On the industrial relations front, Roberts is a critic of Federal Labor’s workplace laws and the AMWU, which represents Cochlear’s manufacturing workers. He believes both hinder productivity and disrupt value creation in a competitive manufacturing world. “Our strategy is to win the hearts and minds of employees which we have,” Roberts says. “The union is irrelevant – it really doesn’t have a role here.”
Strategy
In relatively simple terms, Roberts says Cochlear is working closely with clinicians around the world to develop technology that provides better implants for the hearing impaired. Those affected by hearing loss have a unique story.
“Hearing loss is an emotional journey,” Roberts says. “If you spend time with those affected, it’s hard not to have tears in your eyes. Our goal at Cochlear is to help people reach their full potential. If a recipient has normal speech, vocabulary and can understand speech, that’s a huge advantage.”
Cochlear invests heavily in research and development. It will spend about $120 million this year – almost 15% of revenue – because Roberts believes technology is a “turbo charger” of growth for a company or country.
He says that in the past few thousand years, the world’s prosperity has essentially evolved from two things: the ability of people to specialise (to do something well) and the ability to exchange specialist skills for mutual gain.
“I see science as knowledge and technology as the application of knowledge,” he says. “Often technology comes before the science because you can build things with trial and error. That’s a perfect example of Cochlear implants.
“A medical device company is about trying to understand the future of clinical practice.”
Roberts says implementing a successful strategy begins with a full appraisal of the company.
“You must understand where you are today,” he says. “A company like Cochlear is not typically a capital-intensive business, but a knowledge business. We don’t have huge amounts of capital stored up on the balance sheet.
“Then you must understand where you want to go and how to get there. Importantly, we keep assessing and refining the strategy, but we don’t head off in a completely different direction.
“For us, it’s an ongoing dialogue. Medical knowledge is perhaps doubling every two or three years, so we have to keep revalidating what we’re doing. That requires frequent conversations with key people around the world.”
But, then again, not everything in life goes to plan.
Product recall
They say what doesn’t kill you makes you stronger.
“I really do think you are defined not by the problems you have, but by how you react,” Roberts says.
He was reflecting on a most challenging time in his career when the company initiated a recall of its leading Nucleus CI500 implant series in September 2011 due to moisture infiltrating the device.
“Perfection is what we strive for, but perfection is extraordinarily difficult to obtain,” he says of the major malfunction.
While Roberts was dealing with the enormity of a problem that any recall poses, investors wasted no time in shredding Cochlear’s share price. To give some idea of the brutality, Cochlear’s price just prior to the recall closed at $72.18 on September 9, 2011. After the recall was announced to the market, it closed at $57.50 on September 12. By the time the news had sunk in, Cochlear closed at $45.77 on October 4. It was a far cry from a share price close to $83.60 on April 11, 2011.
