HE is known as one of the hardest-working bosses in British industry and this
weekend he stops. Sir Christopher O’Donnell, the bearded metronome who
transformed Smith & Nephew from a middle-ranking branded goods firm into
Britain’s only quoted global player in medical technology, is leaving the
stage.
Sitting high up in Smith & Nephew’s London office overlooking The Strand,
contemplating the end, Sheffield-born O’Donnell looks pensive. “I would now
like less formality in my life,” he says. “I am not a very formal person,
really.”
So how did he end up building and running a FTSE 100 giant? “By chance, I
guess,” he laughs, then he becomes intense. “But it’s such an interesting
field. You are working every day to try and deliver better care for
patients, helping people get their lives back together, working with doctors
and engineers and scientists to bring technology to the marketplace. And you
get paid for it as well . . .”
He shakes his head. O’Donnell is a big man who speaks quietly and shows little
on an inexpressive face. Tall and thickly grey-haired, he could easily pass
for a medical academic – testament to the years spent listening to doctors’
advice about S&N products.
His tenure at the top almost exactly mirrors that of Tony Blair’s in
government – he started in July 1997. There the similarities stop.
O’Donnell, 60, is an engineer-turned-manager who has long shunned the
spotlight, preferring a gruelling schedule of continent-hopping as he has
transformed S&N into a global technology titan.
Gone are the British healthcare brands such as Elastoplast and Lil-lets that
once defined the company. Now S&N makes complex products for orthopaedic
surgery, endoscopy and wound management, and does much of its business in
America.
It’s new hips, not plasters, that define S&N now. The company’s
innovative Birmingham Hip Resurfacing product – which caps the joint with a
cobalt chrome implant rather than replacing the whole hip – already takes
12% of the UK hip market. With an ageing population worldwide, such products
offer greater growth than its old consumer brands.
That transformation required vision, and some bravery. Before 2000, O’Donnell
sold off whole divisions – textiles, branded goods – that had underpinned S&N
for over a century. Since 2000 he has scoured the globe for acquisitions to
hasten growth. At any one time, according to O’Donnell, the firm is in talks
with up to 30 different companies, from little start-ups to large rivals.
That carries high risks, to add to the sector’s constant threat from
litigation when products fail. But persistence pays off. S&N now ranks
No 4 globally behind the American giants Zimmer, Johnson & Johnson and
Stryker in the market for elective joint implants. It is No 2 in wound
management to American rival KCI.
Recently, however, acquisitions have got tougher. In 2003, S&N tried and
failed to buy the implant maker Centrepulse for $2.5 billion (£1.2 billion)
– it was bought by Zimmer. Last year S&N failed in a bid to buy the
joint-replacement specialist Biomet for $10 billion – it fell to private
equity. S&N responded recently by snapping up the Swiss orthopaedic firm
Plus for $900m. “It is half the size of Biomet, but it has doubled our share
of Europe and it’s going to be great for us in Asia,” says O’Donnell,
talking it up.
But the failure to get Biomet, and doubts as to whether the company should
keep its wound-management division, cast a shadow on O’Donnell’s final year.
Any regrets?
“We had a bit of a wobble last year,” he says. “We could have done better, but
I’m very pleased with the position of the company today. There’s an
opportunity to take it to the next phase.”
Smith & Nephew’s market value of £5.7 billion underlines his point. Most
important for some, O’Donnell has kept the company British, even though half
of its £1.4 billion turnover and more than half its profit now comes from
America.
His replacement as chief executive, Dave Illingworth, an American and veteran
of GE Electric, may feel differently. Many believe S&N might be more
highly valued if it were based in America.
Can it stay British? O’Donnell nods. “Perhaps if there was some big
acquisition-related change, it might no longer be British, but while the
bulk of shareholders remain in Britain, I can’t see it happening.”
It’s hard to rattle O’Donnell. Colleagues say they have never seen him lose
his temper – “He just goes slightly redder when angry,” says one. Inside S&N,
he used intellect and ceaseless questioning to retain control.
He can be stubborn, as you would expect from a Yorkshireman. He left a
previous job running Vickers’ medical-technology division because he
disapproved of a new boss.
At S&N, which he joined in 1988 after 10 years at the American healthcare
firm CR Bard, he had an uneasy relationship with his predecessor John
Robinson, who became chairman. Robinson left.
O’Donnell has since tried to merge British personability with American sales
flair at S&N, often letting old colleagues go so he can replace them
with higher-calibre recruits. Trying harder but doing it nicely are
O’Donnell maxims.
“The companies we acquire are not going to have the chief executive of Johnson &
Johnson turn up in their boardrooms. Same with customers. He doesn’t show up
in their operating theatres. We do. That’s our distinctive difference. This
company is personable.”
O’Donnell’s second chairman, Dudley Eus-tace, describes this as
characteristic. “I’ve seldom worked with a man so single-minded. But for a
big man he can also be so soft, a real Christian gentleman in the old sense.”
That single-mindedness comes from O’Don-nell’s upbringing in Sheffield, the
eldest son of a college lecturer father and a sports-mad mother who played
cricket for England. She gave him his innate competitiveness. Sheffield gave
him a love of engineering.
Later, reading engineering at Imperial College in London, he realised he was
“close to being the least talented in the year”. He later switched to
management and found his feet working for Vickers. When it asked him to
overhaul its loss-making medical-technology division, he jumped at the
chance.
It was, he says, “a disaster, a business so bad that nobody would even buy it,
unheard-of in medical technology”. It made everything from heartshaped
hospitals for the Shah of Iran to screening systems. O’Donnell junked the
loss-makers and polished the “nuggets”, such as its incubator arm.
“And that’s how I got into medical technology,” he says. “I just really liked
it. Doctors aim to make people better and find better ways to do so. Our aim
is the same.”
His revamp of S&N was rooted in what he learnt in those early Vickers
days. Selling 40% of S&N’s turnover was the single biggest decision of
his business life. “I took some really deep breaths before we went into the
final board meeting,” he says. Since then he has competed against American
rivals, honed by a health market that is far more commercially-driven than
Britain’s.
Has the NHS in Britain held S&N back? No, he says, but adds pointedly that
the company’s investment is now going into America, Germany and Japan,
“because the NHS is a slow adopter of innovation”.
Which is how taxpayers like it, surely? He shakes his head. “If taxpayers are
making that choice, good. But I don’t think they are.”
O’Donnell co-chaired the government’s Health Care Industries Task Force from
2003, and has firm views about the NHS. He would like to see it made
independent from politicians, like the Bank of England. So far, that doesn’t
look likely to feature on Gordon Brown’s agenda for change.
“The frustrating thing,” says O’Donnell, “is that the government has put
massive amounts more into the NHS but has missed an opportunity. The
taxpayer is paying for very well-paid doctors, but I don’t think the mix of
healthcare delivery is right.” Perhaps he should run the NHS? He gives a
gurgle of laughter. “Absolutely not. It’s the most difficult job
in the world, much more difficult than being prime minister.”
Instead, he plans to take it easy for a bit. There will be a S&N dinner
for him this month – nothing flash. Then he will consider his options. He
has agreed to chair York University’s council, close to his home in
Wetherby. He laughs off suggestions that he passed on being rector of
Imperial College, following Sir Richard Sykes. Friends say he wants to spend
more time with his wife Mia.
Imperial’s Professor Richard Kitney, an old friend, points out that Mia was
one of the first women to gain a first-class honours degree in mechanical
engineering from Imperial. “She understands what he does. She is a really
important factor in his life.”
Some thought O’Donnell pushed himself too hard, at one stage having 12 senior
executives reporting directly to him, constantly travelling abroad, then
dashing up to Yorkshire and back every weekend. Can he cope with just
stepping off the treadmill? Sure, he says, it’s genuine retirement. He
leaves with a pension pot of £6m and 1m S&N shares owned or under
option. “I’ve got some nice family events to do, like weddings and
grand-children.”
Anyway, my time is up, so he thanks me courteously for coming and walks me
slowly to the lifts. Sometimes, says another of O’Donnell’s friends, the S&N
boss is so low-key “you would miss him if he wasn’t so big”. It hasn’t
stopped him being quietly effective.
SIR CHRISTOPHER O’DONNELL’S WORKING DAY
THE Smith & Nephew chief executive used to start his week by rising before
6am and catching the train to London from his home in Wetherby, Yorkshire.
Sir Christopher O’Donnell was at his desk by 9am. “Usually I’d spend two
days here, doing board meetings and the like, staying at my flat in
Westminster. Then I’d catch a flight to America or Switzerland or Japan. I’d
be seeing our people, or talking to potential acquisitions.”
He usually arrived back in Britain on Saturday and returned to Yorkshire for a
short weekend. From next week, he hopes to spend more time on the tractor in
his paddocks, and less time on aeroplanes.
VITAL STATISTICS
Born:October 30, 1946
Marital status:married, with four children
School:De La Salle grammar, Sheffield
Universities:Imperial College and London Business School
First job:graduate engineer at Davy-Ashmore
Salary package:£700,000 plus bonus
Homes:Yorkshire, Westminster
Car:blue BMW 330
Favourite book:1421: The Year China Discovered the World, by Gavin
Menzies
Favourite music:Dire Straits
Favourite film:Kingdom of Heaven
Favourite gadget:Kubota compact tractor
Last holiday:Cyprus
DOWNTIME
SIR CHRISTOPHER O’DONNELL relaxes by playing golf. “My handicap? The clubs.
No, seriously, I play off 23. I also like tennis.”
Much of his money has been spent helping his children, he says. “I do have a
T-shirt that says ‘Bank of Dad’ on the back.” He sponsors his daughter
Antonia’s event horse Westminster Rapscallion. “It’s modestly expensive, but
not on an owning-a-yacht scale.”
He is also a long-suffering Sheffield Wednesday fan. He was match-day sponsor
of the ball when his team beat Ipswich last season. Promotion? “Maybe next
year,” he says, optimistically.
