1 DANAHER BUSINESS SYSTEMTom Joyce, President & CEODan Comas, EVP & CFOMAY 20182 Forward Looking StatementsStatementsinthispresentationth atarenotstrictlyhistorical,includinganys tatementsregardingeventsordevelopmentsth atweanticipatewillormayoccurinthefuturea re"forward-looking" , ,amongotherthingsdeteriorationoforinstab ilityintheeconomy,themarketsweserveandth efinancialmarkets,contractionsorgrowthra tesandcyclicalityofmarketsweserve,compet ition,ourabilitytodevelopandsuccessfully marketnewproductsandtechnologiesandexpan dintonewmarkets,thepotentialforimproperc onductbyouremployees,agentsorbusinesspar tners,ourcompliancewithapplicablelawsand regulations(includingregulationsrelating tomedicaldevicesandthehealthcareindustry ),ourabilitytoeffectivelyaddresscostredu ctionsandotherchangesinthehealthcareindu stry,ourabilitytosuccessfullyidentifyand consummateappropriateacquisitionsandstra tegicinvestmentsandsuccessfullycompleted ivestituresandotherdispositions,ourabili tytointegratethebusinessesweacquireandac hievetheanticipatedbenefitsofsuchacquisi tions,contingentliabilitiesrelatingtoacq uisitions,investmentsanddivestitures(inc ludingtax-relatedandothercontingentliabi litiesrelatingtothedistributionsofeachof FortiveCorporationandourcommunicationsbu siness)
2 ,securitybreachesorotherdisruptionsofour informationtechnologysystemsorviolations ofdataprivacylaws,theimpactofourrestruct uringactivitiesonourabilitytogrow,risksr elatingtopotentialimpairmentofgoodwillan dotherintangibleassets,currencyexchanger ates,taxauditsandchangesinourtaxrateandi ncometaxliabilities,changesintaxlawsappl icabletomultinationalcompanies,litigatio nandothercontingentliabilitiesincludingi ntellectualpropertyandenvironmental,heal thandsafetymatters,therightsoftheUnitedS tatesgovernmenttouse,discloseandlicensec ertainintellectualpropertywelicenseifwef ailtocommercializeit,risksrelatingtoprod uct,serviceorsoftwaredefects,productliab ilityandrecalls,risksrelatingtoproductma nufacturing,theimpactofourdebtobligation sonouroperationsandliquidity,ourrelation shipswithandtheperformanceofourchannelpa rtners,uncertaintiesrelatingtocollaborat ionarrangementswiththirdparties,commodit ycostsandsurcharges,ourabilitytoadjustpu rchasesandmanufacturingcapacitytoreflect marketconditions,relianceonsolesourcesof supply,theimpactofderegulationondemandfo rourproductsandservices,labormatters,int ernationaleconomic,political,legal,compl ianceandbusinessfactors(includingtheimpa ctoftheUK sdecisiontoleavetheEUandchangesinUSpolic ystemmingfromthecurrentadministration,su chaschangesinUStradepoliciesandthereacti onofothercountriesthereto),disruptionsre latingtoman-madeandnaturaldisasters, , ,theCompanydoesnotassumeanyobligationtou pdateorreviseanyforward-lookingstatement ,whetherasaresultofnewinformation, (1)tocompany-specificfinancialmetricsrel ateonlytothecontinuingoperationsofDanahe r sbusiness,unlessotherwisenoted;(2)to growth orotherperiod-to-periodchangesrefertoyea r-over-yearcomparisonsunlessotherwiseind icated;(3)toOperatingProfitbelowthesegme ntlevelexcludeamortization.
3 And(4)to today referstotheCompany OVERVIEW: EVOLUTION FROM LEAN TO BALANCED APPROACH INCLUDING GROWTH & LEADERSHIPDBS is our sustainable competitive advantageImpact of DBS on GrowthWhat You ll Learn About the DANAHER BUSINESS SYSTEM (DBS)DBS in action at recent acquisitions: from process to results3 Building outstanding leaders through DBS DBS is Our Competitive Advantage4198419911999200120032005200720 092011201320152017 EEvolution of the DANAHER BUSINESS SYSTEM (DBS)As portfolio evolved, so has DBS from Lean to a balanced approachOUR SHARED PURPOSEHELPING REALIZE LIFE S POTENTIALL eadershipLeanGrowthLeadershipLeanGrowthL eadershipLeanGrowthLeadershipLeanGrowthT ODAYMid-1980sLEAN FOCUSEDADDED GROWTH20012016 ADDED LEADERSHIP2009 LAUNCHED SHARED PURPOSE5 OMX is Operating Margin Expansion; WC is Working CapitalSHAREHOLDERCORE REVENUE GROWTHOMXCASH FLOW / WC TURNSROICCUSTOMERQUALITY (EXTERNAL PPM)ON-TIME DELIVERY (OTD)ASSOCIATEINTERNAL FILL RATERETENTION8 CORE VALUE DRIVERSCore Value Drivers (CVDs) are How We Quantitatively Measure Success All operating reviews begin with discussion of CVDsLeadershipLeanGrowth6 Strategic Plan/ 3-5 Year Break-through ObjectivesDevelop Annual BreakthroughObjectivesDetermine Improvement PrioritiesID Measures, Metrics and Key ResourcesDeploy Improvement Priorities with DBSKeep Score Monthly & AnnuallyProblem Solving ProcessWhatHow MuchWhoBy WhenHowWhat is the Annual Process to Drive Performance?
4 Converting our strategy into execution through Policy Deployment78 DBS Fundamentals are the FoundationExpand capabilities, drive consistent execution and sustain outstanding resultsDBS FUNDAMENTALSPROBLEM SOLVING PROCESSVOICE OF THE CUSTOMERSTANDARD WORKVALUE STREAM MAPPINGTRANSACTIONAL PROCESS IMPROVEMENTVISUAL & DAILY MANAGEMENTKAIZEN5 SLeadershipLeanGrowth Common sense, vigorously applied What Differentiates DBS9 DBS is diversely applicable and always relevant at any BUSINESS , in any end-marketIt is a mindset and it is our culture DBS is who we are, and how we do what we doDBS is constantly evolving: in the spirit of continuous improvement, we are always DBSing DBSDBS overview: evolution from Lean to balanced approach including Growth & LeadershipDBS is our sustainable competitive advantageIMPACT OF DBS ON GROWTHWhat You ll Learn About DBSDBS in action at recent acquisitions: from process to results10 Building outstanding leaders through DBS 11 DBS Growth ToolsDBS Growth comprised of innovation & commercial toolsStrategic ProductEnvelopeProduct Planning GroupCustomerSegmentationDanaher InnovationProcess Accelerated Product DevelopmentSpeed Design TOOLSEXAMPLES:EXAMPLES.
5 TransformativeMarketingValue Selling Lead NurturingFunnel ManagementStrategic NegotiationsSales Force TOOLS12 DBS Innovation ToolsReplicable process for innovation provides competitive advantageStrategic ProductEnvelopeProblem toPortfolio(P2P)Product Planning GroupNPD Project ManagementLaunchExcellenceDefine the attractive domain for innovationDefine a winning roadmap for attractive segmentsCoordinate execution & resources across multiple projectsDrive cross-functional development of each new productGenerate & fulfill demand for the new productDOMAINROADMAPEXECUTION & RESOURCESCROSS-FUNCTIONAL DEMANDFROM MARKET MARKET SHAREL eadershipLeanGrowth13 DBS Innovation in Action: Speed Design Review at HachBASICS OF SPEED DESIGN REVIEW (SDR) Gather VOC; go to Gemba Obeyaroom with cross-functional teams together Simultaneous product & process optimization Rapid prototyping & evaluationSDR IN ACTION: HACH CM130 CHLORINE MONITORING SYSTEM FOR DIALYSISRESULTSNEW ADJACENT ADDRESSABLE MARKET+$50M1 STFDACLEAREDONLINE CHLORINE ANALYZER FOR DIALYSISC ustomer purchased Hach drinking water product to try in a dialysis capacityVOCGEMBASPEED15 product design sprints Dialysis clinics are required to test water every 4 hours14 DBS Commercial ToolsIntegrated marketing & sales tools to drive commercial execution, accelerate growthDAILY MANAGEMENT | GROWTH ROOM | STANDARD WORKM arket Insight and VisibilitySalesProductivityand ProspectingLead Generation and Campaign AwarenessCustomer Buying Journey & InsightTRANSFORMATIVE MARKETINGSALES STANDARD WORK Market Overview and Channel StrategySales Funnel ManagementMarket attractiveness How do we win?
6 Market segmentation Customer profileWhat triggers interest? Sources of infoValue Proposition Customer benefitCustomer Buying BehaviorMonthly Key Opportunity ReviewAre we in control? What s working? What s not working?LeadershipLeanGrowthCommercial Execution Driving Growth at PallUsing DBS to improve S&M processes and drive better growth+50%CONTACTS / VISIBILITYLEADS+ +2xWIN RATE %+15%2017 RESULTS MARKETING FUNNELSALES FUNNELSITUATION AT ACQUISTION Limited process for improving market visibility Little to no digital marketing capabilities No repeatable process for generating / nurturing high-quality sales leads DBS ACTIONS Transformative Marketing: Disciplined marketing campaigns to improve visibility & account coverage Lead Handling: Prioritize & deliver more qualified leads to sales Funnel Management: Streamlined sales funnel process to improve win ratesBIOPHARMA WIN THE SPEC 15 DBS overview: evolution from Lean to balanced approach including Growth & LeadershipDBS is our sustainable competitive advantageImpact of DBS on GrowthWhat You ll Learn About DBSDBS IN ACTION AT RECENT ACQUISITIONS.
7 FROM PROCESS TO RESULTS16 Building outstanding leaders through DBS MARKETCOMPANYVALUATIONOur Strategic Approach to M&A is a DBS Process Secular growth drivers Fragmented Higher barriers to entry Optionality with multi-industry portfolio Competitive market position Strong brand / channel Consistent revenue visibility Higher margin businesses Cultural fit Focus on ROIC DBS opportunities Sustainability Synergies with DHR OpCos Combination of value & growth dealsSelectively pursuing value creation opportunities ROIC is Return on Invested Capital17 Core Revenue Growth+Margin Expansion+Strong Free Cash Flow+Acquisitions=TOP QUARTILE EPS GROWTH &COMPOUNDING RETURNSHow We Create Value: Running the DANAHER PlaybookIMPROVE COST STRUCTUREB alanced approach to create shareholder valueG&AS&MOMXCore GrowthR&DGrossMarginsREINVEST FOR GROWTHACCELERATE MARGINS & CORE GROWTH18 INITIAL PRIORITIES / KEY AREAS OF DBS FOCUSI nitial priorities and areas of DBS focus are tailored to each acquisitionAcquisitions.
8 A Tailored Approach with DBS19 Outstanding franchise in attractive, fast-growing marketsHighly innovative, differentiated products & technologyAdded attractive packaging print inspection adjacencyStrong global dental brand that brought presence in implants & digital dentistry1)ACCELERATE INNOVATION2)IMPROVE EXECUTION3)REDUCE COSTS1)ENHANCE COMMERCIAL EXECUTION2)IMPROVE OPERATIONAL LEVERAGE3)BUILD SCALE GLOBALLY1)IMPROVE MARKET VISIBILITY 2)BUILD OFF EXISTING PIDCUSTOMER BASE3)ENHANCE MARGINS1)BUILD ON NEW PRODUCT INITIATIVES2)ENHANCE GO-TO-MARKET STRATEGY THROUGH SALES-FORCE EXPANSION3)REDUCE G&ATailored Integration with DBS: 2015 Pall AcquisitionRapid DBS adoption has been a critical driver of Pall s great start20 >50 DHR associates facilitating DBS post close >300 kaizen events in year one post close >70% of associates completed DBS training in the first 90 daysINTEGRATION PROCESSNUMBER OF NEW PRODUCT LAUNCHESCOST SAVINGS ACHIEVED>$200M+50%ON-TIME-DELIVERYIMPROV EMENT>2,000 BPSACCELERATE INNOVATIONIMPROVE EXECUTIONREDUCE COSTSRESULTS SINCE ACQUISITIONDDDD~50%~55%Flat/LSDMid-teens AT YEAR INLSDMSD~50%>50%High-teens~25%Core GrowthGross MarginOperating Profit MarginFlat/LSDMSD~70%>70%LDD>20%Core GrowthGross MarginOperating Profit MarginUpdate on Recent Larger AcquisitionsAT at or above initial expectations2 YEARS IN3 YEARS INACQUIRED DEC 2014 ACQUIRED AUG 2015 ACQUIRED NOV 2016 Core GrowthGross MarginOperating Profit Margin21 DBS overview.
9 Evolution from Lean to balanced approach including Growth & LeadershipDBS is our sustainable competitive advantageImpact of DBS on GrowthWhat You ll Learn About DBSDBS in action at recent acquisitions: from process to results22 BUILDING OUTSTANDING LEADERS THROUGH DBS Associates are key to sustaining our competitive advantageLeadership: Evolving Strategic Approach to TalentDEVELOPING LEADERS Development primarily on the job TALENT General industrial talent Outsourced talent acquisitionORGANIZATION OpCos& Corporate10+ YEARS AGO Progressive responsibilities & formalized development programs Science & technology talent Internal talent acquisition & cultivation Platform leadership driving strategic moves & portfolio evolution OpCosexecute strategic decisionsTODAY*OpCoPresidents & Above ~80%*AVG. INTERNAL FILL RATESINCE 2015+15%R&D NEW HIRES 2017+15%CUSTOMER-FACING NEW HIRES 201723 Stretch rolesApplication of key learnings, developDelivering resultsExperiential learning in trainingsEXPERIENCECOACHINGTRAININGD evelopment plan executionSenior leader coachingMentoringBest practice sharingCoaching guides70%20%Situational LeadershipGeneral Manager Development ProgramDanaher Leadership Program10%DBS Building Leadership: Developing Leaders at DanaherUtilizing a combination of development programs and processesLEADERSHIP ANCHORS Models humility, transparency & integrity Builds people, teams & organizations Drives innovation & growth Charts the course LEADS THROUGH DBSWhat Good Leadership Looks Like at DanaherCompensation based on both CVD performance and Leadership behavior25 OMX is Operating Margin Expansion.
10 WC is Working CapitalSHAREHOLDERCORE REVENUE GROWTHOMXCASH FLOW / WC TURNSROICCUSTOMERQUALITY (EXTERNAL PPM)ON-TIME DELIVERY (OTD)ASSOCIATEINTERNAL FILL RATERETENTION8 CORE VALUE DRIVERS (CVDs)LIFE SCIENCESDIAGNOSTICSDENTALENVIRONMENTAL & APPLIED SOLUTIONSL eadership Development Across DANAHER : Recent MovesMulti-industry structure a differentiator in talent attraction, development, retentionWATER QUALITYPRODUCT IDPREVIOUSLYPRESIDENTEVP OF LIFE SCIENCES PLATFORMPREVIOUSLYPRESIDENTPRESIDENTPREV IOUSLY EVP OF LS & PID PLATFORMSEVP OF DX & DENTALPLATFORMSPREVIOUSLY EVP OF LS & PID PLATFORMSEVP OF DX & DENTAL PLATFORMSPREVIOUSLYPRESIDENTPRESIDENTPRE VIOUSLY HEAD OF R&DPRESIDENTPREVIOUSLY HEAD OF T&MGROUP EXECUTIVE FOR GROUP EXEC OF PID PLATFORMEVP OF EAS PLATFORMPREVIOUSLY HEAD OF R&DPRESIDENTPREVIOUSLYPRESIDENTGROUP EXECUTIVE FOR WATER QUALITYPREVIOUSLYFINANCECFO26 Common sense, vigorously applied DBS is our sustainable competitive advantage27