Nanosonics at the forefront of infection prevention

Friday, 01 March 2024


    Chair Steven Sargent FAICD (pictured above, left) and CEO Michael Kavanagh MAICD (pictured above, right) are working in sync to position Australian med-tech company Nanosonics at the forefront of infection prevention and make surgery safer. 

    Safeguarding patients from the risk of cross- infection during medical procedures is the mission of Nanosonics, an Australian publicly listed company that’s already protecting about 26 million patients a year in global healthcare markets by decontaminating ultrasound probes with its trophon technology. The company, which researches, develops and manufactures in Sydney’s Macquarie Park, is also addressing the decontamination and cleaning of flexible endoscopes (movable tubes used to view internal organs) with its latest tech breakthrough, Coris.

    In an era when surgery is becoming less invasive and medical instrumentation more complex, there’s a massive opportunity, insist the company’s long-standing CEO and MD, one-time Cochlear executive Michael Kavanagh MAICD, and chair Steven Sargent FAICD, a former member of GE’s corporate executive council whose board portfolio includes Origin Energy and Ramsay Healthcare. A relationship of “fearless candour” helps these corporate leaders navigate the complexities of infection prevention.

    Steven Sargent FAICD

    View from the chair

    I was at GE when one of the Nanosonics founders reached out to see if we’d be interested in distributing its new ultrasound decontamination product. It was certainly an interesting proposition as GE Healthcare was a global leader in ultrasound technology. That’s how I got to know the company. I always liked its people, its technology and its positive impact in protecting patients from infection and making medical procedures safer.

    I was asked to join the Nanosonics board when I retired from GE in 2016, and soon took on the role of deputy chair. So, by the time I became chair, about a year ago, Michael and I already knew each other well. We get on tremendously well. Michael is one of the most charming, endearing guys you’ll ever meet — and super-smart. His ability to communicate and engage with people is extremely high. He runs a terrific team, has established operations internationally and developed a promising long-term growth strategy for the business. Our investors have a high regard for him, as does the board.

    We’re quite different. He started his career as a scientist before moving to the commercial side of healthcare — in medical devices and the pharma industry. He knows what questions to ask and challenges the team to encourage and inspire higher levels of performance.

    I’ve been working for 40-odd years, across four continents, in a number of industries — healthcare, energy, financial services, aviation. I’m nowhere near as deeply into healthcare or medical devices as Michael is. I’m more of an orchestrator who ensures we have the framework, agreement on where we’re going and strong alignment behind that. I ensure we’re having the right conversations at the right time with the right people in the room — so we’re all going to the same place and know what we need to do to get there.

    Opportunities beyond complexity

    The business that Nanosonics operates in is complex — as is the technology and regulatory environment we operate in. Healthcare is a local industry. You have to go through the regulations of every country and Nanosonics operates in many countries around the world.

    The company has built a significant competitive advantage by developing internal research and development capabilities in chemistry, biosciences, engineering and physics. Through the marriage of these disciplines we can develop new automated technologies. We have a technology that no-one else has, and with trophon, we believe we’re the leader in automated decontamination in the ultrasound field. The only by-products from a trophon decontamination cycle are oxygen and water — our technologies are highly sustainable. One of our core strategic pillars is delivering highly effective, environmentally friendly solutions that set new standards of care.

    We’re excited about our new Coris technology, which will soon be submitted for regulatory approval. Coris is designed to address one of the biggest problems in medical instrument decontamination — the effective cleaning of reusable flexible endoscopes. It is a further significant opportunity for us.

    Michael and I see big opportunities ahead. Our relationship is easy because we have a high respect for each other and are aligned on what Nanosonics needs to do. We keep a tight routine, catching up at 5.30pm every Monday for an informal check-in. We talk about his overseas trips or get an update on the numbers. He may have an issue he wants to discuss or I might have feedback from investors to share.

    Building healthy dynamics

    A perennial hot button for me is the people agenda inside a business. The CEO and all the business leaders need to own the people agenda, not just the HR team. I have conversations with Michael and his team. I may say, ‘I thought you could do this one better — can you please jump on it?’ Or, ‘Can I give you a bit of feedback?’ Then we discuss it. A lot of the things that he’s working through, I’ve seen those movies a few times before.

    The board asks questions and challenges Michael, and he will challenge the board. The dynamics are very healthy. Six to eight times a year, I’ll ask him if he’s getting what he needs from me and the board.

    Often, the easy decisions for boards are the quantitative ones — are we going to buy this or invest in that? But there are also a lot of judgement calls like, ‘What are we going to do about that?’ It’s important to discuss those with candour and respect. I tell the board that if they disagree, they have an obligation to dissent.

    Sure, Michael and I might differ sometimes. But we have a relationship where things are never held back. Nothing is off-limits. Fearless candour makes life much easier. We can talk it through, get more data to decide where we come out, get other people in on it, discuss it with the board and decide what we need to do.

    Michael Kavanagh MAICD

    The CEO POV

    I joined the Nanosonics board while I was working as senior vice-president of global marketing at Cochlear. Eighteen months later, when it became clear the company needed a CEO with international experience, I took on the role. Many people asked me what I was doing, as I’d spent almost 11 years on the Cochlear executive and was part of the group that saw it grow into a global success. But being on the Nanosonics board was the best due diligence a new CEO could have. I established the belief Nanosonics could become Australia’s next Cochlear, a sentiment I still hold today.

    I’m proud that this relatively small Australian business has established its trophon product as the new standard of care for ultrasound decontamination in the biggest market in the world. In America, I believe nearly every luminary hospital has adopted it. Close to 30,000 trophon units are used across more than 5000 hospitals in the US alone, and the research, design and manufacturing has all been done in Australia. We’re now operating in the UK, Europe, Japan and going through regulatory approval in China.

    Between 2019–23, during COVID-19, the company doubled its revenue, operational footprint and number of employees. The number of patients protected has grown from 18 million to 26 million. We’ve nearly trebled investments in R&D and our patents rose by 70 per cent. That success comes from having a great executive team, exceptional talent and a high-functioning, diverse board aligned on the company’s mission.

    The journey to success is never straightforward. When things may not be going as planned or there are problems to be solved is when a healthy CEO- chair-board relationship is so important. Open, honest communication is key and to have this, high levels of trust must exist. I’ve bought Patrick Lencioni’s The Five Dysfunctions of a Team for all my executives. The first dysfunction is the absence of trust. Without it, you can’t have unfiltered debate about issues and it’s almost impossible to get genuine alignment for key decisions.

    Similarities and differences

    Steve and I have high levels of trust and mutual respect. I respect all he brings to the board, his wealth of experience on boards and in his executive career. He’s worked for [GE chair/CEO] Jack Welch. I have great respect for his insights, opinions and how he interprets things. He recognises the deep expertise I have in the science area, medical technology and healthcare. I’m an inquisitive person. We’re both blessed — or cursed — with being able to join the dots very quickly.

    We also share a passion for ongoing learning. That’s an acknowledgment that neither of us is an expert on everything just because of the positions we hold. There’s always an opportunity to learn from the opinions of others. There isn’t a book I’ve recommended to Steve that he hasn’t gone out and bought, and vice versa.

    In our weekly meetings, the first five minutes might be what happened over the weekend, how the family is going or various sporting interests, but then I might seek his opinion on a business decision or a run-through of the next board meeting or a point from the last one. Is there anything specifically he wants from me or I need from the board? I want feedback as it happens, not at a later date. Either positive or constructive, we talk about it immediately. If you’re anchored in trust, those discussions aren’t difficult.

    If your starting position is a point of difference, that’s healthy. It’s important to hear different perspectives. If we were all the same all the time, it would mean we don’t have enough diversity in experience or opinion, which could indicate our board or CEO construct is wrong.

    However, decisions must ultimately be made and if there are differences at the end of debate, there has to be an understanding and respect for the roles and responsibilities of the office each of us has. It doesn’t happen often, but after appropriate debate, Steve may say to me, ‘Ultimately, Michael, you’re the CEO and it’s your decision. We’ll go with that, monitor and adjust if necessary’.

    Zooming in on strategy

    I’m fortunate in that I’ve got a high-functioning, diverse board that engages well with all the executive and enjoy working together. They bring a wide range of relevant backgrounds, which add value to how I think about the business.

    With the tremendous opportunity ahead for Nanosonics, board meetings are not just about a scorecard or reporting through the rear window, but spending time working on the forward-looking strategy. These discussions range from our product expansion strategies through our investments in R&D, potential mergers and acquisitions, to expanding into new geographies. People and talent form an important part of our discussions as a critical component of our growth strategy.

    Working through our risk register is also an area where the diverse experience adds a lot of value, which results in robust mitigation strategies being developed.

    Developing insight and foresight

    Steve ensures we have an annual, well-planned, forward-looking board agenda, which provides clarity around work packages and expectations. Management can prepare what’s required for board meetings. He’s also great at organising casual dinners the night before a board meeting, about six times a year. Those occasions are useful for the non-executive directors and myself. You get to know people on a social level, plus we end up covering off much of what’s on the next day’s agenda in a relaxed atmosphere.

    Education sessions within board meetings ensure we stay informed. We work on making it real for directors. Getting board members out in front of customers is important. Steve often says that the context of a customer visit is worth more than 100 IQ points.

    This article first appeared under the headline 'Blitzing the Bugs’ in the March 2024 issue of Company Director magazine.

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