Lessons from Corporate Innovators

Tim Murphy of Philips Live at The CSL 2020 Forum

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Tim Murphy leads the One SRC Services group within Philips Sleep and Respiratory Care. He joined our Forum to discuss his experience with data based corporate startups and more generally business model transformation.

As mentioned last week, we are in the process of sharing all of the videos from this year’s Forum on the 2020 Forum Website. But I also wanted to share a few highlights here on Agile Giants.


Sean Ammirati (00:08):
Welcome to Agile Giants. Lessons from corporate innovators. I’m Sean Ammirati, your host, co-founder and director of the Carnegie Mellon Corporate Startup Lab and partner at the early stage venture capital fund, Birchmere Ventures. Each week, I’m going to talk to guests who are experts at creating startups inside large corporations. I believe fundamentally a startup within a company is the same as one inside the proverbial garage. A group of entrepreneurs, trying to make the world a better place using new ideas and inventions. However, I also believe some of the techniques and processes are just inherently different. This podcast is going to explore the similarities and differences.

Sean Ammirati (00:56):
We’re going to do one more session from the corporate entrepreneurship forum, and this is kind of a twofer. So Tim Murphy, which is the conversation you’re going to listen to, was originally supposed to join a panel that we had on building startups, corporate startups, that are built off the exhaust of data that companies are aggregating. And unfortunately, with some technical problems we had with the event software that we were using, he wasn’t able to actually connect in as a speaker only as a listener. And so I convinced him to come back and do a one-on-one fireside chat style interview at the end, and it was amazing. And so I’m going to share that conversation with all of you here, but I’d encourage you to go check out the video on the Corporate Startup Lab site of the database corporate startup panel as well. And again, this will be the second and final corporate entrepreneurship forum video that we share, but you can see all the sessions, all 16 hours of the sessions online at corporatestartuplab.com.

Sean Ammirati (02:10):
The last of the kind of fireside chat conversations here is Tim Murphy. And Tim was supposed to be on a panel I guess, a week ago. And we had some tech problems and I just wouldn’t let him punt on the opportunity. So pleasantly persistent, I think is what our friendly Lou Musante calls it, was pleasantly persistent to get Tim with us here. I think the conversation on that data panel was good, but it was missing some of the things that is unique perspective that Tim can add. So we’re going to talk a little bit about that, plus I think more generally just kind of business model transformation over the next 20 minutes. Let me just kind of quickly set up Tim’s background. So Tim currently leads the one SRC services group within Philips Sleep and Respiratory Care. The interesting thing to me about that is he’s really got a bunch of different business models within that.

Sean Ammirati (03:00):
So he’s got clinical and business management applications. He’s got SAS solutions and then he’s got these sort of database products, if you will, kind of data analytics and data sharing services. Tim’s been at Philips, and then before that Resperonics for 27 years. So he’s I think seen that model evolve, and he’s also a great contributor in the community as well. He’s been a great friend at Carnegie Mellon in the Corporate Startup Lab, but he’s also on the board of the March of Dimes for the Western Pennsylvania region.

Sean Ammirati (03:32):
So just a cool guy. I would also say Tim is one of these people that when we were starting to think about CSL, maybe more than he even wanted, but we’ve kind of come bother him and ask him questions. He spent a couple hours with myself, Matt and Albert sketching ideas on a whiteboard and a lot of that stuff ended up being things that later became solutions and CSL and things like that. So just really great to have him here. Tim, I want to start with this suite of products that you’re responsible for. You’ve got these analytics products and data sharing products. You’ve got these kind of more classic SAS offerings. How do you think about managing those businesses as being kind of similar and different?

Tim Murphy (04:12):
It’s an interesting question and to some extent we’re coming up on our own maturity curve, because I think we kind of start very much in being kind of like an internet of medical things, kind of connected devices in the home, feeding information. That information being kind of available in some very kind of primitive dashboards to our customers, which are primarily physicians and home care clinicians. And so you start to get very focused on getting really good at moving data from machine to let’s say, application, and then maturing that from a desktop orientation to a cloud. And then you’d say, okay, the next evolution that you start to [inaudible 00:04:48] well, now I really got to make that really that user experience and the experience of those constituents very valuable. And so you really have to be starting to think about really getting good at use case scenario understanding and who are you building this for and what value, because I think the thing we would challenge we can do a lot of feature in as we would call, but it doesn’t really translate to value for the customer.

Tim Murphy (05:09):
And then what we found is then the forest gets more crowded. Other animals start to enter, another player start to enter to serve those same constituents. And now you’ve got to really be good at that interoperability. That ability to move and work with other applications in the forest. And so you really have to come up the maturity curve there.

Tim Murphy (05:26):
And then lastly, what you’re hoping to is over that evolution, you start to really gain insights to recent critical data that you can harvest and create kind of meaningful information that further informs intervention, both reactive and preventative clinical interventions that really not only achieve certain clinical aspects, but really achieved business aspects. Because in healthcare, a lot of the focus of course is delivering a good clinical outcome. But much of the information that we kind of convey, especially in certain disease states like obstructive sleep apnea in certain countries around the world is integral to allowing the [inaudible 00:05:59] buyer to be paid.

Tim Murphy (06:00):
And so you really have to understand how to create meaningful harvesting of those analytics to produce ways to make that process very efficient from a clinical perspective, but very effective from a payment perspective. And so I look at it and say, hey, you start here and you end here and then you’ve got to be good at kind of managing that entirety because in the end, it’s not the parts that people value, it’s the entirety that they value.

Sean Ammirati (06:24):
Yeah. How do you think the fact that you’re kind of also… I don’t know if you agree with this characteristic, but I kind of think of you as like the software guy inside the device company. How do you think that influences some of these issues as well?

Tim Murphy (06:38):
Well, yeah, we’ve talked a lot about this, Sean, kind of going in with Philips SRC going from a very product based company and it still is a highly product oriented company because it needs to be. But what really has happened is now that we’ve kind of moved up the maturity curve and the product company now thinks about software. And I think the challenge now is when you think about software, you’ve got to think about that value. What are we really solving? We’re going through kind of a requirements and a planning process for next year. And we have enough work to keep us busy for three years, but I’m saying where’s the value creation of that solution? And so I think the company, Philips SRC, has really matured up the software curve, but I think we’re at the point where we got to get those people to move from feature and experts to kind of solution and benefit and value experts, and then encompassing that the product and the solution now are something that that’s the offering now.

Tim Murphy (07:32):
And the good news is if you listen to our customers, they’re pulling us, they’re probably faster and better than we can because when you go and talk to them now where 5, 10 years ago, they would talk about the product and what they want the product to do. Now they come to it with a lens that says really what I’m trying to achieve is I need to be able to look at this many patients in an hour and I need to find out which ones I want to look at first and last, how can you help me do that?

Tim Murphy (07:58):
And so they pull you along and we’ve been lucky enough to be pulled along pretty aggressively by our customers. Where we’re still moving up the maturity curve is really now complementing those best software as a service with human service, where some of our customers need help and actually managing their patients, utilizing the software. So they’re outsourcing the clinical management aspects. And to some extent I view that’s the new frontier for kind of Philips SRC is to be more comfortable and move up the maturity curve and understanding how to add value, add human and technology services on top of the core software as a service offering.

Sean Ammirati (08:31):
Carrie Holly from [inaudible 00:08:34] Healthcare spoke this morning, and he was talking about ambient intelligence and how sort of wearables are going to help us move from what he called, you’ve heard this saying a lot, but like move from sick care to health care, where all of a sudden these wearables allow you to deliver those new areas of value. And it strikes me that a company like Philips that brings this kind of deep science to a lot of the problems they’re trying to solve. But I think also knows you’ve been sort of a wearable company for a long time, with the masks and things like that.

Sean Ammirati (09:02):
It strikes me as like… There’s pieces of this that you guys probably know better than a lot of the other players in the market, you guys being maybe the Resperonics legacy part of Philips there. But I also suspect that there’s been a maturing in terms of how the company thinks about data and the value of data, how to use that data, how to derive insights from that data. How do you think the companies changed their impressions of that over the 27 years you’ve been there?

Tim Murphy (09:33):
Well, I think the biggest transformation is, hey, because we’re a clinically oriented company, we focused a lot of clinical intensity. If we could do this, if we did more of that, that would be better. And I think we’ve gotten very good at kind of layering on clinical intensity at the expense of, hey, what are we really trying to affect here? And in our world, especially when you get to the lower acuity, where quality of life kind of disease states like obstructive sleep apnea versus someone who’s really in a chronic life supporting acute care home ventilator situation, you’re really looking at behavior modification. That’s the key element. So what data, what information and how do you position that data to really affect behavior modification? Because if you can do that, then you effectively allow the patient to have the greatest chance of success on the therapy, which is good for the patient and really good for the profit pools of the people involved in here.

Tim Murphy (10:26):
So I think the value of the data that we’ve learned is does that data really elicit a behavior change in the actual patient and does the value of that data help the healthcare constituent spend their time on the patients that they think have the greatest chance at responding to an intervention? We’ve done some unique things where through harvesting some data, we actually kind of ordered the patients to contact in a way that we know that the patients at the top of the list will respond more positively to an intervention than the patient at the bottom.

Tim Murphy (10:59):
So if you have eight hours in your day and you want to have the greatest effect on your patient population, you would call and contact and work with the patients in this order because those patients exhibit the behaviors that say they will respond to the intervention. And so the value of the data you’re harvesting is providing you an efficient way to contact patients versus you could come in and say, there’s a list, it’s in alphabetic order, they all have the same problem. I could be talking to Sean and he says, hey, no matter what you tell me, I’m not going to change. Whereas I could have been spending time talking to Tim and he would have responded and that would have been a better use of our clinical intervention time that we have today.

Sean Ammirati (11:34):
Yeah, actually it kind of builds on some other things Carrie was talking to this morning, too, around the data of the patient is just kind of interestingly synergistic these two [inaudible 00:00:11:42]. I guess, beyond healthcare for a moment, just there’s a lot of people leading innovation in a bunch of different verticals here, and we’ll get back to healthcare in a minute, but I think you’ve done a great job doing what I would call business model transformation within Philips. In many ways, educating the company on different revenue models. If someone was in a different space, but thinking I need to do the same thing in safety and chemical industry, how would you encourage an executive to sort of catalyze this business model transformation?

Tim Murphy (12:18):
Wow. I should have applied much more hair gel today for that one. I don’t know. I guess that my answer is I don’t know, in a way, because I feel like we’re still on that curve ourselves. And I think the way that I found a way to do it is to say if you’re having trouble with someone kind of figuring out how to monetize or build the business case around your software as a service, because some of those aren’t as obvious, especially with us where we kind of came from a connected device [inaudible 00:12:43] a medical things. Where we found successes when we started to layer on, we started to hear from our customers that they were… As much as the software could do and as much as we could train them, they still were struggling on using the capabilities of the platform to its fullest.

Tim Murphy (12:58):
And they were also struggling with just scaling. They wanted to move into a new part of the country. They were taking on a different insurance carrier. They were scaling and they were having turnover. So we said, well, why don’t we build a service that will have the accredited individuals contacting your patients on your behalf and… We actually built kind of a variant of the software configured to that service and for our company and for the customer paying for that complimentary service, which really was powered in a big way just by the software, was a way to make a pivot so that we could monetize the value of what we’re doing, but we had to come to our customers differently. Because even our customers had kind of built a sense that, well, the software just comes along with the product as a ride along because it’s coming from the same kind of connected device kind of history.

Tim Murphy (13:48):
But when we said, oh, but what about if we added the service? Oh yeah, we’ll pay for that. But it really was just us over layering other technology automation and human talents on top of the software and they were willing to compensate us for that.

Tim Murphy (14:02):
So I think sometimes you have to look for another lens versus moving your company, or even moving your customers through a lens that maybe there’s just too much history. And then when you moved there, you can come back to that. And now we’re coming back to that. We’re actually implementing kind of chargeable modules within the software, because now we’re saying, hey, you saw how we used it. Now we’re going to give you kind of a do it yourself version of that inside the software. Would you be interested in acquiring it? They say, yeah, because you got these great results, and if you can put that in the software, we can do it. We’ll now pay for it.

Sean Ammirati (14:34):
That’s awesome. It’s interesting how many sort of device companies have that story of, oh, we gave the software away for free and then we realized, oh, we’ve got to [inaudible 00:14:44]. [inaudible 00:14:46] at MSA has a very similar story. The software that they make came along with the gas detector because that’s how you configured it. And then all of a sudden now there’s value around that. So, I’d also like to just have you talk about outside of that, just building teams, because you’ve built some pretty remarkable teams. I’ve gotten to know a lot of the folks that did that work for you over the years. So I don’t know if it’s a knack for recruiting or if it’s a sales pitch or what it is, but how do you think about attracting and retaining folks to come work for you?

Tim Murphy (15:21):
Yeah, in trying to think first of all, Pittsburgh’s helped us. Being proximate to things like Carnegie Mellon being proximate to what’s actually just happening organically and very genuinely. Pittsburgh has helped us a lot. We could be a lot of other places in the country and probably not have that foundation to help us and that foundation has kind of evolved very quickly along with us. And then I think the second thing we did is we had a natural inflection point. We’re moving from a very old tech stack, very old kind of cloud-based infrastructure at the same time that Philips was really kind of moving forward with its own kind of HealthSuite Digital Platform. And so the confluence of those elements had us making significant technology stack changes. And when you make those changes and you’re moving to more cutting edge technology stack items, it’s amazing. People say, I want to come work on that stuff because I want to gain experience in that environment.

Tim Murphy (16:20):
And if you have a mission where you’re working for a health tech company that’s really trying to help people, I think people say, hey, I’d like that because I like the technology stack development opportunity for me. I like working in a company that’s really out there trying to assist people with acute and chronic conditions. And it just so happens that it’s a pretty nice place to work and you have a kind of a flywheel of like-minded people in a good environment. And so I think all those things helped us. And I think each of them were a factor, the Pittsburgh factor, the pivot factor that we had a great timing on. And then lastly, hey, I think we run a pretty good organization and I think people that are valued where we work.

Sean Ammirati (17:05):
Yeah. I think that’s true. I wouldn’t underestimate the third piece of that too. And I think people could learn a lot from you on that.

Tim Murphy (17:13):
I’ve got a little bit emotional about the Pittsburgh side. I just think it’s a good place. I just think we’re in a good place.

Sean Ammirati (17:18):
Yeah, I agree. And I think some of the stuff that Liz and Kevin are doing around sort of the ecosystem of talent here, it’s broader than just Duolingo although Duolingo helps, it’s broader than just Google Pittsburgh. It’s also Bosch and Philips and Optum and these other companies as well. And there is synergy there with the universities. I think that’s pretty cool. So speaking about the mission part of it, throughout the whole conference we were talking about like, well, how did COVID change your industry? I know COVID was a big thing for you guys, obviously, but just any kind of top level thoughts around the pandemic’s influence on you and your team.

Tim Murphy (17:58):
Well, beyond just the near term, when you hear about even all the consternation around the ventilator stockpile and the ventilation demand, Philips was at the core of that, whether it’s for the United States or the world and the good news is a good deal of the ventilation technology that is now being used around the world is developed from an R&D perspective and manufactured right here in Pittsburgh. And then our hospital ventilation’s made out in our Carlsbad location, but it really is all connected to Pittsburgh from a management perspective. So we immediately were able to jump in and try to serve that demand and still are serving that demand and just came off a call where we’re talking about that ongoing demand and how to configure our capacity to scale to that and to keep up with that.

Tim Murphy (18:43):
The second thing it really did is it really pointed to what I’m sure people would say it really had accelerated our interest in the virtualization of care. And even something not as serious, but still serious, like obstructive sleep apnea, what you find is that dynamic there is totally changed where people would potentially go to a lab to be diagnosed, be set up by a clinician inside their home, and then the clinician would visit systematically. Well, we had been working for years now to really virtualize that whole process where a diagnosis is done in the home, where actually the delivery of the therapeutic regimen comes to the patient through a home delivery service that we operate and we can virtually set the patient up using interaction and technology. And then because we’ve had this long experience in kind of cloud monitoring and cloud management to patients through the software and through our service, we’re managing patients virtually today.

Tim Murphy (19:34):
So it really has accelerated the investment we’re making to scale and even make more elegant that virtualization of care from assessment right on through long-term management, even in something like obstructive sleep apnea. On the ventilation side, our ventilation technology is now connected to our cloud application and we’re enabling kind of remote management of patients that really are more ill and are on that respiratory side of the business. And so COVID was a big influence to kind of accelerating that virtualization of care for us in a home setting.

Sean Ammirati (20:07):
Yeah. I’ve been saying throughout the whole conference, it’s good to be in telehealth right now. And I think it’s sort of an interesting unique lens onto it with kind of what you guys, both having this sort of hospital [inaudible 00:20:22] which is critical, you got to make it happen and then obviously these other implications you’re talking about.

Sean Ammirati (20:26):
So last question is just the things that you’re interested in I think are interesting landmarks for us as we think about research at CSL. And so I’m curious just generally right now, what are the areas of innovation that you’re most excited about?

Tim Murphy (20:42):
I think for me and for us here where I feel like the most stress on the business is really being able to play efficiently, effectively and quickly with the other animals in the forest. You’re interacting with your customer. You may not be the parent system. You’re going to be the child system. So this whole area of interoperability and efficiently interoperating with the other systems and still maintaining your value where you don’t just disposition kind of value you’d like to maintain.

Tim Murphy (21:12):
And so how do you really learn to be a good player where you’re giving enough, but not too much. And from a technology perspective, there’s a lot of things that we can do there. There’s some middleware players you have to start to think about, but really it’s just how do you set yourself up so you’re a good contributor, but you’re not losing your value proposition that you want to maintain? And for us that’s been one of the growing challenges, not only in United States, but really around the world where this interoperability to customer systems, to third party systems, to main line EMR systems and even in hospitals has become a growing part of our portfolio and growing part of our investment because our system has to play with these other disparate systems in the home care environment, in a physician or lab environment, and even into a hospital environment

Sean Ammirati (22:03):
That’s amazing. Tim, thank you for doing this. I really appreciate it. I know your schedule is busy. So getting this on the calendar so quickly was not simple. So thanks to you and Pam for making it happen and hope to stay in touch here. But thanks so much.

Tim Murphy (22:19):
[inaudible 00:22:19] Thanks, Sean.

Sean Ammirati (22:24):
I hope you enjoyed this episode of Agile Giants. If so, consider sharing it with a friend. And if you think it’s worth five stars, which I hope you do, please go to iTunes and rate it so that others can find this content as well.

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