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Mr. Clean Featured

12:21pm EDT September 27, 2002
STERIS Corp. is one of those local success stories Northeast Ohio is so proud of: A small company takes advantage of a niche market, flourishes and even stays in the area.

But despite its success, it has not always been a smooth road for STERIS.

Founder and CEO Bill Sanford left just before STERIS' stock took a dive. All the while, the company and its new CEO, Les Vinney, were trying to figure out how to mesh new acquisitions with the larger corporate culture.

Fast forward a few years, and Vinney and other STERIS executives are in Washington, D.C., standing before the Food and Drug Administration discussing homeland security and anthrax. Those meetings culminated in an agreement to conduct a collaborative research and development project to evaluate and modify STERIS' anti-biological and chemical warfare technology.

Most recently, STERIS, a Mentor-based medical sterilization equipment company, was recognized by Fortune magazine as one of the top 40 mall/mid cap stocks to invest in over the next 12 months.

SBN Magazine sat down with Vinney, CEO to discuss some of the changes the company has undergone since he took over and what Sept. 11 meant for STERIS.

STERIS dealt with some significant changes not only in its core customer base but in the economy. Shortly after it adjusted the strategic plan, the bottom fell out of STERIS' stock, Sanford was out and you were in. How did you manage the changes?

At the same time as these changes in the hospital environment were occurring, we had just completed a large number of acquisitions and were facing a different economic model for all those pieces. The entire profile of the corporation changed. We were going through dramatic changes both as an organization and as individuals. People were uncomfortable not knowing what those changes might lead to.

The result was we had to re-examine some of the ways we approached the market. We had to make sure we were operating more efficiently ... taking advantage of the economies of our operation, and that we didn't build our organization around the old process but rather addressed the issue of providing value and solutions to our customers rather than a piece of equipment.

Bringing together a number of companies can be difficult. What was the most important thing you changed?

You have to do a group of things. You cannot build a team without providing the resources. You cannot provide the resources without building the team. You can't leave cultures in place that are conflicting or using different thought processes to get at issues. You can't do only one thing, and you can't affect only one part of the organization.

You're trying to accomplish a single mindset -- an organizational structure in which everybody realizes they have a role and tries to perform that role to the maximum within the concept of that mindset. That's what you're trying to accomplish.

It's an impossibility, but you know that. But that's what you're striving for.

The first thing you do is try to be involved and be present at as many locations as you can. Any time you have that kind of change, you want to make sure people know who you are and recognize your personality, desires and the direction you hope to take.

We used newsletters, events, sales meetings, leadership meetings with senior management -- all those events defined our activities. On my 100th day as CEO, we took the leadership group off-site and developed a blueprint for growth.

We looked at how we could double the size of the company in the next five years, what avenues for growth we could take and what we needed to do to work more closely together. We started to establish a base for people to have a common vernacular and common approach to issues.

Then we looked at a variety of areas management felt they had to address to expand their blueprint, stretch it out, strive for excellence and get everyone aligned with the objectives and the overall strategy. It's communication, it's interaction and it's difficult from this office to communicate around the world to 4,500 people.

It doesn't have to happen every day -- it just has to be reiterated and reflected and mirrored through the organization a sufficient number of times.

Are we perfect? No, we still have a long way to go. To compound the issue, we were confronted with transition from not just one culture, but many old cultures -- 11 acquisitions. We're still struggling with that. But the way it will happen is by communication, interaction and sharing in successes.

STERIS is highly dependent upon its research and development for growth. How do you decide how much and where to invest?

We narrowed the scope and focused on the projects we though would be most meaningful to the marketplace most quickly. We are very focused on the projects we are involved in, more so than in the past. We are building off the core technologies that we feel we have and positioned as the strongest offering.

For other technologies, we will continue to look at opportunities that are developed outside the company and look to acquiring them or licensing them. It's simply a matter of having enough of a comfort level that the portfolio of projects and technologies we acquire is broad enough to have an adequate return for our shareholders.

Having said that, you can also have too broad a portfolio, which is where we were when we were looking at too many activities, suboptimizing everything. We narrowed that down and decided on a dozen areas we felt were the most important to invest in, and we'll put meaningful dollars into those.

What was it like to go to Washington and deal with the anthrax issue, and what is the level of your involvement now?

When we were in Washington, D.C., late September and early October last year, it was as if we were the only ones visiting the city. People had really gone back to their base and sort of pulled the curtains. That has dramatically changed from the beginning of this year. But we have raised the level of awareness as to our vulnerability.

Sterilization and decontamination chemistries and equipment are used every day in hospitals and pharmaceutical production facilities. Transfer that to an office or mail processing facility, and one can draw the analogy.

You can't stop the event, but you can serve as a preventative to the spread of the event. That's really the key. What we've discussed with the government are areas we felt our technology could be utilized in a modified way or in a new environment to assist in that effort. Discussions continue.

We received exemptions from the EPA for testing in unique applications in authorized environments. The products are not for general consumption. We hope to convince the EPA that they're safe and manageable and can be used generally for anybody in their particular environment.

STERIS could be sitting on a big project in terms of its work with the government. Is Northeast Ohio capable of supporting something big?

I don't care who you are, I don't care how great your intellectual property fence is. At some point in time, somebody can come up with a better idea and drive that idea to fruition. For Cleveland as a city and a community, the challenge is somewhat greater.

We have a very knowledgeable base of individuals, and we have the underlying acumen to pull the businesses tighter. The real question in my mind is do we have the support in terms of the core of individuals that will have to do the day-to-day tasks -- the technicians, the scientists, the chemists, the biologists.

Who will be able to support a growing business as it goes from development of an idea to fruition to commercialization? That, I think, is our biggest challenge as a community -- to have that base of people readily available to not just one organization but to a variety of organizations.

What would you suggest to Cleveland's leaders to strengthen our competitive advantage?

I think our biggest challenge is education or work force. Have a group of people who want to stay in the area, first of all, that's a challenge.

We have to retain the young adults who go to school elsewhere because they don't see the opportunity here. We have to make sure they are aware of the opportunities, and we have to make sure we have a stronger education base in the sciences and math.

Biotech will require that science and math background. Talking to other executives, I think we would say we see that talent piece as the biggest issue, not only in driving biotech business but also in our own businesses today.

If you look at the region, even downtown Cleveland, there has been such a dramatic change in the underpinning of the organizations that are here. They tend to be more technologically oriented. They have transitioned from what were the steel and auto part and tire industry days to polymers and electronic components, subassemblies and medical devices.

There is a core base here. We're not recognizing that the transition has occurred.