Ladies and gentlemen, we are about to begin. Please take your seats.
Good morning. I'm Lisa Curran, Vice President, Investor Relations here at Fortive. Thanks so much for joining us here in Pittsburgh, and thanks to those of you on the webcast as well. Just first on safety, in the unlikely event of an emergency, please exit the rear doors of the atrium and gather in the far parking lot. Exit signs are marked throughout the building.
Turning to forward looking statements. During today's presentation, forward looking statements may be made and actual results may differ materially from these statements. Refer to this slide for more information. Now to the fun part. I think we've got a great lineup today.
Scott Davis, behave. We'll start with Jim Lico coming up to give opening comments, and he'll take questions. And then Jim will hand it over to Wes Pringle. Wes is the Senior Vice President of Fortive and heads the Field Solutions platform. Wes and his operating leaders will each give presentations on their respective businesses.
And then following the platform presentations, we'll have a panel Q and A. We'll then break for about an hour lunch and trade show on the 3rd floor. Following lunch, Barbara Hewlett has the lucky spot after lunch to pick things back up, and she'll present and give an update on the exciting progress we've made with our growth tools, the SBS growth tools, and she'll also take Q and A. Jim will return to the stage and give closing remarks and outlook and take any final questions. We'll then wrap up the day with some tours, highlighting the early days of the SBS journey here at ISC.
With that, I'll turn it over to Jim Lico.
Thanks, Lisa. Good morning, everyone. Welcome to Pittsburgh. We couldn't be more thrilled to have you here to give you an opportunity to not only showcase the Industrial Scientific, but also give you a really deep look into our platform as Lisa just mentioned with Wes and his team. I think what you'll take away from that is not only the wonderful platform that Wes and the team have built, but also the quality of the management team that we have here in the business.
We're exceptionally excited to share this with you and let's get started. To start with who we are today and is really to start with our shared purpose. Around the world, 27,000 people, no matter what business or no matter what market they're in, think about our shared purpose. It's what binds us together as a company. Essential technology for the people who accelerate progress is really about making sure that we have we're in businesses that really provide wonderful technology for customers who are doing incredible things.
And that's what we get up every day. And what you'll see today in our conversation around the business and also certainly in the deeper dive into the platform is how all of our businesses really are part of that shared purpose every day. But how we live our shared purpose every day is in our core values and our extraordinary teams, people around the world really working together out the outstanding talent that we have in the organization really coming together to build their careers and deliver outstanding results. We believe that to build unique competitive advantage in the markets we're in, we need to help our innovation needs to help our customers be successful. And so our second value really is live by making sure that our invention, not only in products but in services and what we do every day is helping customers be successful.
That's how we build unique capability. That's how we deepen ourselves in the workflow and you're going to see that in all of the business presentations this morning. Kaizen is our way of life is really what binds us together with that belief and culture that every day can be better than the day before. You're going to see great examples of the Fortive Business System today in terms of tools and the examples in the operating company presentations as well as when you take the tour, you're going to see a tremendous number of ways we utilize FBS to drive growth, to be more productive and just as importantly is to build this culture of continuous improvement which is so in part, so important to how we build businesses over a long period of time. And when we do that, we understand that ultimately we build an enduring enterprise.
We know all of you have opportunities every day to put your money and invest in different companies. We want to be great stewards of that capital. We want to build trust. And one of the ways we do that is we talk about our due say ratio in Fortive. That means is we're going to talk to you on a frequent basis about what we're going to do over a long period of time and we want you to rate us on how much we get done relative to that and that's our ratio.
And we know that you put that trust in us every day. We want you to know we appreciate that. We're building the company for the long term and we're great to have you along for that ride. It seems a little strange that 2 years ago we were starting to talk about Fortive as we were about to go public in July of 2016. And while we're never one despite the football early, we feel very good about where we are today.
We built the business model differently around recurring revenue. We've deployed capital certainly with last week's news. We're now on almost at $4,500,000,000 worth of capital deployed really to strengthen our business models, build on the great market positions we have and to really continue to think about those strong business characteristics that are in our portfolio today, whether it's the Fortive Business System being the cornerstone of how we build competitive advantage or it's how we think about the leading brands and market positions we have in the business and the strengthening of that over time and using our free cash flow and our capital to really continue to build these businesses over a long period of time with a strong focus on growth and technology. The portfolio itself and the pie charts has not changed much in terms of our segments. We will talk a little bit about that in a second and we continue to evolve the business, which today is a little bit more North America focused, but it's continuing to evolve more as a global company and we'll talk about that as one of our growth initiatives.
In our we have 4 growth initiatives that we'll go into in a minute and really all of those growth initiatives are really focused on building a sustainable strong enterprise over a long period of time. And we think 2 years into it, we really like our progress. And yet as we always talk internally, we couldn't be more excited about the future. So while the past certainly is good to get off to a good start, as Chuck always likes to say, you can't win the first one if you you can't win them all if you don't win the first one. We love our progress but ultimately it's about building the company for the future.
And I think it starts with our portfolio, diversified portfolio amongst a number of verticals giving us the opportunity to really build businesses new in different directions. With last week's news as an example, we'll build our medical portfolio now as a vertical roughly double the size of that percentage that it is today. So we are really working on continuing to build on these great market positions and the diversity of our verticals gives us opportunities to do a number of things. And we think a number of degrees of freedom around the strong secular trends that are driving our business. Are going to see some great examples today of those secular trends in the platform presentations that will follow me.
So we are really excited about being able to demonstrate how a number of these trends are not just PowerPoint slides, but they're real. They're happening in real ways in Fortive, whether it's the connected devices and SaaS based business models and going more towards data analytics and things like helping customers think about condition monitoring, whether it's productivity, safety and security trends that are wonderful and certainly in a regulatory environment. Last week's news certainly also is another example of going after businesses that have those trends. And then lastly, certainly the additional complexity that's going into the automotive world and in the transportation world is certainly driving our transportation technologies book today is still 2 segments, roughly the same size with Industrial Technologies being a little bit bigger, but from a revenue perspective. But as you can see here on the slide, strong financial position both on the gross margin and operating margin and I think what our results have said to date and certainly will continue to be is really the ability to continue to improve those margin structure over time not only through the power of the Fortive Business System but as you will see today in a number of ways through business model transformation in a number of our businesses.
You're going to get a deep dive into Field Solutions today and the businesses that are here and the business leaders that are here. And I think the takeaway from that you'll see is how we build that platform over a number of years and certainly more dramatically over the last 12 months is really a wonderful example of how we'll continue to build the remaining parts of the portfolio here over time. So we're looking forward to sharing that with you. A little bit about the growth initiatives and what I just talked about, we outlined about a year ago about 4 of these that we would be taking advantage of and that's really where I'll give you a little bit of an update of where we stand today. I think the deep dive today on our digital strategy is going to be extraordinary.
I think the takeaway you will get from all of our businesses here in Field Solutions is that really 5, 6 years ago, we really started thinking about our digital strategy with connected devices. At the end of the day, Fortive is a sensor instrument and equipment company, but increasingly more working with customers, partnering and workflows to add software to that and ultimately advanced analytics. You will see a number of those things today in INET and predictive solutions in our Acilyx platform at Fluke. You are going to see that throughout the portfolio of how we're adding all of these strategies to our business and ultimately products. You're not going to see vaporware here.
You're going to see real products gaining real revenue with real market share over the last several years. And the innovation that we have in the portfolio not just here in the platform but also in at Gilbarco with things like Insight 360 and increasingly at Madco and our diagnostics platform with our SaaS based model MaxMe and most recently with the acquisition of Initial State, a small data analytics platform that the Tektronix team is building on to their software portfolio. So number of places throughout the business and certainly you'll see a lot of that today, not only in the presentations, but also as you walk around the trade show at lunchtime, I encourage you to talk with our folks here. We've got a great team here to highlight a number of those innovations with you. And I think you'll see here why our revenue a lot of times we talk about the R and D spend that we have at Fortive, 6% of our sales, a pretty healthy number.
I think what you're going to see in the trade show is certainly how we're demonstrating that level of innovation in the business every day. I couldn't have afforded presentation without an EMV update. So, I'll give you a little bit of where that's at. It was a little over a year ago where we sat with you all and talked about the fact that we were tremendously excited about the opportunity that this would be over the next couple of years, but certainly felt strongly that we would have a little bit of an air pocket and certainly that played out in the Q1 and back in the Q4 of 2017. We are now starting to see that business transact a little bit more.
We are about 35% through that upgrade and maybe just to remind everybody that we probably will never see 100% by 2020 more likely to be 85%. But we feel like we're in a great position and we're starting to see EMV transactions accelerate, probably more of that will happen in the end of the year as we start to see more point of sale to payment transactions occur. We are seeing more and more oil companies with to provide programs and incentives to support those programs. Last year in 2017 as an example, about 25% of our sales in North America were driven by these sorts of incentives. So these incentives matter.
They're not going to impact the entire market. They certainly provide incentives to retailers to accelerate or do their upgrade cycle. And we are seeing more and more of those. We are really excited about some of the partnerships we have with ExxonMobil. Certainly, you see Chevron, Circle K, Valero, a number of those like Exxon and Valero and also Marathon are exclusive to Gilbarco.
The team there has done a wonderful job of really positioning us well with those retailers. So we think this is the deadline is in 2020. We will have a smoother revenue transition than we would have if that had been in 2017 and we feel like we are doing exceptional. The team is really doing a really strong good job and really making sure that we take advantage of that upgrade cycle. And ultimately, what we are really excited about is the technology that will sit at the retailer at that point in time will really help us do a number of things from a recurring revenue perspective because now we'll have a technology platform on the at the site that is second to none and allows for us to do a number of new advanced offerings, SaaS based model with our Insight 360 model and be able to do some of the advanced services not only like environmental protection that we do today, but also advanced things like logistics and fuel management.
So a number of opportunities to build our software as a service model with Insight 360 as this platform technology gets integrated into the sites over the next several years. High Growth Markets has been a great growth story for us over the last few years. We're exceptionally excited about the work we do every day in those countries. Certainly, we've seen our mix change, particularly as a number of our strategies have really taken place there. Barb Hewlett is going to give you an update on FBS.
That's one of her responsibilities later in the day, but Barb also runs our high growth markets as well and is a leader who spends a lot of time on the road really helping facilitate our businesses in our independent operating model, but make sure that we're doing those kinds of strategies or the growth strategies to take advantage of the growth drivers that exist in those platforms. You may remember last year when we bought ORPAK for Gilbarco Veeder Root that that was really a high growth market acquisition that it gave us the retail automation technology and platform in which to build on those high growth markets. Yesterday we announced that we had just bought a company called Midco, so small acquisition for Gilbarco as well, a large one of the larger players in India, which gives us extends our platform and our service capability in that country, Strong return deals, small, certainly in that small bolt on category, but gives us the opportunity now again to really build on a great business that we have at Gilbarco Veeder Root in India. The growth drivers are a number of them. You are going to hear Linda Rae at Qualitrol talk a little bit about a lot of the work that her team is doing to take advantage of some of the grid infrastructure changes that are going on as power generation changes and how the opportunities really that really drives opportunities for Qualitrol.
Certainly, at Tektronix, we are continuing to see the semi cycle in China and other parts be helpful to growth and we are also seeing industrial build out throughout China, which is driving a number of our businesses. Fuel Automation continues to be a big driver. It's not just the Orpak acquisition, but our capability that we've had at Gilbarco really has extended us dramatically in high growth markets. And then finally, certainly what you are going to hear in all of our businesses today in Field Solutions is how these how the changes for and the need for safety and productivity in high growth markets is really accelerating and really driving a lot of our business here in Field Solutions but also throughout the Fortive portfolio. We are primed for growth.
We are building out our hosting of sister companies. We are flag planning in new geographies and building Fortive capability in which to accelerate businesses. We are building we have substantial R and D capability now in a number of high growth markets in which to build product where our R and D centers are building products for those countries, India, China, Israel, Latin America is examples of where we are building our capability to really be local in those markets and build out our capability. These markets are going to grow for a long period of time. They are most of the as we all know, most of the almost all the population growth in the world over the 50 years will be in these countries.
And so building out capability, building the businesses, so they are not only growth drivers for us, but also for the leaders who follow us in the next 10, 20, 30 years is an important part of our investment strategy. And we're really happy about the progress we've made. Finally, just really about how we've built the portfolio, as I mentioned, certainly a number of acquisitions, high recurring revenue focus in all the acquisitions we built. You see on the chart, the ones we've completed thus far, about $1,800,000,000 of capital deployed, about $430,000,000 worth of revenue with high mid to high single digit capabilities. So moving the growth rate afford of over time and with great returns.
And you are certainly going to hear about a couple of those Landauer and ISC today. We are incredibly proud of having those teams and those businesses in the Fortive family. I think you'll get a great you'll see Justin and Chris talk to you today about how they're really driving those businesses and how they're really building out building great businesses within the platform. So, great progress thus far. Obviously, the news yesterday or last week certainly accelerates the capital deployed as well.
And then on the other side, creating finding new and unique ways to create value with an example like the Ultra transaction. We are incredibly excited about the partnership we have with the Ultra team. They are excited about getting our Automation and Specialty business and the businesses there. We are moving through that process, that integration process well. I think one of the things that we've really demonstrated again is our ability to sort of do complex integrations and to be able to use the resources and knowledge that we have in the company of how to do that and do that with the Altra team and we are down we are doing some great work here.
We are excited about getting this completed and we know we're going to have a great combined business here when we're done. So wouldn't I guess we'll talk a little bit about the J and J transaction from last week. Certainly something we're incredibly excited about. Pat Byrne, who works for me, he's one of our Senior Vice Presidents, runs our product realization platform. Pat was the lead executive and sponsor of this deal.
Often when we have a business that's new to us, we'll ask one of our SVPs to lead that effort. And Pat was nice enough to have a second shift job doing this over the last several months. Did a great job with the team and really identifying this is a great business. This is a business I'll talk about in a minute that we've known about for a while and I'll talk about that process. But we think the great 30 year history is wonderful.
The large global installed base really gives us that and that strength of brands really it looks like a Ford of business in those regards. It's got good profitability today, but we see a path to even better profitability over time. We see a tremendous opportunity for the Fortive business system to add value. We were there last week in front of the North American team and on video with the team worldwide and clearly the team is excited about the process of becoming a part of Fortive AC. I think the ability to make a difference in our company and we are getting to work here make this happen.
I think in addition to all the great attributes of the business, this is a great financial return. We will be at our ROIC hurdle in 4 years, which is great for a platform like operating company, a large scale capital transaction of this sort and it really comes down to the fact that we are very confident we can build we can do add a lot of value to this business in a short period of time. A little bit about ASP and I'll do this quick, but we really great business, great markets in terminal sterilization with a number of great brands. Most of the business, roughly 75% of the business is in TS, high level sterilization with things like endoscopy reprocessing is really in cleaning those instruments as part of the HLD product family. So great growth drivers.
The growth drivers here are really around non invasive surgery, robotic surgery, high growth markets and this need for hospitals to reduce the amount of hospital induced infection that occurs in or infections that occur in the hospital. Good consumable and service capability, 80% recurring revenue. So great opportunity to continue to transform the portfolio. I've gotten this question Chuck and I have gotten this question at least as well about what does this look like from an innovation perspective. This just gives you a little bit of 30 year history.
I think one of the things we are really excited about and Pat spent a lot of time really trying to understand this is with the FDA warning letter that they got in 2010 and ultimately closed out in 2016, There was a gap for a few years of innovation in the marketplace and really was a reason one of the main reasons why they didn't grow the last few years. But in 2017, they launched a lot of that innovation and I think the work we've done in diligence to understand the product roadmap really makes us excited about what we can do with the portfolio going forward. Real quick on the portfolio growth, tremendous opportunity here to really take advantage of a number of things that we talked about on this slide over the years. But certainly things like software enable workflows, we see that in the ASP business, obviously taking advantage of healthcare and aging population that occurs that really drives a lot of healthcare markets. Really their commitment to care and our ability to really work in these complex customer workflows and add value both organically and inorganically is really part of our value creation.
We talk about market. Our M and A playbook just to recite is market, company, valuation and we really see this checking all the boxes. We did the market work. We like the market. We certainly as we looked at the company, we certainly saw the opportunities for increasing share, building a leading player, strong brands and channels is something we can work with and high margins and high margin potential.
So and obviously, our ability to create value through FBS certainly is it really checks all the boxes of how we think about a great M and A transaction. You've seen the slide and I think we've made good progress here. 2017, 2018 are great years for really showing demonstrating our organic growth capability, getting great margin expansion on that, ultimately driving strong free cash flow, redeploying that free cash flow, utilizing FBS to ultimately accelerate what we call our strategic flywheel, a really accelerating strategy over time. So, what you're going to hear today? You're going to get a great view, Wes and the team and the platform and what they're doing.
I think you're going to see that they're building tremendous competitive advantage through via their digital strategy and this is not this is real work not aspirational work. Clear examples of how M and A accelerates our strategy and enhance positions. And then finally, you'll get great examples not only in the operating company presentations, but certainly in Barbara's presentation where you're really going to see how FBS is changing as our portfolio changes to make sure that we have the tools and culture and capability to really improve the businesses that Fortive is taking on over time. And so one of the great things we've always said about our business system is that as our portfolio is enhanced as our portfolio changes, we have this wonderful capability of making sure our business system changes with that and you're going to see that in Barbara's presentation. So with that, I'll just say thanks again for coming and we'll look forward to a few questions and we'll pass around the microphones here to make sure we get them.
Julian, you got a mic coming. All right. Go ahead. I'll repeat the question, so go ahead.
Just around the short cycle industrial businesses, sensors, Matco, some of the automation units, how those are still growing right now? I think at EPG, you called out tough comps in one of those. So maybe just any color on that. And then secondly, I guess, more longer term, if you look at the automotive industry in total and you take the franchise piece, your auto exposure and retail fueling, in total, that's about 40% of the company's business mix across all three. How are you confident in the long run-in that industry you can keep adding value?
Historically, it's been very difficult for industrial companies to sustain very high margins and returns in anything around that.
Yes. Well, I think we've 1st on the short cycle side of this, we did our regular cadence of reviews with our businesses yesterday. We go through every business around the world on a monthly basis. We did that yesterday. Continue to see, I think, consistent with the confirmation we put out in the press release this morning, we feel good about where things are at right now consistent with everything we've been talking about.
The short cycle things like point of sale at Fluke, some of the point of sale information that we get that's pretty accurate in North America in particular continues to look consistent with what we talked about. So you're right, we get into a little bit tougher comps in the second half, but we think with the innovation we've got in a number of things, we think we can continue to do pretty well. So, right now, I think things are pretty well. We're certainly watching a lot of the things around the world, Certainly the currency changes that have occurred and things like that. We're certainly I think not trying to put our head in the sand to think that that might not have some impact at some point in time.
But thus far, it's I think steady as she goes. Relative to automotive, 40% is probably a little high. But I think when we think about where we have exposure, we've done a lot of work in thinking about what is the transformation that's going to go into this marketplace, whether it's retail fueling or whether it's vehicle complexity. One thing that's been true and certainly is true at Gilbarco as an example is despite less gas stations and despite less gas stations and even less fuel being used, we have consistently grown that business mid single digit over a 10 year period. So what we've seen is the need for continued technology, continued innovation and we have stepped up to the plate and that's come with even better margins.
We are remarkably better margins as an example at Cabarco Vida Root and Mac over the last 10 years. And I would argue there's been a lot of change going on in those industries since then, including the recessions. So a lot of continued ability to really think about how I think that's why our R and D spend is where it is. It gives us better gross margins and better capability to innovate. You're going to see a great example and I've said this before, but just is that we still think that the complexity of what's going to happen, whether it's electric vehicles or autonomous vehicles, is going to provide new and unique opportunities.
You're going to see an example in Wes' presentation about how Fluke is thinking about EVs and what they can do is just one example of that. We're certainly not trying to put our head in the sand. But we certainly think there'll be some issues over a long period of time, 20 years kind of timeframe. And we want to make sure that we are ahead of the game on what positive changes and opportunities are in front of us. And certainly, I think we have demonstrated over a long period of time that to the extent that we end up being damaged in a market and there's nothing we can do about it, then ultimately we'll look for another solution.
So but we feel good right now that we can find some solutions to that. Steve, I think you got
a point.
Yes. Hey, Jim.
Just back to the $5,000,000,000 that you still have to spend. Given the activities that you've been outlining here, the huge amount of capital deployment already, what's your view of management bandwidth and ability? What is gating that? Is it deal availability, bandwidth? Are there parts of the business where you feel like you can accommodate that growth?
Do you want to slow it down at all? How should we think about that? Well, we always think about management bandwidth. In fact, when
we end this conference, the leadership team is going to spend the next day and a half on our annual cycle of going looking around our corporation to really understand the new leaders and assignments and things that go with that. And our funnel has never been bigger. So we feel really good about where we're at relative to new leaders and new opportunities. We announced on day 1, a new integration leader for the ASP transaction. As an example somebody who is ready for an assignment and put him Dominic Kovankovich who helped build the Fluke Health Solutions portfolio.
So we have got people ready and willing to go and I think what you are going to see today in the field solutions in our operating leaders, number of them are new into their roles and it's just another example of us bringing people up through the organization to prepare the organization for being more bigger and that's our scalable model and we feel really good about where we are at. Relative to the next things, we have a good funnel and a number of opportunities and we feel very good that we have got the kind of management bandwidth to handle it. The integration at ASP is complex as we were talking a little bit before the session and I think one of the good things about that is our team that's working on Ultra can sort of transition to that at around the same time. So in addition to the fact of management capability to run these businesses, you also want to make sure you have the capability to pull off these integrations and we feel really good about the talent that we have to be able to do that. And another maybe one last point you'll see in Chris' presentation, I think a great example of how we're using OBEA rooms on integrations and that's a big version of that is what we'll do for things like ASP.
Teeth? Yes. Thanks, Jim.
A couple of questions on ASP is first is, when will you be in a position to say whether this will be in a new reported segment? And what are the considerations there? And then the second topic, and this has been a question I've gotten a lot in the past week in terms of the apparent or at least from our perspective overlap where Danaher could have conceivably been looking at this business. It's an attractive model for both Fortive and Danaher in terms of the consumables. And Danaher is in the medical space to arguably the same neighborhood.
But just share with us what are the sensitivities, you share the same Chairman. Arguably, you share some of the same business model. What are the sensitivities and the procedures of making sure you don't bump into each other, accusing the Chairman may have to accuse himself and so forth? Thank you.
Yes. So I think maybe the second part of the question, we certainly feel that we're we've learned over time in our history of our careers where we've been Chuck and I and others about the importance of recurring revenue as we build a higher growth less cyclical business. We also understand that those business models build sustainable cash flow in ways that really help fund growth and fund initiatives. So that probably is a common learning. I think beyond that though when you look at the markets we're in and that kind of thing, they really are different markets.
I certainly wouldn't say that we would never ever do anything, but I think we feel very good about some of the places that we look at and don't know what any company will ever decide. At this point, it's no different than any other public company. We never really know where people are going to go. So ultimately, the Board and us as a management team is going to have to chart the course for businesses that are really important and can create value for our shareholders and our portfolio. Now, we're I don't think they'd go into a Fluke business because like business and Field Solutions because the power of Fluke and an 800 pound gorilla, Fluke is 800 pound gorilla in a market like that, just as we probably wouldn't look into some of their segments because they're the 800 pound gorilla.
So that's not anything to do with who where we came from, but more of just how we think about markets. And healthcare is a huge opportunity. We've already had a healthcare business. You will learn a little bit about it from Chris' presentation, Fluke Health Solutions. And we think there's opportunities there with businesses that still kind of look like what we do.
And the workflow that we see in the sterilization lab is an example as I went did my first gambit visit as part of due diligence I said this feels like this feels like a Ford of business. This feels like the things that we could do to add value and some industrial processes and things like that that really I think are very not too far away too far from home from what we do. And so that's how I sort of think about the whole both of your questions. Cliff, we can share mic.
Thank you, Jim. This is a 35,000 foot question. What am I missing in your corporate profile that has SG and A so high? I mean, it seems to me it's, particularly when you're driving for recurring revenue, why is it at the number that it is? Am I missing something or is this some place where Fortive Business System can really work on it?
You mean in Fortive overall?
Yes, sir. Fortive overall.
Well, I think 1st and foremost, what comes generally with higher gross margins tends to be things like sales forces that maybe are direct with maybe more R and D. And I think as you see the portfolio more when you think about all of what I would call the operating expenses, you tend to see things that are consistent with high gross margin. So as our gross margin portfolio, I think certainly in your numbers are 6%. Certainly, when we think about digital marketing and some of those things, there's a lot of efficiencies that come with that. But at the same time, as you start businesses that look a little bit more direct, have more enabled workflow, you tend to see a little bit more on the sales and marketing side as well.
But that doesn't mean that FBS doesn't apply to it. And I think your productivity part of it, and certainly you'll hear in Barb's question a lot about how we think about innovation and how some of the improvements we're making in innovation. We are and you're going to see in a couple of presentations this afternoon with the ISC team, you'll see how even in the early days of the ISC team, they're applying FBS in the ways that are important to them. And those ways are in places like the sales funnel and things like that. So I would never say that there's ever a percentage that ever can't we can't attack and add more productivity.
A lot of the FBS work we do today is oriented that way.
When you look at peer companies, benchmark companies, what kind of SG and A numbers do they have?
I never look at SG and A. I think first about G and A and how we think about that because I think when we think about growth investments, we want to make sure that we're doing the things that accelerate growth. And so I think about G and A and I think our G and A percentage is pretty good compared to most people. Thank you.
Yes. Where's Josh?
Good morning. Another question on ASP. And obviously, we talked about in the conference call last week the slowdown in sales the last couple of years. But maybe you can explain a little bit more specifically. So we have a warning letter in 210.
We solved it in 2012, but then there is this gap and then the sales slowed down. So I was just wondering if does this mean going forward that there is a cost that you're going to have to incur on new product development to get that going again? Or has that investment been made and maybe now we reap the benefits of that? Or maybe kind of the first question, did J and J essentially deemphasize this business and it's in need of capital?
Yes. It's a great question. I think Pat and I will maybe tag team this a little bit. First, I think we felt very comfortable with their innovation cycle and what's occurred. We did a lot of due diligence.
They obviously closed the warning letter out in 2016. So we feel very good about that being closed out. There is a timetable on the innovation cycle. Pat, maybe take a second and just give a
few words on that. Yes. The innovation cycle has been very strong over the last several years that they introduced 6 new products in 2017 and a new terminal sterilization platform called 100NX All Clear, it's a market leading product, biological indicator, market leading product. So, and they have a great pipeline going forward. So, really with the remediation in 2016, they were able to restart their R and D engine a couple of years 2015 or so as they started to close that stuff out and you see the products coming out in '17
and beyond. Yes. Hold on. Yes.
2nd part of the question is we
don't see a significant ramp. They've been spending money in R and D to accelerate. You've seen 6 of those products be launched and we think the road map. So it doesn't mean we won't add to R and D. I think very often in acquisitions, we will look at and see as we do the strategy, the 100 day plan, we'll ask for ways how do we accelerate innovation.
You'll see Justin can probably talk a little bit about what we're doing at ISC to try to do that. We've certainly done that at Landauer as well. So we always look for opportunities to accelerate innovation. And certainly Barb's presentation will give you a sense of how we think about that. So, I think we're at time here.
So, we're going to we'll have some time for questions at the end. So, certainly want to take that opportunity. We do want to try to stay on schedule. Wes Pringle is the President of Fluke, but also does also leads our platform here. He's done a tremendous job in creating a vision for the platform and we're really excited about the words and things that he'll outline for us today.
So without further ado, I'll hand it to Wes.
Wes? Thanks very much, Jim. Okay. Well, as Jim mentioned, I'm very excited to spend a bit of time talking about the work we're doing on the platform and also what we're doing with the individual companies within the platform. The way I'm going to approach this today is I'm going to spend just a few minutes framing up the platform overall, then I'm going to spend the bulk of my time talking about Fluke and then we're going have other leaders within Field Solutions talk about their respective businesses.
First, this is a picture of Field Solutions as a whole. You can see here 2017, about $1,600,000,000 worth of revenue. To put that in perspective, we expect this year to come in just a little bit shy of $2,000,000,000 that's organic growth as well as the full year impact of Industrial Scientific and Landauer contributing to our performance there. We participate in a $9,000,000,000 market. For those of you that were involved in this last year, you recall it's about $2,000,000,000 higher than last year.
That's the addition of the gas detection market as well as radiation dosimetry. That are almost $1,000,000,000 each which takes up to about $9,000,000,000 as well as just the natural growth in those markets. And the outlook of the market growth is similar in the sense of about 3% to 5% growth overall. The platform today consists of Fluke, Qualitrol, Industrial Scientific. You're going to hear from each of those businesses today.
And I think what you'll hear about specifically is how each business has a strong strategy and is in a very good position to take advantage of macro trends that we see, which are impacting each of these businesses. Specifically down the right hand side, efficiency, uptime assurance, IoT, each business has got a digital strategy that's designed to really make sure they're able to take full advantage of this and we believe they represent significant opportunities in each case. Safety and environmental regulations globally, in particular, Industrial Scientific and Fluke are very well positioned to turn that into a tailwind on the business. Data infrastructure investments and this isn't just about the DCs themselves, but all the infrastructure that has to be built in the grid and around data infrastructures are tailwinds for both Qualitrol and Fluke. And each of the businesses have got very good opportunities in terms of high growth market expansion and frankly a strong track record in terms of delivering high growth market growth.
This speaks a little bit more about the digital strategy in the case of each business. If you look at the images going from left to right, each of the companies within Field Solutions has got a core measurement business, which obviously we appreciate and we invest in and we look to grow every single year. But in addition to that, in the case of Fluke and Colitrol, we are pushing further up the chain into connected maintenance. In the case of Industrial Scientific, they're well along the way in terms of transforming the business into a true safety as a service platform. And in each case, we're looking to have a strong position in the core workflow software that these customers that use these products are all about.
And that really helps to create more sticky solutions and also more integrated solutions that our customers fully appreciate. So with that, let me pivot to Fluke specifically. I know many of you are very familiar with Fluke, but let me just set the table a little bit. Fluke is the world leader in a number of different markets. Certainly, they're the world leader in industrial tools that are used by maintenance teams across a wide variety of different industries and commercial industries, heavy industry, different job types, all geographies around the world.
The fact is, it's very difficult to walk into an industrial facility almost anywhere around the world and not find a Fluke tool somewhere in that building. We're also the world leader in several calibration disciplines, most notably in electrical calibration, where the world really looks to fluke to set electrical standards and electrical measurement standards. We're the world leader in medical certification. So when machines and devices land in hospitals, they typically have to be certified that they're working correctly. More often than not, the world turns to a fluke piece of equipment in order to certify that equipment.
We're the world leader in IT system infrastructure testing. So when a new building is being built or when a building is being retrofitted and there's an IT system put into that building, all that equipment, all that all those cabling and so on have to be certified and tested and the world turns to Fluke first in order to do all of that. That's just an example of some of the markets that we're leaders in. And as a result of that broad presence, you can see the footprint we have both in terms of the industries we participate in as well as geographically is very broad, which really does speak to that strength across a wide variety of different markets. One of the points I wanted to really emphasize on this slide is, we've done a lot of work over the last number of years, and frankly, we put this work to work in understanding when is Fluke successful, both organically and inorganically.
And it really comes down to a few things. When we enter a high stakes workflow, that means it's either dangerous or the measurements matter, people are willing to pay the premium that Fluke typically represents. When we're able to bring the brand attributes that Fluke has to life, safety, reliability, durability and so on. And finally, when we're able to bring our scale advantage to bear. Fluke has a very unique scale advantage versus its traditional competitors, whereas many competitors operate in 1 or 2 product categories.
We're entirely unique in the sheer range of product categories we operate in. That gives us a unique access to distribution, a unique capability in terms of engineering might, so to speak. So when we're able to enter a high stakes workflow, bring our brand attributes to bear and we're able to put our scale advantage, particularly as it relates to distribution and engineering might to work, we typically are able to establish a strong position in the market. And that's one of the frames we use in order to build out the business. I think you'll see that as I go through these slides.
So we have 3 main strategies we're pursuing with Fluke. The first is to establish an advantage connected system. We're going to talk quite a bit about that as the presentation goes on. We're looking to pursue adjacencies, hardware adjacencies, leveraging the best technologies that are available and seek to be first to market, bringing those technologies to our customers and high growth market expansion. So on the first, an advantage connected system, Fluke Exelix is our main effort in this regard.
Let me just first explain what it is. You can see at the top is the core workflow software. Emaint is the principal offering in this space. Emaint is a leading SaaS CMMS provider. And so just to break that down, CMMS stands for computerized maintenance management software.
This is the software that maintenance teams use to deploy the work and organize their work, order parts and all that kind of stuff. To the far left, you can see Fluke Connect. These are seemingly traditional tools that we would sell, but they're a little bit unique and that they're also wireless and they speak with various software systems, both in the facility as well as with the CMMS system I just described. What that means is that if someone is using our tools with the CMMS system, if they take a reading that's erroneous, it can automatically open a work ticket, organize whatever parts might be necessary to do the repair. When the person comes back after having done the repair and they get a correct reading, it can automatically close the work ticket.
It's a very unique closed system capability, which not only makes the whole system less error prone, but it also makes it more efficient for our customers. Moving to the right, you can see connected sensors. Connected sensors are retrofittable onto brownfield assets sensors that can be put in place, streaming data off of those assets. And it connects data into the same system I just described, again opening work orders if there's a problem as well as revealing insights about the machine, trending data and so on. And then finally to the far right, as enabled by the SHAD acquisition is really our connection strategy where all of this is designed to work as seamlessly as possible with ERP systems, data systems and so on.
This is not meant to be the data island. That's the system. So how are we doing with the system? This is basically the scorecard giving you a rundown of the individual pieces. E Maint is doing fantastically well, certainly is meeting or exceeding all of our expectations.
We're finding that the Fluke brand and the Fluke credibility brought to Emainte is really helping us to accelerate growth of that business. You can see here, we're well into double digit growth. We're starting to see traction internationally. A couple of things we'll look at is like for like or per seat price increases, termed ARPU. That is lifting according to our expectations.
We're very happy to see that. And churn, customer churn, which was already at very good levels, is gradually drifting down. So all the key metrics on this are moving in the right direction. We're extremely happy with what we see on eMaint. On sensors, we're a little bit behind where we thought we'd be at this time.
We are finding the selling cycle on sensors. It's taking a little bit longer as customers make sure that it's doing everything that they need them to do. And we've also found there's some functionality that our customers are looking for that we had to develop to really strengthen out the overall offering. That's been well underway and we're really liking what we're seeing. We're seeing a very rapid acceleration of sales.
It's really just getting going in its early days, but nevertheless, we like the acceleration that we see. And we have a number of products either have launched or will launch imminently, which really meet the needs of the customer trials that we've been experiencing. So we like very much what we're seeing on sensors. And then on Fluke Connect, just the connection of our traditional tools. We're now at a level where about 25% of our hardware revenue is connectable hardware, and we're seeing an acceleration of people that are actually putting that functionality to work.
So overall, we're really happy with how we are seeing this progress. This is a real business for us. It is driving real revenue for us. As Jim said, this isn't vaporware. Our priorities this year, we're looking to make sure that our key account pilots for the overall system are incredibly successful.
We have a number of pilots with Fortune 500, 1,000 customers ranging from healthcare, facilities management, manufacturing, in many cases, 1 to 4 sites, increasingly very happy with what they're seeing. We're looking to make sure that those are successful, they get deployed, which not only help us learn what a broader set of customers would be looking for, but also of course becomes use cases that we can market more broadly. We're looking to make sure that E Maint is a standalone product, is successful as broadly as possible. That includes international expansion. We're going to be activating distribution support of our sensor products with essentially a starter kit of sorts.
This is a little bit of a lesson that we learned from Industrial Scientific. In the early days of Inet, they learned that to really get this Inet going, which is their SaaS offering, as strongly as they possibly could. They had to get distribution involved in some way. We're putting that learning to work with the starter pack in essence that we'll be launching into distribution shortly. And we're getting some of the critical new modalities that we're learning all the time are useful in certain applications, we've got a nice pipeline against.
So overall, we're feeling very good with how things are progressing with Fluke XLX. That's only part of what we're doing. As I mentioned, we're looking to make sure that the latest technologies are expanding our hardware toolkit on a regular basis. We talked last year about a critical new technology we're preparing to launch, non contact voltage. We have launched this product and maybe just to reinforce to everyone non contact voltage basically means previously if someone wanted to take a voltage reading, there was no real way to do that except to use a reading that had tapped into the live electricity and had some portion of the electricity going through the device itself.
That involves a little bit more danger and often is more time consuming than otherwise would be the case. This product allows for close proximity sensing through insulation in a wide variety of different applications. It is safer, but even more to the point, it is much more time consuming or less time consuming, I should say. Some of our workflow studies show that many of these measurements can do and be done in about 1 5th the amount of time that they historically would take. This product is significantly exceeding our expectations.
It's very nicely patent protected. We're certainly looking to break this out or spread this out into a broader platform in the years ahead. So we're very excited about what this has done for us already and what it will continue to do. Another example of hardware innovation, which I wanted to showcase is our SF6 gas finding thermal imager. This is a general purpose thermal imager.
You may know SF6 critical industrial gas. It's used to insulate things like switchgear to make to stop arc flashes. If it leaks, it creates a number of dangers, not the least of which is it's not doing its job, which is to insulate against arc flashes and so on. This camera is completely unique in the price point that it's at where it can visualize those leaks and allow customers to see them before they become a bigger problem. Plus, it's also a general purpose thermal engine camera.
And as you can imagine, that camera is finding its market. So we're very happy with that level of performance. And then finally, in terms of our strategies, I just want to talk about high growth markets. High growth markets have been very important for Fluke over a large number of years and certainly will continue to be. In particular, we're certainly paying close attention and investing in China and India, both because of the size of those markets, population wise and otherwise, and also just the amount of infrastructure we expect to be invested in those markets in the years ahead.
I'll draw your attention to the right hand side. Jim referenced this a little bit earlier. We have a very strong set of capabilities in China. We've got engineering in China for China. We've got some manufacturing in China for China.
That allows us to develop some initiatives specifically targeting unique needs in the Chinese market and we're putting that to work relative to EV vehicles. EV in general, we think is a significant opportunity for Fluke. China is very far out of the gates on the EV market and they certainly have a stated intention of leading in EV. And so we're using that opportunity to really get deep into what are the emerging need cases around the EV market. This includes things like, for example, calibration of the various devices, electrical maintenance of all the different pieces of the infrastructure chain that need to be built out as well as all the safety consideration and power quality consideration.
So we're using some of the FBS innovation tools to really get deep around what some of these emerging spaces are with the idea that obviously once we understand and we tap into this market in China, we can put it to work more broadly across the world. Just another quick example of FBS in action. You've heard many times, and I know Barb will talk about this, our FBS tools are not static tools. We're constantly evolving them to make as strong as possible. Our problem solving methodologies have been a staple of what we do for a long time, but we actually put some more oomph into that tool as a result of some of our innovation learnings and our innovation work that we've done over the last few years.
We put this to work in the latest example I'll just describe here where our power quality tool line was growing a little less fast than the rest of Floop. We wanted we thought there was an opportunity to accelerate that rate of growth. We applied this innovation enhanced problem solving tool to this problem. We found new markets we could enter a tremendous amount of prototyping and AB testing around what exactly would be required to go after this market. And the bottom line is, as a result of that, the rate of growth on this business has substantially increased.
And in fact, we are making inroads in that particular market. That's just one small example, but it's a telling example about how FBS plays out for us in real life. And I think you're going to see more examples of that as we do the tour here at Industrial Scientific. So in summary, we have with Fluke not just a leading brand, but a truly iconic brand with an unmatched installed base, global engineering capability, global distribution reach and so on, which really puts us in an incredibly strong position to compete in the various markets we compete in and those that we aspire to. We're looking to expand our portfolio of offerings into more sticky and comprehensive solutions for our customers, both by entering market adjacencies, that means filling out the tool belt, so to speak, as well as entering workflow software in ways that are meaningful and useful to them.
We're looking to make sure that we remain consistently the first to bring relevant technologies to our customers. That's really putting our engineering scale to work. And then finally, hopefully you've seen in this how FBS certainly has been and will continue to be a source of advantage for us. So thank you and I'll be up again in Q and A.
Thanks, Wes. I think a couple of things that are just, I think, so consistent with what we're doing in Field Solutions with what we're trying to do around Fortive. You just but you just see it in spades here. Certainly, the level of innovation and we're now celebrating right around our 20th year with Fluke as part of Fortive. And what you see is just in our 20th year still continuing to out innovate the market with a number of those innovations, which a couple of them I think are going to be in our trade show.
So that's number 1. You really see how the digital strategy is coming together over the last several years. This is really a 5 year effort in which we started with Connected Tools to where we're at today. Wes has really led that effort and has really done a great job. And then finally, just FBS, 20 years but still making an enormous difference, not only in the cost side, but as an example, in the problem solving and innovation side to find some growth out of a product line that was looking for some new markets.
So great opportunities. 20 years is not the largest alumni network that we have in Field Solutions. Qualitrol has been a part of our company for I think over 30 years. Linda Ray, who started her career through the Keithley acquisition, spent some time at Tektronix as one of our leaders over there and is now running that business, had a great career with us and we're excited to have Linda here today to tell you about some of the great things she and her team are doing at Qualtril. Linda?
Good morning, everyone.
Excited to tell you a little bit about Qualitrol. So Qualitrol was founded in 1945 as a basic sensor engaged company for high voltage transformers in the utility industry. Over the last 10 years, however, we've been transforming ourselves to a full condition based monitoring solution company through a series of acquisitions building out the portfolio. And that condition based monitoring solution that we offer today is helping us transform the industry, the utility industry from a period based monitoring industry to a condition based monitoring industry. Now what that enables our utility customers to do is to reduce their maintenance costs, only truck only run trucks when they have to, better predict when maintenance is required and ultimately extend the lifetime of their assets and avoid unwanted outages.
We participate in about a $2,000,000,000 market. Our customer base is fairly evenly divided between the end utilities that use our equipment and the OEMs of the assets that we monitor. Again, primarily high voltage transformers and medium voltage transformers, but we're also expanding into other assets as well. We also monitor high voltage transmission lines. Geographically, we have a very large footprint in high growth markets.
And the reason for that is because high growth markets are where the utility grid is still being built out. New substations are being constructed on a regular basis in large parts of Asia and Africa and Latin America as really part of the urbanization of those regions. So in those regions, our growth comes as a result of outfitting those transformers that are going into those new substations with our monitoring systems. In the developed part of the world, our business is more focused on the fact that the infrastructure is pretty old. The assets in our infrastructure are aging and our utility customers in those parts of the world are looking for ways to extend the life of their assets and to be smarter and more educated about when to replace an asset versus when to continue to monitor and to maintain it.
So the competitors that we have in this space are pretty broad and pretty dispersed. But 2 of our sections of competitors are large OEMs that manufacture their own condition based monitoring solutions for the assets that they produce. We believe, however, we have a distinct advantage over our OEMs as competitors because of the fact that we're OEM agnostic. Most of our utility customers prefer, and in fact, some utility customers are required to use OEMs to use mixed OEMs in their asset fleet. So they have a mixed fleet.
So aligning their condition based monitoring solutions with just one OEM doesn't necessarily fit that mixed fleet model. Qualitrol being OEM agnostic really fits that model quite much better. In addition, with our other competitors, we have the largest portfolio of sensors, monitors and advanced monitors in the industry. What that allows us to do for our customers is provide them with a much richer picture of the overall health of their asset, give them better predictive information about when that asset might need maintenance. We have a number of ways in which we're working on growing Qualitrol in the long term, certainly starting with continuing to expand our portfolio in hardware, software and services, all of which help to complete that full condition based monitoring solution that we deliver to our customers.
But we're also constantly looking for adjacencies, new applications that we can serve with our existing portfolio or with innovation in our portfolio. And that's something I wanted to talk with you a little bit more about. So there's a major trend in the industry just in the early stages around how to integrate renewables into the grid. Now, first of all, we know that demand for electricity overall is going to continue to grow. Primarily in the high growth markets, it's around urbanization.
In the developed markets, there are a little bit more ups and downs in the growth of demand for electricity. But long term, we're not going to use less electricity. The trend that's happening in the industry is that we expect more and more of that electricity to be generated through renewables. And the 2 leading sources of those of that generation are solar and wind. And what's interesting about renewables is where they come into the grid.
So think about a solar panel on your home. That solar panel is generating electricity that's coming into the grid at the point of distribution. That's a different place from where normally you would expect to see power come into the grid. So you have current flowing in a direction in the grid that it's not necessarily built to accommodate. We believe and the industry is still understanding that there will be complexities as a result of integrating more renewables into the grid that we believe create unique opportunities for us for monitoring the quality of that incoming current flow, monitoring the overall harmonics and additional complexities that happen as a result of that incoming current flow, as well as different implications on the health of the assets that are already in the grid, but that are now seeing current flowing in a different direction.
So these are opportunities that we believe for us will continue to generate new applications for us as we go forward. Now Jim mentioned that Qualitrol has been part of Fortive for over 30 years. We were acquired in 1986. We are considered one of the poster children for FBS and continuous improvement over those 30 years. And it is absolutely an embedded part of our culture across all of our sites worldwide.
We have certified SBS Champions who are planted in all of our different facilities that enable us to run large numbers of growth Kaizens and productivity improvement Kaizens throughout all of our facilities on a regular basis, all self facilitated. We have daily focus on KPIs and visual management, not only in operations, but in all of our functional areas. You will see examples of that same type of FBS application on your tour today. But what I wanted to focus on for Qualitrol with regard to FDF is the work that we did to receive the Best Plant Award in 2016 for our headquarters site outside of Rochester, New York. Now again, we've been on a continuous journey of continuous improvement for a long time.
But in 2016, we were able to produce 50% reduction in recordable incidents. We're now at over 6,000,000 hours without lost time across all of our facilities worldwide. On inventory, we were able to take turns from 2015 that were in the teens, pretty high turns, and drive them up even further to turns over 20. We're going to continue that journey of turns improvement as we go forward. And on productivity, measured as the total labor dollars over sales dollars, we drive 5% to 6% productivity improvement every year.
In 2016, we took that even higher to a 9% productivity improvement. But again, we continue to focus on driving improvement every single year regardless of where we are. So in summary, Qualitrol has a strong established global brand with a strong installed base that enables us not only to take advantage of new installations in high growth markets, but also retrofit business in the established markets, leveraging new applications that come about as the grid continues to evolve and of course leveraging FBS as a part of everything that we do. Thank you.
Thanks, Linda. I think one of the things we're really excited about at Qualitrol is this transformation that Linda and her team are leading from essentially a sensor company and a transformer to this condition monitoring solution business. And with that comes more unique opportunities for growth. The second thing is and just an example for everyone as we get the question all the time, when does FBS end in a business? And hopefully, from Linda's example, you really see that it never ends.
It truly is a journey. That team is probably benchmarkable within Fortive for every year looking at their business and trying to figure out how they do the next set of things to it for improvement. And certainly 30 years into their journey, they're still making dramatic improvements not only in the on the what we would say the quality delivery and cost side and safety, but also on the innovation front. They're taking a lot of the margin improvement that they've created in that business and they've created that condition monitoring. So not only does FBS use to help us on margins and in productivity, but also generates accelerated growth through being able to transform the business over time, a wonderful example of that.
We'll we're certainly really proud of the work we did last year to bring Landauer into the family at Fluke. We created under Chris' leadership what we now call Fluke Health Systems. We're really excited to have Chris Gorion talk to you about the work she's doing with her and her team to really build out Fluke Health. We think it's a great opportunity for growth and is a great story. Chris?
Thank you, Jim. Good morning, everyone. So we, as Jim mentioned, acquired Landauer last year. Prior to that, I had been with Danaher and Fortive for the prior 5 years. I was running Fluke Biomedical and the RaySafe business 2 years ago.
And then the company asked me to take on the formation of Fluke Health Solutions and focus on the integration of Landauer with my team in the last 9 months. So I'm really privileged to introduce myself and talk to you a little bit about what we're doing with Blue Cal Solutions. So as I mentioned, Landau joins Blue Biomedical and RaySafe, creating a $250,000,000 global healthcare compliance leader in the market. We look at the market today in particular, I think this place, this business is one of the more exciting businesses to be in within Fortive. And I say that because we have 800 associates galvanized by our intention to increase and improve healthcare safety around the world by ensuring that all of our medical and all our radiation technology optimally performs every day for staff and patients, no matter what.
So we have about 2,000,000 staff workers in hospitals around the globe that wear our dosimetry badges and they count on us every day to ensure they're not receiving high doses of occupational radiation. There are about a 1000000000 people safely served in hospitals around the globe based on the use of our quality assurance products. So we're really proud of all that. If you look at the size of the business, we're showing revenue by segment and geography here. The biggest piece of the revenue, certainly through the introduction of Landauer, is our dosimetry business, which is the radiation monitoring badges you'll see today during the demonstration.
And the other piece of that business is informatics reporting. We do. So we report back on the radiation exposure, providing hospitals a lot of insight in that business. The other piece of that is it brings a significant amount of recurring revenue to the market, to the business for us. We're at 55% right now.
When we look at our global coverage, Landauer in particular has had its history in the United States. So about 80% of the revenue at Landauer is in North America. When you look at the biomedical and the RaySafe businesses in our portfolio, we did more than half of our revenue outside of the U. S. We believe that the combined synergy between the organizations gives us a really nice platform to grow the Landau revenue through our channel partners outside of North America.
So where do we sell? Our customer base, we sell to biomedical engineers for the biomedical business, primarily sell to physicists through the RaySafe business and now radiation safety officers and imaging directors for Landauer. What do we see as growth drivers in the industry? In the U. S, which is still our biggest market, we see a lot of hospital integration that creates site management issues, creates complexity, standard work issues for hospitals.
And we believe with our solutions, we can create a simpler approach for the hospitals and we can augment what their issues and needs are. So we think that's a nice growth opportunity for us. The other area where we see significant growth is the need for compliance products to serve the radiation and the diagnostic imaging market. So globally, here and especially in developing markets, we see a huge increase in radiation and diagnostic treatments. And we believe that due to that, these health regulations are growing.
Enforcement is becoming more critical. And our products and services around quality assurance can help improve that. So Fluke Health Solutions was really transformed by the acquisition of Landauer. When you look at the integration of these three companies coming together, we believe we have some of the strongest names in the industry for health compliance. Our history was initially with Fluke Biomedical.
We were a powerhouse in the basement of hospitals, about a $50,000,000 company selling to the biomedical engineers these medical QA devices that you see there. In 2013, we acquired a company in Beldal, Sweden, RaySafe. And that company doubled the size of the business. We went to about $100,000,000 operation. And we expanded our call points.
We started calling on radiation safety officers and we started calling into imaging and CAT labs, selling the imaging QA products. The other thing it did for us is it created a scenario where we were 10 times larger than our nearest competitor in this space. Fast forward to 9 months ago, the acquisition of Landauer and now we double in size again. We're $250,000,000 And we're calling on imaging directors, oncology directors. We're offering diagnostic services.
We're offering subscription services for dosimetry. So expanding those call points has given us access to decision makers in the hospital. So we're talking to decision makers that will cover 7 different departments and have budgetary oversight to those departments. So we see that the integration of these brands coming together is significant for us. So what's the future look like?
Operationally, as we look at our go to market, we believe that the synergy we create will give us a significant growth opportunity. We create one call point in the hospital where we can talk to many departments with our go to market and our channel. We have the opportunity to simplify their decision making with vendor management and technology management. We believe we have the opportunity to differentiate ourselves with our software, our hardware and our services offers. We think that we get a very broad view of what is occurring in the hospital in helping us understand their compliance needs so that we have the opportunity to integrate our solutions with hospital needs.
So as we look forward, what are our growth initiatives? So we have 4 key areas that we believe will give us a key competitive advantage in the market, specifically in the first area around digital strategy. We believe combining our differentiated hardware with common workflow software and data platforms in hospitals will give us access to device data that we can then provide hospitals operational insights. So as you look at the opportunity for them to reduce cost and create simplicity in the way they manage their multitude of sites, improving profitability will be significant. We're looking to continue our expansion into radiation centric markets.
We believe we have a lot of knowledge, a lot of background in this market and these markets. And we believe through acquisitions or partnering with existing partners, hardware vendors, that we'll have the opportunity to advance QA processes and create more seamless, easier patient and machine workflows. When you look at these first two areas, if hospitals have the ability through our data insights to understand effective trends and utilization of their CT machines and their devices that create a lot of revenue for the hospital, it is a significant advantage for us. Our go to market is key. So we have one of the largest sales forces in the globe now.
And as we look at accelerating sales growth, we believe we can expand what we do with our sales channels by enabling them, which we're already starting to do, sell all of our products and services. So we've started in a couple of areas around the world, started in Asia. We're doing this in the UK. And we brought some of our RaySafe product into the U. S.
To be sold by the Landair sales force. So the ability to sell adjacent portfolios is giving us an opportunity to expand go to market. We also have had a lot of nice history with the OEMs. We have the opportunity now to expand those partnerships and integrate our solutions. Finally, we love FBS, the Board of Business System.
So our opportunity here is deploying the full power of that. And we've used that significantly with the integration of Landauer. We're believers and adopters, my team is. It's tangible results. And I'll show you a story here with regard to what we've done with the integration of Landauer.
So when we formed the leadership team for Fluke Health Solutions, it was comprised of Landauer Executives and historic Fluke Biomedical Racing Executives and some new Fortive team members. And we were challenged with how do we return the company to growth and increase profitability. So we enabled that with the FBS or the Fortive Business System. So we brought the team together. Our focus here around revenue growth and we believe we could get revenue growth through pricing actions and through sales synergies.
We wanted to improve gross margin. We believe we could do that through client and contract management initiatives. And then we thought we could reduce operating expenses through cost outs and through efficiencies. So we brought the team in a couple of weeks after acquisition and we formed Kaizen and we elected to use the Abea room Jim mentioned to manage some of these initiatives. We came out of the week of work, which was just before Thanksgiving, we identified 8 different work streams.
And you see the work streams listed up at the top graphic. What was interesting about this as well is 6 of the 8 were Landauer Executives. So they were able to embrace the new FBS tools and the processes and help us in this integration effort. So we meet weekly and we review the KPIs. And you can see the KPIs on that second graphic there where we identify what are the core metrics that are really going to give us early warning in driving these initiatives to conclusion.
So we meet weekly. We look at this 52 times a year. We have 52 times a year to determine if we're doing it well, and we have 52 times to determine if we need to hone either our metrics or our processes. And so you can see each leader is reporting on the core actions they have to deliver. It creates a lot of accountability and it has been remarkable for me as the business leader to kind of keep my eye on the pulse of what the core initiatives are we need to focus on.
My focus specifically is on engagement and vision. And I'm watching that on a weekly basis. So at the end of the day, where are we with this? We have achieved some great results. So we're ahead in pricing.
We're ahead in margin improvement with our physics business. We've taken cost out beyond what we would have expected. And we anticipate that we'll beat our white paper projections through 2018 and beyond. So it's been very, very successful for us. So in summary, we are very hopeful about what we have in store or ahead of us in the coming months years.
We believe that we can take advantage of the increasing needs for healthcare compliance solutions around the world by offering differentiated, operationally efficient products and services. We think by integrating FBS into the culture of FHS, we're creating a growth culture where our employees are feeling really inspired to change healthcare safety every day. We're continuing our expansion into the radiation market and we're monetizing what we're doing there by tying in workflow solutions that integrate to each other. So we can look at our products as a dashboard and a set of workflow solutions across our product lines and we can integrate with hospital needs. So these converge together, combined with our ability to expand our platform in the future, we believe will set us up to be one of the strongest healthcare compliance companies today and in the future.
Thanks.
One of the things you see with Fluke Health, I think is the way we can build businesses over a long period of time. I think with the acquisition of Landau, one of the things you see is that we're very patient. We understand over a number of years from the starting point the kinds of great businesses and markets that we wanted to go after and really we're patient and deliberate about that over a long period of time and you see the financial results and certainly the way the strategies plan out and with the power of FBS truly adding a tremendous amount of value. We're really excited about the work we have going forward with Landauer and certainly, while it's still early days, clearly a great starting point with the power of FBS and hopefully you get a sense of how we can utilize a lot of the same tools that Chris and her team were using to integrate Landauer into Fluke Health. We'll use those same tools as we about how to integrate J and J into Fortive here in the coming months.
No one has more home field advantage than Justin here. So we're excited to sort of close out the platform presentations with Industrial Scientific. Justin has been with the company. He'll tell you a little bit about himself, but for a very long time and has certainly done an outstanding job. And I think another great example both with him and with Linda where part of our acquisition strategy is getting outstanding people.
And I think at the end of the presentation, you'll see why we're so excited to have Justin and his team as part of the Fortive family. So Justin, it's all yours. I'm so excited and honored to
be hosting all of you here at Industrial Scientific. And the other thing I want to say is we're excited to be having this in Pittsburgh. There's a lot of great things happening in Pittsburgh right now. When you look at things like autonomous vehicles, the investments that have been made in the region around robotics, artificial intelligence, things like that. The partnerships that we are well poised with Carnegie Mellon and University of Pittsburgh, this is there's a lot of neat stuff happening here, and we're happy to be here and grateful all of you have made the trip into here.
A little bit of history of Industrial Scientific. The company got its start as a research division in a larger company called National Mine Service. National Mine made large mining machinery, continuous miners, shuttle cars, things like that. And in 1976, my grandfather started a research division to look at ways to better detect methane gas in underground coal mining, which was the industry that, that company served. Over the next 8 or 9 years, the company was able to develop some very innovative handheld gas detectors.
My father, who's here, was running the division, and the 2 of them in 1985, took Industrial Scientific independent with about 30 people right up the road here in Pittsburgh, 2 of whom still work here, 1 you're going to meet later on today, Garth Miller, and began to begin work on driving towards the vision of the company. We have been part now, if you fast forward to today, we've been we are in our 10th month of being part of Fortive. We're very excited to be part of this and excited to see the potential that this company has as part of Fortive. We finished last year with about $180,000,000 in revenue. And if you look at the people in the industries that we serve, they tend to be those places where there is a threat of something really bad happening, explosions, gas releases, things like that.
So we serve markets like oil and gas from upstream, midstream to downstream, manufacturing metals, mining, municipal water and wastewater and emergency response. The individuals we tend to call on are the EHS, Environmental Health and Safety folks who are generally tasked with ensuring the safety and health of a whole bunch of people. So they have a tremendous amount on their plate. And I think one of the things, Industrial Scientific over the years has been focused on serving its customers really well. The result of that is that we have about 65% recurring revenue, and I'm going to talk about those models that have driven that.
But I think that we've really locked on to this notion of what we have here is critical but non strategic functions. If you look at safety, if you look at maintenance, these are functions that are absolutely critical to our customers, but they're nonstrategic. They don't make a whole lot of money a lot more money if they do it really well, but it has to get done. It has to get done well. And so when we find ways to play analytics or automation to those kind of things, there's great results.
We have a vision statement. You're going to see this reflected throughout the building, whether it's on our countdown clock or the name of this One Life Way, preserving human life, our vision. We are dedicating our careers, and we start with that very deliberately. The thing that we've seen with our experience in this industry is that every accident is predictable and every accident is ultimately then preventable. And so we feel compelled as a supplier to industry to be the vehicle through which technology is advanced, new standards are set, new expectations are set societally, to make sure that people go home alive and safe and that we make workplace deaths a thing of the past.
And so our people come into work every day with that mission. We have a mission statement that need preserving human life. Those are the operative wars of what we do. And so I'm so excited for you to meet the great people Scientific as they do their work and hear some of the stories that we have. Our products fall into 3 areas.
Our core business is gas detection. And if you look at what we are protecting people from, there's 3 ways gases can kill you. They can asphyxiate you, they can explode or they can poison you. And so, we provide our customers with wearable sensors. We provide them with test instrumentation.
If you have to go down into a sewer or going to a cracking tower at a refinery, you want to pretest that atmosphere to make sure that there is nothing hazardous in before you go in. And we also make area monitors. I see everybody has a little foam version of the Radius, which is networkable area monitor that would be used to monitor an area where people may be working. Great example, Toronto Transit, is they do construction underground. They would have radius units connected through that to make sure that the atmosphere is safe for people there.
We have pushed on pushed a lot of innovation into what we call advanced safety, and this is focused fundamentally on digitizing workflows. There's something called the hierarchy of hazard controls. And protecting people with PPE is at the bottom. That is the least effective way of keeping people safe, Eliminating hazards and doing workflows around that is a much more effective way. And so when we look at ways that we can get insight into what's going on, we can eliminate hazards.
So at the trade show at lunch, you're going to get a chance to see some of our Predictive Solutions software on display. We have done a lot of work to make it easy to connect people and devices and simplify those workflows with advanced safety. The 3rd area is in live monitoring. There's a lot of work going on right now in industry to really know what's happening, where people are and what the condition of them and their environment is. We launched our first platform, InetNow Live Monitoring, last year, and we're really excited about the ability to integrate a live monitoring aspect into instrumentation.
There are 4 very clear growth paths for Industrial Scientific. The first one is around the digital strategy. I'm going to talk in-depth about Inet and Predictive Solutions, but we see tremendous growth as we look at that. The second is in solving some very tangible customer pains that we see every day and that we see expanding very broadly beyond just gas detection and I will talk about those little bit. If you saw on the first slide, only 25% of our business today is outside of North America.
So one of the great things we have with Fortive is the ability to be present in so many markets that were very hard for us to do as a smaller company independent before. And so we've already had some great examples where we've been able to link up with Fortive companies in other parts of the world and get access to markets in ways that we really couldn't before. And then lastly, FBS. I'm going to talk about FBS. We are early in our journey, certainly not anywhere to where Linden and the Qualitrol team are, but we're seeing some really good impacts already with FBS here at industrial sign up.
And you're going to hear some of those stories later on in the day during the tours. Back in 1999, Industrial Scientific began work on Inet. And if you think about a gas detector, typically, if you need a gas detector, the traditional way to do it, you'd go out and buy a gas detector, you'd have to buy calibration gas, you'd have to calibrate it, you'd have to maintain the data coming out of that, you'd have to charge it, you'd have to spend capital on it. It's a big pain in the butt. And back to that notion of critical but non strategic, we're finding our company our customers, they don't want to spend capital on that, and they don't want to put people's time into supporting that kind of stuff.
So in 2002 then, we launched EyeNet. EyeNet is very simply gas detection as a service. It is a subscription based model, paid out over 40 it's a 48 month operating lease with services and data bundled in, customer Phase 1 fee and we have automated through the docking station much of the maintenance that's done, the bump testing, the function testing, the data download. That data is in the Cloud. We have an integrated system with Oracle and Salesforce where we drive service fulfillment off of that.
We can sense when a sensor is about to go. And one of the really neat things about Inet is because of the size of these devices, we're able to bundle in a very nice service element on it because, as you're going to see later on, we're able to do centralized service fulfillment, which becomes very efficient and very scalable as we grow. And so we're approaching 300,000 instruments in 80 countries around the world. We have a tremendous amount of data that has helped us design our products better. It helps us understand the way our customers are using products because we see it in the field.
We know what's happening. And the other thing, as we've evolved this over the last 15 or so years, we've had to evolve how we go to channel. So Jim and Cliff, you had had a question earlier about sales, and Jim talked about how do you go to market with an integrated connected solution. It's very different than selling boxes through a distributor channel. So we have a lot of scars on our back, but we have also, so to speak, as Wes says, paid the tuition to understand how to sell in an industrial environment to these companies while having a solid distribution channel and creating an environment for growth of a solution like this, we feel like we're well on the way to apply those learnings, and we are applying those learnings and driving growth with that.
And lastly, this is a very sticky solution. We have about a 97% retention rate with EyeNet. We solve a problem for customers and that's it. We have customers that are on their 4th renewal. And because of the structure of many of the commercial agreements, we are able to drive more products and services through those existing master service agreements and help customers evermore.
So it's been a great transformative thing for Industrial Scientific, and this is behind our number one growth strategy. Secondly, predictive solutions is one of our divisions in industrial, scientific and digital. At its simplest, we collect safety observations on a mobile platform. We provide that data back. And then since 2009, we've been applying predictive algorithms to that data to help customers understand, and I like to use the word nudge them.
If you're a safety director for a large construction company and you have 200 projects going on around the world, you want to know which of your projects are most likely to incur a loss, which of your subcontractors are most likely to incur a loss. So we have been involving an algorithm, a set of algorithms actually over the last 8 or 9 years and have a very effective model that raises a red flag on a monthly basis, coupled with our incident data going in. And it's just it's one of those ways that we've been able to apply predictive analytics to an everyday workflow. And so it starts with digitizing it, getting that data digital and then driving better behaviors by getting predictive analytics around that. And there will be at the trade show at lunch.
You can go a little deeper on that. On the customer inspired innovation front, if you think, how do I know where my people are? And are they safe? That sounds like a very simple question and that it should be very easy to drive that. But if you look at the environments that many of our customers work in, these are hazardous locations where you might not even be able to take a cell phone into because there's intrinsically safe requirements for the design of that product.
They may be GPS denied environments that you may be underground. So there's a different world of infrastructure that's needed to ensure that as we connect people to devices and get that data to cloud, that we can do that consistently with the vast number of verticals we serve and the vast geographies that we serve. We have a couple of very neat innovations we have delivered in the last year or so. Lens wireless, very easy deployable device to device connectivity, so simply touching 2 instruments together and now my wearable device is talking to my Radius unit. And if I am working with WES and I am suddenly in a situation where I need attention, I can activate that and have my the crew that I'm working with know very quickly before that data necessarily gets up to the cloud that something's happening.
And so we're focused on ensuring response earlier. And we've been so excited to see how customers are applying that technology. Dynamic site assessment assignment with iAssign, if you so imagine you're in this building and we want to make sure everybody is safe and,
you know, there is going
to be some emergency response driven out of that. If you are using GPS, it is going to show up as 1 Life Way. And we don't know if you're in the atrium. That's our address here. We don't know if you're in the atrium or up on the 3rd floor or on the 5th floor.
And so by using beacons, Iosine beacons, we designed the 1st intrinsically safe beacons on the market. We can wire up a plant to be able to have very accurate, very live location tracking for people to make the insights better when it gets into the InetNow monitoring. And for the user, it's much easier. They are not having to program in anything. It just updates with the beacon.
And lastly, on the live monitoring, InetNow, we launched late last year. This is a live monitoring platform that, again, enables workflow to be driven as we track individuals live. So we have this mantra of earlier, easier everywhere. We don't we understand very clearly that we cannot burden our customers, the users that are customers with technology. It has to be something that just happens, and we're focused very strongly on that.
And these technologies apply very nicely beyond just gas detection, and we're finding ways to apply those. I want to spend a minute on FBS. From my perspective, having been with industrial scientific 20 years and feeling the kind of pains of being constrained as being a smaller family held business and looking at what Affordiv can bring to Industrial Scientific. Certainly, the M and A capital is awesome, but the business system is incredibly compelling. You're going to hear some of our team talk about the impact that FBS has made, the disciplined rigorous approach to tracking something and driving continuous improvement on an on time delivery.
When we moved into this building, we cut our standard lead times in half. We went from 10 days to 5 days, and we thought we were pretty good. We've gotten up to about 95%. And as we were talking before the deal, Wes and Jim had said, hey, we're going to raise the bar on you on many different areas, and now our lead times are tracked to customer request aid, and we dropped to about 80%. And so but using FBS, those tool sets, with some help from the Ignite program, we were astonished at the results.
We are already tracking back up towards 95% in a matter of months. And we are going to see this story. This story got some great press internally, so culturally laying the groundwork to drive FBS improvement throughout the organization. So that was a real win from my perspective on that. But secondly, I'm most excited about the growth tool set within FBS.
This is going to be something that, you know, is you're going to hear a little bit about funnel management and sales lead management. This is a huge opportunity for Industrial Scientific to have a very solid growth strategy through FBS. And in the example I have up here, nobody planned on a volcano erupting in Hawaii and spewing a bunch of sulfur dioxide all over the place. And so we had calls immediately that we needed sulfur dioxide monitors shipped to Hawaii to help protect people and understand where the danger zone was. And we got some nice press on our ability to deliver around that.
So you see that there. But anyways, to conclude here, we have a Industrial Scientific has a proven device connected technology platform. We have 15 years of delivering a bundled software hardware services platform into industry and to some of the most demanding customers around the world. We have tremendous opportunity for expansion in high growth markets. We have a long runway to see where Qualitrol has gone to be on that journey with FBS, and we're very well positioned for high single digit growth and continued margin expansion.
So I couldn't be more excited about being part of Fortive and seeing the opportunities that this company has as part of this team. So again, welcome, and I look forward to talking to you all later on. I think now we're transitioning into the Q and A. So bring your own share.
Mr. Ransom, thank you very much. Justin, I'll ask you because your company was doing things lean well before your acquisition by Danaher. What are the 1 or 2 things that FBS really put, you know, the steroids on them. And the other thing is, I'd like to ask any of you to talk about how do you measure employee engagement and how do you increase employee engagement?
I'll take the first one, I guess. What 1 or 2 things about FBS that ignited, I think, you said. We have done we've applied some of the tools within FBS certainly before we were part of Fortive. The big moment for me came about 6 months ago, and it's that one of the leadership anchors within Fortive is leads with FBS, right? That's the expectation throughout the organization.
And it really clicked in about January. I saw what that meant. When we go to business reviews, when you to frontline leadership, to the folks in the cells here doing Kaizen, at every level of the organization, it's leading with FBS, and it's really a cultural it's a deeply embedded cultural value, I would say. And that's different from having something that is, you know, just on the wall that you talk about. It is it's very deeply in practice.
So that's that was a big guideline.
I was just going to answer the engagement question if you're yes. On engagement, what I would say broadly is every business within Fortive does at minimum an annual survey. We do it as a corporation. We push for essentially every single employee to respond to the survey. And there's I can't remember the exact number, but 90 different questions that we ask, which we trend and analyze business unit by business unit, geography by geography.
And whereas there are certainly certain things that an operating company or corporately we will see as trends that we have to take on overall. We also are very site specific and leader specific initiatives based on the needs that we see in any one individual area. So this is pulse survey on a quarterly basis to see how they're tracking. And, we look at the numbers on a regular basis. Most of the operating companies do some form of a pulse survey on a quarterly basis to see how they're tracking.
And we hold leaders accountable to progress on employee engagement. We take it very seriously. Well, I mean, some of the things that we've focused on I'm sorry, the question was how in what way do we increase employee engagement? How do we increase employee engagement? We focused on career pathing, just what we focused on development, goal alignment to making sure to make sure that everyone is very clear on what career opportunities are in front of them, what they're held accountable for.
We focus very much on job enablement. Are we making it as easy as possible to do the work that they need to do? We focused on rewards and recognition to make sure that people are doing a great job are getting recognized for having done a great job. We certainly bring a lot of attention on to customer satisfaction and are we doing the right thing for the customer every single day. Employees let us know if they see one place where they think we could do a better job for customers.
They're very quick to let us know about that. And so we make sure that when we see such problems, we tackle them as quickly as possible.
Thanks, Wes. Over here. Okay. So Fluke's 10% recurring revenue, you have been on this journey for 5 years in terms of Acelix and whatnot and I've seen a lot of these new products and subscriptions and other opportunities grow. What's your what do you think that number, that percentage of business can grow to in, say, 3 more years?
Where do you think is a natural limit to this, given the long history of how people already do business in that market?
Yes. Well, what I would say is, we've across I'll come back to Fluke specifically. Across the platform, we're at about 15% recurring revenue. We're looking to over the next, say, 5 years to roughly double that percentage of recurring revenue. Most of that will be in SaaS.
And Fluke is Fluke specifically is one of the key areas where we're looking to outperform the platform as a whole in terms of growth. So I don't know if there is a I don't know if I would articulate it so much as a limit, because these especially as we make inorganic investments, these are new markets we'll enter that are substantial. But certainly across the platform going from 15% to 30% is in line with what we're looking to do. The bulk of that is the biggest driver is going to come from our investments in our growth of our SaaS offerings specifically. So that's Accelix as well as I'm answering more broadly than Fluke.
Fluke XLIC certainly, it's expansion of Industrial Scientific's INET platform, which we have big aspirations for and it's also increasing the percent of the recurring revenue in Qualitrol.
Martin Sankey from Neuberger Berman. Questions for Justin. I have 2. I'll ask one, then there'll be a follow-up. The first is, what kind of what has your customer said at ISC?
I ask this because I look at the products and I would think that there are any number of large global companies that would find your product very useful to standardize their AT and T. So what is the mix between large global companies versus maybe a 1 or 2 site kind of companies? And why And what how do you think being with Fortive will help you penetrate the large global accounts?
Yes. I would put about 60% of our business would be with the large global multinational accounts. That it's in that zone, a little bit over half. Inet has certainly driven a part of that. That's been, you know, that's who we're selling to.
I think that's the, just the profile. Your second question was how is Fortive going to help us grow that? And I'll give you an example. South Africa is a market that we've been going after, very large customers there. And it's been hard for us without having a company without having an organization base there to employ salespeople to get into that.
We were able to plug in with Gilbarco, Veeder Root and get some sales coverage there and just get to the reach of that. In other parts of the world, Turkey, China, we're partnering with primarily Fluke distribution channels that get us reach into that get us distribution reach that we didn't have before.
So The second question is, what attracted you to Fortive because people in this audience as well as I have go to Honeywell, see Emerson, CABB, the whole gamut of industrial automation suppliers that want safety as a big part of their business, and I'm sure they attract you down. So what ultimately attracted you to Fortive versus companies that could have probably offered a lot more money for your business?
There's certainly FBS and the M and A capital and talent was a piece of that. But I have to say that one of the things that Fortive really differentiated themselves on in the process was their understanding and commitment to an as a service model. That's something that this company is that Industrial Scientific is really committed to and that we believe in very deeply. We've seen the way we're able to serve our customers better. And Fortive gets it.
Fortive's willing to make the changes, do the heavy lifting it takes to transform into that. And so that was, to me, the biggest differentiator there.
Wes, over here. Maybe one question when you think about the Axcelix penetration increase and growth rates. I guess a lot of the equipment manufacturers themselves that your instruments test, they're much more aggressive now at embedding test and measurement equipment on their own devices. When they ship them, they want to have control of that data coming off those devices. The customers themselves are using IT companies more now to track data coming off devices on their plant site.
So in what's becoming a very, very crowded space or plant or site floor, how do you ensure that Field Solutions at Fortive can find its niche within that environment?
Yes. So I guess what I would say is, first of all, there are a great many assets that are not censored up today or not wired up today and 10 years from now that will continue to be true. And so when we think about adoption, this isn't necessarily speaking to the long term, which you're also probing at. When you think about adoption, the ability to come up with a practical way to retrofit an offering into brownfield assets, we think is a real adoption advantage. But in addition to that, I would reference what Linda indicated with Qualitrol and TRANSFORMERS.
There is a real advantage, particularly when you get into the Tier 2 assets, which is really what we're targeting. There's a real advantage to simplifying an overall system that pulls data off of assets regardless of who the manufacturer is and is also agnostic versus the manufacturer of those systems. So I would simply say, we have a very wide range of capabilities as it relates to all the different types of measurement modalities that are relevant, vibration, thermal imaging, electrical measurement, and I could keep going. We have a deep broad understanding of the workflows and what customers are trying to do. We're taking very much a maintenance team first approach as opposed to an asset first approach.
And that's one of the reasons why we're seeking adoption from the maintenance teams and the maintenance leaders themselves. And do we think that there will be some facilities that will take an OEM first approach? Indeed, that will be the case in some instances, particularly when you're talking about a Tier one asset. But we also see plenty of opportunity and plenty of runway within the space that is wide open. So we feel very compelling or compelled, I say that we've got a real advantage to a space that's available.
Wes, kind of building on Julien's question here. How does the Ocellus platform work kind of within a broader MES system? I feel like even those companies that supply the broader systems are now they have remote and mobile condition assessment and they're building out those platforms and investing in companies that have similar offerings. So how does that work as a logical extension of that? Is it combative with that?
How does that kind of frame how does that kind of slip into the broader system that controls the facility?
Yes. I guess what I would say that is, the best way I would answer that question is by describing what we're not looking to do. We are not looking to be the operational system of record in the facility. So we are very decisively we're not in the automation business, we're not in the process control business, we're not in the ERP business. What we are looking to do is to create an overall system that is very familiar to the maintenance teams and the maintenance leaders and the people making decisions about how maintenance is done within those facilities, a familiar brand with all the credibility that comes from the different types of analysis and insight we provide already to these tools and become a best in class part of the overall ecosystem within that facility.
And part of that means we have to be very easy to do business with and very easy to integrate with other partners, which is part of our strategy. So we're very clear about what we're seeking to do and what we're not seeking to do. And frankly, in terms of some of the bigger plays that we see, we view them as opportunities for partnership, not as so much as competition.
Hi. So, Justin, you talked about Fortive's commitment to as a service models and how important that was to you at ISC. So, can you talk about the challenges you've had over time in transitioning to that as a service model and how ISC can help Fortive with successfully driving that transition in businesses like Qualitrol where customers don't buy from Fortive like that today?
That's a great question. We've had, in the last 8 months, we've probably had 10 or 12 OpCos coming to Industrial Scientific. And we and so doing benchmarking visits, understanding many different aspects of it. I think that we can be helpful on a couple of fronts. Number 1, on the sales process, how to exist in an ecosystem where you have direct selling with account management and working with distribution.
We've had a lot of experimentation. I said we have some scars on our back from the making some mistakes and getting some key learnings over years. And so certainly, on the commercial side of it, that's been a piece that I think we can help with. In messaging and understanding how to assess customer pains and opening their minds to maybe some different possibilities of how to integrate services is an area that I've seen us be able to help a little bit with. The big area that I think we're we are learning as well is in how do we get customers to digest this data, though.
That's every single customer, every industrial company or municipality is, we're swimming in data. We don't know what to do with it. And so we've done a couple of things that's not rocket science, just to make some very key insights about things that could be very helpful to our customers and help them see things that they're not going to see in their businesses. And so that's another area that we're certainly still learning in but we have some nice wins in. And then maybe a last point would be in the commercial model.
I think it's very I think many of our customers don't conceive of things like a short term rental of an instrument, whether it's a gas detector or a multimeter or something like that being something that's available to them. And Industrial Scientific has shown over the last, really, 20 years that there's this market of rental that we are that we've been able to open, solid margins, meet an unmet need and looking at maybe how we can do that within a company like Fluke or where a short term need opens up new revenue.
Wes, one for you and then one for you, Justin. Wes, we have a sensing business elsewhere outside of field. I was just wondering what the synergies are between that business and Acelix going forward?
We principally, it's at the level of technology is what we're we've been doing a limited amount of technology sharing or at least technology evaluation because some of the sensing products are rather specialized as I'm sure you've heard in other forums in terms of what they can do. But fundamentally, the business strategy, I won't speak in detail about what Sensing is looking to do because I'm not the best equipped to do that. But fundamentally, what we're looking to do is not so much be in the Sensing business, although we certainly have to provide, I'm talking about SELC specifically right now. We have to provide the right kind of hardware, but what we're looking to do is to build the overall system. And so we certainly do technology benchmarking within the company.
We also do technology benchmarking outside of the company.
Thanks. And Justin for you, can you just maybe give us a couple of examples of how FBS has helped your sales in the last, you know, 9 or so months?
Yes. The big area, and we're actually going to see this on the tour, is in funnel management. We've we have standardized around a funnel management process that's driven on customer evidence rather than on arbitrary percentages that our salespeople think things are going to close at. That's part of the FPS toolkit. We have some we're in early days.
Again, we're just the beginning of this journey. But we are that's an area that is going to pay dividends very clear. Where are we winning? Where are we not winning? Getting clarity around that and improving on close rates.
And then the other areas is in digital marketing, driving better digital marketing campaigns. We've invested in that from an inside sales perspective, but we've not coupled it with as effective a marketing program as we could have. And so that's another part of FBS that we're excited to apply.
Any more questions? No. Jim, I think we can go to lunch early.
You're welcome. Thanks, guys. A little bit a couple of things to close out and then we'll a couple of instructions for lunch. One is, Scott, to your question about the sensor business, I think what we've tried to do in the sensor business is in some respects replicate some of these things around some of the unique verticals we have. So in the sensor platform where we have kind of vertical oriented solutions like in Anderson Negla, we're really focused on the sanitary market.
Those businesses are really kind of going off in their own and sort of niche applications and what we try to do where we have horizontal technologies as Wes mentioned we're trying to apply those horizontal technologies whenever we have an opportunity to get more scale and cost better cost position. But ultimately I think both what Wes described in his answer as well as what we're trying to do in sensors is to provide better data into some of the verticals that those businesses represent as well. So maybe that's just one thing. I just like to reiterate what this team has really done and is doing and is I think still in the early innings, but is hopefully you get a sense for is this idea of the knowledge base and breadth of skills that they have and bringing together all of these connected devices, software enabled workflows and data analytics. Justin did mention this but we had a and deeply but we had a benchmarking exercise really more of a meeting with all of the data scientists that exist in Fortive here last week to bring them together to talk about how are we going to what common things can we do from a data science and data analytics perspective as we think more about how machine learning can apply to a number of our businesses.
So that's a good example of where we have expertise. I think one of the bastions, if you will, of our culture has been to share those kinds of things and ultimately to where we have opportunity to build scale, we'll do that. So I think this is one example of how we've really learned from a lot of the work you're going to hear on what we're doing in the predictive solutions business here. That's certainly a great baseline for the kinds of things we want to do as a business going forward. So we are off to lunch here, a little bit about that.
So we're going to be on the 3rd floor for lunch. And in addition to lunch, there will also be a trade show. You have an opportunity to mingle and see all the businesses within the portfolio and some of the great innovations and a lot bring to life a lot of the things that we just talked about. So we're going to come back at 1 o'clock. We'll start sharply at 1 just so you know, so we have about an hour for lunch.
We're on the 3rd floor. The fastest way is if you want to walk up the stairs to the 3rd floor, that is. There are elevators though behind us. So if you want to take an elevator or need an elevator, if those creaky joints like me or don't love stairs, you can certainly join me in the elevator, but we're certainly more than welcome to go either direction, probably a little faster. We'll come back, as I said, promptly at 1 and we'll look forward to all the discussions.
We'll be around in the trade show floor to have answered some questions as well. So thanks to the team. Great job. Wonderful organization and great job on the platform. We'll see you in an hour.
Ladies and gentlemen, we are about to begin. Please take your seats and very carefully walk down the stairs. We are about to begin.
All right. Good afternoon. We'll welcome everybody back as we close out the lunch hour. We're live as well on the web. So if everybody could take your seats.
So hopefully, lunch, you had some time to spend a few minutes in our in the booths, get a strong sense of the innovation and the business model transformation that's going on throughout the platform. I think, hopefully and hopefully, not only the product demos, but conversations you had with our team really helps you better understand and bring to life the presentations in the morning. We're going to transition the afternoon, 1st and foremost, to giving you a sense of the Fortive Business System and some of the transformations that are going on in the business to really help accelerate a lot of the things you heard this morning. Familiar face coming up. All of you know Barbara Hulett.
Barb has been with us now for 11 years, 12 years, 13 years, 13 years. So Barb has been with us for a number of years. As you know, she ran Fluke for a long time. A lot of the things that we know and love about Fluke were under her leadership. She's been running the Florida business she runs the Florida Business System office, our high growth markets and a number of key functions for us.
So Barb is going to come up and really give you a sense of what's new in the Florida Business System, particularly around growth and we couldn't be happier to have an opportunity to showcase all the good work that Barb and her team are doing. So Barb?
Thank you, Jim. The after lunch spot. Thank you. Thank you. I'm so lucky to have it because in truth, I have so many exciting things that I can't wait to share with you all that we thought if anybody should take the after lunch spot, it should be FBS so that we can showcase that.
The morning was great and you had a chance to hear from my colleagues around the power of FBS. And I hope you got a sense of how FBS is helping these businesses deliver results. And these are businesses, as you noticed, that we've had in the portfolio for a long time in the case of Qualitron and Fluke or for a short time in the case of Landauer and ISC. And so, we continue to evolve the toolset and we're going to share some of that with you today. As you all know, we've got a long history of FBS, starting with DBS ahead of the separation.
3 decades is quite some time to be doing this work and it underpins really everything that we do. Sometimes you'll hear that referred to as tools. But I got to tell you, it's really more than just a set of tools. It's of course that and you'll see good tools and good processes today for sure. But it's really in the center of our values.
It's the way that we develop extraordinary talent. It's the way that we innovate. It's the way that we drive continuous improvement through the operations. But more so, and Justin talked on this in the Q and A, FBS is really our culture. It's really the way that we do things, it's the way that we live our work lives.
And if you go back and think about that 30 year history working with some of these tool processes and cultures, as you know, we got our start in lean. And that was back in the days when most of our cost structure was in the factory. And if that's the business you're in, you should be pretty good at lean manufacturing. But it's become and evolved to be so much more than that and will continue to evolve as the portfolio evolves. So today, we think about FBS really in 4 different places.
We think about growth, so tools that are going to help us accelerate revenue performance and gain share. We talk about lean, where we're driving improvements in quality, cost and delivery. We think about leadership, we're delivering and developing the next generation of leaders working to improve things like bill retention and engagement. And then the fundamentals, the fundamentals are things that underpin or the foundation, if you will, for all of these tools. And as you can see, the toolkit is pretty full.
And if we were having this conversation 10 years ago, the toolkit would have been different, even 5 years ago for sure. But all of this is really in support of helping our businesses drive improvements in what we call our core value drivers. So these are the 8 KPIs that all of our businesses are working on day in, day out to show improvements. You heard so many great stories this morning that I thought I'd spend more time giving you a little bit of a peek on what's new and in particular in the arena of growth. Many of you have seen what we call our 3 d model for growth, and we start with Dream.
This is where we start to conceptualize new solutions that are going to better meet customer needs and anything on the market out there today. And then we take those conceptualized ideas and we have to somehow turn them into something tangible and that's where the second D, develop, comes in. And in that, we're trying to transform these ideas into something that our customers will ultimately find value in, which brings us to the 3rd D, which is deliver. This is time to money. This is commercialization.
So, let me dive into Dream for a second. A lot of the work that we're doing here in the toolkit has to do with really understanding at a fundamental deep level what it is our customers are trying to do. What makes it easy, what makes it hard, where their pain points are, what their needs are, so that we can apply solutions around that. Last year, we introduced a new tool called the Growth Accelerator. Since separation, we've been working hard to try to accelerate breakthrough innovation and to learn how to manage the risks associated with breakthrough innovations.
And what we've learned along the way is about 2 thirds of creativity is actually learned. It's not in your gene pool. So, if something can be learned, it means that something can be taught. And if something can be taught, it means that we can put it into a process that can be shared across all Affordiv, which is what we've been doing. Our challenge, of course, is to figure out these new breakthrough innovations that are going to spur growth and help us beat competition and quite frankly do something that's going to benefit our customers in a significant way.
So part of the Growth Accelerator tool is spending a lot of time outside of our walls. This means going out and doing networking, research institutions, startups,
experts.
And in that, we're trying to understand what a solution set might look like that we can bring to bear on what it is our customers are trying to do. And then we spent a lot of time out in the marketplace talking, watching, observing, filming. We're talking with customers, non customers, non users, everything that really helps us understand the day in the life of pain points, jobs to be done. And once we understand those 2 things, we can put them together. We can start to envision how we might solve those customer needs in a new and inventive way.
And we're learning a lot about how we can rapid prototype some of these solutions, get feedback so that we can iterate and bring even better solutions to bear. And I'm going to show you a couple of examples of that. To date, we've had 12 teams that have gone through the Growth Accelerator toolkit. Those 12 teams have identified well over $1,000,000,000 of addressable market. We've killed 2 of them and the 10 that remain are continuing to do work and we have 1 in a special situation where we're incubating it.
So we're holding it off to the side and giving it special love, care and feeding to make sure that it grows and prospers into something big. This word cloud that you see is from the first teams that went through. So there was a question earlier today about engagement. The thing that's interesting about the Growth Accelerator tool and program is that it's really helping us drive engagement as well. And you can see some of the words that the teams used, innovative, fun, energizing, also uncomfortable because we're stretching and pushing to learn some new things.
You'll see as I go through some of the stories today, and in fact, Wes talked a little bit about what the team in China is doing around EV, where we're starting to see some of these tools come into place in the day to day work. But here's one example. So, when I talk about external networking, what does this mean? This is from 1 of the 12 teams and the work that they did. So, they spent time out in the marketplace with about 50 different organizations trying to learn.
In this case, they were going deep on machine learning, augmented and virtual reality. And so you can see some of the companies that they went and spent time with and some of the topics as well. So in this case, they spent a lot of time trying to understand technologies, but they're also trying to figure out once you have a technology, what do you have to do to drive a more innovative culture and how do we bring some of that into Fortive? What are some of the business model innovations that we need to see to drive this level of innovation back into our business? And from this, in the in person visits and kind of the exploratory nature of what they're doing, we start to understand these solutions that we can match up with these pain points.
And speaking about pain points, one of the ways we learn how to decipher pain points is through VOC. And we've done VOC forever. What we're learning though is to be broader and deeper. So again, this is from another one of the teams. They went out and talked to over 75 people.
And in that, they're talking to a wide variety. And so if they're getting non customers, even non users, in addition to the people that we might call customers or fans of ours today. From that, we're able to figure out, decode different personas. And within the personas, what's a day in the life like? What's the job to be done?
What are they trying to accomplish? What are the social, functional and emotional needs? It gives us such a round picture, a three sixty view of what these customers or potential customers are trying to do that we can now start to apply creative problem solving back to say how do we invent something new that's going to change this market and create value that hasn't been created before. Once we do that idea generation work, then it needs to go into the develop engine. And this one has been also around in the toolkit for some time.
And if you think about some of the tools that sit in the developed part of the toolkit, it's really about getting out of the historic waterfall production process into something that's more agile. And in that, what we look to do is iterate, go faster, get cycles in, get feedback, change, go get another cycle in. And we can do that in a way that helps support accountability in the way that we have a Bay of Rooms or do visual and daily management. And I thought I'd give you one example of this. I mentioned that the toolkit has changed significantly over time.
That's certainly true in the case of software development. And I get asked the question all the time, hey, do you guys do lean software development? Do you know agile? Answer is yes. That's pretty commonplace across Florida these days.
This is an example of how we're taking those lean software development skills or tools and combining them with some of the experimentation skills that I talked about with the Growth Accelerator. So in this case, Gilbarco was interested in a point of sale solution for a small business owner. So think about somebody that might have 1 or 2 gas stations. Pain point today is hardware is really expensive. And so if you want to bring point of sale into a small business owner situation, it's going to be expensive.
So the Gilbarco team said, let's come up with a tablet based solution that builds on the software that we have.
So they went out and did
a lot of VOC to understand what these small gas station owners were trying to do and then came back and started to figure out how they match up needs with technology. The next thing that happened though is they went back out in the marketplace and said here's a prototype of what we're looking to do. And one interesting example is they didn't think that a small gas owner would need to have clock in and out capabilities. Small operation, right? But when they took their prototypes out, they said absolutely, that's a function that we need.
So before any of the software guys start to rewrite code, they understand what the specs are. And then they go into an agile process where they're running sprints, they're running scrums, they're finding bugs, they're debugging as they go. And ultimately, what the team was able to do here is deliver that software solution a third faster with 30% fewer bugs. And that just means a faster path to revenue. And it also means customers that are happy and team members who are engaged.
Then I'd spend a little bit more time talking about deliver. So this is the part where we take those ideas that were generated that were then created, be they hardware or software, and we've got to go sell them. We've got to go commercialize them. And if you think about the tools that exist in this part of the toolkit, they range from generating awareness at the top of the funnel down to generating leads, maybe marketing leads, to sales qualified leads and to sales processes and ultimately conversion. You heard Justin before talk about web marketing, and I'll go into that in a little bit more detail.
But I wanted to share with you first the story of Tektronix and the Series 5 oscilloscope launch last year. This is a pretty significant launch that the tech team was undertaking. It was a perfect opportunity for us to try out some of the growth accelerator tools. So the Tektronix team went out and they talked to a lot of people. And again, they talked to people that love Tektronix scopes and had used them for years.
They talked to competitive customers. They talked to people that really are episodic users of oscilloscopes as well. And from that, they were able to get a sense of what those customers were trying to do. With that, they put a bunch of experiments into the market and got quick feedback. And you'll see we've got a phrase that we talked about now where we say, what can you learn in a week?
And so they went out and did a series of experiments, got their learning up to the point where ultimately when they launched the Series 5 scopes, they beat the revenue plan by over 300%. I know some of you are saying, well, it must have been a pretty low plan. If you look historically at performance, the plan of new products introduced, this one hit the ball way out of the park and delivered over 2 50 basis points of growth to Tektronix. So significant any way you look at it. So what did they do?
When you've got a launch like this, the value proposition is a big piece of getting the launch right.
And so imagine if you
can for a second, this is a company that's had a user base in scopes forever, knows this customer set really well. So the value proposition of this new product coming out, the best thinking was behind what the answer should be. So they take that out to the marketplace in the form of an experiment and get feedback. And what they find out is that it was close, but it wasn't quite hitting the mark. The team in an afternoon created a series of new value propositions, and they were out the very next day getting feedback from customers.
And just to give you a sense of how this is a little bit different, that process normally takes weeks. There might be outside agencies involved, there's a lot of back and forth or maybe we think we already know this market well, we'll just we'll go with it. We know what it looks like. And the tech team continued to iterate until they thought they had the value proposition nailed. And again, what can we learn in a week?
Similarly, if you think about online demos, it's a pretty important part of the selling process these days, important for potential customers as well as even our own sales team. Now, I don't know about you, but personally, I kind of like the one on the left. Anybody else? Like the one on the left? It's because the answer is underneath it.
Thing is, I'm not in the market for an oscilloscope, so it kind of doesn't matter what I think. When they took these prototypes out in the marketplace, the market said, we'd like you to do some things a little bit differently. We'd like to see things and experience things a little bit differently, which ultimately created the prototype on the right. Team figured this learning out before they ever created the demo. The team figured this learning out before they ever created the demo.
And if you think about just human nature, killing an idea on a piece of paper easy, Easy. Killing an idea once you've coded it and created the demo and you're ready to launch it, hard. So in this case, the Tektronix team was able to iterate through the variety of demos here to get something that was really optimized. And again, this was something that took, in some cases, hours or days, certainly not weeks. Another example I mentioned before, digital marketing and some of the work we're doing around web marketing in particular, and you'll see an example here that brings experimentation plus old tools together as well.
Our TeleTrak Navin business really relies on online lead generation. And the team for the use of daily management, KPIs, digital dashboards was doing a great job of managing the cost per lead down. At some point in time, the team said, hang on a second. Our goal here is really to maximize revenue, not to have low cost per leads. And so how do we think about more of a return based situation?
We've got some challenges in the marketplace here because they're highly competitive boards that have low counts. So, the notion of being able to apply typical web analytics to it is a little bit challenging. So they created an experiment that they ran using Google AI where they built clusters of words and then went through the optimizer with Google AI for bid management. 7 weeks before and after, and what they found was they were able not only to reduce cost per leads by 50%, but they increased conversion by 127%. But if you peel that back and looked at it, they had the confidence to pay more for some words that were so much more productive than before, which allowed them to play in words that historically would have been too high or too rich for their budgets.
And ultimately, the story was a great one. So think back for just a minute of all we've seen and heard today. These are the stories behind me that my colleagues have also shown. I really hope you get a sense with FBS that it's relevant for growth, lean and leadership. I hope you can think about the notion of it works on hardware businesses and software businesses.
The sense that it works for businesses that have been in the portfolio for decades and businesses that have been in the portfolio for months. And we are continuing to evolve it. So the tools that I talked about today, innovation tools, software tools, marketing tools will continue to evolve as
the portfolio evolves. So here we
are, a couple of years after foundation of everything that we do, but we'll evolve it. As the business evolves, it'll evolve. We've got more SaaS tools coming in. We are learning things from Industrial Scientific as an example. You heard from codify and bring to the rest of the organization.
And we'll continue to make those changes as the portfolio moves. And that's going to help us manage the risks around innovation and drive higher levels of innovation into new areas like software or software as a service business models. And ultimately, that should ring the register for us even more. So with that, we're going to open it up for questions. I know somebody's got something.
Thank you, Cliff.
You don't have to thank me. Thank you. Is there a direction to Fortive I'm sorry, to FBS that you said this looks like a profitable road for us, but you eliminated as you eliminate products and marketing campaigns, but you eliminated the FBS approach? And if so, how did you decide to do that?
Are you talking specifically about web marketing?
I'm talking about FBS as a process itself. How did you use lean thinking to improve lean thinking?
Yes, no, it's a good question. The first thing we do is we start with BOC. And so as I think most of you know, the FBS office is a rather small lean team within Fortive that's really set to catalyze the rest of the organization. And we spend a lot of time with the business leaders to figure out what the needs of the business are. And then we start to take a view across what's common in the businesses.
Sometimes it's a little bit more obvious because when we make a big acquisition that has a different business model and we'll say, okay, this is something we need to go learn how to do, how do we bring the best and the brightest together. Jim mentioned that we were out here last Thursday Friday as an example with the various data scientists, PhDs across Fortive that are doing analytics work. And it's the same kind of thing there where we'll look and say the business is migrating in this direction. And so how do we bring together a point of view across all Affordiv and then how do we share it back to the rest of the world. And the evolution happens somewhat naturally over time too, which is the tools that are in less demand get used less.
I know this is an unfair and very difficult question. But we hear we've heard for many, many, many years about the benefits of lean on the cost side. The growth toolkit has been in process across a lot of companies for some time. Affordiv, it's perhaps better developed, but evolving as always. How do we step up and get your view a little bit of in aggregate as opposed to always the many anecdotes we see, what this is likely contributing to an overall organic growth so that investors can kind of think about this and say, you know what, we know there are a lot of puts and takes here, hard to do, but probably worth this much?
We've struggled to answer that question for you all for many years simply because we don't keep score that way. So I think you've heard us say many times that we have such a fundamental belief in what we're doing from an FBS perspective that we haven't tried to tick and tie every last point. I think where you probably see the best evidence is pre and post acquisition note when you say I've got some base plan of how we're performing and then we bring a whole slew of tools. And if you look back in our history, that would probably help answer it to some degree. But honestly, we don't try to quantify it that way because it's something we believe so much at the very core of it that it's doing more of it is a good thing.
It varies the question was, what does it look like when we look across acquisition? It varies across the board. But generally, you can see a couple a couple of 100 basis points uptick. But again, you're going to see a lot of it depends on the state coming in and out.
Maybe just to add to that because it's one thing to think about is we also think about that in terms of share gain. So in many respects, how do we outperform the markets we're in because I think at the end of the day, the market growth of the industry is going to somehow dictate some of the market growth of an individual business. But are we taking market share? And I think we try to give you a little bit of color every year. Those things move around quarter to quarter, but certainly on a full year basis, you can see all of our major businesses taking market share, certainly where we're principally I mean, I would say almost all of our businesses taking market share and accelerating that over time as well.
So the 3 metrics I think about are that one, I think about our gross margin expansion and the ability to glean better gross margins, which is, I think, a real advent of our success both commercially and from an innovation perspective. You don't improve gross margins. If customers don't understand the value of your innovation, I think Barb showed some great examples of that. So and then our price, I think price also really gets to the value propositions that Barb was describing. And if we're getting price better than the market, if we're expanding our margin structure, is a great example of innovation and certainly market share.
I think those are some of the metrics we talk about a lot that you can tie directly back to the success of FBS.
I want to piggyback off of your answer to the two questions ago. When it comes to acquisitions, is there some maybe a little bit more granularity on that? Is there maybe a 90 day plan where you send people in to really teach the FBS way? And then secondly, I'm sure that there's a lot of variability around this couple of 100 basis points of margin expansion expected from an acquisition. So to what extent does your group even get involved in the bid process and the modeling of what this company can do?
The majority of our work will come after when there's heavy lifting to be done to try to drive improvements. Typically, what happens with the new acquisition is we're going through, Jim referred to it earlier, the 100 day plan. And this is a chance for us to put our heads together with the company we've acquired and share notes, where before we were doing that separately to make sure that we've got a strategic plan that's a winner. Within that, there are priorities for the business and we'll match up the business priorities to what we're doing from an FBS perspective. It's really important that we don't do a one size fits all like thou shalt do this, that and the other thing.
We look at the specifics of the business and say, where are the biggest opportunities to have an impact for our customers, for the business, for our people, for our shareholders? And then we come up with a customized plan around that. Embedded within that process, of course, there's a fair amount of teaching and learning that goes on. We've got a physical space for FVS University that's up in Everett. We've got virtual spaces.
In fact, the space where you all were today looking at the demo is one that we'll use for the East Coast to do training as well. And we'll draw on resources for our larger deals throughout all of Fortive to come help share the teaching and the learnings of FES to make sure that we get that embedded within the new company.
Barbara, there was a question earlier that was answered by Justin and Wes. The question was about early engagement of FBS of the culture, right, when you early on in integration. So there was something I thought I'd hear that I didn't and maybe it's a chance to see if do a sanity check and if I'm thinking right, that you measure internal fill rate. So that has to do with the positions that are filled internally. And I'm wondering if that did factor into decisions by ISE or other companies to join Fortive, whether or not that's something that is valued early in that integration or if it's something that's later.
But it seems to me that company can retain their winner their leadership if they also show that there is a pattern of internal fill and that there is a greater opportunity for talent to B Mobile.
So we love it when we're able to acquire a business like ISC and bring with it a management team and a broader team with great talent. And you saw examples today of how over time that talent moves around and it gives us greater capacity to do more. And Jim mentioned that the leadership team is together over the next couple of days looking at our pipeline of leaders, and we'll go through that group and think about development plans and how we'll be moving that along. One of the things that we love to see in this process is when we have a team like we do at IST that really embraces the culture of FBS, it frankly gets a lot easier. Because what we know is that there's some things that are so dear to what we do that we've got to have a fit and lead with FBS is one of those.
And it's not for everybody, right? So we'll try to look as we go through the process, diligence process, ensure that we've got a cultural fit because FVS is going to be the way that we operate these businesses and to ensure that it works that way. But in the cases that you see like ISD where there's a good fit and good curiosity and the willingness and quite frankly, the drive to go towards continuous improvement, it works out extraordinarily well. And you'll see it not only in the internal field, but in a lot of things around engagement as well as the actual results of the business. Good.
Thanks, Barb.
Thank you.
Great job. Maybe a couple things on the relative to the due diligence and how we're involved relative to looking for opportunities in FBS, Barb mentioned the execution side. I would say also that our business leaders who are intimately involved, including myself on M and A, are obviously the first line of looking at businesses and it's the experience that of Pat and Wes and their counterparts and the operating leaders like some of the you saw up on stage who have the most experience in FBS in businesses and are always they're the first line of really looking at that too. So that's really how we do it. And then certainly, Barb and her team are conciliaries on throughout the process and certainly afterwards to help us on post integration.
So certainly an example. I hope what you took from Barb's presentation was a couple of really important parts. One is that this whole idea of disruptive innovation and a lot of the things we talked about this morning around the software and SaaS and data analytics and all these transformations that are going on in our industry are only market opportunities if you build the kind of capability that it takes to take advantage of those things. And really the Innovation and Growth Accelerator work is really the muscle that we're building to make sure that we can take advantage of those opportunities and accelerate those opportunities over time. And we've taken a big leap forward.
The investment that we've made is substantial. Those teams that she showed on that page are all full time. They are not part time teams. They are full time teams that we've dedicated investment into innovation, dedicated to disruptive innovation and bringing in talent and resources to help our businesses transform themselves. And we're very early stages, but we're really proud of the work we're doing.
And that three d model is really critical to that. And so things like fast cycle experimentation, prototyping, the voice of customer work that we do today is incredibly deep and incredibly powerful and we're really excited about the work we're doing, although it's really early days. And we're certainly in Investor Day 2025, I'm highly confident we'll be talking about some of those 10 teams and the opportunities that they've made available to us through the work they're doing. So with that, we'll take Q and A. So open mic night for everybody, whatever comes up.
We got about 15 minutes. I have slides. I thought I was finishing. Yes, that's right.
Thanks, Lisa. I guess there's a
summary and an outlook. You guys wanted the outlook. Couple of things obviously that we heard today that are really important. I won't reiterate all of these, but I think where we've you really saw I had a chance and an opportunity to talk to all of you or many of you at the lunch and certainly I think it resonated in terms of the things we're thinking about relative to accelerating growth and building different business models with technology and innovation. Certainly, Barb's wrap up certainly gives you a sense of not only the aspiration of how we're doing that and you see the business models in all their actuality and then certainly the process how FBS supports that to really build that capability more broadly in the organization over time.
We're in the midst of some great transformation. We're really excited about the M and A work that we've done and yet we really feel like we're still in the early stages. We've talked about the fact that we have still substantial capital to deploy opportunities to bring great businesses in and you got a great some great insight this morning in some of those great businesses like Landauer and ISC. So we're really excited and certainly the capstone of really the continued power of FBS. Really, I hopefully gives you a sense of while we're in 2018 and having a very good year and intend to have a very good year, we still believe that the future is incredibly bright for our businesses and our team.
We put a press release out this morning to give you a little bit of just reaffirming the hopefully no new news is good news here. We certainly see the quarter playing out as we said. You can see the range on the guidance core growth still in the 3% to 4% for the full year. OMX, we still think 50 basis points to 70 basis points on the full year. For the quarter, steady as she goes, really strong EPS growth in that range of 20 plus percent, mid single digit growth.
I feel good about that. As I mentioned earlier, we're seeing the right kinds of things in our point of sale data that makes us feel good about that and good OMX. So from a platform perspective, Professional Instrumentation continues to see good point of sale. China Semi still is good. Again, I won't and certainly what you saw today is a number of the things that our acquisitions are performing well and adding to our digital connected presence in a number of marketplaces.
Industrial Tech mentioned EMV in a good place, high growth markets continue to be good and in our Automation Specialty, a lot of the robotics initiatives that we've talked about still remain giving that business good double digit growth. So we're in a good position right now and we think we've got a great portfolio. A lot of things will go on between now and the end of the year in terms of the Altra transaction bringing in ASP, but we feel very good about the year. So, that capstone of that is hopefully you got a sense of our continued great brands, the great drivers behind those brands, certainly the experience in FBS to really drive all of our business metrics in a way and you're going to
see a lot of that
in your tour. And then finally, just that we're continuing to create tremendous advantage to our capital structure and our strong free cash flow. And as I mentioned, we think we're on a we're certainly on a journey, but we love the path we're on right now. And now with that, we will take some questions. Cliff?
Jim, in the old days, the aspirations for organic growth were higher. Now I know we're in a slower growth economy, but when you look at the valuation on the stock, which do you and I don't want to do this as an eitheror because that's not fair. You've proven that you can do the operating margin enhancement 50 to 75 to 100 basis points. You've proven that over and over and over and over. But have you proven that you could go to a 5% to 6% organic growth from 4% to 5% or from 3% to 4% or why wouldn't you take lean tools, lean thinking and apply it to accelerating organic growth and really set yourself apart from the past?
Well, I think if you look over the last 3 years, our organic growth has been pretty good. And I think when you look at relative to peers and I think I'd like to take a long term view of that. 2nd, hopefully, Barb gave you some sense of how we are using all of the tools of FBS to drive growth. Relative to expectations, I think, we can look at our markets and what they are and certainly as we continue to evolve the portfolio, I would expect our core growth rate to continue to improve over a period of time. And I think you combine that with our ability to deliver very strong earnings growth over a number of quarters, number of years, we think the continuation of that is really it's the multiplier of that on a regular basis.
And I think while we've only been out 2 years, I think we see that I think that's been in our portfolio and certainly is in our future. Hey, Jim. Can
you talk about trends right now at Tech, given some of the comps you have and some of the commentary you've heard across that sector? Is that slowing a little bit? And then second, can you just remind us the rates the growth rates that you're assuming in your ROIC calculations for Landauer and ASP? And how do you get like comfortable with projecting a growth rate? I mean, you've touched on this, but before you're able to super dig in after you own the companies, how can you get yourselves comfortable with the growth rate for businesses that haven't really done that the last couple of
years? Yes, sure. So the first one on tech, as we said last year, we did have a one time order in the second quarter that would mute tech a little bit this quarter, but we still expect tech to be mid single digit this year. Good so things are good. They've obviously grown double digit in China over the last 3, 4 years in a row.
That's slowing a little bit to high single digit growth and I think we're continuing to see those sorts of trends. So we feel good about what Pat and the team have done at Tektronix. We'll have a number of new launches in the platform later on in the year and that kind of thing. And we look at our 2 year growth rate and 3 year growth rates against peer companies and feel good about our performance relative to how they're doing, maybe taking it back to sort of thinking about market share and things like that. As we think maybe more broadly about how we get comfortable with growth rates in businesses, we start with the market growth rate and is the business performing to the market growth rate?
Yes or no. And then we obviously like higher market growth rates. And to the extent how are those businesses doing against those rates? What the real gap analysis as to what can how can we close that gap to our things we're doing today closing that gap, are there segments of their business that are closing that gap. We felt in the case of Landauer that we certainly had an opportunity to really improve.
That business had been under a lot of challenges relative to some of the kinds of ERP implementations and a number of headwinds that they've sort of self created in the marketplace. We think that market is about low single digit growth. We think we can grow a little bit better than that. In the case of ASP, very similarly, we looked at market players. In this case, we've got some public comps who are growing pretty well.
And so we look at the market. And again we thought the market was growing pretty well. So we get pretty comfortable. And then as Pat mentioned in his quest in his when we were talking about this before, we look at the innovation funnel. We see the and that's a good example of bringing that GAAP question to life.
What's the reality of the GAAP? Is the gap in this case, we thought it had a lot to do with some of the innovation that was launched, but was still not taking complete effect and felt comfortable that that would start to accelerate the business over time.
Any other questions?
Sort of building on that last question a little bit in terms of base rates of industry growth, as you all talk about adding more software, data and analytics into your products, Does that change your view of what the base rate should be?
It will. And I think one of the things that we certainly see and maybe using a couple of examples, the eMaid example that Wes had where that business is growing 20 plus percent, that market is growing high single to double digit as well. We're doing slightly better than the market. That's great. That's how we what we want to do.
And that will inevitably when that business gets big enough, it will start to move the needle. And I think that's what you're starting to see in the portfolio and will start to see in the years to come is that the software startups, both organically and inorganically start to become larger parts of the overall portfolio and ultimately move the growth rate. Maybe that gets a little bit to Cliff's question is the confidence that we think we can move the growth rate up over time is in some respects the investments we've already made. We just need to see those become a bigger part of the company. And as we change the portfolio, certainly by the end of the year, as we start to see some of the in and out of what's going to happen with all of the M and A, the core growth rate, recurring revenue, all of those things are ultimately going to start to shift with the portfolio.
Dean?
Thanks. Jim, you and I talked a bit about this at the break. And just especially when the discussion about the sensors technology came up, Fluke and all the sister companies have then made their mark in handheld instruments, but you seem to have all the right technologies and sensors to do more in line testing and whether it's manufacturing or some kind of process controls and it lends itself to that. And do you consider that to be an attractive adjacency? Are there areas that you think that might be applicable?
Yes. So first, I what Wes showed in that in our condition monitoring solution is a set of connected devices that we sell today, the instruments that we have at Fluke, as well as a set of fixed sensors that can be used as a and I think his answer to that was we're thinking more broadly about the solution, but our sensors enable the solution itself. So I think great examples and certainly you see this in ISC maybe more in a handheld, but certainly in stationary sensors as well. This ability to accelerate the business model and sometimes the ability to have a broad sensor network or instrument network to do that is certainly part of building that business model. Great example of how we think about that.
So certainly in the case of a lot of the examples that we saw this morning where we can accelerate, certainly Linda's business started as a sensor business, it's now a solutions business. So to the extent that we can scale these investments in that way and sensors become a more important part, those are certainly places where to the extent accelerates the broader business solution, we're going to love those businesses we're going to get great returns. More broadly, when we think about sensors, we have a sensor platform. And I think we've been relatively vocal about the fact that we like that business and continue to look for opportunities where we might be able to add to that portfolio over time. Darren, you're not asking a question, are you?
Okay. So we're ahead of schedule by 1 minute 44, it looks like. And I have some instructions. So let me first of all, all on your badges, you have a color. So take a look at that on the back of your badge.
That's your team. And I think we're our various tour guides are going to have a sign with a color. Please join that tour guide. So that's first. We'd ask that you take no pictures in the to do that.
There will be buses outside to get you to your transportation or that is your transportation to your next form of transportation, planes, trains and automobiles in some cases. So we I think this will be our last time to sort of publicly thank all of you for coming. We're incredibly proud of the work we're doing. But hopefully what you heard today was not the pride of what we've done so far, but the excitement of what we can do together as a team going forward. And we appreciate all the trust you put in us every day.
Here's the 5 teams. Folks, raise your colors here and we'll adjourn. We'll take a minute or so to get together and then we're going to go off to these 5 tour sites. Thanks again, everybody. Have a great day and thanks to everybody on the web.