Good morning, everyone, and thanks for joining us here. For those of you I haven't met, I'm Matt Cugino, Vice President, Investor Relations here at Danaher. Thanks for joining us here in New York as well as a special thanks for those joining us on the webcast. Just first on the forward looking statements, I'm not going to read all of these, but do need to say today's presentation may include forward looking statements and actual results may differ materially from these statements. Please refer to the slides for more On to the agenda, I think we have a great day for you here.
First, Tom is going to come up and give his opening remarks. After that, Melissa Cuino, Head of our Danaher Business System Office is going to come up, give you an update around what we're doing with some of our DBS growth tools. We'll have our group executives and executive vice presidents then come up and give an update on their respective We'll take a We'll take a short coffee break in the middle, give you a chance to see some of the product displays that we have out in the atrium and the adjoining room. After that second presentation section, Tom will come up and give his closing remarks and some details on our 2018 guidance, followed by closing Q and A. We'll wrap a little bit before 1 o'clock with the formal presentation, and we will have a light fare lunch outside in the atrium for anyone that is interested in that.
So with that, I'll bring up Tom.
Thank you, Matt, and good morning, everyone. Let me add my thanks to all of you for being here today, as well as those on the webcast. It is a busy time of year. So we really appreciate you taking time out of that busy schedule with so much going on to be here today. So with that, I will get right at it.
As you just saw Matt put up on the screen, we think we have a terrific lineup of presentations for you today from the senior leadership of Danaher that will take you through really a series of updates on the platform, a look at how we're continuing to accelerate our growth momentum and our operating margin expansion and how we will continue to deploy our free cash flow strategically in the interest of long term growth and competitive advantage. So what you'll hear today in my presentation is, I'll start with a quick update on 2017, a quick look back at the performance of this year, a solid year without question and a year that we're building momentum and clearly we feel good about how we are positioned right now going into 2018. We're building and evolving a stronger and better Danaher. That comes in the form of continuing to evolve the portfolio and I'll give you a perspective on that evolution over a period of time and bring you up to date on the portfolio of today. But in parallel with that, we're building and evolving the core of our culture and our competitive advantage, the Danaher Business System.
And we'll take you through that at a high level in my presentation and Melissa Aquino will take you a little bit deeper and you'll hear a series of stories about the impact of DBS throughout the course of the day. And then finally, I'll touch on how well we're executing, how DBS is impacting our businesses broadly, utilizing what we call the Danaher playbook. We'll touch on how are we deploying capital? What's our approach to strategically and diligently deploying that capital over time for the highest possible returns to shareholders. And finally, I'll touch on talent.
None of what we do is possible without continuing to build an exceptional team, attracting, developing and retaining that talent over the long term. So a quick look back at 2017 even though it's not done yet. 2017 has been a year of accelerating core growth, accelerating from our first half performance now to improved performance in the second half, really led by life science and product ID, but with a number of good things happening across each of the platforms. Specifically, relative to the Q4, we've talked to continuing to see that acceleration in the Q4. We've had a good start, October was a good start to the quarter, November pretty well in line, So we feel good about what we've talked about that 3.5% to 4% core growth in the 4th quarter, which represents the the acceleration we were looking for throughout the second half of the year.
2017 has been a year of double digit free cash flow and double digit adjusted earnings per share growth. That's even better than what we anticipated at the beginning of the year and we expect that this year will represent the 26th consecutive year of free cash flow to net income conversion, one of the most important metrics we focus on in terms of driving quality earnings growth over the long term. 2017 has been a year of expanding margins, but as we expand margins, we take a balanced approach to ensuring that we are reinvesting for the long term, reinvesting in R and D, reinvesting in sales and marketing. And you see that in the metrics as you see increases in those while you see us controlling and in many cases taking down our G and A costs as a percent of sales. Another year of consistently executing what we call the Danaher playbook.
And finally, and certainly last but not least, our recent acquisitions, important acquisitions, significant deployment of capital acquisitions at Cepheid, at Pall, at Nobel, certainly with the addition of PhenomenaX in our Life Science platform, all off to a terrific start. But that wasn't all, we closed 9 deals roughly for about 300,000,000 of spend this year. And this year, as we said, was going to be a year of rebuilding the balance sheet, ensuring we focus on our integrations and get those newly acquired businesses off to a great start and we couldn't be more pleased with how those businesses are performing and contributing to the accelerating performance that we've seen across the platform. So clearly building momentum as we head into 2018. So let's take a step back for a minute and we'll talk about Danaher today.
And then I'll give you a perspective as to the evolution of the portfolio over time and how the Danaher business system has evolved in parallel with the evolution of the portfolio and how the combination of the evolution of the portfolio and DBS have been the core of how we've delivered the consistent high levels of outperformance over so many years. So Danaher today, Danaher today is roughly an $18,000,000,000 revenue business and we organize the corporation into 4 segments and 5 strategic platforms. Those 5 platforms being life science, diagnostics, water quality, product identification and dental. Those platforms are made up of roughly 20 individual autonomous operating companies. But as I'll talk about more in a few minutes, those operating companies are really unified by a common business model, characterized by global market access into highly attractive markets with tremendous secular drivers.
They characterized each of those businesses by significant installed basis of instrumentation that generate outstanding consumables or aftermarket revenue at high margins that in turn deliver a high level of stability and consistency to our revenue base. Each of these businesses continue to maintain number 1 or number 2 positions in their marketplace. And when combining the platform construct, they deliver market level scaled competitive advantage and scaled advantage in terms of talent, in terms of access to high growth markets and in terms of our ability to do M and A, not to mention the option value associated with having 5 platforms today. So today Danaher, that $18,000,000,000 corporation is a multi industry science and technology portfolio with significant competitive advantages across each of its operating companies as well as its platforms. But Danner's business model and the portfolio has never been a static one.
Those of you who followed us for a long time know that and you know that so well. I know there are some folks in this room that actually go back with us to 1984. We usually get a question from somebody in this room who goes back to 1984. And so some of you will remember. But we were founded back in the mid-80s by Mitch and Steve Rails, 2 tremendous investors, 2 key shareholders today and members of our Board of Directors.
And the business was essentially built on the back of some wonderful largely industrial businesses. And you see the starting point with some modest levels of revenue, 20% gross margins, very minimal consumables revenue, largely industrially equipment oriented businesses and very modest exposure to high growth markets. But the portfolio evolved over time and as it evolved over time, if you fast forward roughly 15 years, we began the evolution into the science and technology portfolio that we have today. And you see the growth in revenue, but what you also see is the improvement in the gross margins associated with that new business model, that new portfolio, then 40% gross margins and 15% consumables revenue and 10% high growth market exposure. And that was at the point where we began to develop our position in new platforms, platforms like our life science platform and our diagnostic platform.
I was there in the early
days when some of our first science and followed by Radiometer, our first diagnostic
business,
and followed by Radiometer, our first diagnostic business and then Leica Microsystems entering us into our life science portfolio, advanced then later by SCIEX and eventually by Beckman Coulter Diagnostics and Life Science. So wonderful progression over time, again rotating out of more industrial businesses into higher margin businesses where you see now 55% gross margins and higher levels of consumables revenue and a much higher representation in high growth markets. But I think what's really noteworthy and we talked about this a little bit last year is with the evolution of the portfolio and the capital deployment that's been associated with that over the last, oh, let's say 5 or 6 years or more, you're talking about $20,000,000,000 going into that rotation of the portfolio. Danaher's portfolio today is now the youngest it's ever been, probably since about the year 2000. And what that represents is a significant opportunity for both improved growth trajectory as well as margin improvement over time, and I'll touch on those opportunities in just a minute.
What unifies the portfolio again are some of those characteristics that I just mentioned that form a common business model. Those outstanding brands with market leading positions, the extensive installed base that drives those largely captive recurring revenue streams. Captive meaning those recurring revenues are largely attached to or enclosed systems with our instrumentation base and usually form the heart of mission critical functions for professional end users. Our businesses today are roughly 2 thirds direct sales and about 1 third distribution. And the combination of direct sales and that those mission critical consumables allows us to form what we believe is clearly a very high level of customer intimacy.
When you put all that together, the Danaher of today is a 55% gross margin portfolio. We're running a 20% adjusted EBITDA margins year to date and we continue to drive that free cash flow generation that I mentioned for the 26th consecutive year. So today we are building and enhancing a sustainable growth, earnings and free cash flow profile in the interest of long term shareholder value. Now, in addition to those that common business model and the attractive characteristics of that model, we also participate in highly attractive global markets. You can see the scale of the markets that we participate in with the dollars associated with each of them at the top of the slide.
But what I draw your attention to is some of the characteristics of those end markets. Characteristics such as regulatory requirements and workflow efficiencies and improving standards of care and environmental concerns around the world. These types of attractive secular drivers play a role across a number of our businesses. And when you have those kind of secular drivers, those present opportunities, opportunities for differentiation and leadership position when you align yourself with those key secular drivers. In addition to that, in many cases, they create barriers to entry and in some cases, high barriers to entry that limit the ability for new competitors to come into a market unless they are well aligned with those drivers.
So for example, our life science business, our diagnostic business, our water quality business, all driven by regulatory requirements in some respects, as well as product ID with the growth of consumer packaged goods and food safety and pharmaceutical tracing and tracking. Workflow efficiency, critical to end users at our Life Sciences businesses and certainly in the Dental industry when workflow efficiency and digital dentistry is at the heart of the evolution of that market. High growth markets are an important part of virtually every one of our businesses and one of the key dimensions of high growth markets is the improving standards of care that are represented in a number of those markets that are help that's helping to drive our diagnostic business as an example, not to mention water as well as our Life Science businesses. And finally, the overriding concerns in many, many markets about the environment and about safety, whether that's water safety or food safety. And those benefit our Life Science businesses and our applied markets positions as well as water quality and product ID.
So strong secular drivers influencing a number of our platforms across the board. And at the heart of driving our performance for well over the past 30 years has been the Danaher Business System. The Danaher Business System, it guides what we do. It defines our core values. It defines how we measure the impact of deploying those tools in the interest of a consistent and perpetual cycle of continuous improvement.
That's really what DBS is all about. It's the heart of who we are and how we do what we do. It's anchored in our 5 core values. Let's start with the best team wins, and I'll be talking more about talent today. But we are challenged to put the best team on the field every day and we charter that team through the second of our core values, which is customers talk, we listen.
Our team is targeted with listening to customers better than competition does and looking for unmet needs in markets in the interest of driving higher levels of innovation. Once we understand the customer, it allows us to drive continuous improvement. It allows Kaizen to be essentially our way of life. And as we continue to drive improvements in the interest of customers values of quality delivery costs and innovation, we come to recognize that innovation ultimately will define our future that much of what has driven businesses in the past are now table stakes And that the continued evolution of products and their capabilities and our value propositions are ultimately what will define our competitive advantage, our long term growth and our share gains. And finally, the 5th of our core values, we compete for shareholders, somewhat of a double entendre.
We compete in our markets for your benefit. We also compete for you and your attention and your deployment of capital on the basis of our abilities to deliver the longest and highest prospects for long term shareholder value creation. Underpinning these values and DBS is a set of tools and you'll learn more about those tools today. You'll learn more about the way they've impacted our businesses when you hear Melissa Aquino in a few minutes on DBS and during the course of the presentations from each of our platform leaders. Just as our portfolio has evolved, so has DBS evolved over the 30 year plus period that I've talked about.
If you go back to the mid-80s at our founding and shortly thereafter, the heart of the Danaher Business System was a set of lean tools, largely borne of our insights and understanding of the Toyota Production System. And the disciplined implementation of those lean tools helped us to improve quality, delivery and cost consistently in our businesses and made us more competitive and helped us to grow. But as the portfolio evolved and our challenges evolved beyond simply the ability to improve competitiveness through lean, we sought to broaden DBS with a set of growth tools. And we did that virtually in parallel with that evolution of the portfolio into more Science and Technology businesses, where sometimes the challenge is relative to growth really can be that much more significant and where our tool set needed to be more sophisticated. And so the growth tools evolve.
And then finally, not much more than about 7 or 8 years ago, we began the evolution of the DBS toolset into more leadership tools. And for some of you who have been with us in the past, you have heard us talk about some of those tools in great depth. But that's a recognition that we compete not only in our marketplaces for customers, but we compete for talent and our ability to attract and retain and develop talent is critical to our long term future. And finally, just 2 years ago, we further unified the corporation and our common business model under what we call our shared purpose. And that is 4 simple words, helping realize life's potential.
That's fundamentally what we do. It's what we do for our associates, we help them realize their potential. It's what we do for our businesses. It's what we do for newly acquired companies. It's what we do for suppliers and partners around the world.
We help realize life's potential. It's fundamental, it's core to us and it's ultimately what our products and our companies do in the interest of the betterment of the world. So let's now turn to how well we're executing our strategic priorities. How do we measure the impact of DBS? How do we think about its impact on our ability to drive growth, shareholder value and market share gains.
I'll touch then also on where what the role of inorganic growth is, how capital deployment and strategic deployment towards mergers and acquisitions influence the business model. And then finally, as I've mentioned a couple of times, the importance of talent and how we're evolving the talent model in parallel with the evolution
of the portfolio.
In many respects and we often use this term, simply put, DBS is common sense vigorously applied. The balanced approach to lean, growth and leadership, the tools embedded in the business system, the 5 core values that I talked about really represent what many would say common sense, good business practice. Perhaps the difference is in the execution, is in whether we vigorously apply those tools and those principles, which we do. So how do we measure the impact of DBS? Well, we measure it, we believe, through the lenses of our shareholders, the lenses of our customers and the lenses of our associates around the world.
And when you put lean growth and leadership together and you deliver against those metrics through those lenses, we call that running the Danaher playbook. So what is the Danaher playbook? Well, it's a model for value creation, and it looks something like this. We focus on improving the cost structure of our businesses. That comes through quality, comes through focusing on waste, comes on improving delivery performance and ultimately it comes on driving the highest level of customer value propositions possible with an improved cost structure.
That involves driving gross margins up and holding tight on general and administrative costs. What that allows us to do is reinvest in businesses, reinvest in R and D, reinvest in sales and marketing. And when we do that, the end result is both core growth as well as operating margin enhancement. So a balanced approach to creating shareholder value, continuing to reinvest in the interest of long term, while at the same time delivering on the near term objectives of improving our profitability. So the combination of enhanced core growth and margin expansion with strong free cash flow, often which is accelerated on all fronts by deploying that free cash flow towards acquisitions is how we equal top quartile EPS growth and compounding annual returns, the Danaher playbook.
And so what does all that mean, deploying that mean relative to the opportunity we have, The opportunity that I mentioned a few minutes ago about a relatively young, a relatively new portfolio that 50% of the portfolio roughly in revenue terms has been acquired into the corporation in the last 6 years. Well, it means that we have a number of businesses that we've owned for some period of time where continued execution with improvement opportunities can continue to accelerate their core growth. And if you look at 2017, the group of businesses that you see here on the left hand side, roundabout 3% core growth in those businesses. With opportunities for improvement in a number of those, some that are underperforming today, some that simply have had new opportunities as a function of new product innovation. Then add to that our new and larger acquisitions, Pall, Nobel, Cepheid, Phenomenax, all mid single digit growers today in 2017 and a reminder that in the case of Phenomenex and Cepheid, those only contributed a small bit to the Q4.
So next year, we'll see a full year of those businesses, but the combination of our improvement opportunities in businesses we've owned for some period of time as well as the newer businesses really combine to give us line of sight to being a mid single digit growth company over a long period of time. And DBS is at the heart and the growth tools are at the heart of ensuring that we continue to make that progress. So if we turn to margins, again, a similar story of opportunity. If you start on the left hand side, tremendous execution over a long period of time by core businesses that many of you know well, our Hock water quality business, Videojet the cornerstone of our product ID platform, Radiometer a wonderful business and our longest tenured business in our diagnostic platform. Those businesses averaging 25% operating margins today and roughly delivering over 1,000 basis points of improvement since they were acquired.
But there are opportunities for improvement and you see some of those in relatively large scale businesses at Beckman Coulter Diagnostics, at Cabo Kerr that are mid teens today, but fundamentally have no reason why they shouldn't be higher than that, namely 20% or better. And then again, add to those our newly acquired businesses, which are already roughly 20% operating margins today, wonderful businesses and have shown the kind of acceleration that we've seen from businesses that we acquired much earlier. In this case already north of 600 basis points of improvement since acquisition and continuing to improve from there. So because of the combination of these improvement opportunities in the newer businesses, we've actually delivered a higher operating margin improvement year on year more recently than we even anticipated, roughly 75 basis points over the last 3 years. So we put a peg in the ground at 50 to 75 basis points of operating margin improvement as a good placeholder.
We've outperformed in the past, but we think that's probably a good guide for what we think we can do, again focusing on the improvement priorities as well as our newly acquired businesses. So when you drive accelerating core growth and when you drive operating margin improvement and you do that in a quality way, obviously you generate tremendous levels of free cash flow and we have done that consistently. I mentioned that this will be our 26th consecutive year of free cash flow in excess of net income. And you see the growth from 2014 to 2017 and we expect to continue to increment that growth as we go in to 2018. But it's not just about newly acquired businesses and some of you have heard the numbers, but go back to Beckman, over $300,000,000 of working capital improvement out of Beckman Coulter.
Pall, over $100,000,000 of working capital improvement out of Pall as well. But every one of our core businesses is accountable for improvements in working capital year on year as well. So the combination of core growth with good operating margins and a consistency of working capital improvements really helps to deliver that superior free cash flow generation. And as a benchmark and you can pick any number of peer groups to benchmark us against, in this case you've got one of our peer groups here, where our free cash flow is clearly a differentiator. And we continue to believe that this is one of the most important measures of the quality of our performance over time.
We recognize that the diligent and disciplined and strategic management and deployment of capital is essential to continuing the wonderful stewardship of the corporation's growth and profitability over time. We take an approach that's really a 3 pronged approach to deploying that exceptional free cash flow. It starts with a strong bias, first of all, towards deploying it towards M and A. Obviously, we deliver a modest dividend today. Historically, we've only bought stock back in times of dislocation.
So the bias remains towards strategic M and A. We focus on the market first and always the market first to understand the attractiveness of the markets. You've seen some of the secular growth drivers just a few minutes ago. We love fragmented markets with high barriers to entry and we love the optionality that a broad multi industry portfolio represents, M and A goes in cycles. Secondly, then we focus on companies.
Companies in those attractive markets with leading market positions, strong brands, we love distribution businesses, but direct businesses tend to give you greater levels of customer intimacy, which tends to allow for greater levels of competitive advantage. Consistent revenue visibility comes from high levels of aftermarket and consumables. Finally, we then look at valuation. And the return on invested capital, which has been a cornerstone discipline of ours for a long period of time remains a discipline of ours, continuing to hold true to the thresholds that we've established and making sure that we're putting that money to work exceptionally well. So we will continue to selectively pursue value creation opportunities through M and A in 2018 with a stronger balance sheet and in the years beyond.
So to sum up the value creation model, Videojet represented a beachhead acquisition back roughly in 2,002, 15 years ago or so to our Product ID platform. And what you see since Videojet's acquisition as it evolved within the Product ID platform is an improvement first of all in its core growth rate. Videojet started out as a low single digit growth business. Now it's become one of the most consistent mid single digit growth businesses that we have today, mid single digit consistently over the last 8 years, while enhancing its operating margins at 100 basis points or better over the last 3 years, while deploying capital strategically to the tune of 14 acquisitions since 2002. And when you combine core growth and operating margin improvement with those acquisitions and the accretion they represented, we've now on a combined basis delivered in excess of 20% return on invested capital.
Videojet deploying the Danaher playbook, driving organic execution, adding M and A through smart capital deployment, equaling compounding returns on invested capital. Those are the shareholder metrics, core growth, operating margin enhancement, cash flow and working capital and return on invested capital. Now Videojet is a good example over time. Some of our more newly acquired businesses represent equally good examples, but more recent ones. If there was one thing that was impressed upon me 3 years ago when I took this role, it was how important the diligent and strategic deployment of capital was to the good stewardship of the growth and profitability of the corporation over time.
Nobel in 2014, a low single digit operating margin business when acquired now north of 20% and you see the return on invested capital continuing to improve. Paul, off to a tremendous start, core growth improving, little bit of a challenge this year, but getting better and we'll see that in the Q4, but operating margins high teens now roughly 25% and again the return on invested capital moving up. And finally, Cepheid. Dan Daniel will tell you more about this today, but boy off to just a fantastic start, consistency of performance, double digit core growth, but you see the dramatic improvement in operating margins at the same time. And obviously that driving a great start to what will be a long term run of improvement in return on invested capital.
So all the more recent deals at or above our initial expectations. None of that would be possible without continuing to evolve the talent of the corporation as we evolve the portfolio and the tools of DBS. And if you look at our talent evolution in this historical context, you'd see that going back a decade or so, we were focused more on industrially oriented talent, we outsourced a lot of the sourcing of talent. Today, it's more about science and technology talent. It's more about internal sourcing and internal development.
Organizationally, it's not just about operating companies, it's about scaled platforms that create leverage in their markets. And finally, it's about developing those leaders in a different way, not just on the job training, but progressive responsibilities and formalized development programs. And you see some of the metrics that support the progress that we've been making, particularly the one at the bottom where greater than 80% internal fill rate meaning we are filling roles from within at the operating company president and above. And here are some exceptional examples of how we're building talent from within. There is no better evidence of the evolution of the model than looking at where the talent is today and where did it come from.
The fact that we now have former leaders of R and D now running operating companies at Radiometer and at Nobel. The fact that Chris Reilly from Videojet is now over at Beckman Coulter Diagnostics, driving growth in that business and Ganesh Ramaswani has moved from the diagnostic platform to product ID. And that our group executives and our EVPs have all grown internally within the Corporation and in many cases across platforms. The multi industry structure we have today, the tools of leadership within DBS are truly a differentiator in terms of our ability to attract, develop and retain talent on a long term basis. So you put it all together, the tools of Growth Lean and Leadership, the Danaher playbook, then you look at the results over the past 3 years.
200 basis points of lift in gross margins, G and A as a percent of sales down to 50%, R and D up 50, that leads to the operating margin enhancement that you see here and mid teens average annual EPS growth over the period. Revenue growth, margin expansion, cash flow plus acquisitions equals the top quartile EPS growth and those compounded returns. So in summary, the portfolio is evolving and DBS is evolving along with it. They've contributed to a better and stronger Danaher and that new portfolio today creates great option value and the runway for improvement over time. Superior cash flow will remain a differentiator and the diligent and strategic deployment of that capital, particularly as we go into 2018 with renewed strength in our balance sheet is an opportunity.
And finally, talent and leadership will always be critical to ensuring that we deliver and sustain those results over time. So with that, I will draw the opening to a close and invite Melissa Aquino up to the stage. Melissa has been with Danaher for 17 years. She currently runs the Danaher Business System Office, a global team of resources around the world helping to train, develop, run Kaizens in many of our businesses. Melissa and I go way back.
We worked together nearly 17 years ago in the water quality platform. She had progressive levels of responsibility throughout the corporation as well as being a Danaher Operating President before taking this role. Melissa is going to tell you more about DBS. I gave you a high level view. She's going to take you deeper into growth with a focus on how we drive growth through the tools of DBS in terms of innovation, as well as commercialization in the interest ultimately of gains share gains in our market.
So Melissa, it's all yours.
Right. Thanks, Tom. Pleased to be here this morning to give you that deeper look into our DBS tools, particularly on the growth side. You saw this graphic in Tom's presentation, where we started off in the lean roots of DBS and have evolved to a more balanced approach to what we have today where we have lean leadership and growth. We've been able to do this, because some of the bedrock we have in our culture and our history and the legacy of Danaher, these DBS fundamentals you see to the right.
And they span the tools across the board. So as we think about growth, we break them into 2 categories that help grow the top line. Our innovation tools, you can see some examples in here and I'm going to give you a deeper view into that in a minute, as well as the commercial tools which help us with our sales, marketing and our service execution. It's interesting to think about how do these tools evolve, what is the process by which they evolve and how do we make sure they're keeping up with our portfolio. And it really comes from 2 directions.
If you think about the longest companies in our portfolio, you saw the Videojet example and their acceleration into mid single digits that Videojet is a prime place that has evolved our marketing tools for us. So we had a nice suite of sales tools. The Videojet team took that to the next level and developed what we call our transformative marketing tools, something then that we can put into DBS and take to the rest of Danaher. It also comes from another direction and innovation is a good place to talk about Cepheid, where we come into Cepheid and we add value to the top line, the bottom line, we run our DBS playbook that Tom mentioned. We've also learned a lot from Cepheid, particularly on that front end innovation space around what is solve and how do we match up the technology to do that.
And learning from them has helped evolve our toolkit on the front end of innovation. So I want to talk about innovation, the innovation DBS tools that we have today that enable us to go from market insight, where do we want to play and what's our rate to win, all the way to the right to how are we going to take share. And you might think innovation is really a structured approach. In the case of DBS, it is. This is a structured repeatable process that allows for us to go in and evaluate how we're building these engines in our operating companies, but also keep the creativity flowing, especially as we go out and work with customers.
So what we first do is go in and look at that strategic product envelope we call it, which is where is the attractive space that we want to go innovate and what do we like about it. We next go into our problem to portfolio kit. This allows us to go out with customers and start technology with it, go back out to those customers and make sure we get it right. Once we have a roadmap of these projects that we want to execute against, we then go into our product planning group. And this is where our executives get together and start looking at the return on investment of these suite of potential projects.
Are we going to resource them? How are we going to make sure we get them out on time? And so we rack and stack those and we start pulling the most attractive projects off the top. You can take an individual project then and we use our NPD, our new product development project management toolkit. This is where we leverage the basics of visual management.
We put it up on the wall. We can see where a project is headed, make sure the cross functional resources are deployed so that we can get that out on time and with quality. And when the product is ready to go to market, we have our launch excellence toolkit. This plugs right into the commercial tools, which I'm going to talk about here in a minute, that allow us to make sure that we are creating the demand, getting that project out with quality and hit the investment that we expect or hit the return on the investment we expected. So again, it's a replicable process that does allow for some creativity in there.
Here is a great example from Hock and you're going to hear more from Lance later about this particular product, but I want to talk about one of the tools we used. Within that project execution box I just mentioned, we have a tool we call speed design review. And essentially what this is, it gives us rapid cycles with customers, sprints we call them. So we will go out and talk to customers and say what is the unmet need that we can fulfill for you. And in this case, we're starting to see customers purchase some of our Hach drinking water analyzers into the dialysis market to test for chlorine.
So we went out to understand that. We bring it back to our labs and we start innovating against it. We leverage a concept called OBEA, which in Japanese means big room. This is where we break down the walls literally cross functionally. We put the scientists of different disciplines together and we start coming up with prototypes and innovating against that customer idea.
We're not sure we get it right initially, so we go back out to the customers and we talk to them again and we iterate those prototypes with them. And in this case for the Hawk example, there were 15 product designs, sprints and loops that we did with the customer that unlocked for us a $50,000,000 adjacency. Now this is going on all across Danaher. This is just one example that I wanted to give you a peek inside how it works. We have multiple projects running, leveraging the DBS tools for innovation at any one time.
So now I'm going to go into our commercial tool set. Very similar to innovation, we start on the left and we look at the market, how does it work, How should we be going to market? What are the channel strategies that we want to deploy? And then we have 2 pieces that we look at next and this is our transformative marketing kit and our sales standard work tools. So I talked about Videojet earlier and this is the transformative marketing tool set was evolved at Videojet and now is deployed broadly across Danaher.
And what that means is we start with market visibility, can we even see all the potential customers and spaces out there and how do we know and then a disciplined process to make sure that we see that then go into the customers buying journey, how do they want to buy from us, how are we nurturing those leads and winning that opportunity. We end up with high quality leads at the end of that transformative marketing engine that then plug right into our sales engine, our sales standard work. We start looking at sales productivity, do we have the folks deployed to the right territories, how many customers are they calling on, how do we know that that is the correct way to deploy them. And then we have a funnel, leveraging one of our basics of visual management. Can we see the funnel?
How are the opportunities progressing through it? This is a comprehensive integrated system between sales and marketing and it's built on that bedrock I mentioned, those foundations of daily management, standard work that Dan Hur is known for that we've applied for over 20 years now. So to give you an example of Pall where we have worked on this and Rainer will give you a deeper dive on it later. We have a we went into Paul, it's interesting when you go into an acquisition for the first time, because you start asking the sales people, you start asking the marketing people, well, how many customers do you have? Do you know are you seeing all the customers?
The answer is do you have? Do you know are you seeing all the customers? The answer is usually, yes, we know all the customers out there, we see them, we know who we're calling on, we're doing pretty well. Once we start applying our visibility tool, their eyes kind of light up and say, well, maybe there's more out there, maybe the space is bigger than I imagined. And so what we found at Pall when we went in is they did not have that complete market visibility, we could unlock that potential for them.
They also did not have digital marketing capabilities. So once we could help them see the market, how do we come in there with some digital marketing tools that allow us to can't And they have a nurturing process around that. So we came in and we started with both transformative marketing visibility, went into some lead handling standard work and then finally making sure that they have robust funnel management coming out the other side. What this allows us to do if you look to the right is you have this almost a predictable engine if you will of how much we increase visibility by 50%. Well, what does that do?
It drives leads 6.5x. We get double the opportunities out of those leads and then a win rate that has increased 15%. So this has been a repeatable recipe, but we have used it, Paul. So in summary, I hope I gave you a flavor of that DBS is our culture, it is our competitive advantage. We have a rich history and now we're applying that more broadly to the growth toolkit.
It's not just lean, but those lean principles and what we've learned have allowed us to evolve DBS to match our portfolio. It's about growth and leadership and laying a very balanced approach. You're going to be hearing some great examples today from our platform leaders where DBS has allowed them to win this year and we'll continue to help them win in the future and hopefully deliver long term growth to all of you. Thank you.
Thanks, Melissa. Thank you very much, Melissa. Hopefully, you got a sense of where DBS now is having a greater impact from a tool perspective on our businesses and how it as a toolset can continue to contribute to the accelerating growth over time. Again, as Melissa just mentioned, you'll hear more about that during the course of the platform presentations. And to get us started in the platform presentations, Rainer Blair is going to come up immediately following a video that's about to play that will introduce you to the Life Science platform.
Rainer is our Executive Vice President in charge of our Life Science businesses and I think you'll find it interesting to get an update on our Pall business as well as the balance of the portfolio.
Well, thanks, Tom, and good morning to all of you. Every time I see that video and it's been many times, I can't help but get really pumped up and I hope that that is the same for you. I look forward to sharing with you today some of the things we've been up to here in the Life Science platform over the last year, as well as set up where we're going in 2018. So before I jump into some of the details, perhaps just a quick overview of the platform itself with our global leading brands and our high performance solutions, we drive for share gain in roughly a $40,000,000,000 addressable market worldwide. We expect to achieve $5,700,000,000 of revenue this year with 25% EBITDA margins.
From a revenue mix perspective, you can see our bias for that razor blade business model with a very high consumables to equipment ratio. When we think about the diversification of our portfolio, we're very pleased with the way we're positioned there, both from a geographic as well as an end market perspective, with the high growth market as well as the biopharma exposures being particularly noteworthy. Well, the Danner business system and playbook is alive and well and has helped us in 2017 to deliver some nice results as well. By the end of the year here, we expect to exceed 150 basis points of operating margin expansion. If you look at Pall since the acquisition, we look to be exceeding about 600 basis points of operating margin there and we're accelerating core growth across the platform.
In fact, we'll be delivering mid single digits here for the platform for the year 2017. And at the same time, we've created some nice value with some recent acquisitions. Phenomenex was mentioned. More recently, we've acquired IDBS, one of our first plays in the informatics and software area in the life science platform, strengthening our hand in biologic workflows. So we feel pretty good where we sit here in 2017 and the momentum that we're building for 2018.
So how do we win in Life Sciences? Well, our winning formula is really based on 4 pillars. The first is, we index our portfolio, our organic as well as our inorganic investments to high growth markets, both from a geographic as well as an end market perspective. And I'll talk to you about that in a little more detail here in just a couple of minutes. From an innovation perspective, we focus on proprietary, high performance solutions that require a high degree of customer intimacy and stickiness in that relationship for greater defensibility as well as pricing leverage.
When you think about our service business, we really see that as an aftermarket channel to help our customers succeed, as well as deploy a portfolio of differentiated service products, as well as informing our innovation funnel. In fact, this is much more than a break fix approach. When we think about our commercial teams, these are really highly qualified subject matter experts that are fighting an application targeted application segments for share gain. And so this is much more than selling boxes. This is a lot about helping scientists advance their research.
So getting back to this topic of high growth markets and how we think about secular growth drivers, you see across the top here the various verticals down the side are operating companies and the way they are appropriately exposed here. If you think about Biologics and Applied Markets as an example, fully 40% of our portfolio in Biologics, these are highly efficacious drugs. They are just the beginning of their penetration in the marketplace. And of course, the pipeline there is still growing. So really a really nice growth driver there.
If we think of the applied markets, growing populations are pressuring the food supply as well as the environment. Governments are starting to increase the number of compounds that you have to test for as well as the frequency in order to ensure both compliance and sustainability, a great growth driver for us. If we think about industrial markets, here we are very selective focusing on applications, which will provide us a long time a long term play. And I might mention in this context, semiconductors, which are very much buffeted by the current IoT trend, providing us a nice tailwind here as well. In research and academic markets, these tend to be anemic at times, because of constrained government or public budgets.
And so here we focus on so called translational research, research that we expect will transfer over time into the pharma or applied markets. And then lastly, in the clinical markets, we are looking to marry our high performance solutions with those applications where we can create significant clinical value for the physicians. So if we just have a look here, I won't go through all of these examples, but just a couple of examples and statistics on some of these secular growth drivers. Biologics, once again another greater than 20% increase in the number of biologic entities in the pipeline. And we're just at the beginning of new therapy classes such as cell and gene therapy, which will continue to buffet this area.
We think about high growth markets, China and India in particular are transitioning from decade and a half long investment cycle in basic research to applied research. And we fully expect that to continue here over the next years. And then lastly, I talked about microelectronics. Today's vehicles, 300 sensors, tomorrow's vehicles, up to 600 sensors. And I think we're all experiencing the censoring up of both our personal and professional lives.
And so you can imagine the kind of tailwind that provides. So we feel really good about the way we've positioned this portfolio to straddle these secular growth drivers for the long term and provide us the appropriate growth tailwinds. Now let's switch gears and talk about innovation and how we try to create competitive advantage there. The operating company Cyence just launched the Topaz clinical mass spec and vitamin D assay and during the break or lunch you can see that outside in the foyer. Now in this particular case, we're first to market with a real solution that creates clinical value.
And this FDA approval is the first of its kind as well creating a nice set of entry barriers. For instance, here, clinicians can now bring this vitamin D test into the hospital, feel secure in its FDA approval, and this test creates a base load in order for them to be able to pay for this new capital investment in their hospital, while at the same time adding additional lab developed tests in their clinic. What does this do for them? Well, the first thing it does is it reduces the number of costly send outs to other testing centers. The other thing it does is it reduces the time to measurement and the time to diagnosis, all very, very important things.
Now going forward, we're going to continue to invest in menu expansion for this particular solution, particularly there where we see mass spectrometry providing material clinical value versus other testing modalities. Now let's switch gears and have a look at Beckman Life Sciences. Once again, the Danaher playbook working for us. If we during the acquisition of Beckman Life Sciences, this particular business was flat. Today, we're growing solidly in the mid single digits for 3 years in a row.
And what are we doing? Well, we're certainly removing waste and costs on the one hand, but we're also shortening simplifying processes and then reinvesting in sales and marketing and R and D, employing some of those tools that Melissa spoke to you about, speed design review, shortening cycle times and innovation and helping us accelerate our own innovation cadence. And the results here speak for themselves, 20 products launched in the last 3 years and this compares to 3 products launched in the 3 years prior to the acquisition. And I might just mention here this Biomek iSeries automated flow cytometer used by scientists to answer some of the most difficult questions in cell biology. Both of these solutions launched this year and are best in their class and significantly accretive to both our core growth as well as our operating margin expansion.
So just another great example of the application of the Danaher playbook here at Beckman Life Sciences. I alluded to our the importance of service to us and here's another example with SCIEX. Once again, customers speak, we listen and with that end in mind, really our service is an aftermarket business that helps our customers succeed. And we look to differentiate here from asset managers as well as break fix service providers by providing proactive subject matter expertise that not only keeps these instruments running at the highest levels of utilization, but we also help these scientists get the answers they're looking for to advance their research. So in that fashion, the service business is not only a high value, high margin recurring revenue stream for us, but it gives us customer intimacy, it gives us that stickiness that we're looking for and it also informs us of the pain points in those labs in order to inform our innovation cycle once again.
The results speak for themselves. You see here 500 basis points of improved contract capture rate supporting what is now 5 years in a row of high single digit plus core growth and share gain for SCIEX. Here a quick update on our Pall acquisition. We couldn't be more. All good?
We couldn't be more pleased with where we sit at Pall and the adoption, particularly the speed and application of the Danaher Business System in our playbook there. And I think meaningful improvements meaningful improvements both in quality and delivery, over 2,000 basis points of on time delivery improvement is pretty significant. From a commercial perspective, we're really pleased with the progress we're making with our commercial initiatives, which are gaining traction and improving our go to market capabilities. And Melissa pointed some of those out to you just a couple of minutes ago. From an innovation perspective, we've really concentrated our project portfolio to build some additional leverage, pulled in the Danaher Business System and applied our tools there to improve and shorten our innovation cycle times, resulting in a 50% increase in the number of products launched versus the prior period.
Now as we think about this year from a growth perspective, we've seen orders growing well since the Q2 on, but it's been a little bit choppy from the market perspective. And so we with the 2 hurricanes and the earthquake, so by the Q4 here, we will be solidly into the mid single digits again with Paul and feeling good about the momentum that we are building there in 20 18. Now I know some of you are paying attention to our cost target there. I had some questions during the break. You may recall, we increased our cost target from $300,000,000 to $350,000,000 over 5 years.
We've clocked in that 2 $100,000,000 here after 2 years and we feel really good about where we sit in relation to achieving that target. So Danaher business system and the playbook alive and well at Pall and we couldn't be more pleased with where we sit there and the momentum that we're building. So if we back out of the operating companies once more and think about the platform overall, how do we apply the Danaher playbook there? And if right here you see that we've deployed $19,000,000,000 of capital on over 25 acquisitions since 2,005 building out the platform. And this is essentially a combination of larger acquisitions with smaller bolt ons.
And throughout this process, we're playing out the Danaher playbook, as well as applying the tools, simplifying processes, accelerating processes, reducing costs and gaining the flexibility to reinvest organically in those businesses to expand both the core growth as well as the operating margins. And when you combine that with our ability to successfully execute on acquisitions, you get some outsized results. And I think when we look at these mid single digits here for the last 5 years in core growth, a 1,000 basis points of operating margin improvement over the last 5 years. Those really show the playbook in action and also really under really prove and underwrite the hypothesis that the Danaher Business System works in and for the Life Sciences. So in summary, we've got some outstanding global brands here that are very attractive markets that are buffeted and supported by those secular growth drivers that we spoke of.
The Danaher Business System and the tools not only allow us to have terrific margin performance, but to reinvest in the business to strengthen both our commercial as well as our product innovation. And then of course, we feel great about where we're sitting with Paul currently and the momentum that we're building there and look forward to continued acceleration. So in conclusion, then we want to continue with this balanced approach to deliver long term sustainable value to shareholders. Thank you.
Reiner, thank you. Thank you very much. I think that small pause that was causing a gasp, I think it was actually the few members to be honest, they found the results breathtaking, I think was what happened there. I even found it breathtaking a bit at a moment when you reminded me that we'd spent $19,000,000,000 over the last 12 years, but 25 acquisitions. And it was a great portfolio as we were building on the back of Leica and SCIEX and Molecular Devices and Beckman Coulter Life Science.
But boy, with the addition of Pall, because of the fundamentally great business it is, plus the performance improvement, and the addition of great consumer business like Phenomenex, we've gone from having a really good portfolio to a really fantastic portfolio, again, with opportunities for improvement from there.
So now we're going to turn to the Dental platform. And as you
know, we've talked about the Dental platform as as a platform that we're approaching and have for the last couple of years as if it were a newly acquired business. And Amir Agadeh is going to come up here and talk to you about that and he's done following this introductory video.
It's a pleasure and honor to be here. Let me start by reorienting you, telling you a little bit about the dental platform. $2,800,000,000 business in a $20,000,000,000 market. Currently 20% adjusted EBITDA margin. Our business is a combination of specialty consumable, about a half, half of the business, traditional consumable, another 20% and about 30% equipment.
Think about it in that format, about 70% recurring, 30% standard equipment. We're changing the portfolio. We're getting more and more in the high growth market. And we have a fifty-fifty format, 50% direct, 50% indirect. Let me tell you this transition and transformation that we have been going through over the last 2 years.
We started by looking at the platform as a new acquisition. We started integrating a lot of the back offices, improving performance, freeing up fund for investment and start looking at early innovation ideas. And we're beginning to see the outcome of that work. 2 years through this process, we're glad to communicate 100 basis point of a margin improvement. We have increased the R and D investment by almost 10% in the last 2 years.
We've doubled the size of our software engineers in the last 2 years. And we are beginning to see the outcome of that in some of our specialty businesses. Nobel, we talked about, Ormco in the same format and a double digit growth in a high growth market. I say we are at the middle of this journey. There is plenty of upside potential in here.
By staying the course, by executing, you're going to see us continue to perform as we move forward. So what are the underlying macro drivers that makes us feel good about this platform? Patience. You're seeing the high growth market continue to become a major driver in here. If you look at it, the amount of investment or spend per capita, U.
S. Is 30 times higher than in China. Aging population and a lot more attention to aesthetics. Look at the dentists, they are shifting toward more of a workflow approach. And the reason for it is efficiency, clinical outcome, reducing cost and continue to give better care.
And a business, looking at the business when DSOs are looking at this industry, Big corporation coming in, buying a lot of the dental offices and trying to create a business out of it to give better care to a larger population. Outcome of that is they are applying some of the basic principles of a continuous improvement into the dental offices, introducing the IT, the procurement, other pieces that we haven't seen in this space decade ago is becoming reality now. Outcome of that is, it is a significant upside potential. The macro drivers, as I said, are there for us to really take advantage of it and transform this industry over time. Only less than 50% of the dentists today are using this integrated workflow.
Less than 5 percent penetration in the implant, those that they needed and those that they get it due to cost, the skills and the time that it takes to really make that a reality. We talked about treating this platform as a new acquisition. In order to make that a reality, we have created a 3 pillar approach. Number 1, it's about integration and simplification, Danaher playbook that you're going to be hearing over and over from us and in this space, about probably about 10 years later than what we should have done. But we are going through really simplification, consolidation.
We are freeing up funds and we're using that fund for innovation and growth in order to create sustainable competitive advantage. And then start looking at how do we position ourselves to win in this market to have a leading position. This is the playbook that we have been following in the last 2 years. I'm going to give you a status update of where we are in each one of those pillars. We had over 10 operating companies, 10 President, 10 CFOs only 2 years ago.
We have brought it together to 4 fundamental focus areas. We have reduced the footprint of our manufacturing, sales offices, some of the entities that we have been managing by 30% over the last 2 years. And there is plenty more room to go in here. We are trying to be thoughtful, make sure that we operate in the format that we create value for our customers and for our partners. Outcome of all of that has been over 100 basis points of a margin improvement and our G and A has reduced by almost 50%.
These are what we call the basics of DBS in action that is going to help us to continue to improve our margin and our core growth. And as I said, there is plenty of room in here for us to continue this playbook. So freeing up this fund has allowed us to start putting investment back into the business. Over 10% I'm sorry, over 100 basis points of R and D improvement, adding R and D resources, over 10% adding more feet on the street, the sales people across the platform. This is much more pronounced when you look at Nobel itself.
3 years since acquisition, 800 basis point of a margin improvement. 20% more R and D spend, 15% more feed on a street in Nobel in the last 2 years alone. Outcome of that is a whole lot of new product introduction that will create that differentiation that we have been looking for. Nobel, before acquisition, flat, low single digit. We have seen a mid single digit growth in a sustainable format and investment that we have layered in, in the last 2 or 3 years is beginning to pay off.
We're going to continue to play that playbook moving forward. Another example of this is around high growth market. In China, to give you a little bit of a feel, in 2012, we had $35,000,000 business. This year, we'll have $150,000,000 business. We have increased the size of our presence in China by 50% in the last 2 years.
We have R and D resources made in China for China. We have service organization now built to take care of our customer locally and a manufacturing capability that allows us to really respond to demand of that market very quickly. What we call a one stop solution, having the entire dental platform under one umbrella, so we can go in and solve problems as they needed and go after opportunities. And we are in more than 50 cities, we are present now and we are partnering with many of our partners in order to continue to expand that over time. Two examples of what the distribution of fund from that Pillar 1 has allowed us to do in the last couple of years.
And as I said, we're going to continue to play that DBS playbook in order to create funds, so we can invest in the growth areas. What does this long term view look like? How do we create competitive advantage, sustainable differentiation? Today, we are point solution providers. We sell equipment.
We sell consumable software and digital capabilities. In the future, the intention of going to a dentist is around diagnostics, planning and execution. The idea here is to create that workflow, any graded workflow that make it seamless, make it easy to reduce costs, to improve efficiency and to give you better clinical outcome. When we talk about the digital workflow, digital dentistry, these are the components that we are building in order to make this grand vision reality in a sustainable format and across the board. What makes us think that we can do this?
We have the largest number of installed base in imaging in the world. These are give us a sensor, an entry point that we can do the diagnostics. Building the software capabilities with the acquisition of Nobel has allowed us to start building this integration infrastructure. And over what dentists spend today, over 90% of what they spend in their offices, we are able to address by the capabilities that we have today. The start of a crisis, we have long way to go in here, but the key message is about continuity and execution.
We're beginning to learn how to do that. We're getting better at doing it. And in spite of a lot of the challenges that we have seen in 2017, we're really optimistic about what the future is going to look like in here for Dental as a platform inside Danaher. As I mentioned at the beginning, DBS is fundamental, reintroducing DBS into this platform, playing the dental the Danaher playbook. We have done it in some places, plenty of opportunities that we can continue to expand.
We are making good progress. Our goal is to get to 20% operating margin, but continue that play of innovation, execution and growth through commercial activities. We have seen good momentum in the high growth market in our specialty consumable and we are applying the same playbook now to our equipment and our traditional consumable. Our intention is to create long term value, and I feel really good about where we are after 2 years of that journey. With that, I want to invite Melissa and Rainer and answer any question that you may have for us.
Cliff Radz who mentioned research. First of all, Rainer, that was my interruption. I apologize. There are a lot of people in this room who got their knickers in a twist about the size of Pall and the price paid and those numbers should put them all to rest. That's a polite way of putting it.
Melissa, can you give us an example where you've used what I'll call DBS thinking to improve DBS thinking?
DBS Thinking to improve DBS Thinking? Yes. Is that it? Yes. I think that's what's happened in our evolution that I was trying to articulate where we have that bedrock of the foundation of the fundamentals.
Those fundamentals permeate how we think about DBS and it daily management, visual management, we're always looking at we have system thinkers who embrace DBS and we think of it in terms of systems and that can apply broadly whether it's commercial innovation.
So what's the latest change in the way the DBS office works as conditioned by DBS thinking?
The latest way we work, We always say that DBS is common sense vigorously applied. We're really looking carefully at my team and where we're going to deploy them against the biggest opportunities. We've always done that well, but I think we're taking it up a notch making sure that we're deployed against the biggest opportunities.
Two questions for Rainer on Life Sciences. First, for Paul, Q4 Life Sciences, you talked about mid single digit growth. I think the longer term guidance have been mid to high single digit growth for that business. So can you maybe talk about what you think could get Paul Life Sciences to high single digit growth? And then can you just talk a little bit about what you're seeing in the pharma channel?
Obviously, there's been a lot of talk of inventory destocking and where are we in that cycle on the pharma side? Thanks.
Sure. So thanks Tycho. Good to see you again. Starting off with Paul, I think our guide has been really mid single digits for the company overall. And if we look at the Life Science business, there we would have guided here over the long term, probably high single digits driven certainly by the biopharma business.
So I think the way we see the end markets there is really Life Sciences mid to high singles, and I would say industrial low to mid singles rounding us out there for Pall overall in the mid singles. As it relates to the biopharma market, in fact, there was a bit of an inventory adjustment here that we saw throughout the year as well as some other just market choppiness. And our early indicators are, and we're looking at orders and our funnels is that that's starting to normalize. So we're starting to see the order rates pick up again and give us some nice traction here as we think about the next coming quarters on the one hand. On the other hand, we do think it's probably going to take the course of 2,008 to work its way through the system entirely and get back to those normal growth rates.
So, see some stabilization for sure, but probably take the course of 2018 to get back to normal.
Thank you. A question combo question for Amir, Melissa, maybe Tom wants to chime in too. And just I'm curious to hear more about when you say you had to reintroduce DBS to the dental business, because I don't recall a situation where this has happened before. And it suggests that it wasn't DBS wasn't either installed or embraced the first time. So what went wrong?
And has there been any discernible market share loss during this 2 year period?
So two key pieces. 1, we normally build our platform around marquee brands, such as Videojet and Hock. We did not have that marquee brand in dental. We bought a series of acquisition and we didn't do as good a job any grade in that. That was one part of the equation.
And the second part is about leadership. Wherever we have seen continuity is where we have had leadership embracing and bringing DBS into the platform, executing it, say the course, have a long term perspective, while continue to execute in the short term. We have now I'm glad to say that in the last two and a half years, we have reinstituted that. We have a great leadership on the ground in all of our businesses and we're going to continue to execute moving forward. We have brands that they have stayed the test of time and we are closing the gap as quickly as possible.
A lot of the investment that we are making is resulting in new innovation, 5 new imaging new product introduction next year, 25 in Nobel, in Ormco. So we are closing the gap and creating a leadership position very quickly.
I would add to that that DBS is alive and well at Nobel. We're seeing it work very well there. The results are showing and we're taking some of those lessons learned into the rest of Dental, deploying there.
And a follow-up on market share changes in the past few years, especially on the consumable side?
Consumables is a choppy year in 2017 as you all know, but it has stabilized. The gap between inventory and sellout is in a much better place. In the last couple of quarters, we have seen a good momentum and we are introducing a whole lot of new product category. Traditional consumable traditionally is low single digit growth, but in a high
in a
custom or very customized consumable, which is our bracket and wire implant, we are seeing mid single digit growth as well as in a better performance in some of the geographies.
I don't think
you answered the question. Not really. Did you gain share or lose share?
Consumable, we have maintained share. Okay. And our goal is to continue to grow as the business grows.
That's fine. This is for Melissa. I'm just trying to picture how DBS integrates with modern technology and when I think about all these software packages are out there for project flow and does it integrate, do you utilize these new tools?
We do, but honestly back to the DBS fundamentals of can you see it, daily management, visual management is really powerful. So we use it where it makes sense, but we're very thoughtful around making sure that the fundamentals are alive and well in our operating companies.
Okay. And just as a follow-up, I mean, when Tom talked about how this is the youngest Annaher there's ever been, there is an awful lot of new employees. I mean, how do you teach and train, whether it's logistically or otherwise and culturally integrate this many people in relatively short amount of time?
I think we've done this really well in particular both Paul and Cepheid where when we go into an acquisition, we have a point of view of where DBS is going to give us leverage both on the top and the bottom line. And we make sure when we go in that we pull the right DBS tools and that allow us to do that and communicate that to the associates, so that they're not overwhelmed with so many DBS pieces, but it's thoughtfully pulled in and oftentimes it's solving a problem that they've had for many years. We try to connect the dots to win their hearts and minds out the gate.
Maybe I can just add to that. If we take the example of Paul here you're talking about in excess of 10,000 people and the challenge of change management and how do you introduce DBS. And that's a critical part of our integration plan. This is something that we think about in due diligence. And as we then close, we move forward there in a very organized fashion to introduce Danaher Business System fundamentals on the one hand, and then we have what we call executive champion orientation.
That's where we get the leadership in to understand how do you lead with DBS. And then that is reinforced with experiential learning. In the 1st year, Paul did in excess of 300 Kaizens where people are improving the processes on the critical field objectives that we've set for that year. And through that practical experience and application coupled with the conceptual understanding, we really drive forward the message as well as the change management aspect.
Hey, great. Thanks. Derek De Bruin from Bank of America. So a couple of questions on productivity and innovation. I appreciate the color on the new products introductions from Beckman and Paul.
But can you discuss the overall biz? I guess how much of your organic revenue growth is coming from new products launched over the last couple of years? What's embedded in your 2018 guidance? And then I have a specific follow-up on new product introductions in Dental.
So the if I understand the question correctly, the impact of the new product introduction has been a phased approach. We started in Nobel, we got 25 of them introduced in the last 3 years. It's impacting the business. We are seeing the growth of those. And the investment that we have layered in, in the last 2 or 3 years is beginning to pay off.
Now you're going to see a cadence of a new product introduction happening in a continuous format. We started in IDS and every quarter, every 6 months we are bringing new product categories into the market.
I was actually asking about the overall Danaher business about new what's embedded into the organic revenue growth guidance of the company for new products overall?
And how
do you look at the just the new product what's been how much of new products been driving overall organic revenue growth and
Derek, when we've looked at that and obviously there's a level of imprecision because you can treat cannibalization in a variety of different ways. So we try to
be
a a point of our core growth in total come from new products. I think what you're hearing and what you hear today and you'll hear more of later on in the follow-up presentations is a focus on using the tools that we talked about earlier that Melissa teed up around driving innovation more effectively, some of the investment that Amir and Rainer have just touched on and the others will touch on to lay a foundation for seeing that increment of growth be more like 200 basis points or better rather than the point or so that I think we've probably seen so far. Again, knowing that there's a level of precision in those calculations all along. Great. Thanks.
That's fair. In a year.
Sorry. This is Erin Wright, Credit Suisse. Just kind of where you stand now in sort of your M and A pipeline or areas of focus, where and maybe this is Melissa, where can you best apply DBS? And where does DBS not apply? And what areas kind of is best suited for it?
Thanks.
Maybe I'll start with that one. So first of all, as you can imagine, our M and A funnels are very active. This is daily work for us on the one hand. And we would start with the proposition that perhaps almost in every business, the Danaher business system applies. But of course, one are we're driven by strategy and the secular drivers that Tom spoke about.
We look at those markets in a deep way to ensure that we like the assets and market space and then of course we look at valuation. At the same time, with that assessment, we look at the let's call it the degree of applicability of the Danaher Business System in any specific asset. So that's absolutely something we look at. And in some cases, there might be higher applicability and in other cases, less so. But it all starts with strategy and whether we like the market, the asset, and then as a part of our diligence, we assess what kind of impact we can have.
Thank you, team. Rainer, Melissa, Amir, appreciate those questions and your responses. That last question and also coming back I think to Scott's question around technology related business and the impact of DBS and I think maybe perhaps implied in that question was also a sense of how does it apply in not only higher technology but software. And I think when we get in and talk to Joakim later on after the break, you see businesses where workflow is really driven by software and where we've applied DBS to businesses that are much more software driven than some of our other more equipment and installed base oriented businesses. But if there is one thing you've seen from Danaher over time relative to DBS, if you go back to that evolution of the portfolio, portfolio that began as fundamentally industrial, as it's evolved into more science and technology oriented businesses, to Reiner's point, those markets, those companies have come to be known as equally viable candidates for DBS impact in terms of lean, in terms of growth tools and in terms of leadership.
So within the markets in which we participate and in that evolution of the science and technology portfolio, we see the continued applicability of DBS in a variety of different ways and in a sense gives us that gives us great, great optimism that our continuous deployment of capital into these markets can in fact be capital that will ultimately be the beneficiary of the impact of DBS in driving higher core growth and margin expansion. So we feel very good about the impact of DBS as we continue to grow the Corporation. With that, we are going to go to break. And as we do, I would ask you to take a couple of minutes as you circulate around and look for a couple of things. First of all, we'll have product displays out in the break area And please I'd urge you to stop by, visit with some of our associates who are manning the product displays, get a sense of some of the new products and some of the innovations that are coming out of each of our businesses.
In addition to that, as some of you recall over the last couple of years, we have dispensed with the new umbrella or tote bag that we know many of you have. I know you're disappointed, Scott, because you lost the ones we gave you a few years ago. Instead, we've taken those funds and we've allocated those funds to a number of charities. And actually each charity that you'll see a poster for next to the product displays is aligned with a charity that is supported by one of our operating companies. And so we are pleased to make those donations on your behalf and on our behalf and also on the behalf of each of our operating companies.
So, enjoy the break. I would ask you to try to be back in your seats here at 25 after the hour. We will start promptly at 11:30. And at that time, Joakim Wiedemannes from our Product ID platform will be taking the stage immediately following a brief introductory video to the Product ID platform. We'll see you after the Ladies and gentlemen, we are about to begin.
Please take your seats. We are about to begin.
Hello, everybody. I'm here to talk to you about what I think is the most exciting platform in data. Hopefully, you'll agree with me after this short presentation. You see and you experience what we do every day and you already have today, whether you knew it or not. And I see there is some ice cream on this slide here, it's probably a little cold for that, but maybe this is a little more heartwarming.
So these are some of our customers. The consumer goods companies of the world, their suppliers and people who help them bring new great products to market to us as consumers. So I'm going to tell you a little bit about what it is we do to help them in their world. So a little short introduction here. First of all, we are a razor razorblade business just like the other platforms here in Danaher, completely global business.
We serve all the global consumer goods brands as well as the very fragmented food and beverage industry that you find in virtually every country around the world. And you can see from our vertical mix there that really about half of our sales is to the consumer goods companies themselves, a quarter to their suppliers, and then we have a quarter of various industrial businesses as well. So great mix, great diversification in our revenues. 2017 is another great year for us, another year of mid single digit growth, another year of solid margin expansion. And maybe what was a little different for us this year is that the rate of product innovation increased in most of our businesses.
And I'll come back to later in the presentation here to talk to you about why we're so excited about some of those recent product launches here. DBS has for many years, not just in video jet, but many of our other businesses, really helped us both accelerate our growth as well as our rate of margin improvement, so that we can continue to invest in this great platform, which of course we plow into things like those innovations, but also to add to the platform organically. And I'll talk to you a little bit about the most recent additions here. This platform then, what is it really we do then for these customers that I talked about? Well, think about the Oreo package that I showed you there.
Sometime 12 months ago, somebody in that consumer goods company was thinking about some new product concept or a new flavor or new packaging format for those cookies. Did you know by the way that those Oreo cookies come in about 100 different SKUs, not languages, but SKUs, flavors, packaging sizes, things like that. So sometime 12 months ago, somebody started thinking about that. 12 months later, things start hitting the shelf. And really, our game is to help the consumer goods companies and their suppliers and people they collaborate with to take that 12 months down to something much shorter, let's say, shorter than 6 months.
In essence, that's what we do. And this platform was built starting on the right hand side of this slide with Videojet, and Videojet prints the best before dates, for example, on your consumer goods. You read what we print every day. And over the years then, we added things on the left hand side. And now we're really adding solutions, technologies, more software based technologies, where we work with the brands, the designers, the marketing people of these brands to help them, for example, define what colors, Pantone, they should be using for their products.
We help them actually design the packaging and the software solutions of ESCO. And we help them and their suppliers figure out how to make these things in an easy and cost effective way through the color solutions of X Rite, making sure they could get to the right color in the manufacturing right away, as well as the various tools we provide through ESCO to facilitate the manufacturing. And if you really think about it, what we're doing is we are automating manual steps. We're enabling departments inside consumer goods companies to collaborate using our automated tools, which many times are software based. So we're really digitizing workflows.
And then in addition, we're helping those consumer goods companies work with their suppliers using these various automated and digital tools. And if you think about it too, the domain expertise that we have built in this platform through these great teams that you see here on this slide is really a unique position and situation that we have in our market that we're continuing to leverage more and more in our newest innovations here. So let's talk a little bit about the market environment and what kind of drivers we face here. So first of all, like I said, this OREO package, who would have known, right, because there are 100 SKUs behind such a cookie. And that phenomena, there wasn't 100 a couple of years ago.
And it's really the age of consumerism, right? So all of these consumer goods companies, they're adding flavors and they're experimenting with different package sizes. And that's driving SKU proliferation, adding complexity to their world and their supply chain. And of course, if you're a global company, like the company that manufactures Oreo or Coke, as you have in this example here, you obviously have designed your package, the product many times as the package, right, to be attractive and you wanted to look Coca Cola Red has to be Coca Cola Red exactly everywhere in the world, right? Not so easy to do when you have suppliers in hundreds of countries and you're manufacturing your pharma customers, there has been over the most as well as our pharma customers, there has been over the most recent years an increased number of regulations that require changes to the packaging design.
So whether that's like we're experiencing here in the U. S. Right now that you have to change a little bit what you declare in the ingredient box on every product or what's happening across the world, pharmaceutical companies are required to introduce the ability to track and trace their products during their supply chain before it gets to us as a consumer. Those regulations have been tightening up and that actually plays in our favor here as well. And then what our customers have known for years is, of course, that even though you might think as a consumer that you always buy the same brand when you go to the grocery store, various studies actually suggest that about 50% of our decisions are not made before we get to the store.
They're made there at the point of purchase. So obviously, the package is a marketing vehicle for our customers and that's why they pay so close attention to it and are always looking for ways to tweak and make it more attractive to us as consumers. So a lot of drivers here that affect our customers. And basically, if I summarize it, they all add up to the need for making more frequent packaging changes, and they need some sort of help tools to be able to handle that complexity. And if you think about our strategy then and how it relates to those secular drivers, obviously, we've defined our strategy to help our customers harness those complex things that I talked about, but also help them compete, because at the end of the day, one of the competitive vectors for them is to get new products to market quicker than their competitors.
So the kinds of tools that I described that we have in that overview of the value chain really helps them harness that complexity that those drivers represent and it helps them get these products faster to market through the automation, allowing people to collaborate, through the digitization and also through the various solutions that we provide that allow them to run their operations more predictably. And I'll come back to a few examples like that. And our advantage isn't just built on the technologies that we have, but it's obviously based on this very deep domain specific knowledge and being able to understand the whole chain versus just one piece of the chain. So let's talk a little bit about the things we do to drive the growth and the performance of our platform. I'm going to use a couple of Videojet examples here.
And you should know that I've been about 7 years with Danaher and I was the President of Videojet for almost 5 of those years. So I've been part of some of the things we'll talk about here. We play in a very fragmented market. And just in the United States alone, there are about 60,000 factories that could be using Videojet like products. And they only buy about every 5 years and maybe the person who bought last time no longer works for that company.
A typical buying behavior is to look at what kind of printer do they have today, the brand, and then maybe they'll repurchase the same brand. Now if you're trying to grow a business like Videojet, somehow you have to figure out how to win new customers, right? So but with what I just described there, when even though you have the industry's largest sales force of 70 or so salespeople, it's like searching for a needle in a haystack. So that's where marketing comes in. And also over the years, we've developed a marketing approach that's become part of DBS today, Melissa talked about that, that allows us to not only go find where all these customers are and update our keep our databases up to date, but also apply various techniques through digital marketing or by having phone based marketing to go and try and catch these customers when they're in the purchasing cycle, which is only about 60 days.
And we've made really good progress here over the last couple of years. You can see some of the numbers here. You should think about this as adding about 1 to 2 points of growth per year in the equipment part of our business. And what I'm really pleased about that the team is doing right now is we're really evolving our approach here based on our domain expertise and no longer marketing products. We used to market printers.
Today, our marketing is geared towards the quality manager of the dairy plant. So all of our marketing speaks the quality manager dairy plant language, not just the printer language. You can see through our marketing how that is actually helping us drive more leads and better conversion rates. So that's how marketing adds growth. Service in our business too is important.
Our customers own our printers for up to 10 years. The labor force that they have in their plants, sometimes not very high skilled. The maintenance teams that they have in their plants are under pressure, they're trying to reduce costs. So gradually, they are looking for their vendors to provide more support to them during the lifecycle of the product. We embrace this years ago, productized our service offerings and have been able to drive solid double digit growth here for quite a while now.
And then more recently, we have added to we can call it the Internet of Things. We've started to connect our printers to the Internet, so we can monitor them remotely. And more recently, we launched a product, which is being displayed out here, which has about 100 sensors embedded in the printer, so that we can start doing predictive diagnostics. This is a first in our industry. And we have several 1,000 printers already installed that are connected and are adding 1,000 every quarter, ramping very quickly.
And we not by now not only have the industry's largest field service force, but we also have the largest installed base of connected printers. The 2 combined obviously allow us to offer our customers response times and various kinds of service contracts that are difficult to compete with if you don't have those 2 advantages that we have here. Service with the growth that we're driving here is adding about 1 point of growth to Videojet annually. Finally, innovation. Great year for us here.
I know a few of you have participated in some of the larger shows that we go to. So you've seen a little bit more of the customer response, very, very positive. Start on the video jet side, not only did we launch this new printer that has the 100 sensors in it with the embedded predictive analytics, but we also launched a new printer that has a camera embedded inside the printer, and which allows the customer to inspect the prints, which many times they want to do for various reasons, traceability reasons and so on. Embedding the camera eliminates the need to buy separate cameras and they can get a much better total cost of ownership that way. In the X Rite world, X Rite traditionally is a color player.
So we are able to not just measure color, but help our customers render what color if they choose a certain color, what might it look like on different packaging formats and so on, which are usually paper or plastic based. About a year ago, we launched a completely new technology that we call the appearance product line. And really what that does is it's a scanner that can scan different kinds of materials, different kinds of textures and digitize that so that you can use it in various kinds of CAD, computer aided design systems. The benefit of that is, for example, if you're designing sports shoes is that you use so many different kinds of materials and you get those materials from many different countries around the world and by being able to scan in those faraway places, digitize it, you can do all of your designs and rendering digitally, saving tons of time, because you don't have to go to the physical world when you're doing your designs. And obviously, right before you go to production, you have to decide which variants you're going to release for production.
Any times they will make hundreds of different variants of these shoes, They might choose 20 to go to production with. Now if you can do all of that digitally, you can imagine the time savings and the cost savings and actually more you can do more experimentation with different materials and colors and so on. So early innings on this product line here, but some really, really good feedback from customers. Finally, on this slide, we our most recent acquisition is a company called ABT. This is a software based inspection company and they serve the customers that manufacture the packaging materials.
So they do full in line inspection for all sorts of different attributes of the packaging. This acquisition was great for us, because not on its own is that a growth industry, but with the capabilities we have in ESCO in the design of the packaging as well as preparing the various things you need to prepare before you launch the printing, the manufacturing of the packaging materials. And then with the capability that we have in X Rite to inspect for color, we really have a 1 plus 1 plus 1 equals more than 3 situation. So with the addition of AVT, we're able to offer these people who manufacture packaging materials a holistic solution from setting up manufacturing to inspecting as well as providing data to their brand owner customers, which in the end allow them to get more out of the factories that they already have today. So great acquisition for us.
We're very excited about that. So if I move to wrapping up here, Tom showed this slide, some of it earlier in the presentation. I'd like to emphasize something a little differently here. With what I've just talked, with what we've done in marketing and sales and on the service side, on the innovation side, we've been able to accelerate the growth of Videojet here over the last 6, 7 years. And we've been able to consistently outperform the market, as you see here.
And then applying a DBS kind of mindset to these different areas that I've spoken to you about, we've been able to in some ways decode how you can plan and predictably execute on growth. Growth isn't a mystery anymore. So that mid single digit growth track record that we've had here for the last couple of years, we're very excited about and confident that we're going to be able to maintain here going forward. And obviously, we'll continue the solid margin expansion here as well. So in summary, I think we should all be very excited about the differentiated product offering that we've been able to build and the domain expertise that's come with that work.
We continue to apply DBS, not just in the growth areas, but also on the margin side. And we're really running the Danaher playbook here. And we're also contributing, like Melissa said earlier today, 2 chapters in the Danaher playbook, just like any Danaher company is expected to do. But in particular, Videojet has done a really nice job here over the last couple of years. So look forward to seeing you here next year again.
And hopefully, I'll be able to share with you a similar story. Thank you for your attention today.
Thanks, Joakim. VideoGen, the Product ID platform has had a fantastic run of years here in 2017, no exception. As I think you can tell from that presentation, that platform is extraordinarily well set up to continue to outperform its peer group in the years ahead. That's really about executing the tools of DBS, ensuring that those tools are directed at product innovation and extraordinary commercialization of that product innovation and supporting that business with a level of customer intimacy that comes from the exceptional service that they provide along with now the technological innovations that allow that service to be delivered that much more cost effectively, that much more rapidly and in a way that truly drives extraordinary customer satisfaction. So a great run.
Now let's turn to water. Another example of running the Danaher playbook. A tremendous track record of utilizing the tools of DBS, deploying capital effectively and expanding the platform and compounding returns over a long period of time. So with that, after this brief introductory video, our Group Executive over the Water Quality platform, Lance Reisman, will come up and share with you the details.
Good morning. I'm here to present the water quality platform where we both measure and treat water. I'll spend some time talking about the water cycle where we participate. I'll also talk about the secular growth drivers and how we're taking our insight from both of these elements to drive competitive advantage, to drive growth and drive share gain, both from an organic and an inorganic perspective. First, a little bit about the portfolio.
You see the brands that drive a majority of the $2,200,000,000 revenue, and that is a relative high share of a very fragmented $15,000,000,000 market. So you're very profitable, this is EAS, water is similar. Number of factors driving that profitability, the 2 key ones are tied to DBS. The first is years of DBS and lean taking out cost, being more efficient. The second is growth.
We've really been able to differentiate our product and our services, thereby driving premium pricing in the market. A few more details about the platform. Again, another high consumable mix. As Tom mentioned earlier, we like that, that brings a lot of touch points with our customers' frequency of touch point intimacy, so we can learn more about their needs and deliver on those needs. Geographically, we're heavy on North America, it's driven by ChemTreat and Trojan.
If you look at Hach, which is our largest OpCo, you'd see a more evenly dispersed geography. End markets, majority of our business is focused on the industrial and muni. We're very strong, have a great heritage there. We're also expanding in the environmental space. Touch on a few highlights in 2017, where we continue to gain share in water quality.
ChemTreat and Trojan continue to execute well at mid single digit growth. Solid performance in Hach in the core industrial and municipal markets. As I mentioned, we use DBS to drive growth. I have a couple of examples here from Trojan, who is already leadership in project wins, but we've expanded that by 7.50 basis points. We've done that through innovative new products, specifically our Cigna product, as well as commercial execution, funnel management, digital marketing.
Melissa mentioned the CM130, this is the 1st FDA approved product for chlorine monitoring systems in dialysis. Again, DBS Growth Tools helped us identify this adjacent space, incremental growth opportunity and also helped us accelerate product development, so we can meet customers' demands very quickly. And we continue with our acquisitions, we've had 10 over the last 4 years, we've had 2 since May. They are listed here, Applitech. This is a perfect example of a bolt on for us.
Online analyzer fills some gaps in our lines from a product from a company that develops some leadership product, but do not have the commercial capability to grow the business. They don't have the brand equity, they don't have the feet on the street and on the digital marketing. So we'll take these products and we'll expand them rapidly globally. Envyscience is our distributor in Thailand as we continue to drive our direct strategy. Is another distributor acquisition.
Again, here we get to direct, we get the intimacy with our customers, we get to lay in our DBS programs, our commercial excellence. This business was actually growing quite nicely in Thailand, but since May, we've accelerated growth by 4x. So let's talk about where we play. If you look at the water cycle, we look at stored, treated and used water. And if you look at the top blue bar, you see our companies that do measuring, that's quantity and quality.
Bottom blue bar is the companies that do treatment. In stored water, we measure quality and quantity. These are oceans, rivers, lakes. These are source water that go into drinking water in the municipality that we treat and we measure. That water goes to industrial and consumer usage, where we also treat and measure back through the system in the wastewater, where we treat and measure and then back out to stored water.
Well, how do we win? Well, brand leadership, understanding this water cycle, winning within each segment, but also the cross connecting points is critical. We have that knowledge, we have the application knowledge, we help customers meet their goals, regulatory and process efficiency. And we've built that brand leadership over many, many decades. The trust is there.
In addition, we continue to product innovate and drive commercial execution, and I'll touch on that shortly. And we continue to drive our winning levers in the differentiated channel where we have over 1,000 direct sales and service people as well as technical support, and then also a global digital capability that is world class. So let's look at the strong secular growth drivers. I think we're all familiar with sustainability and scarcity, and this is all about more efficient use of water and reuse. And I'll talk about how we're driving business through there.
Regulatory requirements, there's a data point here about the U. S. Specific to nutrients showing some growth, but regulatory is growing globally, more regulations, tighter regulations. This is good for the environment and when it's good for the environment, it's good for our business. High growth markets, you may be aware that there are some challenges with water in high growth markets from both the drinking water, but also wastewater.
In the current 5 year plan for China, 220,000,000 people will be connected to wastewater, that today direct discharge in the stored water. So this is great for the environment and again great for our business. Then the Internet of Things data, data analytics obviously is in water as well. We're looking for how to take data and make it operational. What do you do with that data to drive efficiencies?
We think we are well positioned for the long term with these secular drivers. And how we do that is through strategic focus. We look at these secular drivers, we go out, we talk to our customers, do deep voice of customer, very intimate, a lot of touch points with our customers to really truly understand their needs. And we drive that into our strategic plan and our strategic focus and execution. So one of our key strategic focuses is accelerating new products and truly differentiated products.
We've talked about the chlorine monitoring system, 1st FDA approved for monitoring chlorine and dialysis. This is a regulation, we're taking advantage of a regulation trend. Claros, this is about data. This is a water intelligence system, where we're taking data, making operational insights to allow our customers to better hit regulations and to better meet their process efficiency needs. This is outside, I recommend you spend a little time with everything we have going there from data instrument and process management.
Trojan, talk about reuse trend, they've been playing in the reuse market for a number of years, but Flex is a new product that's out this year. This has a 70% reduction in the footprint. Trojan is able to do that because they are leadership with lamp technology, making the lamps more efficient and therefore a lower footprint, smaller footprint. Why is that important? Because in wastewater facilities that are already built out, space is limited.
Customers would like to avoid 1,000,000 of dollars of new construction and movement of assets. This will fit in most wastewater facilities of any size. And in Chemtree, CTVISTA, this has helped customers optimize their water treatment. This is a software program. And again, we're talking about efficient use of water.
We're talking efficient use of energy. And that's what this program does for our customers. Talking about commercial execution, leveraging it at the platform level. What we've done in digital marketing, we had a world class system at Hach. They spent over $5,000,000 on digital assets.
What we've done is we've built a team at the platform level, it's enabled us to hire strong talent, digital expertise and as well expand the number of talents we have focused in this area. They've been able to take this $5,000,000 asset, which optimizes search engine optimization, e commerce and for $50,000 they can now roll all those capabilities to the other Opcos. Tremendous leverage has moved in our digital strategy 2 to 3 years. From a strategic key account perspective, in our strategies we looked at, if a strategic account touched more than one of our Opcos and was being very proactive with their water strategy such as reuse, such as tighter regulations and was even on the books today, then we brought our resources together across Opcos, so we can walk hand in hand with the strategic accounts and help them solve their water strategy moving forward. Finally, high growth markets.
Hockey is the biggest OpCo, as I've mentioned. They have the most resources in high growth markets. We've been able to leverage their leadership team, also their back office, finance, HR, etcetera, to allow all the other Opcos to focus their investments on customer facing resources. As you can see, all three of these have driven great results, 40% up in digital since 2014, high growth markets up 40% over the last 5 years. We've been talking about organic, talked a little bit about inorganic.
I'll take a little walk, historical walk with our ChemTreat business. ChemTreat now has been with us for 10 years. I was actually part of that due diligence team. They've always been a strong growth engine. They've got 50 years of consecutive revenue growth.
Danaher, when we do acquisitions, we do have a playbook, but we also have flexibility, recognizing what's working, don't touch it, what's not working, help out. So they've been a great growth engine before we bought them, also after we've grown from $200,000,000 to 500,000,000 dollars We brought them into the high growth markets, right now Latin America primarily. Now 20% of the business, it was 0 when we bought ChemTreat. Their revenue in Latin America is 5x since 2013. And commercially, as I mentioned, they were very good commercially.
We were smart enough not to touch their commercial model. But we were able to enhance it a little bit with DBS to help them grow as well as take some costs out of the business as we've improved the profitability significantly. And over the years, we've outperformed the market by over 2x. So in closing, we have a strong position in highly attractive end markets, where we continue to gain share and continue to build differentiation. We're winning in markets through product innovation, commercial excellence, as I've talked, leveraging DBS, and I think we're opening up even wider differentiation than in the past.
And despite being the oldest platform now at Danaher, we continue to grow and invest organically and inorganically to expand our market opportunities and expand and accelerate our growth. Thank you.
Thank you, Lance. Lance and the water quality team have done a tremendous job, continuing to drive share gains across what is really broad market. If you think about the water cycle that Lance described, there is a tremendous number of opportunities in that water cycle from the natural resource through facilities, muni and industrial to continue to expand our footprint both organically and inorganically. There are a lot of similarities in a way to the business model between what you heard from your WACM and PID and what you just heard from Lance. Both strong installed basis of instrumentation anchored by incredible brand strength, both of which combine then to pull through a high level of captive consumables.
A tremendous business model that's really contributed to the consistency of their share growth in their markets as well as operating margins over a long period of time. And in both cases now adding technology to that installed base of instrumentation the case of PID, leveraging the Internet of Things for purposes of higher levels of customer intimacy around service that I mentioned, but in the case of water quality, leveraging technology for greater ability to drive process optimization in those water facilities and therefore greater efficiency and cost management. So tremendous uses of technology that we think will drive future growth in both of those businesses in addition to the fundamentals of the business model that are already working today. So now we're going to turn to diagnostics, another fantastic platform. In just a minute after this introductory video, Dan Daniel is going to join you and share some details about the diagnostic businesses.
For those of you that have that music burned in your brain, you'll be pleased to know this is the last of the platform presentations. Last but certainly not least, great to see many of you again, I certainly had the wonderful opportunity to lead many of the platforms at Danaher over 11 years. And to begin this year, Tom asked me to help Amir with our progression and our evolution, our dental platform, as well as take over direct leadership
for the diagnostics platform. This is a platform of
wonderful businesses and we businesses realize its full growth potential. We have 4 very strong operating companies with strong market presidents, with revenue now nearly $6,000,000,000 strong earnings and significant market runway. These are businesses that all have the Danaher business model we like with a high end technology instrument that's supported by a recurring revenue consumable stream. They have global reach and breadth, a global footprint and strong service organizations to help our customers with their daily challenges. Whether it's radiometer, which has been in our portfolio for 13 years and many of you have tracked the progress and followed the wonderful examples of DBS in that business.
Leica Biosystems, which came out of our 2,005 acquisition of Leica and a couple of years later became a spin off of a small business that's now a significant business of scale and size for Danaher. Beckman Coulter, which has been part of our portfolio for 6 years, or Cepheid, now 13 months a part of Danaher. These are all businesses that even today have significant growth potential to leverage DBS with both product innovation, technology innovation, as well as improved commercial execution, and we're looking forward to continuing that journey in diagnostics. 2017 has been a
year of
progress. Obviously, one of our highlights was the transition of Cepheid to becoming Danaher Company. It's been a tremendous 1st year. We're thrilled with the team, their adoption of DBS, the market runway, the technology they bring to the market, and it's been a wonderful story of continuing our double digit growth in Cepheid, of which they have a long rich history, applying DBS for rapid improvement in the margin profile of the business, now taking that into be a double digit profitability business with plenty of runway ahead. I'll spend some more time on Cepheid in a few minutes.
All of these businesses over the last few years, as we've shared with you at this conference, have been working hard to build the innovation pipeline in their business. And 2017 is a year when we're beginning to see the fruits of that labor. Both Leica Biosystems and Radiometer have both launched products, instruments and menu in 2017 that are helping improve the core growth of the business throughout the course of the year. This is also a platform that's very well positioned in high growth markets. Diagnostics has over $2,000,000,000 of revenue in high growth markets around the world, led by Beckman.
Beckman has a very strong presence in all the significant high growth markets around the world and is increasingly taking our presence more direct for long term share gain in those markets. Cepheid is a business in China, started very small. One of the first decisions we made in 2017 was to double down on the feet on the street in China. It's paying fine dividends with very strong growth and significant long term runway in China. So 2017 again a year of progress, one where our innovation pipeline begins to bear fruit and where we're beginning to see the results of our efforts to improve commercial execution for long term share gain and winning in the diagnostics markets.
I think we all know the diagnostics market is attractive for the long term. We think there's a number of things that are going to help continue to drive that over the next few years. First on the patient side, whether personal, predictive, preventive care continues to grow in opportunities in ways we could have only dreamed about a few years ago for an aging population that's going to continue to need care and diagnostic treatment. On the customer side, tremendous advancements in technology, of which molecular diagnostics is certainly one of the most significant, still in the very early games of adoption of that technology. Also on the customer business.
That's where our solutions for automation, simple user interface are significant opportunities going forward and a big part of our innovation pipeline. And again, high growth markets, where markets like China are still working hard, investing heavily to expand care throughout their market. And it's a unique opportunity for us to leverage our Danaher footprint, our scale and most importantly our people to drive continued growth in China and the rest of our high growth markets. So we think we're in a great market, strong brands and businesses and positioned well to improve our growth going forward. I actually believe one of the strengths I've seen in my 1st year here in diagnostics is the breadth of our offering.
Obviously, we play significantly in all of the core labs in a hospital. We have significant presence in point of care with radiometer and also Cepheid. And again, as molecular applications grow, Cepheid has tremendous growth runway ahead. All of these businesses and our teams very important in what is continuing to be a cost pressured environment, whether it's our automation systems in Beckman, advanced application of software to connect our instruments and provide data to our lab customers to help improve the efficiency of their workflows, leveraging our global distribution or service networks, these are all things that we try to do well in each of those businesses to help strengthen and improve our position. A handful of situations that are very growing very strongly, certainly in Leica Biosystems with our next generation and launch of Bond Stainers, advanced staining equipment, helps drive the fastest turnaround time in the marketplace today.
At Beckman, with our strong instruments in chemistry and IA together with our automation help provide the highest throughput in the marketplace today. And one of the many great strengths of Cepheid certainly is their menu development capability to provide the broadest menu in the marketplace today. And that menu capability is a very important set of skills and people that we plan to leverage further going forward across our diagnostics businesses. We love the breadth and where we play across these businesses. As I said, we are thrilled with our start at Cepheid.
I think just like Paul, the 1st year has exceeded our expectations, and our expectations were high. Warren Kopman and the team have embraced DBS, Melissa Aquino and her DBS office team have spent a lot of time in Sunnyvale and places around the world training and educating and demonstrating examples of how DBS can apply across all of their business. Of course, the Cepheid maintaining and improving that double digit growth rate is at the top of the list. We had a strong year in doing that. But obviously, our DBS tools helped us improve margins significantly where we've grown gross margin 500 basis points in that business in the 1st year.
Our lean applications have also helped us significantly improve on time delivery. And in lean, it's helped us with our supply chain performance, it's helped us with our labor productivity, it certainly helped us with capacity utilization, which is an important aspect for a business as fast growing as Cepheid, and it's driven significant benefits for customers. So we've been thrilled with the operational aspect, and we think there's plenty of runway ahead in this area. Like all of our acquisitions, we spend the 1st few months eventually working towards what we call a 100 day strategic plan. That's to check our diligence information, how does it compare now to then.
It's also to evaluate the growth opportunities in a business and make sure we're funding those highest growth opportunities, maybe putting a couple on the back burner for a period of time. And there are a number of those in Cepheid, and we've invested in 2017 in China, as I said, building out our sales team to support smaller hospitals around the world and expanding their presence in point of care and physician office labs. In addition, the team has been wonderful embracing fundamental DBS growth tools such as funnel management, demand generation like you heard about at Videojet and a number of tools to help improve the organic growth execution of the business around the world. Innovation has been one of the keys to success for Cepheid over the years. They have a wonderful
team,
some specific skills around menu and enzymes and assays, and some processes that maybe were a little loose that they've been embraced from Danaher. Those in product development have been instrumental in making sure we can accelerate the development time. We're very focused on protecting that super strong culture of innovation at Cepheid for long term growth. So we are thrilled with Cepheid. We know it's a great market.
We knew that before. It's a wonderful team. There's no surprise in that. We have been thrilled with their adoption of DBS. And I'm confident this is one of those businesses like Fluke, like SCIEX, like Videojet that's going to make Danaher a better organization over the years, and we're thrilled about that as well.
I talked about product innovation and commercial execution. Those are really the 2 buckets of things that are going to help us reach that mid single digit growth rate here in the future. Over the last 2 or 3 years, all three of the businesses that have been part of the portfolio have spent substantial time, effort and energy in re launching and rejuvenating the product pipeline, whether that be at Beckman with our chemistry analyzers, beginning to launch new hematology analyzers, our access to bench top IA analyzers and software solutions such as DX1, which helps labs manage information flow, taking that into the cloud, connecting instruments to again deal with improved efficiency, but also manage some of the cost pressures that they face in their market. LBS has accelerated growth through launch of stainers, tissue processors such as the PLORUS 3, which launched in September. The marketplace has been thrilled with the rejuvenation of that product line, and it's driving growth in LBS as it accelerates throughout the course of the year.
And radiometer has been an innovation machine for years. But the future is as much about menu and solutions with assays as it is with instruments. And 2017 is a year when we began to come to market with more assays, including high sensitivity troponin in Europe for Beckman, vitamin D, women's health, radiometer and Cepheid with Express Flu and the October FDA approval of the Group A Strep Express Assay. Again, Cepheid is a wonderful group of folks with technologies and capabilities that we can and will leverage across the platform. So we're going to continue to see the fruits of the innovation pipeline in 2018 and beyond.
But also like any business, and probably more impactful in the near term in some of our businesses is improved commercial execution. You've heard about the DBS growth tools and the Danaher playbook they apply in diagnostics just as much as any other business. In this market that's consolidating our efforts around targeting and strategic account management is certainly an initiative that's gaining traction. And DBS applies as well in our clinical trial capabilities, where our workflow management, our process improvement and continuous improvement, even in clinical trial execution has helped us significantly expand the number of clinical trials that we pass through in the marketplace. High growth markets will its business direct.
We're increasing that in important its business direct. We're increasing that in important markets like China, the Middle East and Latin America. As you hear in other businesses as well, we're investing in localization, have established a localized R and D center in China to help build more products designed for China in China. Those will continue to be important growth drivers in the future. So it's been a year of progress in 2017.
It's wonderful to have Cepheid part of the portfolio. I think we're ahead of where we thought we might be this time last year. We're thrilled to be there, but even more important, the runway ahead is significant. DBS application in both innovation and commercial execution are going to continue to help take our diagnostics portfolio and help it reach its full growth potential in Danaher. So thank you for your attention.
With that, I'd like to invite Joachim and Lance back up and we'll take your questions.
This is Tim Evans with Wells Fargo. Maybe just one for Dan, over here. Are you willing to tell us the growth rate at Cepheid for emerging markets versus developed markets?
I don't think that's something we've split out, but high growth markets has been a bit higher than developed markets and all up, certainly the double digit growth rate is
what we expect
to continue to be able to deliver.
Okay. And then just with the discontinuation of Verus, can you talk a little bit about the product development roadmap for Cepheid in the instrument category where you might be looking at something that's higher throughput appropriate for Core Lab?
Sure. Well, like any acquisitions, one of the first things we do is look at the R and D pipeline. In a business like Cepheid, there's a very full funnel of assays. We spent a lot of time and attention on that. We've talked about the omni development, that's a development that continues.
We expect it to bring that to market sometime in mid-twenty 18. And the ability with the GeneXpert and Infinity to expand that is how we're addressing the high throughput piece. But Cepheid is an assay business, that cartridge is what really drives it. We think we're going to have a nice balance between GeneXpert, Omni and the Infinity, which allows us to increase the throughput across the businesses.
Dan Leonard here from Deutsche Bank. A question for Dan again. Dan, can you give us an update on how you're thinking about the impact of PAMA across your diagnostics customer base? Thank you.
Sure. We believe the impact is probably minimal for us going forward over the next few years. In fact, in 2018, it's probably negligible. As a reminder, our business is about 60% outside of North America. Much of our business is in the core lab that's not impacted by PAMA.
So we think it's a small amount of our business. I look at it as just additional cost pressure that's been existed in this market for a decade and frankly in other markets as well. And our automation, our software, our workflow work that we do with our customers, the fact that we've got an organization of folks who are available to go train customers with DBS and help them improve the overall throughput in their cost position, Those are the things we do that we think can mitigate that nominal impact of PAM over the next few years.
Yes. Thank you. Lance, got a couple of water questions for you. The first, when you showcased the water quality brands, you had highlighted Hach, Trojan and ChemTreat. And Pall was not one of the brands.
It did show up later, but this is not the first time you all have not showcased Paul. And if you go to big water trade shows, Paul gets equal billing in its own booth and it's a recognized leader in UF and nano filtration. So just curious why it doesn't get more airtime in showcasing. I know it's got the big bio tech side of it, which is really important. It's a big profit driver, but it's still a key player on the water quality side.
And then just as a second question separately, could you talk about the opportunity in environmental? It's an important area. And when you address that, who's your primary customer in those applications? Thanks.
So, Pall is an interesting question. We put our largest brands up from a revenue perspective. We do see opportunity with Pall, and we have had a good year in bookings with Pall. So we share your optimism and the power of that brand in water, forgetting about Life Sciences. From an environmental business, the environmental space has been a little slow this year.
There's been some projects are there, they're not getting processed. We do World Bank, United Nations, municipalities, but a lot of these programs have not progressed through. We haven't lost any major projects, but these projects have been slow. We started to see some increase here in the back half of the year, improvement over the first half of the year.
So it's nice to see the on time delivery up at Cepheid, having covered that company for a long time that was a problem that was there. Just looking at the Cepheid, you talked about pruning some of the portfolio and pruning some of the R and D projects that were ongoing. Can they had a lot of stuff that was going on in the genomics area. Can you sort of talk about where some of those products are and sort of like the overall desire to move more into the genetic testing business overall for the diagnostics business given that that's an area where you've seen better reimbursement in the relative to some of the infectious disease areas and other stuff?
Well, Cepheid, 13 months ago, had a very long list of projects that were active, all were valid, all were significant opportunities. And as I said, one of the things we do early on in acquisitions is slow some down, speed some up, invest some. And certainly in one of their core capabilities around infectious disease, that's an area where we've invested to speed up. Some of the other opportunities such as in oncology are still very good and important long term opportunities. We're continuing to explore and expand those as well, but we want to be sure we get some of the products that are a little bit further along in the pipeline can help us continue to build the growth capabilities up to the front of the line and that's what we've been doing.
Certainly on the instrument side, Omni is important project, the Honeycomb multiplexing something is one of those that we slowed down, but again it's something that has full potential going forward as well.
And just a quick follow-up. How long before you can get Beckman Coulter a 20 plus percent operating margin? Thanks.
Did you say Beckman Coulter? Yes. We're pretty close today. I think with a little improving growth and so far improved work on our footprint and continued high market growth, certainly it's something in the next couple of years we see ourselves in that zone, not too far away today.
So question on your BNP business, I'm not sure how much you're willing to comment, but can you just talk a little bit about how that business has done? And then obviously, there's been talk of your appetite to maybe potentially purchase the assets from Alire that went to Quidel. Just curious as to if that's the case what the attraction there would be? That market doesn't really grow and there have been some pretty big numbers there on what you potentially might pay to acquire that?
Well, Tycho, I certainly wouldn't comment on any potential M and A activity, important part of our business for our customers. And it's one that we've had a long standing supply relationship that's continued with the new owner of the business, and we'll do whatever we have to do to continue that. But it's a very important test that we have strong right to play in. We'll continue to do everything we can to support our customers in
that area.
Thanks.
So,
let's try to wrap up, and then we'll take some additional Q and A after just a couple of slides. So the key messages from today, the key things we hope you heard and that you'll take away today is clarity around the performance that we've delivered obviously in 2017, solid performance, but most importantly, momentum building as we go into 2018, accelerating core growth, solid operating margins and the ability to continue to increment those margins over time. The newly acquired business is continuing to perform exceptionally well. Double digit EPS growth this year, double digit growth in free cash flow. When you put all that together and we look back on 2017 and we say, hey, a year where we continued to deliver as we had planned, but clearly a difference in terms of what we're seeing in the second half versus the first and in such a way gives us great optimism that we'll continue to drive improved performance as we go into 2018.
You should have also heard that we're going to continue to invest and invest strategically by putting our free cash flow to work with a strong bias towards M and A. And that activity in terms of building our platforms, both organically and inorganically, will largely be directed into markets and businesses where those strong secular drivers that we talked about will continue to provide opportunities across the board. We will continue to look for businesses with strong installed basis of instrumentation, but most importantly, where customer intimacy is strong as a function of that recurring revenue stream of the mission critical consumables that we provide and where our relationship with customers through service and direct support really adds tremendous value. And finally, you've heard about the evolution of the portfolio, but more importantly, you've heard about the evolution of DBS. Hopefully, you've come to understand that DBS is certainly a lot more than lean.
It's really about growth and it's about leadership. And as the portfolio has evolved, so have the tools of the Danaher Business System. That this multi industry science and technology portfolio today continues to benefit broadly and deeply from the evolution of our growth tools and that those growth tools are clearly directed at driving higher levels of innovation and more effective levels of commercialization, all in the interest of accelerating our market share gains. A balanced approach we believe to delivering long term value to shareholders. You all saw the press release from this morning, so you've seen the guidance that we put out.
What's embedded in that guidance is a core revenue growth estimation of 3.5% to 4%, consistent with our view of continuing to accelerate core growth as we move into the year. And implied in that guidance is roughly about a 35% fall through. We continue to balance our reinvestment in the businesses in the interest of R and D and sales and marketing to continue to drive innovation and commercialization with also dropping through solid operating margin expansion. Cepheid and Phenomenex will be part of the improvement in the core growth as we go into 2018. They are now part of the core and a fraction of that here in the Q4.
And there are a number of different levers in addition to those newly more newly acquired businesses where we expect some improvement this year. So if I had to pick a couple, I'd probably point to Paul for 1, you heard from Rainer about the improvements that we're seeing there, about the continued progress using the growth tools of DBS, about some of the challenges that we had during the course of the year relative to the market, I think we'll see some better performance there. And a little bit of the softness that Lance talked about relative to water quality, we expect to get past that. I think just to name 2 of what I think are a number of levers that will continue to improve during the course of the year will contribute to that accelerating core growth. From an FX perspective, today we peg the euro at roughly 118, that translates into a bit of a tailwind about $200,000,000 in revenue and about $0.04 to adjusted EPS.
The tax rate, obviously, taxes have been quite topical of late. Looks like we are making some progress, at least down the street in Washington. From our perspective, we plugged in a tax rate of 21%, that's pretty consistent with 2017. And plus or minus any final adjustments that come through, we wouldn't expect the tax bill as it exists right now to have much impact on that one way or the other. And then we put some numbers in there relative to seasonality and that's really just in the interest of helping you with your models.
So you put those pieces together and that leads us to the guide for 2018, which is adjusted EPS guidance, nearly 10% EPS guidance at the high end of $4.25 to $4.35 So as we look forward, one final look back, a look back over the last 5 years, where we have delivered low teens adjusted EPS growth compounded from 2014 through 2018. Embedded in that obviously is a period from 2014 through 2016 and the impact in 2017 of nearly $20,000,000,000 of capital deployment and bringing in $5,000,000,000 of newly acquired businesses. And obviously those continuing to have real impact on our ability to drive earnings growth through the tools of DBS that you have learned about today. 2017, obviously a year where we focused on ensuring that those businesses were successfully integrated into Danaher, that the DBS culture and the impact of lean growth and leadership were being felt in those businesses and you saw the returns through the course of the day to day. But 2017 was also a year of reloading the balance sheet.
We entered 2018 with a whole new level of firepower relative to deploying capital. And we will continue to deploy that capital again as I've mentioned with strong bias towards M and A. So we're excited about going into 2018 with some accelerating momentum with a tremendous balance sheet and an extraordinary team, many of whom you've met today, who are leading a tremendous number of platforms of businesses throughout Danaher. So with that, we have a few minutes left before we wrap and we'll go to some Q and A.
Thanks, Tom. Impressive day as usual. The you talked a lot about the evolution of DBS over time. And what I was curious to hear from you is how has your executive compensation changed over time as you've added on the different toolkit to DBS?
Well, our executive compensation has always for as long as I can remember, and that's coming up on 28 years, has always had embedded in it a performance review that anchored that incentive compensation that had DBS kind of at the center of it? Did you embody the core values? Do you understand the tools? Do you put those tools to work? Can you point to the results in your businesses as a function of implementing DBS?
So I always felt that our compensation system, certainly our incentive system had at its core a performance review that reflected whether or not you were leading with DBS. We actually describe that term today, leading with DBS, as one of our leadership anchors. Turning to the metrics then that represent that performance. Our leadership team, those that run our businesses, are measured on core growth, operating margin expansion and working capital turn. Working capital is a function of a proxy, if you will, for helping to drive free cash flow.
It's the performance of those three metrics on a combined basis, along with the personal demonstrated values and tools that I mentioned earlier that combine to feed compensation system that we have today.
Okay. And as a follow-up, just as you think about one of the things that has changed, I think, in the last 20 years, evaluations on M and A have continuously gone higher and higher in the marketplace overall and no deals for sure as well. But how do you think about the reinvestment cycle, if you will? It's almost like every 2 years, you're reloaded again. But how do you think about the being optimistic or just waiting for pullbacks, things like that, which is the pressure you feel just to continuously redeploy capital?
One way to come back at that, Scott, is to say we're not market timers. We don't sit back and wait for cycles to run their course. We have been very consistent over the last 3 decades at using the model those markets and then approaching those companies appropriately and then with the right opportunity and the right valuation taking advantage of those. If you look back over history, we have done that in times when valuations were seemingly at a point where people thought maybe that wasn't the best time to do that deal. By the same token, we've done that at times when valuations were actually quite low and frankly everyone was kind of going to the sidelines and we went all in.
It comes from a consistent view on markets and companies and valuations that allows us to take advantage of those when they become available. And by being consistent in that model, by never changing our view of the importance of return on invested capital without regard to where interest rates are at a given time, I think that served us pretty well. So it's really been all about consistency of our philosophy about deploying capital, I think.
Hey, Cliff.
Cliff Ransom. You're making me rethink my recent rampage on metrics, because I've been driving to the fact that I'm struck by the fact that most of the value is produced in the Gemba, but you have no metrics for safety or employee engagement at the level of presentation here. Can you help me understand what I'm missing?
Sure. You're right, we don't we didn't put those up on the board, but safety is the number one metric in certainly every manufacturing plant, if not every facility in the world today. When we talk about metrics at an operational level, we talk about them in this order and always in this order, safety, quality, delivery and cost, and always in that order. And in fact, when we survey our associates, coming back to your second question about associate engagement, which we do measure and we have measured consistently over the last several years, we do the survey each year, We've seen significant year over year improvement for the last 4 years running. 1 of the highest ratings we get within the employee satisfaction survey is actually on safety.
And so we do put those measures in front of ourselves quite frequently and we recognize that doing right in terms of a safe working environment and associate engagement is fundamental to one of the associate metrics that I did put up on the Board, which is retention or the inverse of turnover, if you will.
Tim Evans with Wells Fargo. Amir's presentation left us with the impression that Dental, you're making progress toward accelerating growth here, but when we looked at your high level summary of the organic growth driver accelerations, Dental was sort of conspicuously absent. Why is that?
Well, it certainly didn't make anything conspicuously absent, I hope, given the breadth of the portfolio and the fact that we have expectations for improvement across a number of different levers and businesses that hopefully I made reference to in a fairly general way. This has been a challenging year for the dental industry at large and certainly for the overall market in terms of sell out, which has been fairly tepid, not to mention some of the shifts in manufacturing and distribution alliances. There is still some settling out to do of those dynamics, particularly as it relates to these manufacturer distributor exclusives having changed hands and these alliance shifting a bit. So I would expect as we go into 2018 that particularly on the more traditional equipment side of the house, we could continue to see some softness as inventories shake themselves out and those distribution alliances settle. I think we will see some stabilization on the consumable side and we think and I think we will still consider continue to see good Nobel and like Ormco, which are also terrific margin businesses, like Nobel and like Ormco, which are also terrific margin businesses as well and almost exclusively consumables.
So I think there is a bit of a balance there with some early weakness in the first half of the year perhaps on the more traditional equipment side and then some continued solid performance on Specialty Hey, Taco.
Hey, Tom. Maybe just a follow-up on the M and A discussion earlier. Curious if you're having to cast a wider net, there's a view that a lot of higher quality assets have been picked off in tools and diagnostics, including by yourself. We've seen some of your peers getting into drug manufacturing. I'm just curious about the odds that you would maybe look at new verticals or other different areas?
Yes. Certainly, as time goes on, we've seen each of the markets in which we participate consolidate.
I am
not sure I have even set 1 of the 5 platforms aside as some place where we haven't seen consolidation and that does have an impact. And the answer is, yes, we do in fact then cast a wider net. It doesn't tend to be necessarily a net that would have us going too far a field from the broadly defined market segment that we're talking about, whether that's Life Science, Diagnostics, Dental PID or Water. I guess the examples I'd point to is, if you look just a couple of quick ones, if you look at what you Wacom's done in PID as an example, when you start with Videojet and all you think about is coding and marking, you don't you are not immediately thinking about brand owners and digital packaging design and the overall workflow back to brand owners. So casting a wider net starts to look like what we have built in PID.
It certainly starts to look like that when you look at what Lance has done in water going to treatment as opposed to just analytics. So, yes, we do consistently when I talk about market evaluations, we cast a pretty wide net in terms of how we define those markets in the interest of making sure we are seeing the best opportunities even though they might start to look like not exactly like what you bought the last time. And certainly, valuation and consolidation combined to make that really an imperative if you want to continue to put the free cash flow to work. Matt's given me the high sign. Thank you all very much for being here today.
We really appreciate it's a busy time. On behalf of everybody at Danaher, we wish you the very happiest, safest and most joyful holiday season. Merry Christmas. Thanks.