Thanks everybody for making the trip out to California. Also like to thank everyone on the webcast that is joining us. Forward-looking statements, not going to read these in details. They are there to reference if you would like. Just a quick overview of the day. I think we have a great day for you here at Beckman. Really the first time investor analysts will have been out here since the acquisition almost four years ago. Given the news of Pall Corporation and the separation about a month ago, we are going to have Tom come up, give some opening remarks about that. Probably about 15 minutes of opening remarks, and then take about 15 minutes of Q&A. After Tom is done there, and in that Q&A, we just ask that you keep any more detailed specific questions on Beckman till the end, where you will have another opportunity to ask questions.
After Tom is done, he will talk much more and get into the heart of the day with diagnostics and Beckman. Arnd Kaldowski, the President of Beckman and Group Executive of the diagnostics platform, and some of his team members will get into the heart of the presentation on Beckman. There will be a break in the middle. We will follow the formal remarks with some Q&A, about 3:40 P.M. You have about 20 minutes to ask Q&A. After that, we will do some manufacturing tour walks as well as demo visits, and you will spend about one hour there, and then we will have a cocktail reception from about 5:00 P.M. to 6:00 P.M. Get everyone wrapped up by 6:00 P.M. and on their way. We will get started and bring up Tom.
Thanks, Matt. Good day, everyone. Let me add my thanks to all of you for making the trip. In some cases, a short trip down the coast, in other cases, a long trip. We really appreciate all of you being here. We do have a terrific day lined up, and we have got a lot to cover. Before we get into the heart of the formal remarks and presentations, I thought I would just take a minute and give you a brief update on the current trading environment. Obviously, we are just a shy over two months into the second quarter. I would say to this point, the second quarter has played out through those two months, largely in line with our expectations. I do not think we have been surprised by anything in particular to this point through the couple of months. June is obviously an important month.
We have got to make sure that we continue to deliver. From a geographic perspective, I would say a lot of consistency with what we have seen so far in the earlier part of the year. The U.S. continues to perform reasonably well. Obviously, we remain cognizant of the headlines and some of the changes in the environment from day to day, I think in large part, U.S. still remains a pretty steady marketplace. Europe, generally a slow growth market, as you have seen from us over the last couple of quarters, we are executing very well there. I think we see that continuing here in the second quarter. Wrapping up with the high growth markets, a mixed environment. Clearly, some of those markets have slowed down and become rather sluggish, others of them continuing quite well.
Overall, pretty mixed environment, generally, we feel good about where we sit here through the early part of the quarter. With that, I thought I'd spend now a few minutes talking about the two really significant announcements that we made back on May 13th. I know we've spent time with many of you over the last couple of weeks, apologies for any of this that may be redundant for some. Obviously, these were two very significant moves that we made. We thought it would be helpful if we spent a few more minutes on that, and then I'll take any questions you have on both these subjects when we break here shortly. The first of those announcements was the single largest acquisition that we've done in our history, the acquisition of Pall Corporation.
A truly unique and transformational opportunity for Danaher to take on an extraordinary business, one that will deliver significant earnings accretion and cash flow and has a number of unique strategic vectors that it opens up for us over time. I'll spend some time taking you through those. Then the second announcement, the announcement of the separation of the corporation into two separate independent publicly traded companies. Danaher, a continuing, a going concern of nearly $17 billion in revenue and a new publicly traded company yet to be named, a $6 billion diversified industrial growth company. Danaher will remain a very focused science and technology business, this really creates an opportunity for the new operating business to essentially renew their license for more aggressive organic growth as well as a deployment of capital towards M&A. A couple of exciting announcements. Let's start with Pall.
Some of you I know in this room, we talked over lunch, are very familiar with Pall. You've watched this business for a long time. You've seen the extraordinary progress that they've made building up a great franchise, a tremendous brand name, focused on filtration, separation, and purification of a variety of different fluids, generally water in many cases, but in many cases applied to unique and important manufacturing processes. It's a business of nearly $3 billion in revenue, 18% operating margins that participates in a very large global market of nearly $20 billion. There's a number of exciting markets where Pall participates, I'll spend a bit of time here later in the presentation focusing on one of those, specifically the biopharmaceutical market, the highest growth market of the various verticals where Pall competes.
One of the things we like about Pall is that it is a multi-industry play. It focuses not only on biopharmaceuticals, but has strong positions in food and beverage, as well as different medical applications, all the way into some industrial applications, such as aerospace and microelectronics that have some important growth drivers that we like a lot. A unique business model, one that has extraordinary potential for long-term growth, starts with what we believe is an extraordinary position, good share position, and again, great growth opportunities. The strategic rationale for Pall is that this gives us a position in a very attractive marketplace. A marketplace where Pall has roughly 75% recurring revenues, 50% growth margins, and we think opportunities and upsides to lift those gross margins over time.
Think one of the things that makes this position unique is that in these vertical markets, there are significant barriers to entry. The relationship that Pall has in its filtration business with its customers are very sticky relationships. These are critical manufacturing processes. Manufacturing processes that are generally validated, if you will. In some cases, a light form of regulation that is associated with ensuring that those processes are consistent and deliver the highest possible quality. Secondly, we see a tremendous opportunity in terms of the application of DBS. As you've heard us talk about the cost opportunities, the opportunities to lift operating margins, we see an opportunity for $300 million of synergies in this business. Those will come both in the form of opportunities to lift the gross margins as well as opportunities in SG&A.
Many of those opportunities are similar to those that we've seen, and you'll hear about today, at Beckman, where we delivered and in fact, over-delivered on those targets over the period of time that we've owned the business. Thirdly, an M&A runway. When you think about Pall, you can think about it really in two dimensions from an M&A perspective. It's a tremendous horizontal play in terms of filtration, and there's opportunities to broaden its position in filtration into adjacent vertical markets. Secondly, you can think of them in terms of the individual and diverse vertical markets in which they play, and an opportunity to go deeper in those workflows and add capabilities that essentially broaden the value proposition that we can deliver to customers in those individual markets. Fourthly, this is an exceptional opportunity for earnings accretion, strong cash flow, and ultimately, tremendous returns to shareholders.
We'll see $0.40 of incremental earnings per share in 2016. We'll see $1 five years out. When we think about the returns on this business, while we're targeting high single-digit growth returns in the five-year period, we wouldn't have done this deal if we didn't think that there were opportunities beyond that, if we didn't think there were opportunities over time to run the same playbook that we've run numerous times at Danaher. Beginning with a tremendous foundational asset like Pall, the combination of synergies and great growth dynamics with bolt-on acquisitions, ultimately leading to tremendous shareholder returns and the commensurate returns on invested capital. You put those together, and what you have is a strategic rationale that represents a truly unique and transformational opportunity for Danaher. I just want to spend a minute on one of the key growth markets for this business.
As I mentioned, there are a number of vertical markets where Pall plays, but the single highest growth market is the biopharma opportunity. Let's start with a couple of the basics. When we talk about the biopharma opportunity, we're talking about biopharmaceutical production or the production of drugs, if you will. This is a tremendous opportunity because there's a major shift in the market towards a higher growth segment known as biologics. This is the evolution from more traditional, in effect, chemistry-based drug production into drug production that is much more sophisticated, much more complicated, known as biopharmaceuticals or biologics for short. In this particular segment, where Pall has a unique and differentiated position, you have an opportunity for a much higher level and more sophisticated level of filtration.
Hence, a market with high single-digit to low double-digit growth over time, and a market that really is just in the early innings. Today, there are roughly between 175 and 200 biologic drugs on the market, but there are 900 biologic-based drugs in the pipelines today. That represents the significant growth driver that is behind the biopharma opportunity at Pall. Today, this market represents roughly a third of the platform. We believe over time, this could very well turn out to be half the business. Growing from that billion-dollar position that it is today to significantly more than that. As that happens, we'll also see a richer mix that will contribute, in part, to some of the higher gross margins that we expect over time.
A tremendous opportunity, a large growth market today at $4 billion of addressable market, but we believe that market will grow significantly in time. Pall is very well-positioned, and I think this is one of the key reasons that this business has the growth potential that we believe will take it beyond what we've seen historically for the business. Again, there are a number of other vertical markets where Pall plays today. Time won't permit us to go through those in great detail. We think in each one of those markets, there are good opportunities for added competitive advantage and higher growth rates. With that, I'm going to leave the Pall transaction for a few minutes here. We can come back to it during the Q&A.
I'm going to spend just a couple of minutes talking about the second significant announcement, which is the separation of Danaher and the formation of a new high-growth, industrially oriented business. What this does in effect is it sets up two more strategically focused enterprises. Danaher remains a science and technology-based business that's united by common business models. These are business models that have very resilient characteristics like high levels of recurring revenue, high gross margins, and better than average growth trajectories. What we also do is we free the industrial side of the house to deploy capital, frankly, in ways that we hadn't in the past. I had an opportunity, starting in the fall last year when I took my new role, to take a fresh look at the portfolio.
You heard Larry mention on a number of occasions that he and the board, in effect, saw me as having a free swing, a chance to really step back and look at the portfolio and decide what we wanted to do over time. What we found was not a great surprise, but there was roughly a third of the corporation, a third of the portfolio that was not getting capital deployment on a consistent basis. As we had rotated the portfolio towards more science and technology businesses in life sciences, in diagnostics, had continued to build dental and water, essentially, we had left a third of the corporation behind in terms of the compounding of our earnings capability. In looking at that, we saw the best opportunity to free that business was to set it up in a separate operating company to essentially renew its license.
By setting up a $6 billion business, we're essentially setting up what we think of as a new Danaher. In doing that, let's look at what we have when we look at Danaher and NewCo separately. Danaher is a $16.5 billion business with greater than 50% gross margins and mid-teens operating margins. I think the key thing to remember about that $16 billion and that jumping off point from an operating margin perspective is that roughly a half of this portfolio would still be in the early to mid-innings of improvement. About $4 billion is represented by Nobel, Devicor, Siemens Microbiology, to name a few, the acquisitions of last year, as well as Pall. Another $4 billion is really represented by Beckman Coulter. Still with plenty of opportunities for improvement, and you'll hear some of those today despite the extraordinary progress we've made.
Danaher represents a tremendous opportunity for continued improvement in operating margins and consistent mid-single-digit growth opportunities. Dan and I will continue to lead this business, and we believe it sets us up with a tremendous focus on continuing to evolve a leading science and technology portfolio. The new operating business will be a diversified, multi-industry, generally industrially-oriented growth business. Again, with that renewed license to deploy M&A. Jim Lico, a familiar face perhaps to many of you, a great leader at Danaher of nearly 19 years, a tremendous practitioner of DBS, will be bringing the Danaher culture, the tools of DBS, the capabilities of M&A that he's demonstrated in building the test and measurement platform, in building out Gilbarco Veeder-Root, and the other businesses that will be part of this new portfolio.
Jim's track record is exceptional. Under his leadership, this business will become a tremendous growth opportunity and a great source of shareholder value. To put it in perspective, the new company will be roughly the size of Danaher in 2002, 2003. For those of you who followed us during that timeframe, you can understand the great shareholder value that we created over that period, and this is really an opportunity to do it all again. To summarize, Pall truly is a unique and transformational opportunity for Danaher. A tremendous market, a great position in that market, great opportunities to deploy DBS and lift operating margins, and an excellent runway for M&A and building out consistent with the kind of track record that we've had in building out the water quality platform as an example.
Secondly, the separation, unlocking shareholder value, ensuring that we created an opportunity for the whole of Danaher to deploy capital effectively. Danaher has always been at its best when the whole of the portfolio was running the playbook, growing organically and deploying capital strategically and effectively to create shareholder value. That's the news of the last few weeks. I want to pause there, and we'll take a few questions on those topics before we get into the heart of the day, and we'll spend the balance of that on the diagnostic business, but specifically Beckman Diagnostics. With that, Cliff? Sorry, Cliff. Wherever the microphone is going. This is the follow the microphone game. Yeah, thanks. Sorry, in the back.
Hey, Tom. Isaac from Goldman.
Hi, Isaac.
How are you? Thanks for.
Good to see you. You bet.
the chief seats.
Thanks for coming.
Yeah. I was interested most by your comments on the opportunity to gain some share with the Pall assets. As I think about those markets, it tends to be that the customers are relatively slow to shift share in material amounts. How much of that strategy is maybe driven by just being expedient given some of the disruption in the major competitors in that market, Millipore and Sigma-Aldrich and all that, sort of integration work could create an opportunity. Is it kind of a timing thing, or do you have a sort of new go-to-market strategy where you think you can really move the needle on share?
Sure. Well, there are a couple of things, Isaac, that I'd share. First of all. Similar to many of our other businesses, we're building that installed base with the associated tremendous recurring revenue stream that follows. In this case, at Pall, 75% recurring revenues. It is a process of competing for those installed base positions. The good news is once you've acquired those positions, the barriers to entry are very high and the relationship with those customers very sticky. You do have to compete well, though, to gain those positions, right? Because that can work against you if you're on the outside in. In meeting with the Pall team and getting to know the business a little bit better and the leadership there, they would say there are opportunities to execute better from a commercial perspective.
The more we talked with them and the more we got to know what some of those opportunities might look like, the more those look like they fit with the tools of a Danaher Business System. Clearly, many of the tools that we've developed on the growth side of the house, that we applied here at Beckman, by the way, that took us from a flat business at Beckman to now a mid-single-digit growth business most recently. We believe those are the same tools and techniques to not only retain customers, which we've done exceptionally well here at Beckman, but to gain competitive share over time. Yes, it does take time. It's hard to shift that share on a very near-term basis. Beckman, same story. You've got to win those accounts over time, and we think the tools of DBS will help us do that.
Let me just a follow-up.
Yeah.
In the past, you guys have talked a great deal about workflows across all your businesses, serving the customer with a complete solution. If I look at the Pall assets that you've acquired, it gives you a couple of really strong pillars, there's still a little bit of white space. How important as you deploy capital going forward will it be to fill in the other white space areas? Specifically, things like media, chromatography.
Yeah.
You've got single-use and obviously the filtration.
Right. On a near-term basis, I don't think it's mission-critical that we fill in any gaps. I don't think this business in any way is hampered by the breadth of its products or technologies. In fact, I think it's a tremendous competitive advantage they have. The breadth of technologies they have today, the positions they have across multiple vertical markets, the strength of their technical selling skills, and the ability to bring application solutions forward have served them really very, very well and have been kind of key to their strategic position over time. I think what you'd see us do is very akin to what we've done in other businesses, whether it's water quality, what you'll see today in diagnostics. I'll show you a slide in a few minutes about how we built out the platform.
I think we'll do that over time, but I don't think it's a strategic imperative sitting here today, that there's a strategic gap. Cliff.
Tom, much of the success of the investment in Danaher from the very beginning was both management and the board. When will we know the composition of the board and the full management team at NewCo?
Sure. Jim, Lico, Dan and I, the rest of our leadership team, Angela Lalor, will be working on the formation of the management team, the naming of the players at Jim's level 1, if you will, over the next few months. That's a nearer-term priority than the board, which, in most circumstances, Cliff, from what we've learned of others who've been through this, and obviously this is a little bit newer for us than others who've been through it, tends to be a little bit more of a downstream effort. While that takes time, and we'll certainly allow enough time to do it, that will not be an imperative here in the near term. Our priority will be on establishing the management team and then building out the construct of that beneath. Shannon?
Yeah, Tom, in terms of your point of the post-spin Danaher being still a multi-industry, it makes sense. At the same time, we're talking about Beckman today and you highlighted the Pall Biopharma
Yeah
That's where a lot of the attention seems to be. Maybe give us a sense of growing the industrial side of it. Where is it? Is there really that you can add to water quality and PID or is it more legs there? I mean, just help us.
Sure. I think the first thing to understand is maybe to answer a question that you didn't exactly ask, but I'll end it. Why PID and water, right? Because as you kind of frame it up, how's that all going to work? Remember that the unifying theme of the portfolio is going to be the business models. That the businesses we've chosen in the Danaher portfolio will be the businesses with more closely aligned, mid-single digit kind of growth businesses, higher consumable streams, generally higher gross margins. Those are the characteristics that will represent those businesses. What that does, I think, Shannon, in the commonality of those business models and their performance levels is they will all be at the front of the line from a capital deployment perspective.
Each of them warrant capital deployment in their own right, which was not necessarily true when we compared those positions to the industrial positions of NewCo. Those businesses were not getting to the front of the line in terms of capital deployment. We're very confident that the businesses we've chosen on the Danaher side are consistent enough and common enough in their performance characteristics that, frankly, it'd be a high-class problem to have to choose where to deploy that capital.
Just within those two, I mean, because for a while, PID was really dormant, then you started doing Esko-
Yeah
Some other things. I mean, is there
Is there really enough runway in Water Quality and PID to get enough deals done to offset what you're probably going to still find things that you like on the life science?
Yeah. We think they are, and I think you raise a great point about PID. I think Dan Daniel and his team have done an exceptional job of moving from a coding and marking position into one that really focuses on brand owners and the broadening of that footprint with Esko and X-Rite. Again, businesses with similar characteristics in terms of growth rates and operating margins and opportunities. Dan and the team, Joakim Weidemanis, have done a wonderful job of putting a pretty wide strategic lens on the PID platform. I would say Water, same thing. Some of the work that the team has done clearly over time, expanding beyond analytics into treatment technologies with ChemTreat and Trojan and so on.
More recently, many of the things they've done in expanding into broader into the hydrological network, going out to the deep ocean with some of the acquisitions we've done there, into the natural waters and the analytics that, businesses that we've acquired there. We're confident that there remains some attractive runways. The key is putting a broad strategic lens on those markets and being creative. Sorry.
Hi, it's Ross Muken-
Hey, Ross.
Evercore ISI . Thanks for the color today on the Pall asset. Obviously, you talked about the biopharma opportunity, and seems like given where biologics are going to be half the drug market in the next several years, that's a massive runway. If you sort of had to think about that franchise against the backdrop of all of life sciences. You now have been a consolidator in this space. You've looked at lots of different brands, lots of different companies. You've obviously been very thoughtful about where you've acquired and placed bets. How unique would you say that asset is relative to much of what we look like? Obviously, between the double-digit growth and the margin profile and the market structure. As you kind of rank different assets that you've thought about over the last several years-
-how would you kind of put that into the context of the space?
Sure. I would rate it as highly unique. As a result, we did rank the various segments of the life science market to choose where we would make the bigger and biggest bet. The combination of filtration with the biopharma and biopharmaceutical segment of the growth market, as well as the diversity of the verticals that came with that, combined to make, first of all, the market where Pall participates the most attractive of those, namely the highest growth rate market. Secondly, Pall, the most attractive asset in that most attractive market. To put it in terms that we tend to use, we do rack and stack the market opportunities and then make thoughtful strategic choices about what market we like best and what asset in that market is the premier asset. It's the combination of those two things that brought us to today.
Maybe on NewCo quickly, the organization has now had some time to kind of digest the news. Some of the key leaders in the respective assets that will be included in that, what's their feeling like now, and sort of how has their mandate changed now that, as you said before, it was unlikely that that subgroup was going to get a substantial amount of capital from an M&A perspective. Now it's a very different outlook for them, what has it kind of done for the organization, and how has it sort of changed a little bit of the strategic planning?
Sure. Well, I can speak for the businesses that I visited most recently. I was just at Kollmorgen, one of our industrial technologies businesses, just a couple of weeks ago. It was clear from the many associates I met with in the cafeteria that day that they understood that this put them in a very different position relative to the whole of the enterprise that they would be a part of. First of all, their organic growth was going to make a more meaningful difference to the top line of that business. Their operating margin contribution was going to be more meaningful to that business. They were get a chance to deploy capital, in ways that they hadn't in the past.
Some of the perhaps lower multiple, lower margin businesses that we may not have taken a run at on the Danaher side, were now going to be more fair game on that side. Again, with probably, although they may have started at a lower margin, the opportunities to create tremendous economic value off of that starting point were going to be theirs for the taking. I think there's a lot of folks walking around now in those businesses saying, "You know what? This is a chance for us to run the Danaher playbook like Danaher did back in 2002, 2003." Steve.
Hey, Tom. When Beckman was first announced, there was a tremendous amount of skepticism about whether or not the costs and other synergies would be realized. We're here to see that this week. You talk about, now there's a tremendous amount of skepticism, I think, on Pall for different reasons.
And the $300 million and other items that you're putting on the table. You talked about Larry Culp saying that this is a business which was in its third inning.
On that front. Maybe give us a little color or help us understand how and when we're going to get a higher level of comfort to overcome some of that skepticism that.
Sure.
those are achievable numbers.
Sure.
in a business that's starting in a much better and different place.
Sure. Well, you're right. We'll start that today by giving you Beckman Coulter as a success story. You're right, a lot of people were skeptical. We were in a tough spot and needed to dig out of it. We beat those cost targets at Beckman Coulter. We've doubled the EBIT margins or the EBIT contributions of the business. We've taken the growth rates up that have contributed to that. We'll start with building credibility today, using the Beckman example. I think over time, just as we've done at Beckman. We'll get closer to the business. Obviously, we're still between signing and closing right now, so we're still running to a bit of a hands-off environment. As we get closer, we'll be defining clearly what those targets are, the same way we did here at Beckman.
We'll define the easy stuff, or the more straightforward stuff, like public company costs, as an example. We'll define what we need to do in terms of taking cost out in the procurement areas, in indirect spending. We'll look at where there's opportunities, where commercially, we may have opportunities from a pricing standpoint. We'll look at how we can drive the mix of the business over time to contribute. Obviously, that's not part of the $300 million, but it's accretive to the gross margin line. I think as we get closer, we'll bring you along in terms of the specifics, just as we did at Beckman.
Okay, great. The second question is back to NewCo. Over the next year and a half, before the separation happens, what should we expect in terms of business on hold versus moving forward aggressively through that interim time period?
Yeah. We don't see the business as on hold at all. We've told the business development teams, we've told our strategic development teams. Jim has all the teams mobilized to ensure that if there are opportunities, for example, to deploy capital strategically against one of the new company businesses, we will do that. We'd love to see those businesses take advantage of that license to grow inorganically now. We're not waiting for day one of NewCo's public trading for that to happen. Same is true on the organic side. We want to make sure that we are running the growth playbooks in those businesses the same way today as, frankly, we would've liked to all along.
One last question.
Sure.
Hi. Could you tell us a little bit why you think the SpinCo businesses weren't getting the capital? I recognize on a relative basis, right, they're not as attractive.
Sure.
If they still deserve capital, what was the gating factor that prevented them from getting it?
Sure. Under the tremendous strategic vision and leadership of Larry Culp and Dan Comas and our entire leadership team that helped to contribute to it, but really through a very conscious decision that goes back the better part of a decade, we committed to evolving the portfolio from its starting point nearly two and a half, three decades ago, as more of an industrial portfolio. We committed to evolving that portfolio into a more science and technology oriented portfolio. Why? Because we knew the growth rates would be higher, the cyclicality would be less, the overall operating margins would be much healthier, and the free cash flow would be terrific. That was a very conscious decision.
As we did that over time, and it wasn't that we didn't deploy any capital to the industrial side, it's just that over time, a greater and greater amount of it tended to move towards the evolution of the portfolio towards science and technology. It really was a very conscious decision that at some point you then have to step back and say, "Okay, we've done exactly what we wanted to do. We created tremendous shareholder value along the way. Now, is Danaher at its best? Could we have shifted more capital in that direction?" At this point, we could've, but probably not with the strategic clarity, with the strategic coherence that would be associated with a business that is focused on particular markets. Now we have two businesses that frankly can do separately what we probably couldn't have done coherently together.
It really was a function of simply stepping back and saying, "We accomplished what we wanted to, but now it's time to enter a new chapter." I think we've drawn to a close of that Q&A. Thanks for those questions. I'm going to turn the page now and get into the heart of the day, which is about our diagnostic platform, and specifically about Beckman Coulter. I'm personally thrilled to be back here in Brea today because Beckman Coulter holds a very soft spot in my heart. I was part of the diligence early on, as maybe you would've expected, but back in February of 2011, when we signed the deal, I came to Beckman and took up my office here for the first time and spent really the better part of the next two years as the sitting president of Beckman Coulter.
I'm very proud of what Arnd and John and John and Allison and all the folks that you're going to hear about today have done at Beckman. It's been a journey, and I think you'll learn a lot about that as the stories are told today. Let's start, though, with DBS, because DBS is an important part of the starting point of the story of Beckman Coulter. Beckman has a tremendous history, and one of the things that made it attractive at the outset is because we knew that many of the core values that Danaher holds dear were core values that had been held dear at Beckman Coulter for the better part of its 80 years of history. They believed that the best team always wins. They believed that customers talked, and we needed to listen. They believed in continuous improvement. The business was built on innovation.
Over time, Beckman actually delivered pretty good returns to shareholders. As time went on, and we'll tell the story today, some challenges emerged, challenges in terms of quality, in terms of delivery, in terms of cost, in terms of innovation. That created an opportunity for us. It was also that opportunity to take advantage of a strong culture built over those 80 years that brought us to Beckman Coulter as well. It was a combination of the strength of its foundation, the consistency of that foundation with DBS, and the opportunities that were created based on performance challenges that had emerged. Danaher and DBS, the Danaher Business System really has three fundamental tenets. All of the tools of DBS really roll up into these three areas. Lean, which was our heritage.
Lean operating practices starting in manufacturing, but now being applied to virtually every function in a business. Growth, the tools of growth that have helped us over time move businesses forward from below-market performance to above-market performance, and Beckman's a terrific example of that. Leadership, building strong leadership teams. Today, you will hear from John Dion. You'll hear about the way we apply the tools and the techniques of our lean operating practices and those tools to Beckman Coulter in a variety of different ways to create a better customer experience and lift operating margins at the same time. John Nosenzo, as well as Arnd, will tell you about what we've done in terms of growth. They'll explain how we took a business that was losing share, that was fundamentally flat in its markets, we re-energized it and brought it up to market growth rates.
You'll hear about leadership. You'll hear about the teams that we built, you'll hear about the sources of those teams, and you'll hear about how Beckman has actually gone from being a net importer of talent to a net exporter of talent at Danaher. What a powerful tool that is when you've had folks come through the process, the journey at Beckman, but then become resources provided to the rest of the corporation. That's what you'll hear about today. Beckman sits at the heart of and is one of the cornerstone businesses of the diagnostic platform at Danaher. The diagnostic platform is just shy of $5 billion, with mid-teens operating margins. As I mentioned in my opening remarks, it's still early going in terms of the opportunities. Beckman, you'll hear about tremendous progress today, but still opportunities.
Leica Biosystems, a tremendous business with great growth rates, still taking advantage of terrific opportunities in its marketplace and growing margins. Radiometer, the earliest of our acquisitions, one of our best-performing businesses across the entire portfolio at Danaher. You can see the mix that we have with 80% consumables and service versus 20% in equipment. Speaking to the resiliency and the attractiveness of the business model that's associated with the diagnostic platform. A tremendous position that spans really across the hospital. When you look at those positions, you'd see that there are really three key places that we play. Beckman Coulter plays in what we would describe as the central laboratory of the hospitals, of large hospitals and small, as well as reference labs.
This is where blood samples go to get tested across a wide variety of test modalities like clinical chemistry to immunoassay, and now into even areas that were beyond Beckman Coulter's original position. Newly acquired businesses like Iris that gave us a position in urinalysis, as an example. Overlaying that, a tremendous position in automation and information technologies that delivers productivity. Leica Biosystems owns a leading position in anatomical pathology. In this case, you're talking about tissue samples. You're talking about biopsies. Our recent acquisition of Devicor that now is the front end of that workflow, that then extends with Leica Biosystems' capabilities all the way through tissue processing, through to imaging, both through a microscope as well as in a digital form. Finally, Radiometer. Radiometer plays in what we call critical care or acute care.
You'd typically find Radiometer in the emergency room or potentially in the operating room. Three critical pieces of the footprint of a hospital, anchors in the landscape of the hospital, where we've built leading positions in all three. What's the story behind the build of the platform? It started back in 2004 with the acquisition of Radiometer, our very first entree into the med tech world. It was literally within months of that acquisition that we did our first bolt-on acquisition of Innotrac that gave us the nucleus of technology that ultimately has become AQT. A tremendous expansion of the footprint from beyond the basics of blood gases now into immunoassay at the point of care. Most recently, the acquisition of HemoCue, which has given us a strong position in point of care in hemoglobin.
You see a similar story being played out at Leica Biosystems with a tremendous number of bolt-on acquisitions subsequent to the formation of Leica Biosystems, which really came out of the acquisition of Leica Microsystems. Then finally, Beckman Coulter with three significant acquisitions that Arndt will tell you more about later on today. If you just look at that visually for a moment, one of the things you'll notice is how over the span of that decade, how we've picked up speed, how we've added over time such a significant number of bolt-on acquisitions that have expanded our footprint, allowed us to bring greater value propositions to customers, but most importantly, delivered significantly higher returns over time than the returns that may have been anticipated just when the initial acquisition of a core foundational business was completed.
This evolution represents $9 billion of capital over that period, still has tremendous opportunities for continued expansion from an M&A perspective. You'll also notice that many of those names that you'd see subsequent to the big names are smaller names, certainly not household names, not terribly familiar. Again, very consistent with the Danaher playbook that those foundational acquisitions typically beget smaller bolt-on acquisitions. Maybe ones that might not initially move the needle from a top-line perspective, but over time, really do. The significant added additional returns end up creating a portfolio that now is a double-digit return on invested capital across that $9 billion of capital committed. Why do we like diagnostics? We like it for a number of reasons. There's a significant investment that's going on and has over time in terms of predictive and preventive medicine, getting at problems early.
It is estimated only 2% of healthcare costs are attached to diagnostic testing. Yet diagnostic testing actually informs roughly 7% of medical treatment decisions. A critically important component of the entire healthcare ecosystem, and yet a relatively small component of the overall cost. Aging population obviously drives utilization, then there's a critical issue when it comes to making customers successful, and that is a critical shortage of skilled resources and of course, cost pressures. You'll hear more about that today when we show you some of the innovative new products that Beckman has delivered because they squarely address these issues of labor shortages and cost pressures while at the same time delivering exceptional clinical outcomes. New technologies are critically important. Our customers are constantly looking for ways to drive that efficiency and driving those higher levels of clinical outcome and more consistency.
Again, you'll see some examples today. Finally, we have tremendous opportunities in the high-growth markets with not just markets like China, but certainly in India, in Brazil and the Middle East, all driving significant growth rates above the developed markets. How do we win? It's a highly competitive market. It's a challenging market without question, Beckman truly, and our other businesses as well, Radiometer and Leica Biosystems, have carved out truly unique and differentiated positions, largely focused on superior workflows that in addition to those, that ability to drive improvements and address those issues of labor shortages and cost pressures, again, also deliver a higher level of diagnostic consistency and quality.
Secondly, we've done it by excellence in go-to-market, you'll hear from John Nosenzo today, he'll talk about the way we have built and invested in our go-to-market opportunities and built that installed base. You'll hear from John Dion how we've improved our service capabilities over time. We've made significant investments. We've invested in feet on the street. We've invested in innovation, most importantly, beyond that, we've supplemented with investment in M&A. That brings us to Beckman Coulter, a tremendous business, again, acquired in 2011, midstream in its journey of DBS and continuous improvement with a significant position in the central laboratory. A great history.
I think before we talk about the challenges that we faced in 2011 when we acquired the businesses, thought we'd just take a couple of minutes and give you a little historical perspective on the 80 years of history that brought this iconic brand into the leadership position that it holds in the market.
To understand where Beckman Coulter is going, we must understand where we've been. Dr. Beckman was an inventor, and that's the company that he founded. It started in a shed in Pasadena, California, in 1935. He wanted to manufacture an instrument that he had developed for a friend of his. The pH meter, as it became known, was hugely innovative at the time, and it could produce accurate results time after time without any special expertise. His friend came back looking for a second box because he said everybody else was using the first one. Dr. Beckman later joked that that was enough to start a company. Came the DU spectrophotometer, which fundamentally changed the way people measured biochemical processes, and on and on from there.
Winner of the National Medal of Science and an inductee into the National Inventors Hall of Fame, Dr. Beckman maintained that we must always invest in research so that the instruments keep up with the demands of science and technology.
Wallace Coulter came from a similar background and had the same vision of science serving humanity. In 1946, Wallace began experimenting with methods to count microscopic particles. Several years later, Wallace was granted a patent for what came to be known as the Coulter Principle. The Coulter counting technology was rapidly adopted in the clinical laboratory. Fact, Coulter introduced the concept of automation to the clinical lab. Accomplishments, not accolades, drove Wallace Coulter. His company grew rapidly to employ thousands of scientists, engineers, sales, marketing, and service specialists. He was awarded more than 80 patents and was inducted into the National Inventors Hall of Fame. I had the privilege of working in R&D with Wallace. Clad in his ever-present fishing hat, we were always met with his challenge of, "What have you invented for us today?
That innovation continues today. Our over 10,000 associates in 35 countries continue to collaborate and innovate for our customers, the physicians and patients they serve, and our world. With investment in diagnostic innovation and singular focus on the lab, Beckman Coulter serves our customers through a dedication to advancing and optimizing the lab, the true foundation of patient care. 80 years of history. A tremendous history, and a remarkable level of commonality between that history at Beckman and Coulter and the other great businesses at Danaher. Businesses like Hach, the history of Kathryn and Clifford Hach, who built businesses, frankly, at the same time, were peers and colleagues of the Coulter brothers and Arnold Beckman. Businesses like Fluke, built by John Fluke. Again, tremendous inventor, one who brought a great culture to a business and a focus on innovation.
Much commonality, now obviously with the addition of Pall Corporation, another great history of innovation anchored in a founder with great vision. Yet, a business can have 80 years of history, 80 years of success, and still run into some challenges. We certainly saw how Beckman Coulter, back in 2010 and 2011, ran into some challenges. Quality was a big challenge, mostly from a quality systems perspective. Less about the quality of the products, but more about the quality systems and the way things worked internally in the business. That led to three warning letters. It led to issues around troponin. We'll get into that in more detail later. A very challenging position for the business to be in. As the resources of the business became increasingly dedicated at resolving some of those issues, service and support frankly suffered.
Past due maintenance calls, on-time delivery suffered, customer satisfaction, frankly, was at an all-time low in the business. As a result of, again, that shift in resources, innovation really came to a screeching halt. At the same time, the organization actually had become more complex and not as efficient as it needed to be. A very difficult situation, frankly one that created opportunity, one that the Beckman Coulter team, the organization here, was willing to take on, was up to the challenge, just needed a little bit of help. That's where we came in. In 2011, we acquired the business, we focused on narrowing the scope of what the business tried to accomplish, starting with focusing the business in on improving that customer experience.
We knew we couldn't do everything, one of the things that we're particularly good at at Danaher is using the Danaher Business System in a way that focuses in on the vital few, the critical issues, the must-dos, the burning platforms, to ensure that we put a business on the best road to success over time. We focused on improving the customer experience in tandem with building the right management team, a deep talent bench. You'll hear today how a combination of the team here at Beckman with the team at Danaher that came inbound into the business, as well as teammates from outside of the business and from the diagnostic industry teamed together to really drive improvements first and foremost in that customer experience. You'll hear about how that success has played out over time.
We knew if we did that, if we got past those challenges, that then we could shift those resources, then we could move those resources over time into accelerating growth. It was tough to do that, tough to focus on commercial execution and innovation, unless you had the trains running on time first. The team did an exceptional job, now you'll hear the story today about the results of a journey that frankly is not yet complete, but one that's come a long way, and I think the team has a lot to be proud of. With that, I'm going to introduce Arnd Kaldowski. Arnd and I have worked together for the last about 7 years. Arnd joined us in 2008, initially into Leica Microsystems, and then really was the anchor point, the key leader, in building the franchise that today is Leica Biosystems.
Arnd was key to ensuring that that business got on the growth trajectory that it did and continues to thrive today. Two and a half years ago, Arnd was my successor here at Beckman Coulter, and during that two and a half years, has really led the team on the journey that you'll hear about today. A journey of continuous improvement, a journey of focusing on innovation and growth, and providing great opportunities for people around the world. To take us through the Beckman journey, Arnd, welcome.
Thank you, Tom. Thank you very much. Good afternoon, everybody, welcome to Beckman Coulter here in Brea. I'm very happy you took the journey on you to be with us this afternoon. We're very proud to share what we have accomplished, as Tom said, hopefully also some learning on how we did it and where we can go from here. As Tom was saying, I was in Leica Biosystems, and as you could hear from the words and probably from some of the presentations you've seen so far, that was a good place to be at. We were nicely running on the organic growth side. We had good investments done on the acquisition side and more to come. I'm just half kidding that as Tom came around and said, "Arnd, it's time to think about something different.
How about moving your family from Frankfurt in Germany to the West Coast and helping me out here on the Beckman journey?" I wasn't so sure if I did win in the lottery or if I was set up for quite a challenge. At the beginning, it felt like a challenge, I think, I feel I won in the lottery given all the things we have accomplished and more things we can do from here. Tom talked about the problems, together with the team which is presenting today, I really want to focus more on what we did, what we accomplished, and how we went about those problems.
Just briefly recapping, improving the customer experience, quality, and delivery. Getting Beckman back to a growth trajectory, and doing that by funding those investments into growth, by taking advantage of productivity improvements we had with DBS throughout the organization, then being mindful where we put that scarce money, which we had created, into the best growth investment opportunities. I would be remiss if I wouldn't say that in our eyes, there's still tremendous opportunity here, continuing to drive the continuous improvement as well as driving the top line and the bottom line. As Tom said, somewhere in the middle of the journey of improvement here. The first priority for us was clearly around improving the quality management system as well as the customer satisfaction.
As you see here from the graph, we're in a very challenged situation with regard to three warning letters and glucose, sodium, as well as troponin being off the market in 2011. In the eyes of our customers, that was the highest priority. On the one hand, getting the products back, but secondarily, regaining the confidence of the authorities and honestly speaking, also of our customers. We put dedicated task teams in place, cross-functional for all major sites to cover all the open items. We brought the best RAQA talent together, and we complemented them with DBS leaders from different places in Danaher to really help those teams to get the work right with regard to improving the processes fast, but also putting sustainability into those processes so that we can rely on them going forward.
In parallel, we started to go on a journey with regard to improving our fundamental product quality. There were products where we were in a better place, other ones where we were behind the competition, but clearly, we wanted Beckman to be the hallmark in the industry with regard to product quality, particularly if it comes to external defects on the instrumentation. What we've accomplished in the last three years on that measure is a 50% improvement in service calls per instrument, which makes a significant difference to the life of our customers. We got to the point where the quality remediation was completed in 2013.
We had our products back, then we shifted the focus to a second phase with regard to quality management system, where we really worked on simplifying our quality management system and making it easier and more robust to get product faster out, and at the same time prevent any errors you can generate if your system is too complex. An important side effect, which I think sometimes gets not the visibility it should be, if you're in that quality remediation situation, you spend most of your engineering resources on fixing quality and quality procedures. We had more than 70% of our engineers in 2011 and 2012 not working on future, but working on fixing the system. Today, we're in a position where we have 75% of engineers working on innovation, new products, and improvements to our products.
Clearly, an engine here to get back to an innovation path, even without incremental investments. Scores on the scoreboard from the quality management system improvements, really improving the procedures as a response to the three warning letters we had, which we closed out at the beginning of 2014, getting the troponin back on our instrumentation. End of 2013, there was a multi-site large study to be done with more than 2,000 patients, part of that study. At the same time, while we were going through the quality system remediation, being able to get products which were outside of the troponin environment, still cleared by the FDA as a proof that they were seeing us a fair partner, a partner who was working on their system. There's a second trajectory here if it comes to customer satisfaction out of the remediation efforts.
One of the biggest pain points for our customers is what we call a field action. A field action is an action a manufacturer like us has to take if a product creates risks on the quality or the safety of the patient. If you have such a field action to conduct, all of your customers who have that product in their hands need to cooperate with you. They have to change their procedures. They have to take many extra steps. Us being at a point where we had many of those in 2011 and 2012 didn't help our customers. We were able to reduce that number of customers impacted by about two-thirds. The last one here from a process simplification, we started that later in the game after the remediation was completed.
Early running here, we reduced our procedures by more than 25%, and equally important, we touched all those procedures to make them more simple and get us acceleration in our product development processes. From a customer services perspective, lots of improvements. John Dion will go deeper on those, but let me touch on the highest level here. When we did the due diligence on Beckman, the VOC clearly told us that the biggest driver of retention losses, so customers who after five years come to a renewal point and choose to stay with you or go to somebody else, is really a vendor who creates many interruptions to their work life. They have patients waiting there. They have doctors waiting there to get results. Any interruption is a problem for them.
Looking at the VOC and looking up at the Beckman results, there were clearly two major drivers where we were driving dissatisfaction on the customer side. The one side was the supply of reagents, where at any point of time, we had 40 reagents, which were either on low supply or no supply in a month. At the same time, the lack of ability to get fast enough in case the customer needed a service engineer to those customers. Taking a step back, we didn't just look at the process problems. We thought about What does that tell us about the culture? What does that tell us about the way the company is run? We felt there's not the right sense of urgency, and there's not the right decision-making processes to really move the resources to the places where the customers have that pain point.
We needed to reconnect and open the communication lines with the customers. Tom and Larry led that from their position and were out with many, many customers, more than 100, which were customers of ours, but not satisfied. You can imagine that was not always beautiful moments to introduce yourself newly as Danaher to a Beckman customer who was not happy. I think it sent a strong message to the inside as well as to the customers, that we're here to take those issues serious, change the culture, change the processes, and drive those improvements.
From a sustainability perspective, we're clear that we need to put more simplification in our processes across all different parts of the organization, and also reduce the complexity of the organization, as Tom pointed out, and really delayer and get the leadership closer to the customer, which ultimately led us to us taking two layers out of the organization, particularly on the customer-facing side. You heard us often talk in other circumstances about how we use DBS, particularly in the manufacturing environment. At Beckman, it was even more important to use DBS in customer-facing processes, given all the challenges we had. Since the acquisition, we've done more than 200 Kaizens in customer-facing environments to really get after responding fast, understanding our customers. That priority is still well alive. A week ago, we had what we call a president's Kaizen in Chaska, Minnesota.
It's one of our main sites here in the U.S., where we had 13 work streams, all of my level 1 management team members being part of those different work streams to help break through on some of the process challenges. I'm proud to say that more than half of those Kaizens were again focused on how we serve our customers, how we improve our response to customer complaints, and how we drive product quality and reliability. A big turnaround from the process, but also the culture here. The second priority in rebuilding Beckman Coulter was to get back to growth. You heard Tom talking about when we acquired the business, it was flat. First step towards that path for us was how do we generate the investment capacity? How do we use DBS in all the areas where we can use DBS to get more efficient?
How do we then take some of that money to invest into growth? The first big step in 2012, where we not just resized the organization from the layers, but also took a significant cut, with regard to the spend levels. A second step on continuous improvement in the areas where you know DBS from the lean side, improving manufacturing productivity and reducing indirect spend. You can see the numbers here on the progress we made. By the way, all of these numbers you see are Beckman Coulter Diagnostics, not the life science side. You would see similar trajectories on the life science, but for the discussion today, we focus on the diagnostics. Then we had opportunities to reduce structural cost, close a couple of sites, smaller ones, bigger ones, as we were going along here and getting rid of overhead structures as well as lease costs.
If you add all of these measures together, we reduced the annual spend on the Beckman Coulter Diagnostics side by more than $300 million. Take a look on the graph, chipped more than 500 basis points to the operating profit while we created the investment capacity we needed from the growth side. Similar imperative story on the balance sheet side. Don't want to go too deep here. In three years, we were able to almost improve the turns by two. No silver bullet on that journey. Accounts receivables, inventory, accounts payables. On the tour later, you're going to see one area here in Brea, where we dive a little bit deeper on what we did from an inventory perspective.
Overall, if you add it all together, in three years, we reduced the working capital by more than $300 million. You could argue that this paid the acquisition of Iris Diagnostics by itself. Coming to the fun part, the investment on the growth side. We had now freed up that capacity, we want to be mindful and very focused on where we put that investment capacity to get the biggest bang for the buck. There were two priorities for us. The one was feet on the street in high-growth market, the other one was new product and innovation. From a feet on the street in high-growth markets, it's important to take a step back and see where Beckman Coulter stood. Very strong position in China. Very proud of that.
The number two in in vitro diagnostics market there, mainly driven into my eyes because Beckman Coulter was very early in China with manufacturing Suzhou more than 20 years ago and a strong distribution network. All other high-growth markets, we were significantly underinvested relative to our competitors. Very little feet on the street, very little direct activities, really an uncharted territory for us. In the spirit of focus, we chose three regions first to really amp up the investment from a high growth markets perspective, China, Russia, India. Drove that for two years. Did see how that worked in the organization. We're very happy about the results on the growth rate. We've seen pretty fast returns on those increases, we then entered into a wave two, in which we started to do the same in Middle East and in Brazil, still investing into those.
If you take those five countries together, we added over the three years, more than 50% more feet on the street in high-growth market in those five countries, which is a significant driver for our growth in those markets. Getting to the new product development, not just did we had many of our engineers on remediation, we also started off at a low level of R&T as a % of revenue. Lots of challenges with regard to where do I find the next engineer whom I can put on a new product development project. One thing we did consistently every year was to add, on a pretty constant basis, incremental resources on the new product development.
We did that in line with a product roadmap we had defined in the first year together with Beckman team. The priority was first on finishing important projects which were promised to the customer but not delivered for many years. One of them being the hematology connectivity, which we launched last year. At the same time, focusing on products which were half through the pipeline, really high impact. We made sure those get delivered so that we start the curve from a growth perspective.
I would be remiss if I wouldn't mention the VERUS, our molecular diagnostics instrument, not just because it was one of the biggest investments we held steady, and we continued to fund on a good clip here, but also because two days ago, we received the CE mark on the fourth viral load assay, which we wanted to have a meaningful cornerstone menu in viral load for Europe. Since two days, we're actively selling and commercializing that entry into the molecular market. John Nosenzo will share some more light, and you'll see the VERUS later outside in the demo. More to learn about the molecular market here.
If you take all those investments together, as well as the process improvements we've done from a commercial execution perspective, you see a nice step up here year-over-year from an organic growth path. Now us running at a mid-single digit, which is in line with the market. More to come, more opportunity. I think a good start. In order to deliver on such a somewhat simple but challenging game plan, as Tom laid out, I went through just the high-level results. It's very important to have the organizational structure as well as the leaders in that organizational structure set up well. On the one hand, you want to have accountability and transparency. You want to make sure the priorities are clear. You want to make sure there's fast execution, and you want to have the best people on the right seats of the bus.
Three steps which we took here. The first one was to separate Beckman Coulter pretty much after the acquisition, because in reality, these are two beautiful businesses which look at different market segments with very different dynamics, very different needs. We wanted to have two management teams get up in the morning in their own group and focusing on what they can do for the customer. Second one I talked over, reducing bureaucracy and simplifying the reporting structure. The third point, which I hope you see not just on slides but also by the presenters we bring forward today, was to really get what I would call a well-balanced management team. What do I mean with that?
For me, if you get to bringing two companies together, and that's what we de facto did with the Danaher and the Beckman, you want to have a management team on the first level, where you take the best from both sides, where you really create on that level one team a good synergistic behavior and a good teamwork, so that you really can lead the organization in a constructive fashion. We took the best talent out of the Beckman side. We brought a couple of very experienced Danaher leaders to the group, and at the places where we felt we had open seats, we were hiring from the industry. We have three of those examples with us presenting today. Allison, who came from the Beckman side, is here since 8 years. John Dion, who came from the Danaher side, being there since 18 years.
John Nosenzo , whom we hired from the outside, and Alois there profiled a little bit over. I was very proud and happy to get that kind of a management team. It was in a very good position and really helped drive what we had to drive here. Summarizing the highlights from a more financial perspective here for the diagnostics business, strengthening the revenue performance from flat to mid-single digit in the first 4 years, improving the gross margins from low 40s to high 40s by using DBS, driving price, lean conversion, quality improvements, taking some of that money, putting it to the bottom line, taking some of that money, investing into the highest impact growth vectors.
I'll get to that later today, doing the first bolt-on acquisitions here, not just adding attractive businesses, which will help drive more growth, but at the same time, building that muscle and that capability within Beckman to do more if opportunities arise. Great start from a revenue growth and a continued margin improvement perspective. In our eyes, more to come. With that, I want to introduce John Dion. John is 18 years with Danaher. He was in managerial positions in Gilbarco Root, Videojet, and many others. He's taken on the role as the senior vice president for service here. Not a simple task. He'll talk over some of the challenges he's overcome with the team together. A great DBS practitioner who helped us get many people on the Beckman bus into DBS and make it sustainable. John?
Thank you. Thank you, Arnd. Good afternoon, and thank you for the opportunity to share a little bit of our journey here with you. You've heard a lot about DBS, I'm sure, the Danaher Business System. I want to reiterate for some of you that it is this kind of relentless pursuit of excellence focused on quality, delivery, cost and innovation. Very importantly, in that order, while we do achieve some productivity and efficiency gains to reinvest in other places in the business, as Arnd said, we really start with driving quality and delivery to those aspects that customers tell us are most important to them, and it's always been this way. We often describe it as building process muscle versus muscling the process, and that's the really key part of the sustainability of this.
We always ask our customers for feedback. We do this directly, we do it through third parties, we do it through blind methods. Ever since the day of the acquisition, even prior to the acquisition, our customers have not been shy in giving us this feedback. Very specific quotes, we only captured a few of them here today, where customers told us their dissatisfaction around our inability to deliver, their dissatisfaction with our quality and reliability of our solutions, their dissatisfaction with our ability to serve them well and that customer experience every day. We took this to heart, this was the cornerstone for our improvements going forward.
I'm going to share with you today a few of the places where we've used DBS in our service business, in our manufacturing businesses, quite frankly, in some of the places, what we refer to as Carpet Land. You'll see in the tour later today, you'll see a couple of examples of those, one in R&D and one in manufacturing. First, a little bit about what we've talked about earlier, troponin. I have to tell you, when I joined this business almost four years ago, I thought I knew what Danaher was about. I'd spent about 14 years in some of the industrial businesses. Go to my first few operating reviews, I'm hearing about this troponin over and over again. I had no idea what it was.
I quickly learned, because it's a leadership team and a next level of leaders and 10,000 employees who are very well-versed, you don't lose any sleep because every day there's a high degree of confidence. There's a lot of experts on the team. For those who don't know, our troponin test is a biomarker of potential heart problem. It detects elevated levels of the troponin proteins in blood that are released in the event of a potential heart attack. What makes this test so critical for our customers and ultimately for the patients, is that this is one of the tests where ultimately that patient is in the emergency room while we're running the test or while our customers are running the test. It's so mission-critical.
We, as Arne shared earlier, lost the ability to market that test to new customers, we lost that ability to run it on one of our platforms, quite frankly, because we had some differing results amongst the two platforms. This was a great opportunity, cross-functional Danaher Business System application, product management, R&D, quality, regulatory, and clinical affairs, to solve the problem, to form stronger processes on how we run verification and validation of the solution. Very critically, in following new guidance from the FDA on how to do clinical studies to offer that proof of the solution, then ultimately how to market that again. That proof through the clinical studies, as Arne referenced earlier, a multi-site, multi-sample clinical study, far advanced to what the previous was back in 2000. This is used today as a benchmark by the FDA.
Really great opportunity, not in manufacturing, not in service operations, where you typically see a lot of the applications of the Danaher Business System, but one of the opportunities right in what we call Carpet Land, R&D, product management, quality and regulatory, et cetera. DBS applies to everything we do. Mishima, Japan is where we manufacture the AU product line for our clinical chemistry analyzers. This is the former Olympus clinical chemistry business that was acquired by Beckman Coulter about 6 years ago. If we look back around the time of the acquisition, were very long lead times. There was missed sales as a result. Yield issues could not keep up with the capacity, yet this is where we were shifting a lot of growth into this line of analyzers.
It was a great opportunity for DBS in the standard work in daily management and a lot of Kaizen opportunity. One of the very first places where we implemented what we call the Danaher Reliability System, one of our lean tools where we take actual defects that we're tracking in the field, things that occur from out-of-the-box failures, right through serviceability issues. We take those defects, we track them back into the business. Cross-functionally, we form specific funnels of opportunities, whether they be design, supplier-based, manufacturing, service and support, and how we train our customers. This team still exists today, and it's not something here, not just at Beckman Coulter, but at other Danaher operating companies. It's not something that we just delegate to the critical mass, then the leadership team gets a report out once a month or once a quarter.
This particular team has 3 of Arnd's direct reports on it, and we meet with the team in Mishima. Most of it's via telephone or WebEx, but we meet regularly through the month. This is truly cross-functional in all levels of the company, working on those funnel opportunities, again in design, in supplier base, in manufacturing, in training of customers, and training of our own service professionals. As a result, in less than 3 years in on that project, we've got the supplier defects down by 90%. We've got the first pass yield in manufacturing up by 30%. We've got those external defects that we measure at the customer reduced by just over 50%. At the same time, the output volume of instruments out of Mishima has doubled as we've shifted the customer base to this line. Nowhere complete. A lot of opportunities still exist.
It was just this past Monday evening, we had a call going through the funnels, very healthy list of projects still for us to go after. Chaska, Minnesota, is where we manufacture our immunoassay instruments as well as the reagents for those instruments. If you look back similarly at the time of the acquisition, long lead times, poor yields, overdue, not only in the instruments as measured by poor on-time delivery, but also in the reagent kits. We had weeks' worth of reagent kits in the past due backlog. Here, the approach was a couple of different DBS tools, variance reduction Kaizens, a heavy application of daily management. You'll see a good example of that here today when you go to the manufacturing environment here in Brea. Using daily management where the team focuses on those critical few customer attributes every single day.
What did we say we were going to accomplish yesterday? What did we actually accomplish? Do we have any on-the-spot issues that we can solve together right now as a team or report back later in the day? What's on the dock for the day? What do we need to accomplish today? 10, 15 minutes, invaluable tool to rally everybody in the organization, especially in the specific set of customer deliverables on what needs to be accomplished. Quick assessment of yesterday, all hands on deck for today. Standard work was a big key in Chaska as well. Standard operating procedures. A lot of companies may do it, but with us, it's really about not just putting the standard work in place, but making sure we're adhering to that every single moment of the day and every single asset going down the line.
Strong DBS fundamentals in all of our environments in manufacturing. These were just a couple of examples of them. On the regulatory side. I'm sorry. On the regulatory side, as Arne shared earlier, we had three warning letters in three different facilities. These are serious. This required another cross-functional approach, more in the Carpet Land and in the field, around processes of how we document customer feedback on a daily basis, on how we investigate those opportunities, on how we form new processes and how we're going to launch potential letters to the field, recall notices, or other guidance. Ultimately, how we transfer design into manufacturing and into serviceability in the field. If it weren't for this cross-functional approach on creating those strong processes, those warning letters would not have been lifted.
Auditors return, do follow-up audits, look for that evidence, that proof that we're really doing what we say we do consistently all the time. That's what resulted in us getting out of that regulatory issue. If you look at the 483 observations, those observations are what you receive from the regulatory body, in this case, the FDA, when they come in for an audit and they see something that just doesn't look right. They give you a chance to resolve that. Come back in a follow-on audit. Failure to resolve those and to show that evidence in a consistent, sustainable way could ultimately result in another warning letter, which would be detrimental to this business. Back at the time of the acquisition, we had 39 of those, many of them were very systemic and very serious. Took some while to remove those.
Each one of them required some specific process muscle to be built. Last year in 2014, three of them, not one of them systemic. All of them rather quickly addressed and cleared and approved that we had to close those properly. Another place where outside the traditional DBS applications in manufacturing and in service, where we apply those same principles to building sustainable process. In the service organization, Arne shared earlier, was a very reactionary business that we had. Break fix, a lot of slowness in installing new systems, past due preventative maintenance, which in some cases was contractual, slow response times. Still a pretty solid team that really wanted to make the improvements. Measuring everything they could measure. Every month, big package of measurements, 70 KPIs. Not really sure which ones to act on first or how to act on them.
We begin the next month and start measuring all over again. The irony is I saw, and I've seen this in other Danaher businesses, is despite having all these issues, customers were telling us, "You better get this right. This is your last chance." The reason why I'm sticking here with you today is because of those people in the field that I work with every day from your business, those sales professionals, those service professionals. It's that team that's keeping me with you. We won some loyalty with customers and a little extra patience while we worked through the issues. We had to start off by setting some really clear expectations. We had to start off by establishing a more straightforward organization.
It's difficult to implement change when you've got an organization, you're not really sure who's responsible for the change, who's going to be accountable for driving it on a day-to-day basis. The surprise for me, which I probably won't be surprised the next time, but the surprise for me when I came in here into Beckman Coulter was that the organization that you see on the left looked just like the organization that we acquired at Videojet back in 2002. The organization on the right that we quickly drove to looks very much like the organization that we put in place at Videojet back over a decade ago. Great teams, great businesses, but sometimes the bureaucracy just might go a little bit too far. Once we unwind that just a little, we're poised to provide much, much better customer service.
We took those 70 measurements and got down to the nine critical ones, the ones most important to our customers. We put in a lot of process around standard work, around daily management, simplifying the organization, as I said earlier, aligning the roles to what the customer valued most, establishing clear accountability, and taking our on-time installations up dramatically, taking our response time down to a place that's almost half of what it was before. Improving our ability to fix the problems right the first time, our service quality measurement, while still taking out close to half of our field service spare parts inventory. Anyone who's ever been involved with a service organization, a direct service organization, that's a scary thought in itself.
Last thing your service professionals want to do is to give up any inventory, even if it's not turning, even if they're just driving around with it for years and years. During this process, Kaizen event, meet one individual, he's got inventory since 2007 in his trunk. Said, "Why 2007?" Well, in the ERP system we're using, that was as far back as it went. He was with the company for 42 years. We still don't know if he had inventory that was 42 years in his trunk, but then it was better than seven, eight years at the time. We took a lot of cost out of the service business at the same time, well over $50 million, and a lot of headcount related to that. You'd think with those two pieces around inventory and around headcount, that your customers would be very dissatisfied.
In one of those independent third-party surveys that compares us against our peers, if we go back at the time of the acquisition, in almost every category, Beckman was fourth or fifth out of five participants. Last year, in 2014, Beckman Coulter was first or second in most categories. Not out of the woods, haven't tapped all the opportunities. We've got a lot of low-hanging fruit to go. I look forward to us getting better and better, maybe earning number one in all categories. What some of the customer feedback is, and some of the feedback is just from the past month. We're showing an accountability and a responsibility to their needs. In turn, they feel it and they're telling us.
In summary, it started with really understanding what the customers value most, establishing very clear expectations for the organization and what we were going to accomplish, how we were going to do it, and who was going to be accountable for it. Driving continuously that relentless pursuit for quality of service and delivery, quality of what we do in our manufacturing environments, quality of what we do and how we respond to regulatory concerns and other customer feedback. This whole time simplifying the organization, doing this in an effective and efficient manner, such that that productivity can feed other investments in the business. Thank you very much.
John, thank you. As you can see, lots of progress in four years on quality, service, and delivery. Most important for me, really moving from some customers being the problem to being more the partner of the customer. We're going to take a 15-minute break here. Afterwards, we'll come back and have John Nosenzo come up and share how we become more of a partner to the customers, how we drive customer excellence and sales execution. We'll start with a video at the beginning, come in when the time is over. The video will allow you to get a first glimpse into our customers' world, as well as what they do for the patients, John will pick up from there. Thank you.
We've all been there. Time drags when people have questions about their health. Test results matter because behind every test is a person, a patient, someone who wants to be well. At Beckman Coulter, our vision is advancing healthcare for every person. Our mission is working with every customer to deliver innovative, reliable, and efficient diagnostic solutions for patients around the globe. We know the laboratory is the foundation of patient care, we work to understand each lab's workflow. We deliver solutions, from instruments to information to better process design to make that workflow as efficient as possible.
Automation has allowed us to both, I think, at the pre-analytical and analytical points in the process to focus more on the important patient care issues that arise. Even in the highest quality, most automated laboratory, you still are going to have issues.
Outreach is 60% of our business, we've done a lot of lean initiatives with our outreach. One of the things that we've been able to do is we've been able to grow our volume by 800% in the last seven years with only adding two FTEs.
Our turnaround times has changed dramatically since the implementation of this track. Prior to implementation, we were on the average of a basic metabolic panel, took 89 minutes. Once we implemented this track, we did some studies, and we found now it only takes 24 minutes.
What makes these kinds of improvements possible? It's the team at Beckman Coulter who know that every test matters and that behind every test is someone who wants to be well.
Good afternoon and welcome back from break. I'm glad we had an opportunity to show you that brief video. As we spent the early part of this afternoon talking about the focus that we've had on driving improvement in cost and improvement in quality and improvement in supply, one of the things we never lost sight of as we did all of that improvement was the focus on the patient. At the end of the day, the work we do, our beneficiary of that is that patient. I'm glad we had an opportunity to share that with you. I'm John Nosenzo. I'm the senior vice president in charge of customer operations, and I fall into that third segment of folks that Arnd had talked about earlier.
I joined the Beckman Coulter organization post Danaher acquisition coming out of the diagnostic industry where I had spent time in Bayer Diagnostics and then Siemens Diagnostics after it acquired Bayer. I'm excited to be here this afternoon to present to you a little bit about what we've done over the last couple of years in terms of accelerating growth and driving growth at Beckman Coulter. There's a lot to talk about in a very limited period of time. I'm going to focus in on three what I call pillars that we instituted in the beginning years. The first was teed up a little bit earlier. It talks about the continued investment we made into our high growth markets. With really two thoughts in mind with that.
We wanted to increase the breadth of coverage we had in our high-growth markets, making sure that we were in front of more customers. We also wanted to make sure that our relationships with those customers are deeper. Also talked a little bit about the improvement we made in our commercial execution to drive higher retention and higher win rates. With that, let me just step back a second and make sure that everyone kind of understands the model that we play in in our business. Most of the business is large capital equipment with the reagents flowing through it, and customers sign a five-year contract. It means 20% of our base business is up for renewal every single year.
We've got to stay focused on that base business, but what we've also got to do is make sure that we're growing new and taking share from others. Last is the innovation that has been talked about a little bit in terms of our new products, whether they be platforms, whether they be assays, or whether they be services we can provide to our customers. First, let me start with this chart. It was alluded to by Arnd earlier on in a different format, talking about our productivity improvements. I put it here not to go through the financials, but to set the framework of how important the cost savings were to us. We wanted to drive the cumulative cost savings, obviously drive an improved margin for the returns that they'll deliver.
The other impact of that is it gave us the ability then to fund growth investments in other areas, those areas being in our high-growth markets and in those new product development. That's really the pivotal part of those productivity improvements to help us drive and fuel a growth engine. If you take a look at the growth market specifically and drill down a little bit more than was spoken about earlier, take a look at our breakdown of high-growth markets. Represents about 36% of the overall diagnostic revenue, about $1.1 billion. As you look at the countries that are represented there, we're pretty well-balanced in the fact that we've got good revenue return for most of those countries. We made a decision early on to invest in feet on the street to grow that business. Let me explain a little bit more about that.
You heard the challenges that we had a couple of years back at Beckman Coulter. The most significant region that was impacted by that was the U.S. FDA removed troponin, and as John spoke about the impact of that, when a customer cannot run that cardiac assay on your platform, their workflow changes. They've got to separate out the blood. They've got to run some on your platform, some on another platform. That patient who's waiting in the emergency room that should get a result in 30 minutes could now be as long as 45 minutes, an hour, an hour and a half. While we had that impact in North America in a developed market, we needed to make sure we grew our business in those parts of the world that did not have that same impact while we developed the improvements in the developed markets.
We made significant investments in feet on the street. 30% increase from 2011, both in sales and in service in those developed markets. When we looked at where we were going to go, we took a very thoughtful approach. We started with China. Number 1, if you look at the chart, it's 51%. Makes sense to go there. The real reason behind it is we had a good critical mass in China. I think as Arnd said earlier, we had been in China. We had been one of the first entries into that marketplace. We had good brand recognition, and we had a leadership position in some of our products. What we wanted to do is really grow our business in China and then define and refine what that playbook would be as we then sought to do that in other countries.
First, let me drill down a little bit on China, you'll start to see what we did in the other countries as well. First and most important thing, we'll start with the numbers. We wanted to increase the installed base revenue. Because of the actions we've taken from 2012 to 2014, we've increased that revenue 75%. First thing we did was very, very clear. We wanted to expand our market coverage. Two ways. First thing we wanted to do is make sure we went from a primarily dealer market into a combination of much more direct as well as dealer market. We wanted, quite frankly, to control our destiny. If we have the relationship with the customer, if we're the ones that are driving the value of Beckman Coulter, we have a further opportunity to keep that stickiness of that relationship for years to come.
We put more sales folks, we put more service engineers in the field to continue to broaden out that coverage. When you look at a market that's as large as China, quite frankly, it doesn't make sense to try to be direct in every part of China. We increased our dealer coverage by 50% to go into the parts of the region that we did not have coverage in before and we did not sell our Beckman Coulter products before. The first plan is get in front of more customers in order to increase our growth. Second part of the plan is making sure even if we have a dealer relationship with a customer, that we develop a higher level of intimacy, deliver value to the customer, and keep those customers close to us.
In China, the way we had that interaction, but not in a traditional sales call, is twice a year, we run a national symposium, which is attended by about 500 folks. At that over a day or two-day period of time, we provide educational information about what's going on in diagnostic trends, but we also take the opportunity to spend that time with them as Beckman Coulter. They understand who we are, what our product pipeline looks like, what innovation we're driving, how we can help them, and just further connect with our customers to continue our relationship. Now we can't hit everyone in the national symposium, and quite frankly, we want to get down to a local level as well. About twice a month, we have symposiums in local regions.
To make sure that we target it for our tier 2 customers in China and make sure we can have that connection as well. The third part of what we've done in China is really introduced an increased cadence in the products we've delivered there. Because if we're selling to more and we're selling deeper in those accounts, we want to make sure that we're able to provide more products at a much more frequent basis, so we differentiate ourselves from the competition. We've delivered increases in automation solutions, we've delivered new chemistry assays and licensed them in country, and we've also started to begin local reagent development in China. Kind of developed in market for market.
Part of the three ways that we've modeled our growth in China, as you can see, successfully, and we've continued to do that as we've now gone to the other high growth markets. One of the other things we had to really focus on is the commercial organization. Now again, you've heard some of the challenges that were presented this morning in terms of supply and quality. The commercial organization was not without their challenges as well a couple of years ago. Well, you see a couple of them here. Let me start the first one and tell you a brief story about my first week here on the job. I started here, went through all the normal stuff you do as a new hire, got to my office and sat down with my finance person and said, "Okay, how do I get daily sales?
If I'm the sales guy, I want to know how we're doing." He informed me we actually don't have daily sales. "Okay. Weekly sales. How do I get the weekly sales report?" He informed me we actually don't have weekly sales. I stopped asking and just figured he'd tell me what we actually have, and he informed me that the normal sales report would be delivered at the end of the month after the month closes. Hard to fix what you don't see, and hard to change what you don't know about during the month. I think it was probably eight days after that we started having daily sales.
For most of us, kind of inconceivable in a sales environment not to be able to track your sales, one of the things that it wasn't a metric that was being looked at, and you can't fix it if you're not looking at it. Second part, I spent same part of that week out in the field with a sales representative, made a couple of calls. One of them was a great call. Customer that they had been working on for about 14 months in a sales cycle finally got to the point that they decided the Beckman Coulter solution was the right solution. All they wanted to know was they just needed a quote. It's great. Get back in the car, rep's going to work up the quote.
About three days later, emailed the rep and I said, "Okay, how did we do with the quote?" He gets back to me and goes, "I won't have the quote for a while," because the normal turnaround time for a quote, and I'm not talking about a difficult one here, I'm talking about a one instrument quote, is somewhere between 20 to 30 days. Now imagine this. This weekend, you decide you're going to go buy a car. You go to the car dealership. You see the car you want on the lot.
You go to the car salesperson and you say, "I want to buy that car." They look at you and say, "Thank you, and I'll get you the price in about 30 days." For a salesperson, time kills deals, if you have that kind of time lag, that means that opportunity's on the playing field for somebody else to come in and try to outsell you during those 30 days. Absolutely a process we had to change. Now, I'll be honest, part of the process was a system process, right? We had to change some things from a system standpoint. The other part of the problem is in order to get a quote through the system, there were 10 levels of signature approval on the quote. Even if it was in pricing parameters, there were 10 levels of approval that were in that quote.
Very quickly you know where this is going, right? We changed from the IT structure to make sure the quote goes through the system quicker, and because we had, as John had shown you in the service organization, we condensed the sales organization as well. First off, there were actually not 10 people that could sign it because you didn't need 10 levels anymore. The reality of the situation is we started empowering our sales reps that they in the field have a pricing authority within a range that we've set and they can produce quotes quicker. The same thing, if it needs to elevate, their regional manager has a pricing authority as well. We put the authority back in the field so that our folks, quite frankly, can move quicker at any point in time to make sure we close more business.
We had the sales organization because of the problems in our own process problems, but in handholding the base business, they were spending 50% or greater of their sales time just trying to resolve issues, just trying to show the support to keep folks with us. 50% of the time, they weren't selling. You add onto that the administrative part. What we need to do is clear, we fixed the process, we fixed the empowerment, we fixed the issues in terms of cost, we fixed the delivery issues, we fixed the quality issues. What we need to do is put a sales process in place that changed the mindset and the culture of the organization. For us, this is where DBS really helped. If you talk to any salesperson, they naturally think that to be in sales, there's just an art to it.
There's not a lot of science, right? You've just got some sort of skill and you can do that. Well, the reality is what we were able to put together with the DBS tools is a little bit of science behind that art. First thing we decided to do is start with something which you've probably heard about called policy deployment. We decided very quickly on what the two most important KPIs we were going to look at for the sales organization. All good policy deployment, we put some stretch goals there, it was the retention of our business and it was the winning of new competitive accounts. The math in terms of installed base growth for us is very simple. You got to lose less, win more new business, and then you drive installed base growth.
It's harder to do, it's a very simple math equation. We started with understanding what the goals were that we were going after, putting together a level of accountability so everybody knew exactly what was expected of them and what targets they were going to hit. We had to change the mindset of the organization, who had done the right thing for the last couple of years in terms of only focusing on keeping the base business, and remind them what it's like to go out and aggressively win new business. The fact is, at a point in time in North America, we had fixed those issues. We had troponin back on the market.
We needed to go out and sell all the process improvements we've made, why Beckman Coulter is once again the company they want to do business with, and make sure we go fiercely after taking share from our competitors and get back what I would say is rightfully ours. We've developed standard work. You've heard it in terms of other parts of our business, in terms of manufacturing. We have standard work for our sales manager, standard work for our sales director. We built something that was rather revolutionary for many businesses in the diagnostic industry. We built what we call a growth room. We stole shamelessly from other Danaher businesses and what they did, set it up as one room. It's in this building one week a month. All the sales managers and the sales directors come in. Each area has one day.
They come into that room, we go through the metrics that are there. We take a look at their funnel development, the velocity of the funnel, how the opportunities are moving through it. We take a look at the business plans for retaining the base business that's coming up in the next 90, 180 days. They present on the competitive opportunities that they've got in their funnel that are going to close, and they have an opportunity to sit there in that room with people who can help make a decision for Beckman Coulter on what their asks may be to get that business closed. We started a different process that, quite frankly, has resulted in the lift we've seen. All of the things I just talked to you about are great actions, without results, it makes for a really nice story.
Let me show you the results, because that's probably more important. If you take a look at where we are right now in terms of customer retention through the end of 2014, first thing we'll focus on is competitive win dollars. The competitive win dollars have gone up 50% since 2011, that's by sheer muscle and focus of looking at the opportunities.
We've done a great job with our marketing organization in terms of coming up with campaigns that will develop new leads for us, we've gone back to the basics of telling a sales rep, "If you're driving down the street and you see that blue sign that's got a big H on it, and if you don't have business in the account, stop by and find out who does, and figure out what those opportunities are going to be." We've got to have that visibility so that we can win more. We didn't lose sight of retention. We drove our retention from a sheer points of percent up 20 points from 2011 to 2014. We never lost sight of that important base business for us, we clearly started to understand as a sales organization that we've got to take share in order to grow.
We built this first in North America and did very well in North America, and we've moved the process over the last couple of years. Those KPIs, the dashboards, the tracking of what's going on in an account by territory is online for every sales representative on their laptop. Every morning, they can open up their laptop and see exactly where they are. They can see ordering trends of their customers. They can see whether or not assay orders are up. They can see if they're down, and if they're down, they know they've got to go in and see if something's happening in that account. We've now put that war room, if you will, which still operates today, but we put all those KPIs down at a local level so our rep can work quicker and understand their business better.
We've also now exported this around the world. If you travel around, China's got a war room, Japan's got a war room, Europe's got a war room. Latin America's built out a war room, and they've got the same KPIs and the same focus on growth that the others do. The analytics have been built for each of those areas as well. You'll see some of the results as we look at install base growth in terms of a total company roll-up. You start with 2011, when our sold base growth, if you could actually use the word growth if it's a negative number. It was negative. We started to turn it around in 2012 by at least coming to a flat, and then you'll see the trajectory that we've made in 2013 and 2014.
Improved execution from a sales organization, improved quality and service from other departments have helped us grow this. I'll suggest we're still in the early innings at Beckman Coulter of driving this kind of improvement. Here's the most interesting thing about what we learned with DBS. If it can work in a sales organization and it works in a manufacturing environment, it can probably work in our customers' labs. At the end of the day, a lab is really no more than a manufacturing floor. What they're manufacturing is results, and it's the blood that's going through it in the test tubes, but it is a manufacturing process. In early 2011, we took one of our customers, the top 100 customer in the United States, large integrated healthcare network that was continuing to grow and acquire more, and they had some Beckman Coulter products.
We went in there and started to change the conversation about what our relationship was. It has to be more than just about the box. We spent some time with them. We went through, again, part of the DBS toolkit and talked about value stream mapping, really understanding where the pain points were in that lab in terms of their business. What did they want to improve so it'd make that lab stronger and they could then, in turn, provide better service to their customers, the physicians? In 2012, we had set up a process to look at what their pain points were, what those actual transactions were that they wanted to improve. We had made the recommendations and helped them with the implementation of the change of process, and the first one that they want to see an improvement in is the turnaround time.
By the time a doctor orders a test to the time the result goes back, 60% improvement. The other thing they want to see an improvement is just the throughput, how quickly they can get all of their work through the system. 50% improvement. Lastly, had to do that at the same time as they wanted us to help them and reduce the errors. We were able to reduce the errors 20%. Just think about that. We're all at some point in time patients, right? We all go to the doctor, they take blood, and then they send it off someplace to get tested. If there's a problem with that test, if there's an error, you got to go back in, take some time off from work, go get the blood drawn again, and start all over again. Not a great customer satisfaction situation.
The reduction of errors, in addition to the speed of result was very important for them. All that's great process for them. We continued to work on that in 2013, it was important for us to work on that because an RFP was coming up in this account. They were putting out to bid chemistry, IA, hematology. Some of that was our base business, some of that was somebody else's base business. We wanted to make sure they saw the value of Beckman Coulter and wanted us to be a partner in more than just the product line we had. In 2013, they announced to us they were canceling the RFP. They realized the value that they had with Beckman Coulter was something that was more than just an individual product line.
We were able to retain the business we had, we were able to add new platforms that we didn't have, and we now have a contract with them that instead of 5 years went on for 7 years. In the last couple of years, they've acquired 3 more hospitals. Their volume has grown, their results are still as good as the improvements we've shown here, and our volume has grown because of that. We've now taken that model and obviously done it in more than just one account, and we have a team of folks that go into the customers now, helping with this workflow, helping with the process. We've expanded this now outside of the U.S. as well.
It's interesting when you start looking at DBS and how it can work in a commercial organization, both in the organization and then with the customer base. Truly, this is something that differentiates us in a market from our competitors. The last part of those pillars is new product development. It's great. We've got our reps executing better, now they need to go in and they need to have some new products to keep our customers coming back to us and to keep helping our customers in terms of what they're trying to do in their hospitals. That additional ability to have funding has allowed us to drive R&D capabilities. Arnd spoke about a lot of that. Product development spend itself, just the product development spend, went up $70 million.
Later today, as we bring you through some of the individual sites in the building, you're going to meet with a team who's going to talk to you about speed design review. Our ability to actually go through the process of development of a product and get it to market faster. If we're able to do that, we can improve the cadence of new products coming to market, quite frankly, in many cases, we can leapfrog our competitors in coming to market. We've continued to invest in that, not just platforms, but in novel assays as well. Some assays had to catch up to make sure that we're equal with our competitors. Some assays, our focus will be on delivering what they don't have, which again helps to differentiate us. In terms of time to market, we've reduced the time to market by 25%.
A huge advance from where Beckman Coulter had been. The most important part of that, or the most recent part of that, I should say, is a product that you heard a little bit about early on. It's right across the hallway here, and you'll see it as we bring you around to different sites. It's our entry into the molecular diagnostics field. Let me tell you a little bit about molecular diagnostics, it is complicated, I'm not a complicated guy, so I'm going to be real simple on how we describe this. Number one, it's a $6 billion market opportunity that we're entering into. It's a $6 billion market that is the fastest-growing IVD market right now.
It's a market that has potential to grow because as with the science of genomics, they continue to identify new markers, which will continue to help manufacturers like us develop more menu. The specificity of a product like this in helping doctors identify disease early and make sure that the treatment that they're doing for the disease is actually having impact is critical. A little bit about our product. It's called VERIS. It's truly a breakthrough in terms of workflow. Traditionally, molecular testing in a hospital lab is not in the core lab. It's over in either some corner or some specialized room in the hospital lab. Part of that is because there's always concerns about contamination, there's always concerns about quality.
There hasn't been a unit that you can actually put into a lab that is automated, that is a simple process like what you will see with VERIS. I'm going to jump to the next slide here just to show you the normal process. The top view is a normal molecular testing process. It goes from taking the sample from the patient and about eight different steps that will take up to eight hours to produce a result. One other additional factor in that, in molecular testing, in most cases, they have to do what's called batch testing. Which means if you come in for a test, I can't run it on you today because I need to run multiple patients at the same time. Many labs, because of the volumes they get, will run that once a week.
If you happen to be the patient whose blood gets sent in the day after they ran it's going to be a week before your test gets run. It's a week at least before you're going to get an answer to what's going on with your health. If you look at VERIS, you could run it on one patient, one sample at a time, you could run 100. Now you can actually get the result very quickly. Lastly, what I like to say, now that we've launched in Europe, it is a very simple process. If you look at the steps, there's four, it is very simple and you don't need highly trained individuals. You load the tubes in a rack, you put the rack on the machine, you hit the run button, then you read the result about 90 minutes later.
It is as simple as that. That is novel in the molecular marketplace. Let me just summarize real quickly. I hope I gave you a little bit of the journey that we've had and the focus that we've had. One last comment I'd like to say from my vantage point, we are in the early innings, I am confident that the rest of the innings are going to be far more significant than the ones we've even accomplished. Thank you very much.
Thank you, John.
Thank you.
As you could see from the presentation of John, many vectors we're working on from a growth perspective. As he said, early innings, I'm looking forward, we are all looking forward over the next quarters to show more on our trajectory here on the one hand, on new products, as well as the impact to the revenue side, as well as the profitability. Having seen all of the improvements we're making, none of that is relevant, none of those great process opportunities, those product opportunities, if you're not having the right team on the right seats of the bus. I'm asking Allison Blackwell to come up and share with you how we were building the organization, how we were improving the processes on that side, and what the results of that is with regard to our talent bench.
Allison is eight years with Beckman. She was here prior to the acquisition, during the acquisition, and now after the acquisition. She's in a great position to give some deeper insights here.
Thank you. Well, it's my pleasure to be here during the 80th anniversary of Beckman Coulter. I was here at the 75th, five years ago in 2010. Let me just say, it wouldn't have been as fun to talk to you about Beckman Coulter then. We have made a lot of improvements here in terms of team and organization. We'll talk about those right now. Arndt had mentioned that first important step was to get the right mix of leadership talent. Another important step, though, was the introduction of DBS leadership tools and processes to help us understand our talent and close our talent and organizational gaps. We also had access all of a sudden to this huge pool of talent across Danaher to help us with the business.
It provided great opportunities for our high potentials at Beckman Coulter to export them. Again, a win-win for everyone. To understand where we've come, you got to go backwards in time a little bit and talk about where we were. Prior to 2010, Beckman Coulter was publicly held. We had pretty good system for talent management. We had not only the process, but also the system. We had CEO leadership on it and board of director involvement. We knew our talent, we knew our succession. 2010 came. Quality issues. The leadership team was really forced to focus on the crisis at hand, and we did that. It meant putting a lot of the processes that were non-critical on hold, including talent management, including leadership development. At that point, Beckman Coulter really stopped nurturing its talent base.
2011, as part of the acquisition, we split the company into two parts. We reorganized both companies completely, and we took out more than 1,000 people. By the end of 2011, our turnover was unreasonably high, and our internal fill was unreasonably low. It was at that point that Beckman Coulter really did not have the right talent base any longer. Where do you start? We mentioned that we started with getting the right leadership team, and that involved looking internally to say, who are we going to retain, and who are we going to promote, maybe stretch to that L1 level? We did that. We also got some great leadership talent from across Danaher. A president, operations, finance, service, and marketing, John Dion and Arnd being two examples of those.
We also had made some really key critical hires, including in sales and medical affairs, John Nosenzo being our sales leader. That put the right mix of talent to lead the company forward and really made a difference. In post-acquisition, the team was much, much stronger. We then leveraged those DBS leadership tools and processes I mentioned, most importantly, a thing called organization and talent assessment. That allows you to really look deep and tie it to your strategic plan and understand the health of your talent, your succession, and your organization overall. It helps you identify the gaps and put actions in place to follow up and close those gaps. The best part about the process is the rigor and that accountability. If you're going to put actions out there, you're going to follow through and complete them.
That kind of accountability allowed us to rebuild our bench and close the organizational gaps. It allowed us to shift resources to the growth initiatives, both organic and inorganic, and in whole made us a lot stronger. The other process I'd like to mention is the external hiring process. We had to bring in a lot of talent to make Beckman Coulter stronger overall. In our senior leader hiring, we went through a really rigorous selection process just to make sure those people we hired were going to be successful at Danaher. When we got them on board, they go through an 8-12-week immersion process. What does that entail? It entails going through executive champion orientation. It involves benchmarking visits to other operating companies, getting to build a network of contacts across Danaher, and specific DBS training.
What our leaders told us is, it gave them a fast start. They felt like they got into the job, and they were prepared, and they could apply DBS quickly. In fact, this has really become a differentiator for us in the talent marketplace. Leaders tell us how much they appreciate the investment Danaher makes in their onboarding. Going back to organization and how we had to close some of those gaps, we had to realize what capabilities and capacity we needed, and that was to drive that growth engine. What we did is start to shift resources that direction. In fact, there are some really good examples. In high growth markets, we increased our feet on the street by more than 30%. In R&D, we increased our new headcount by over 350.
We started to build commercial organization to support the launch of Veris in Europe, we had to do that from scratch. We did that all through dynamic resource allocation. Organizational look also allowed us to figure out ways to collaborate across Danaher. For example, life sciences and diagnostic platforms are now looking at talent together, they're figuring out how to move the talent across the operating companies. We're leveraging the Danaher leadership programs to really accelerate the growth of our talent. We've also found ways to create centers of excellence that serve all of the life science and diagnostic opcos. For example, China R&D, government and medical affairs, software and IT in India, legal, and even talent acquisition. Again, this is helping to make us stronger and support the growth, not only at Beckman Coulter, but across the chain. Where are we today?
A better, stronger Beckman team. Associate engagement is trending upward. Our customers are noticing that positively. We've really built the bench. We've increased it by more than 300% from 2011 to today. It's got great diversity representation, whether that's diversity of experiences or backgrounds, gender, ethnicity, or nationality. We really have been able to change that internal fill equation. Back in 2011, we were filling two out of 10 jobs internally. Now we're filling more like six out of 10. Finally, we are exporting talent. That's really a proud thing to be able to say, because I remember having conversation with Tom Joyce, where he really supported us being takers of talent and said that Danaher would help Beckman Coulter by supplying some talent.
Even then, I knew the real goal was to get healthy enough so that Beckman Coulter could begin to export talent and help other operating companies. Indeed, that's where it is. In sum, Beckman Coulter has been helped by Danaher throughout. It has a healthy foundation for talent and organization now, much different than it was back in 2010. It's infused talent to get the right leadership mix. It has leveraged the DBS leadership tools and processes to close org and talent gaps. It's allowed that opportunity both to bring in talent but also to export talent and help the high potentials with their career and development. That makes everybody better.
I think to myself, we talk a lot about the core values, the core value of best team wins, but I really think Beckman Coulter is a good story of where we live it. Thank you very much.
Thank you, Allison. I think you all can see the strong talent bench makes a significant difference. While we were a net importer, we are now a net export out of Beckman, which gets us in a terrific position in Beckman as well as at Danaher to continue what we like to do on the inorganic side. Let me turn the page here and share a couple of thoughts on what we have done so far inorganically on the Beckman side before we move on to M&A. If you look at Beckman Coulter as a platform within our different areas of business within Danaher, I look at it as a similar opportunity as what we have created in Hach, in Fluke, have started to create on the Leica Biosystems side. We are operating in an attractive market with a strong market position, with a good brand.
We have a broad geographic coverage. We have learned many DBS capabilities and tools which we can bring to the forefront in any bolt-on we may make. We have done three acquisitions in the last three years. You can see the names here. I am going to dive deeper into the Iris and the Siemens MicroScan business in a second. The addition from a growth perspective through those three acquisitions was about 10% in inorganic growth to the Beckman Coulter business. Helping on the growth side here. Let me quickly touch on Nomand. I am not going to get into more detail here. Nomand was our software middleware provider, which was working with us as well as with other companies. The opportunity presented itself that we were able to acquire them.
We wanted them to focus on all of our products and accelerate the product development in that strategic area of middleware software and moving capabilities upstream and helping our customers to work through the efficiency issues as well as their ever-increasing need of having data available. We are able to close that acquisition 2013, making good progress on accelerating that product roadmap, have more to sell. The financials are looking good and in line with our expectations. If you ask the question, where can we go from here? From a Beckman Coulter Diagnostics perspective, I think there are four generic vectors in which we think when we go through our funnels on the market work side, as well as with regard to targets. First and foremost, we are operating in what we call the core lab. That is where we are at home.
There are other parts in the hospital in which our experiences, our capabilities can play a role. The first vector for us is really landing in another lab, which is doing diagnostics, but is not a core lab. If you look at the Siemens MicroScan acquisition, that was landing in another lab. Now, a nice universe by itself in which we can bring our capabilities and broaden our business, taking a deeper look on the microbiology lab. The second one is, if you look at the core lab, there are areas where we can increase our product offering to the customers in certain techniques, menu, products we do not have today. We will get to the Iris discussion. That was one of those examples.
A third vector is, if you think in terms of a blood test, the collection at the patient down to the report out, a little bit in line with the story Tom was telling about the Leica Biosystems, where we are now going from the sample collection down to the digital pathology, really thinking about how can we improve that overall workflow? How can we make the result better and take care about the sample integrity and ultimately the quality of the outcome? Then the fourth vector in that ever-increasing efficiency pressure in the hospitals and more and more data which they need to work on, really thinking about the IT side, the workflow solutions, and the automation. Really, a multitude of different vectors, still very at a generic level here, but good work.
I look at our market work and our funnel work and many opportunities around us, which we are interested in. A couple of highlights here on the first acquisition we did with Iris, an example of expanding our offering for the core hospital lab. Iris was the leader in what is called the automated urinalysis testing. That is an attractive market, growing at mid-single to high single-digit growth rate, particularly because more and more customers are moving from manual or semi-manual testing to automated testing, and that is where Iris had a great product and a strong reputation. As you can see, nice consumable mix here. One important point to note, the urinalysis instrument stands in more than 90% of the global markets, next to the hematology analyzer in the same part of the laboratory.
Lots of leverage from a go-to-market perspective in markets where we are direct, or where we are direct, bringing the hematology and the urinalysis sales teams together to being in a position to cover more customers with a broader portfolio. In the high-growth markets where we are indirect, really, Iris is a smaller company, not with the reach which we would have in more than 100 countries. Lots of runway here from a growth perspective. Some interesting elements on technology synergies. If you think about a hematology instrument, a urinalysis instrument, there are technologies which you can use in both, and where for the going forward new product generations, we have those teams work closely together and really leverage core technologies. Looking at the results after two years, we are very proud on what we have achieved so far with Iris. Mid-double-digit growth in 2014.
You can see an enormous operating profit lift or leverage from the scale we brought to the party, the synergies we were able to unlock, the DBS we brought forward. Again, similar to the Beckman playbook, that allowed us to do incremental investments into the feet on the street and on the R&D side. Ultimately, if you measure in terms of ROIC, already in year two, north of 10%. Great bolt-on acquisition on the back of the Beckman acquisition in 2011. In February this year, we closed the acquisition of the MicroScan assets from Siemens Diagnostics. Down the first vector of entering into a new laboratory.
The MicroScan is a fully automated system, which allows you to do, in case of a microbial infection, the identification as well as what we call the susceptibility measurement, meaning seeing if a certain treatment can help for the specific bug or bacteria. Mid-single-digit growth rate to high single-digit growth rate. Again, the automation from manual to more automated, but at the same time, an increasing incidence rate of microbial infections. The MicroScan, a good position in the marketplace, a very reliable product with a high customer retention rate, but a little underinvested from an innovations perspective over the years. At the same time, a strong market position in U.S. and Japan. We like that. Really a low market share in Europe and in other countries.
We like that from a different angle because that's an area where we now can help with investments into feet on the street. Really using a similar playbook again, lots of runway from a DBS perspective to unlock the capacity to invest and drive that organic growth rate here. One last important point to mention around the microbiology and an opportunity to land in a new lab. To some degree, we're getting a new sales channel and the right to play in an installed base. In microbiology today, there's more and more molecular testing happening in that lab. There's more mass spec coming to that lab.
Looking at the total portfolio, not just of Beckman, but also of Danaher, you could imagine then that we have a plan to moving into the molecular side in the microbiology, into leveraging that channel for the VERIS to start off with, at the same time, having the colleagues from SCIEX certainly things one can think of and work on with regard to a mass spec presence at some point of time from us in that market. Don't want to go deep. You've seen that chart before. As a summary here at the end of the session, great improvements on the organic side here, being able to move the growth up from flat to mid-single digit, now growing at market.
Lots more opportunity, as you've seen from the different section, continue to leverage the investment we're making and the opportunities we have to improve the commercial execution. Good margin expansion, part of that reinvested into growth. With the three bolt-on acquisitions, certainly a good runway with those three, but also muscle building in the organization to move forward with any opportunity, which would be a good strategic fit here. More to come on the core revenue growth and the continued margin improvement. In summarizing the journey here at Beckman over four years, I think the most important message for me, and hopefully for you, is that ultimately, DBS, the toolbox as well as the culture, is great in driving sustainable improvements and getting to strong results on the margin side as well as on the growth side.
There's many people in Beckman who would say today that Danaher and DBS came at the right point of time, when it was needed the most, and when they didn't find the way out of a path they were on. Started the organic growth engine, more opportunity to continue to invest into those, and at the same time, starting to build that compounding effect through the M&A side and the ability to do those and integrate those well. With that, we want to move to Q&A. I'll ask my three presenting colleagues to come up and help me out here, and we'll ask for questions.
Maybe over here. It's Tycho Peterson from J.P. Morgan. Just a couple of questions on Veris. I'm wondering if you can talk about timing in the U.S., menu expansion plans. Then, one of the things we saw previously with Beckman was the transition from sales type to operating type lease. Do you see that as potentially happening in molecular as well?
Can you repeat the second part of the question, please?
Timing of U.S. launch for Veris, menu expansion-
Yeah
Ultimately, do you expect that to go to more of a reagent rental model like you've seen in chemistry and immunoassay?
First, we had a high focus on getting the product to the place where it is and launching it in Europe. There's obviously a longer pathway from a regulatory approval perspective in the U.S., and that is something which is out, I'd say by it's hard to tell given the regulatory side, but certainly not in the next year in my eyes. From a menu expansion perspective, the next on the radar is sexually transmitted diseases. There'll be, I need somebody help me out. I'm blanking. Did you say sexually transmitted diseases? Sexually transmitted diseases. We'll get back. Let us get back. We'll have the specialist in front of the instrument. From an OTL perspective or from a rental model perspective, the high end of that market is very much a rental market today. Yeah.
That translates a little bit into the revenue, which will take a time until we are able to build that up. The majority of the placements, we expect to be in the rental.
Just a follow-up on the core Beckman business. Can you talk about who you think you picked up the most share from in chemistry and immunoassay? Can you comment on hematology? You didn't really highlight that today, but there was always a dynamic with Sysmex there. Just wondering on-
John, do you want to take a try?
Sure. Without getting us into the specifics, it's the top four is where we're capturing. In chemistry and IA, it's one of the top two players in the marketplace, although we're winning against all of them, right? That's where we're playing. From a Sysmex standpoint, Sysmex is a good company that's been around a long time. They've got a good product. We've competed with them for a while. We are still holding our ground in that. Depends on the region of the world. Sysmex is probably more aggressive in the North American region than it is outside the United States. We continue to battle against them, and we continue to win against them as well. Now, perfectly transparent, they will win some accounts, we will win some accounts.
We're not any more concerned about Sysmex today than we would've been about a year and a half ago.
Yes, sir.
Hi, Steve Gray with RBC. This afternoon, I wasn't surprised to hear all the ways that the DBS playbook has been, and toolbox has been a big factor here. I was surprised, and maybe you've just undersold it, on how the lessons from Radiometer might have been used here as an example, because Radiometer's been such a success story, and it's in such close markets and diagnostics, selling into hospitals with sample prep, with the new product development. I really didn't hear much about how Radiometer may have been a factor here. Are there cross-selling opportunities, and should we be hearing more about that?
I think from the learning from each other, very early on after the acquisition of Beckman, we brought teams together, and we shared best practices, and Beckman learned from those. I think if you look from a commercial execution and the rigor and some of the things John has shared, there are hallmark stories out of Radiometer. If you look at customer retention, their diligence, their focus on the installed base first, and then after the competitive and really focusing on that's certainly things we were able to pick up from there, learn from there, and infuse into the organization. From a more synergy perspective We're, I would say, selective in the areas where we see true leverage.
We have a couple of work streams between Leica Biosystems, Radiometer, and Beckman Diagnostics, where we, as the presidents, come together, and their teams really select where's the opportunity. I'll give you a couple of examples. On the commercial execution, particularly with customers who are moving the decision-making to the next level above the individual lab, and really have it more of a C-suite decision, we do bring our teams together. We leverage good market access and good credibility of a Radiometer or a Leica, but Beckman may be in a weaker position at that point of time. We really come up with strategic game plans for that overall opportunity. That's one area in high-growth markets, some of that in developed markets, more of that. You heard us talk about the development center for software in India. That's the collaboration we've done together.
There's things Radiometer can learn from us, and that comes to places where Beckman has more muscle with regard to PMAs on the regulatory side, some of the higher-risk menu items, while Radiometer is building their menu portfolio on the AQT. It's a little bit of a give and take, but we're really focused on where can we help on the technology and the product development, where can we learn from each other on things like the regulatory environment, the commercial side, certainly, up and running in many of the countries.
Hello. Hi, Isaac Ro from Goldman Sachs. Just want to ask one product-specific question on DxN VERIS. If I compare where you're standing in the molecular market versus some of the other franchises you have in life sciences, AB SCIEX had a great market share and brand position when you bought it. Beckman in the immunoassay, chemistry, and heme. If we look at molecular, you guys are kind of the new guy on the block. Talk a little bit about your strategy, who you're really trying to go and compete against, on the competitor front, who you really think you have to win a little bit of share from to achieve your goals.
On the highest level, I think the market, in our eyes, breaks into somewhat 2 segments. The one is more the high throughput, large volume type of instrumentation, and then there's smaller volume places in the hospital, broader menu, but smaller in terms of number of tests run. The DxN VERIS clearly goes after the hospital market, where you have high volumes with a specific menu and a specific panel people are looking for. I think if you look at the market, you'll see what players are in there. That's where we are deriving from the go-to-market. That's where we're leveraging our access to the core lab, which we have on the immunoassay and the chemistry and the hematology, so we have some channel access and credibility in those laboratories.
That's where the automation and the ease of use plays in, as well as the capability to ultimately hook the DxN VERIS up to our automation lines. I think from the competitive environment, the high throughput players, but with that transformational change of the ease of use, the faster turnaround time, and ultimately, the ability to hook it up to the automation line.
Great. Just to follow up on the timing, you mentioned the menu expansion in Europe. As I recall, you had previously said at one point that it would be a U.S. launch, I think at the end of 2016 maybe, and please correct me if I'm wrong, but as part of that, is there sort of a menu expansion that you need to bring to the U.S. so that when you come to the U.S. market, you have the full offering you want to be successful?
Oh, yeah. Digging up what I was blanking on. The next one on the menu is the hospital, the infections-
MRSA.
Yeah, MRSA and others, which you pick up in the hospital. From a timing perspective, as I said, I think the regulatory pathway is one which is not that easy to predict. I don't expect it in the next year to be ready in selling the product, but I think soon after.
If I could just jump in, just on the kind of the segmentation that he asked in molecular. The other thing, obviously, the high throughput, but we're also having conversations with hospitals, again, about what their pain point is. Where their workload is going up, staffing is not what it needs to be. VERIS gives us an opportunity and gives them an opportunity to start doing that molecular testing with less headcount associated with it. Not only are we going after where their high volume are, but we're also kind of trying to segment hospitals by some of the issues that they're dealing with that we feel are a perfect match to meet those needs.
Mr. Nosenzo , I think you're in a pretty unique position because, obviously, you have a lot of experience prior to Beckman and Danaher in terms of turning around customer-based organizations. Could you talk a little bit about, and I can open the question to others as well, just being an outsider, seeing Danaher and DBS and kind of what it allowed you to do, were there epiphanies? Was it applied common sense? How do you think about it as a little bit of an outsider?
Sure. I'll give you a good, honest perspective. I was one of those sales folks that thought there was more art than science in sales. When I first came here and I started to learn it as part of my immersion, I had some questions about it, be perfectly honest. I took the leap of faith and we started to implement it. The impact that we had from the implementation and the speed of the change that we saw has made me a believer in this. To your point, I was in the Bayer organization. When Bayer was acquired by Siemens, I was at Siemens. I have perspectives from two different organizations.
Just the thoughtful process behind the DBS tools and the way you can get a group of sales organizations to start thinking differently and acting differently is, to me, in addition to all the kind of the operational things we had to fix. For the sales organization, that to me was the one most pivotal thing. The development of the growth room that we have, the growth war room, as we call it, that started to turn around in terms of our being able to retain more and win more. When we started to replicate that in the other geos, we've seen that pickup as well. That was probably the one most critical thing and the largest difference that I had not experienced before.
All right, thanks. One question I have, almost every investor day I attend, not necessarily at Danaher, uses the word early innings about 15 times during the day. I want to get a better sense, because you've already taken gross margins from low 40s to 49%. You've taken core revenue growth from flat to what looked like strong mid-single digits. What does that mean in your mind when you use those words, both financially and some of the operational items that you're talking about? Molecular diagnostics are a lot of those exciting opportunities that are out there, but maybe give us a better perspective for where you're coming from when you use those words.
I think if I look at the start off from a process perspective, we've obviously started to improve the biggest opportunities and we're probably not yet at a point where you would say we're running them at perfection, and you can go to the commercial execution side. I would think there's still incremental process improvements we can do, and we can run them better. In that simple model, I would say we can clearly increase our commercial execution and our retention rates, as well as our competitive win rates further from here and pick up some on the growth side. I think from a new product perspective, you haven't seen a lot yet from us. As I told at the beginning, when we took over Beckman, there was very little investment, and we're really backed up. You've seen the first new products coming out.
Some of them are catch-up, honestly speaking, like the vitamin D or the connectivity in hematology. The VERIS is one of the first significant moves. AMH was another one on the menu side. I think a lot more runway on the product side out of us having built that engine now, but it takes a while to get the product out.
Cliff Ransom. In your experience at Beckman, when you began to apply DBS thinking to the issues that you attacked, were you ever over any intermediate timeframe net cost behind? Were the benefits of either cost savings or redeployable assets, how do you think about that? Was there ever a time lag where that was significant? Did Lean ever cost you money?
Yes, moments where kind of getting started is an investment by itself. You need to kind of get the resources behind it. Sometimes you need to make an incremental investment somewhere. But I think the returns and where we moved the needle right now and many of the ones you've seen, it's very fast returns. If you are layering your roadmap of improvements you go do, you can get into something like a flywheel, where the first ones start to fund the next ones, and you pick the low-hanging fruits, which have the lowest investment. I think we're still in a frame in which the ones we started attack have a very good return profile.
I won't try to nail you down on this, I'm going to ask you to think about one level down. When you talk about those lags, are you speaking in terms of months, quarters, or years?
I think it really depends on where you're addressing an issue, right? If I would go as an example, one of the ones I like the most because it drives the cost side as well as the customer satisfaction, if you go to a reliability side and take our experiences we have there, you're talking in paybacks which are months, not years. You're talking in the ability to make changes on the existing products. In some cases, you roll them out to the field and really get your money back fast. Then you have the cumulative effect of the better quality and the better customer satisfaction. That would be one where you're very fast. I think the same in the manufacturing environment. If you look at the R&D, given the time lag of all of the roadmap until you get a product out during the years.
Last question. Would it be safe to say that outside of R&D, that feet on the street would be one of your longer paybacks in terms of training them?
It's a little hard to gauge for me because we're doing it over years, we're seeing the growth rate, right? I would agree, it's kind of in the middle relative to the operations and the reliability.
Thank you.
Maybe just to go back to the question before. If you bought this business and it was a 10% operating margin business, and today it's a 15% operating margin business, where should this business be and where is it sustainable going forward?
I think the way-
The way I would answer both those questions, we're growing mid-single digits today. We will target to do more, if we can sustain mid-single digit growth, the next 5 years of margin expansion could get us close to 20%. We could compound operating profit here before acquisitions at a double-digit rate. With the bolt-ons, and you see some of the returns we're getting on those bolt-ons, we could get a low mid-teens growth in operating profit over the next 5 years out of this business with select bolt-ons.
If you bought this business, what do you think it'd be getting to 20%?
Yeah. Like Hach or Fluke might be a 10-year journey. You can see that. With this sort of gross margin, this amount of.
Gross margin.
We see more upside there with this amount of aftermarket. That's going to be out there a little bit. Does that help?
Thanks.
One follow-up, one minute.
Just a follow-up. You touched on SCIEX for microbiology. Can you maybe just talk more broadly about how you're leveraging the mass spectrometry technology within your business today?
If you look at the mass spectrometry and look at what SCIEX has currently as an offering to the diagnostic, it doesn't go to the microbiology. We're collaborating with SCIEX with regard to the go-to market, where they have product offering for Europe, particularly right now from a regulatory perspective, and really give them an entry into the customers. At the early penetration of the market, we think the model is right to have the SCIEX colleagues using us as a lead generator because there's a lot of technology and application capabilities you need to bring forward, which we don't have in our organization, while the diagnostics market is smaller.
I think we'll get to a point where we have to take a decision if ultimately the go-to market channel for the mass spectrometry in the diagnostics market is the SCIEXs or the Beckman, and we're not at that point from a decision-making perspective, but we are in discussions with Ryan and the team on the SCIEX side on when is that point. Right now it's really lead generation and us opening the door, but we'll cross that path probably in a year in the markets where we have the product available. Thank you.
Okay. That's going to conclude our formal presentation and Q&A. For those of you on the webcast, thanks for joining. We're going to cut that off now.