? You show up on day one, you're disrupting other parts of the organization. Were there people that, frankly, were scared, they thought this would almost disrupt their own jobs?

Stanton Rowe  06:32

Well, I don't think everyone at Edwards thought this was a good idea. I think that the surgical heart valve group, which was the majority of their business, was about as skeptical about this technology, as their scientific advisory board was, they reflected the perspectives of the cardiothoracic surgeons that they serve in the market. I remember somebody telling me that they worked in that division, and they asked their supervisor about the acquisition. And the supervisor said, “Don't worry about it, it's not going to happen during your career.” I think that was not an unusual perspective that maybe they thought Mike made a bad purchase. So, I don't think there was a total support across the company. But I think that that's the nature of disruptive technology, both internally and externally. That over time, you have to drive a vision for this, I gotta say the, you know, the management team that I worked with executive group was very receptive and very, very accommodating for me to come in and join them as an outsider, as many of them have, you know, worked together for a number of years. So, I was very grateful for that.

David Morris  07:50

Did you ever imagine you were going to stay there 14 years?

Stanton Rowe  07:54

No I didn’t, I thought, like many CEOs, I would just hang around for a couple of years, hopefully make sure that the handoff was successful, and probably go on to do my next startup or something. But this is where, you know, Mike made a place for me, even when I kind of handed off this technology, at some level to Larry Wood who worked for me, who became the head of that business unit. I mean, I remained connected with those guys, very closely. But I went on to create out of an intrapreneurial unit with an Edwards called Advanced Technologies, with the goal of creating, you know, the next new breakthroughs and focus in areas where Edwards had a strategic interest, Mike was very supportive of trying to create an environment where we could actually do big innovation in a big company, which is pretty much unheard of. So, it's Bell Labs.

David Morris  08:59

In what were some of the key components of it, I mean, if you're sitting out there, you're a CEO or president of a country, you know, a huge organization, and all of a sudden you bring in an innovator, you hire them, you acquire them, you have an innovator, they have a vision. What are some of the things that can be done to really allow the opportunity for that organization to disrupt itself, innovate, break new ground?

Stanton Rowe  09:25

I would say the number one thing that inhibits big companies is the risk of failure. And I think about a great VC, venture capitalist may have out of 10 investments, he may have two that are really successful, and maybe one or two more than kind of breakeven. I mean, that's an outstanding record for venture capitals. And of course, their job is to do big innovation. Well, why would you expect a big company that's doing big innovation to do much better? I think you have to embrace the risk. And when you embrace the risk that not everything is going to work, you have to have some way to deal with failure in a way that makes it acceptable, as part of the process. And I think this is where big companies fail, they have not figured out how to embrace the failure that comes with innovation: scares them to death, things don't work, they put their money in things that are predictable, and they don't know how to deal with a group that failed; are they failures or did the device not perform? Or did the technology not perform? If you don't support the people in a way that embraces the innovation, if you don't support the people that are embracing this kind of innovation, then you will never get that innovation internally. That means you have to be able to say, “Okay, we're going to kill this project, you guys worked really hard. You did an amazing job, I'm really proud of you. You did exactly what we asked you to do. But we're going to close it down, because it's not doing what we expected it to do. And we're going to move on to the next one. And you guys are gonna make that successful.” I don't know companies to do that today.

David Morris  11:19 

One of the questions that's probably going on in a lot of CEOs minds right now, is "Hey Stan’s a very entrepreneurial guy, how do I hire someone like that? How do I acquire that person's business and keep them engaged here?” Back to when you are J & J; how many years were you at J & J? 

Stanton Rowe  11:37

13. 

David Morris  11:39

Okay, and a lot of people say someone like a Stan, it was inevitable, he was gonna leave and start his own business, but a company like J & J, could they, in fact, have retained you long term? If they'd had an environment like this? And you could have been an intrapreneur within it? Could you have stayed at the same company for all these years?

Stanton Rowe  11:57

Absolutely. I mean, I love the culture, they're, they're very patient-oriented. They believe in long-term investment. And I'd say the same is true of the medical device companies, the Medtronic, the Boston Scientifics, the Abbotts. Creating innovation? I think there's an opportunity to keep people to do this. But you have to be able to deal with those cultural issues around risk-taking, failures, and investing longer term, that does make it challenging.

David Morris  12:32

What was the trickiest decision? Maybe for both of you, Mike, and the executive team early on, you know, the first couple years, when you first joined, what was sort of that moment that maybe the whole project could have been killed? And how did, ultimately, the culture of innovation prevail, and prevent it from not going forward?

Stanton Rowe  12:57

I would say number one, in every project runs into key obstacles, that's how we deal with those obstacles, both creatively and culturally, that really, really matters. And we had our share. I mean we had things that didn't go right. We had some big challenges: I remember when we tried to translate our early clinical work in Europe, to the US, where there was, frankly, less background in some of the imaging and approaches. And we couldn't make a translate. We had some early failures in our clinical studies, just after we had invested a lot in getting approval from the FDA, which was very challenging. And I had to walk into the executive leadership team meeting and tell them that we were going to stop our clinical trial in the US and entirely redo our approach to implanting the valve and it took, I don't know, nine or 10 months, I think of putting that clinical on ice. I would say some companies would have just folded it up. But I think that's the kind of commitment and persistence that's required in big innovation to ultimately succeed. And imagine what they would have been foregoing, if we just closed up shop, when we had those troubles, the growth opportunity for Edwards would have been much diminished, and somebody else would have picked it up, which would have been really sad. So yeah, you have to be you have to have a level of persistence and that decision-making between; is it time to kill it, or is a time to reinvest in it and take it to the next level? There's no good handbook on it. So, it's always a tough, tough decision.

David Morris  14:58

At that moment, what was the role that you had to play? Did you have to make a case to the group? Was this more of a one-on-one thing? What personal battle did you have to deal with that moment?

Stanton Rowe  15:10

Great question, David, because I think ultimately, it's kind of like, we go back to what I was talking about venture capital, a lot of it has to do with who's leading the effort. Do you believe in them? And do you believe in their capability to solve the problem? I think that's a lot of it is, I had to put my credibility on the line and say, “Guys, we, we can do this, we can solve this, here's how we're going to do it. Here's the approach we're going to take and here's the consequences. Yeah, it's gonna, it's disappointing to me, I know, it's disappointing to you, it'll be disappointing to Edwards Lifescience’s investors. But we're in this for the long game. And if we're in this for the long game, and there are patients to be served and big growth opportunities, let's just go do it.”

David Morris  16:03

As related to your team, as well as your stakeholders, how did you have to evolve, leading them, you know, as opposed to when you're at the startup?

Stanton Rowe  16:14

Well, I think the hardest thing for me in managing these multiple programs, is the day I have to go out and kill a project. There's no project team that will ever walk into my room and say, “We've run out of options, I don't think we can make this work, it's time to kill it.” That never happens. So, somebody has to throw the flag in and kill a project at some point in time. So, I think, how you kill projects, really matters, I kind of learned how to do that in a way that was respectful of the teams and inculcated a culture that allowed for innovation. And I think that is very, very critical to create an innovation culture, that our company.

David Morris  17:09

As you sort of reflect back, and you think about the ultimate playbook for intrapreneurship. First off, it's being able to identify and recruit the intrapreneur, as Mike did with you, in the end. And then there's a matter of how you operate within the organization. We talked about Clayton Christensen principles. But ultimately, you probably evolved them, you develop new ones, and wondering what you think a few of the things when that organization was operating at its peak, just some of the principles that really allowed just that incredible growth of the business.

Stanton Rowe  17:46

So, I think there's, at some level, that freedom to fail. And try again, is really critical. I think recognizing innovators and innovation culture is critically important. One of the things that I tried to do was to institute a system for recognizing those behaviors, cultures and accomplishments that drove the kind of cultural acceptance of innovation internally. I would say the other thing was just kind of the financial side that is investing in that long-term disruptive vision. It can't be a short term, you can't say, “Well, we're going to try this for two years, and see if it works.” I think you just have to dedicate some percentage of your revenues or R&D budget to that and make sure that you have the right people to drive it is really critically important.

David Morris  18:49

I'm trying to picture what it would have been like, when all of this got approved by the FDA, and you are scaling this out. And you know, as we think about the company's market cap, going from a billion to almost $50 billion, as it sort of took off all together, is what your role is because you talk in a very level-headed manner in portfolio management and the right culture and a lot of these basics. Just like you have that excitement of the startup stage and the key, that's you how to make it all; what was sort of just that most critical moment, driving your team, managing the stakeholders?

Stanton Rowe  19:31

Yeah, so when you talk about launch, I think about the privilege of standing in front of a bunch of salespeople who are going to go out and promote this product and tell them the story of developing this innovation and how challenging it was, but how important that is for patients. The impact that it has on patients-giving them an opportunity to have a procedure that's life-saving. These kinds of biomedical companies, when we have the privilege of launching something that's truly life-saving, it's pretty rare. I am, hopefully, fairly level-headed. But I can be pretty enthusiastic too, when it comes to things that really impact patients. Those are times I can definitely remember. I've also been asked to speak at many major medical meetings where I have the opportunity to hopefully talk to physicians about the value of partnering to develop these new innovative technologies. And that's also critical, we don't do these things that a vacuum. We do this typically on a close coordination with key physicians that have unique insights. So that kind of partnership is just critical, as well. Those really help drive innovation.

David Morris  20:52 

As we conclude, and you put yourself in the shoes of a Fortune 500 CEO, or a Governor of a state, who is trying to drive major change, what are just some of the traits they should seek out in that leader they're going to bet on to be able to orchestrate all this?

Stanton Rowe  21:13

I talk about one of the key attributes of innovation, is you have to be a little bit of a nihilist. You have to be able to look at the world and say, “Come on, can we do better than that?” And I think that really has to do with the status quo of that, that we accept so readily that zeitgeist that sits on us that makes us accept the way we do things. Making that change is difficult, it requires a lot of communication skills, to let people see the vision of where we're going. And that requires the leadership and persistence to actually make that happen. And organizations can be resistant, but it is steering a ship. Over time, they will definitely change and they will definitely see it as, we repeat it, we start showing progress. And everyone gets on board with a kind of a different vision for what we can be and how we can be better. We have to have a place for those nihilists in our company, even though they can they can be, I'll say it, they can be somewhat annoying sometimes. But without people saying we can do better than this, we never could better it.

David Morris  22:33

It seems like you had that trait. And again, you express it in a very calm way. Right now, though, I know your mind is quite vibrant. You have that trait. You also have the trait, though that you could bring along your peers, you could bring along the medical community, there was all these stakeholders that you were able to bring along. And I am wondering, with 20/20 hindsight, what the CEO who brought you on board may have seen in you to realize that not only you had the drive the ability to really bring the people along.

Stanton Rowe  23:07

I think a lot of this is persistence. A lot of this is transparency, you have to be comfortable with sharing everything and really being yourself. I'm not the guy who's seeking attention. I just want to make it happen. And I think sometimes those guys get overlooked. I'm not interested in politics in companies. I like having friends, like communicating and joking around. But I'm not interested in the political intrigue I see in a lot of companies. And I think spotting those people who are very earnest about their mission, and especially those who were focused on innovation and changing the status quo is really critical. And I think being able to lead an organization through that, again, just takes a lot of transparency and communication and hiring the right people.

David Morris  24:14

Clearly, one of the things that we've observed a lot is that HiPER leaders are under-political; they're mission-driven. They're so under-political that sometimes they're not even noticed, and that's why I want the audience really to be able to see what someone like Stan, as you can look at the history at Edwards Life Sciences and really see the amazing accomplishment of how they literally changed this entire way in which, instead of heart surgeons needing to do these procedures, a cardiologist could, correct me if I'm wrong here, it really redefined it. And being able to find a leader like a Stan, it may not be obvious, it may not be obvious and they could be working at the company, and Stan would have stayed at J & J if he had this type of mission or opportunity, they don't need to just go off and start their own organization, they actually want to be part of a larger organization because the scale’s greater to be able to bring their vision to the world, identifying this leader being able to have the air cover for them. Ultimately, this is what this is what brings innovation to the world. Thank you, Stan.

Stanton Rowe  25:22

It's a real pleasure, David, you do remind me that one of my stints at J & J was developing the worst coronary stents, which was incredibly innovative for J & J. But the way it happened was they created a small unit, and they put it outside of the core structures of their other business units. And they grew it and adapted it under a great leader there. But then, I haven't actually seen them reproduce that kind of innovative structure. So, I do think it's possible in big companies. But I think that kind of remote development capability enhances your chances for success.

David Morris  26:06

Before we go some traits in that leader that you may recall, that great leader?

Stanton Rowe  26:11

That great leader was Marv Woodall who is still a dear friend of mine. And Marv could work across a number of boundaries, right, so I think in our field, you have to kind of be able to manage the Research and Development and Engineering side of medicine, working with the clinicians, and then kind of the corporate structure. I think you need those broad capabilities, to be a great leader. And that kind of structure, especially in J & J historically, has been fairly political. He did an amazing job with that.

David Morris  26:50

Well, there you have it. A classic example of an intrapreneur. It may not be obvious to find them, but they do exist, and the ability for air cover to exist at the top for that individual, especially for when there's major setbacks. And to our HiPER leadership listeners, thank you for your continued support and feedback. Stay tuned this season for incredible stories of game-change from other HiPER leaders. And if you haven't already done so, please subscribe to the HiPER leadership podcast. And of course, if you have a big program that you're leading; transformation, visit our website to learn more about how we work with organizations going through change at HiPERsolutions.com