Few CEOs have been given the mandate Scott Huennekens was charged with as employee No. 1 at Verb Surgical, the robotics spinout backed by Google (NSDQ:GOOG) and Johnson & Johnson (NYSE:JNJ): Go forth and change the world.
“Don’t worry about capital, don’t worry about funding,” Huennekens told MassDevice.com publisher Brian Johnson recently. “Just go out and change the world.”
Many CEOs might find that daunting. Then again, most CEOs don’t have a $400 million war chest and the backing of 2 of the world’s most innovative companies. And, as you’ll find out in this interview, Huennekens may not be your average CEO, having been involved in medical device startups for some 20 years. His previous company, Volcano, was acquired by Philips in 2015 for more than $1.2 billion.
Huennekens also discusses the mission at Verb Surgical to change the way surgery is performed and how their solution is less a product than a platform. Below are the highlights, edited for clarity, of our chat with Huennekens at the DeviceTalks West event Dec. 12, 2016 in Newport Beach, Calif.:
Brian Johnson: Let’s talk about Verb Surgical. I think it touches on so many things that fascinate us. First, it’s the collaboration between Google and Johnson & Johnson, and it deals with robotic surgery. It’s hitting all these awesome buzzwords. In [an earlier] discussion we talked about 1 of the premises that Verb Surgical is built upon, that there are something like 133 million surgeries a year globally that don’t happen because of lack of access.
Talk me through that premise a little, because robotic surgery makes up what, 5% of all surgeries? The leader in robotic surgery is Intuitive Surgical (NSDQ:ISRG) right now. I would not call that a low-cost provider by any stretch. What do you see in these 133 million surgeries a year that don’t happen?
Scott Huennekens: Leaving Volcano, having a big success, I planned to take a couple years off to enjoy myself. Then I got a call from the guys at J&J, [medical devices chairman] Gary Pruden and Alex Gorsky, the CEO there – J&J VC had funded Digirad Corp. (NSDQ:DRAD) and also Volcano as investors – and they said, “Hey, we want to create this new company to change the future of surgery.”
I really wasn’t interested. I said, “I’ll go up there and take a look. Who doesn’t want a free lunch at the Google campus and get to ride around on a bike, can even get a haircut for free, for crying out loud?”
I went up, and the thing about Google that really got me excited (other than they have more money than God) was that they have these moonshots where they want to make a big difference. When you look at this, you see there are 8 billion people on earth and only 3 billion have access to surgery. That’s incredible. I didn’t appreciate that, and that you could be part of something. It’s temporal in nature. It may take 20 or 30 years, but [the idea that] you could kickstart a process to build a platform that could grow into giving access to surgery for those other 5 billion people was … it still sends shivers up my spine, to have the opportunity to get to make that difference in the world, by creating a platform that could include robotics and machine learning and data analytics. That was awe-inspiring and super-exciting for me and made me say, “All right, I’m done with Africa vacations and golf in Scotland. This is more important.”
Brian Johnson: So when they started the company, they told you, “You’re not going to have to worry about capital. You’re not going to have to worry about funding. You’re going to have to worry about changing the world.” Personally, that proposition might make me a little bit nervous.
Scott Huennekens: I know what it feels like to be one of my kids now! You’ve got these 2 really wealthy parents who are very demanding, and you have no reason to fail. None.
They’re 2 of the 7 largest market-cap companies in the world. You’ve got all this Google technology. J&J’s the largest medtech company.
We’re on the fringe of this next “Medtech 3.0” era, where 1.0 was industrial devices, then 2.0, you made some devices with micro electronics and some digital, but mainly analog. Now we’re at 3.0, where you have smart devices with machine learning capabilities, connectivity. All this stuff is free with computing power. Arguably J&J’s the biggest and the best at medtech 2.0. Google’s the best at information technology. You put them together, that’s super-exciting and intriguing.
And hey, here’s $400 million to go do it, not having to worry about financing. But again, it’s a $10 billion to $20 billion opportunity, with all of Google’s technology, J&J’s putting them together to go make this happen.
Brian Johnson: Do you not look at it like boiling the ocean? How do you break that down? How do you change the world? How do you start that 1st step?
Scott Huennekens: Anyone in here run a marathon? Anyone, anyone? Hey, two people. And how’d you run the marathon? One step at a time, right. You’ve got to train. You’ve got to prepare and do it. Similarly here, this is something that will take time. There are going to be stages of introductions of products that will have 1st-generation technology, 2nd-generation, 3rd-generation, where there’s going to be actionable information and then semi-autonomous information, and then autonomous capabilities built into a product over time. But you’ve got to get started, and you’ve got to put that platform out there to collect the data, to do the things you need to do with machine learning.
Brian Johnson: I would imagine this is a much different challenge than the other startups you’ve worked at. You were employee No. 1 here, right?
Scott Huennekens: Yep.
Brian Johnson: So employee No. 1, you walk in, you put the picture of the family on the desk…
Scott Huennekens: There are no desks.
Brian Johnson: You sit on your ergonomically correct …
Scott Huennekens: Yeah, you’ve got a ball. You’ve got a little space in the room.
Brian Johnson: Seriously, how do you even begin to start carving this out? Aas much as you can share, what will the products you create look like? Or is it even a product?
Scott Huennekens: We think in terms of a platform. In the worlds of surgery, there was open surgery, that was Surgery 1.0. Then there was laparoscopic surgery, 2.0. Robotic surgery, 3.0. We think in terms of of this new era of digital surgery, what we call Surgery 4.0, that a number of key opinion leaders have talked about, and we’ve adopted that language, which is to say that robotics is a tool. It will be used on open surgeries, laparoscopic surgeries. Data analytics and machine learning, again, working on open and laparoscopic procedures as a tool.
We’re not a robotics company. We’re a platform company. There will be robotics – which are a key element – but also advanced instrumentation, advanced visualization, data analytics and machine learning. You’ve heard of things like Google Brain, TensorFlow, Deep Mind. And connectivity. All of these robots, just like every Google driverless car, is connected, and all the data goes up and you have learning that comes back to the device. All of our devices will be connected.
But Generation 1 can have a level of information different from 2 years out, 4 years out, relative to its capability. There’s a generational, iterative process that’s going to go into this. Just like a Tesla car. I was a meeting a couple months ago – this is kind of a knock on Google. The Google guy got up and said, “Hey, over the last 2 or 3 years, we’ve got a million miles on these cars, on self-driving.” The next speaker was Tesla, and the guy got up and said, “We’ve got a million miles in the last week.”
The last week, by putting the technology on all of their cars, every car. They’re collecting all that data, so they can have better algorithms. They’ve got more data. It’s all about the data, which is incredible relative to a connected platform and learning. I think that’s going to happen across medtech over the next 10 to 15 years, whether it’s with Google and things that will happen there, or IBM Watson that Medtronic (NYSE:MDT) is working with on their platform.
Brian Johnson: Tesla’s a car, and that’s very tangible. But what you’re talking about as the value prop of Tesla is it’s this hive-thinking automobile that works on the power of the collective. Is that similar to what you’re envisioning as a product with Verb?
Scott Huennekens: What we’re envisioning as a product is, today I would compare it to a mainframe computer. Intuitive, great company, incredible what they’ve created. We’d all be proud, super-proud. Three billion dollars in revenue, $27 billion market cap. But like mainframe computers, they had a hard time transitioning to minis to PCs to cell phones. Really only 1 company transitioned even from PCs to phones. That was Apple. Everybody else, it’s taken a different company to disrupt and create that new platform.
I look at what we’re doing, what Medtronic’s doing, as moving from mainframes to PCs, where robotics and those platforms will be always there, or always on, like a PC on every desktop. Every OR will have them.
Back to my Volcano days, we said we need to put our system in every single interventional cardiology cath lab. Five years later, we had 8,000 installed systems. Between us and Boston Scientific (NYSE:BSX), we were in every single cath lab. We had 80% of the installed base because we said, “Hey, we’re going to have an open platform with all of these apps.”
Similarly, it’s our intention [at Verb] to be open-platform, have multiple apps. We put in this platform that allows it to be always there, always on, available to help you, as the surgeon, do surgery. If that’s one portion of the procedure, if it’s the entire procedure, we’re indifferent. If that’s just using an advanced instrument with J&J on it. If it’s the advanced visualization, because now we have machine learning on visualization to help you identify a ureter or a nerve, et cetera; or if it’s the segmentation, because we can track through your procedure the steps relative to simulation and training. All of those are going to be part of a total solution.
The product is no longer robotics. The product is robotics, advanced instruments, the visualization, machine learning, the connectivity. That’s the product. Who cared if Lotus 123 was a little better than Excel? It doesn’t matter. The product was Microsoft Office. You had to have PowerPoint, Word, Internet Explorer. The whole thing was the product. At the same time, you can’t be the copier, printer, fax. It’s a shitty copier, a shitty fax. We’ve all been there. It’s got to be best-in-class in each of those segments.
It’s a platform. The vision is that it’s in every OR. Every single 1 of them is connected to the cloud. We have a whole suite of products at Google, Google Cloud, YouTube for organizing all the videos, 3 different machine learning algorithms with TensorFlow, Google Brain and Deep Mind, AR, VR, all their gaming stuff. Both Android and Chrome from an operating system. All the cybersecurity.
If you’re another company trying to replicate that, you’ve got to go to 7 or 8 different vendors. I tried to create an operating system for Volcano when we switched from being a single app to multiple app. It took 4 years and $30 million and all these engineers who were good, but not great. Now, when I wireframe this product solution, 2 months later with full access to Google, all their software, and you have a fully working prototype.
Brian Johnson: I assume this is going to still be a pretty normal, standard business model, or are you looking at something more innovative in the way that Google learned how to, in your phrasing, skim 2% off the world’s economy?
Scott Huennekens: Google is the most incredible business ever. You have a monopoly on skimming 2% to 3% off of the world economy. That’s pretty good. Larry Page and Sergey Brin did well for themselves.
The opportunity we have is to have 2 businesses, in the sense of 1 is the surgical business. The other 1 is all those Google technologies that I mentioned, where there’s 8 or 9 of them that it could apply not only to us, but it can be a solution if you’re an EP company, if you’re a cardiac surgery company, if you’re a visualization company, if you’re a orthopedic company.
The same things apply where you’re going to want all of these devices. If you’re ResMed (NYSE:RMD) with sleep apnea, if you’re a Pyxis pill-dispensing machine, you want that connectivity to the cloud, to learn all this data, get this machine learning and benefit that you can push down. But also you all get these benefits whether you’re on Twitter or Facebook or Instagram or whatever, where you’re not paying for anything, but you’re getting benefit. They’re getting benefit by being able to advertise to you, get all of your data. There’s an opportunity for another business to collect and have all that. IBM Watson’s pursuing that aggressively, and Google’s now setting that up, more on pharma and biotech, to do the same.
Brian Johnson: It must be fun for you. To be there in this place that everybody thinks is synonymous with world-changing innovation. You told me you’re a startup guy, been in startups for 20 years, and now you’re working right next door right to where they founded Google. Your offices are right next door, right?
Scott Huennekens: Yeah, 2400 Bayshore was their 1st office, and their 2nd office was 2450. We’re in 2450. It’s pretty weird. 15 years ago, Larry Page and Sergey Brin were there as two PhD guys with this little company, Google, which is now the largest-market company in the world. That’s crazy. That’s crazy to think about like 15 years ago.
They were on roller blades cruising around in there, talking about how they were going to do search better. They had no idea how big the impact could be.
That’s often the case. A lot of you guys are startup people. That’s often the case. You start, you adapt, you change. The vision gets bigger, it becomes bigger. You’re in the game, and you see things, and new opportunities are created by being there and being open to making those changes.
I’ve been involved in 10 startups. Nine out of 10 of those ended up doing something entirely different than what we really started out to do.
Brian Johnson: Is Google’s success replicable?
Scott Huennekens: There’s not enough surgery to skim 2% off the world economy. That equation isn’t replicable. That’s a once-in-a-lifetime kind of thing. I think we can have an impact, back to the 133 million people who need surgery who don’t have it. Arguably that has a greater social impact than being able to search for the information. I don’t know. Information and knowledge have created so much. It’s not fair to make that comparison. They’re both very important endeavors.
Brian Johnson: Is the ecosystem different just because you’re there in this really fertile environment. In terms of your startup, does it feel like a typical startup? I mean you’re not, because you have a $400 million startup, but what’s the different between a $25 million startup and a $400 million startup?
Scott Huennekens: Oh it’s very different. At Digirad and at Volcano or CVI or these other things I’ve been involved in, there were no free lunches, no free haircuts, no free laundry. Those things didn’t exist. But I think it’s important to recognize that I still fly up there on Southwest. I still get the cheapest rental car I can get. If they have the ones with the roll downs versus electric, I’m like, “I want that one,” just to set the example of we’re not going to waste money. We’re a startup. We need to be focused on what’s important.
The patient is important. We draw our organization chart upside down. I’m at the bottom. Patients and physicians are at the top. That’s our focus. Again, back to that word privilege. We have a privilege to get to work in this industry, solve these problems. We don’t want to waste capital. There are a number of these moonshots at Google that have not worked out. We will not be 1 of them. We’re very disciplined, very focused on delivering, and have executed accordingly.
Part of that is we’ve got a team that’s done a number of startups before and done them successfully, coupled withEthicon that’s a world leader in surgical instruments and Google on the technology. We kind of have the best of all worlds, no financing risk. It’s all 510(k) products, so there’s no regulatory risk. There’s no technology risk. Technology’s more temporal over time and what gets executed. It doesn’t have some of the risk that maybe a lot of the other startups I’ve been involved with that had financing risk, regulatory risk, technical risk, and marketed option risk.
That’s why I liked it as well. When I left Volcano, I said, “I will never do a startup from the beginning again,” and then 7 months later I was employee No. 1. It was different. Those 4 risks I talked about were mitigated.
Audience question: When you 1st took this job, you had expectations of what it would be. What was the 1st misconception you had to face, and how did you deal with it?
Scott Huennekens: What’s the 1st misconception? I thought I was probably smarter than I am. You get up there, and there’s a lot of super-smart people. The other flip side of that is, not a lot of people have thought that the whole synthesization to the solution together. There was a vision of the product and the solution that was way to narrow. I had to get them to move to something that was much more broad. How to do that wasn’t really a challenge, but it was something that took a little bit of time.
Nothing against the people at Google, but they don’t know medtech. It’s a regulated environment with its own set of challenges, and they’re used to doing something for 2 or 3 weeks, you release a beta version, and you go. That’s not our world. We wish it was our world at times, but it’s not. I thought they would have a better understanding, which maybe they didn’t have. To bridge that without coming across as a curmudgeon who’s not techie or smart or not from the auto industry, Detroit guy, who’s so behind, you know what I mean? That’s their perception of people who aren’t from Silicon Valley or from tech, and to earn that respect over time, they go, “Oh geez, these guys do know what they’re doing.”
Audience question: Do you still use Google for your personal searches?
Scott Huennekens: No, the thing is I didn’t use Google for anything except for search. Now I use everything. The company is horrible relative to training or any kind of customer empathy, but their products are unbelievable. I’ve told them that.
I never used Google Docs and Sheets and Google Drive. Like why does anyone use Dropbox or any of these other things when you can use Google Drive? It’s better and it connects with your Gmail and all your calendar things, and now with Google Home I just say, “Hey, Google, what time’s my flight tomorrow? What’s this, what’s that? Read me my email.”
That’s what we’re doing on our platform. The synergies of having this product be so big relative to everything, it’s scary on the 1 hand about everything they know about you. The microphone’s always on on that Google Home, to the learning that takes place and is possible. Pretty incredible.
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