Vantage Point

An interview with Christian Brutzer, 48, President of Heraeus Kulzer North America.

How long have you been with Heraeus Kulzer?

I joined Heraeus in 1990 after my post-grad time in Japan. I had already basically been drafted by Heraeus to set up and work in the joint venture we started in 1990 in the Japanese dental market.

How did you become involved in the industry? How did they know to target you?

That is a very funny thing. The head of Heraeus Holding in Japan, the rep office in Japan, happened to know me as a post-grad in Japan. I was there in a government program learning the language and I was not at all in the dental industry. I had no background expect for one time schlepping gypsum bags out of a gypsum factory in Germany. I had no other involvement in the laboratory business or the dental business. He asked me if I would be interested in this field with doing this with Heraeus, a family-owned company in Germany. I visited, I had an interview with the dental division and I got hooked. Ever since then I’ve been there and it’s been great. The first year was the most exciting year probably because Heraeus gave me a great training program, as I had no idea about laboratories and dentistry. They put me through a year of working on the job while at the same time working in a commercial laboratory, working in R&D, putting together light-curing units and working with a dentist in Switzerland. So it was quite a bit of hands on there. Learning how to do an alloy. As someone with a more legal/commercial background that was very exciting. It was a great time.

Tell me a little bit about your background.

Technically I am from Germany but I am German-Australian: German born, German raised and migrated to Australia at a later stage actually with Heraeus. By trade I am a forwarding agent. I did logistics in my first life, supply-chain management. With that in my pocket I financed my university and I did law, philosophy and economics and majored in law. It’s international law but basically its business law - mergers and acquisitions, labor law, intellectual property and so on.

In Germany in the legal service you have to do some public service where you work as a lawyer - immediately the day that finished, I joined Heraeus and worked first in the export department. I was the deputy, manager of the export department, of Heraeus. I was responsible for everything east of Burma and from North to Japan to South to Hawaii. So that includes Southeast Asia, Japan, Australia and the islands between Hawaii and Australia.

Tell me about your family.

I’m married (to) Regina. We have our two kids here in the United States and three older ones in Australia.

How would you describe your management style?

I think my management style is one that is based on the principles of our company and the principles of our company, amongst others, are that we respect each other and we work with each other. So, it’s one that is of leadership, I think your staff needs to know where you’ve come from and what you stand for. It needs to be one that is not only academic and theoretical but has first hand, hands-on experience that you share. We respect each other, we also have to have an atmosphere that is angst free where you can actually discuss issues, controversial issues, and come to the best results and then just run with it. My first boss at Heraeus Kulzer had one simple rule and it was that you must have the responsibility and freedom to make entrepreneurial decisions. That’s basically my leadership style.

Would you say that Heraeus Kulzer and other manufacturers have a responsibility to educate technicians because of the diminishing number of dental technology programs?

I would be hesitant to say I have a responsibility. If I have a responsibility then I can be called upon to finance it. I would say that it’s in the interest of any manufacturer that you educate your customers. In particular in our industry I think Heraeus Kulzer has had a long history of that. If we educate our customers about the products and the processes, the natural consequence will be the customer will buy our products because we can show him or her tangible benefits. So for us, training was always our best advertisement. Many years ago in the 1970s Heraeus introduced vacuum pressure casting to the dental technology base. We did that virtually only by training, by showing the customer first hand how to use it. The benefits were better casting, reduction of the use of precious metal and the reduction of scraping of fees with waste metal. You can see it’s in our very own interest to have good and continuous education. Whether you do that in your own training centers or you do that by teaming up with organizations like NADL or others that’s a different story.

What does the global marketplace look like from behind your desk?

Well, I think the global marketplace in the proverbial meaning has become the global village. Today almost every day you talk to someone else who has business interests somewhere else, whether it is in Canada, Mexico, the Philippines or China or India. The dental community has become a very, very small community on a global basis. There are certain players who play in every strategic market that there is. So any decision that you make today in the United States, you have to put in context of the global reality that everything migrates, everything is known. We are not on an island anymore in the United States; neither are other countries - Germany in particular.

With your experience with working with Heraeus Kulzer in China, what would you say is the fact and fiction there? Will China have a 5,000-technician laboratory that functions like an auto plant?

I don’t think so because to manage 5,000 people is still something very difficult (when manufacturing) individual medical devices. Will they have huge laboratories? For sure. We already have laboratories that are close to 1,000 people there. The growth of China will be, from my point of view, curtailed by its ability to have skilled labor. Already now if you look at the increase in domestic demand there, the biggest problem identified by the Chinese Dental Association is the lack of skilled technicians. Over the last four years, over and over again the Chinese Dental Association has reached out to other countries and to manufacturers to help them to come up with a program to train dental technicians for the domestic demand. Now imagine what’s happening right now with the trend of outsourcing. That takes away the best dental technicians from the domestic market because for a few dollars more they can work in an export laboratory and make a few dollars more a month. So taking loyalty into account, in China that is a proposition that a lot of dental technicians take and change their jobs.

But isn’t the United States also having trouble finding qualified technicians?

Absolutely. I think one of the key challenges that is ahead for the dental laboratories in the United States is to train and retain skilled labor. That is the whole backbone of the discussion of automatic processes and outsourcing. It’s not so much about whether or not we are competitive but whether or not we have a skill edge over our international or global competitors.

Are there big differences in how a laboratory in China approaches business as opposed to a laboratory in the U.S.?

How most of the good laboratories in the United States are run is actually a model for many countries not just China. The knowledge about processes and the knowledge of management of the bottom line, management of efficiency, management of marketing your product to the consumer, in this case the dentist, that is really outstanding in the United States. There’s a lot of knowledge there. In China I still see a lack of the economic dimension of running a dental laboratory.

What do you mean by that?

I mean, for example, if an American laboratory (owner) would go to a laboratory in China and set up shop there, their knowledge of how to market and how to run the place is far superior to any Chinese domestic laboratory I’ve seen. You actually see in the laboratories that work for exports the guys that actually manage it are mostly American trained or German trained.

Canada requires a patient consent form if a patient’s restoration is manufactured outside of Canada, do you ever see something like that happening in the U.S.?

I don’t think that they FDA would go down that road. I think the FDA has an approach that they do not want to put up unnecessary regulatory barriers for the re-flow of goods. The approach of the FDA is to have safe medical devices. The regulatory climate that is in place right now for outsourcing from overseas laboratories is that the laboratory is registered, that it meets GMP regiments and that it has a registered domestic representative. This already warrants the safety of the device.

What advice would you give to U.S. laboratories that are concerned about the state of the industry and staying competitive in it?

First of all, outsourcing is nothing new. It’s also nothing new in the dental industry. When I started 15 years ago being responsible for Southeast Asia at that time there were already 1,000 man plus laboratories in Thailand. There were huge laboratories in Singapore that worked exclusively for the export markets. There are laboratories in the Philippines owned by American laboratory technicians that have been in business for more than 20 years. So this has always happened. I think as a laboratory owner today, you really need to make a choice of where you want to be. Do you want to be in a low-end market? If you are in a low-end market you most likely have to face the competition and you have to rationalize and, yes, use outsourcing. Is this the way for the typical 10-15 person laboratory? I don’t think so. I think that the typical laboratory, the mainstream laboratory in the United States, needs to focus on its client base and just have superior services.

An example, if you know your dentist and you establish a good relationship with your dentist, you most probably can make the point that it’s about the laboratory creating more with the value creation. Such as the technician who can help with shade taking, which will help with shade matching, which will lead to better restorations. The laboratories can help with impression techniques to help increase the accuracy of impressions and thus models. They can reduce the need for second-seatings because the restoration fit the first time.

Chair time cost for an hour is about $700 these days. If a crown doesn’t fit and the dentist has to reschedule for a second fitting for the patient and he’s missing 30 minutes for the second seating, he just lost $350 worth of productive time. So, a laboratory that is in close contact, close cooperation, can create value there by better fitting high quality works that far outweigh a couple of dollars saved by using an outsource Chinese restoration.

Logistics got better, but turnaround time from China is still a week. What if there is bad weather and the plane doesn’t land on time? Are you calling your dentist to reschedule? Outsourcing is for a certain clientele, but it isn’t for everybody. You have to make your choice. Which clientele do you want to cater to? Focus and then be true to your business model.

People complain about the QS/GMP what are the pros and cons?

When I joined Heraeus in 1990, I came from Japan and GMP and total quality management were buzzwords that came from Japan in those days. Heraeus was one of the first companies in Europe that had the ISO9001 certification. We were running a program on a similar basis as the ISO9001 quality management before there was a body in the European Union to certify us.

I believe that you run this not just as something that creates a piece of paper on the wall, but as something that actually gives you insight to making your processes better and becoming a better supplier. Then it has a very, very huge justification. When you start it up it is a lot of work and a lot of investment. But actually with the new ISO13485, which has a clear medical device focus and a customer focus it really helps you understand who is your driving force and what your whole being is about - it’s all about the customer.

For the regulations as they are in place, one thing I am a little bit sad about is that when we started out in 1990 we had the hope of global harmonization, which would create a level playing field for everyone with the same standards. I feel that these efforts have been weakened and we see more localized requirements. The Chinese came out two years ago with a new medical device legislation that doesn’t match anybody in the world. The Japanese have basically stopped their harmonization efforts. The Canadians just came out with rules specific to Canada that you have to match. The burden of compliance these days is going up again and it doesn’t make the products cheaper. At the end of the day the patient has to pay for it. Everybody at every level has to pass the costs on.

How do you see the U.S.’ enforcement of its own importation regulations?

It’s a little bit like Homeland Security. Can you really be able to have 100 percent policing of what’s coming in? I don’t think so. The cost-benefit would not be there. Is the FDA doing an excellent job with it? I think so. I think the FDA is doing a great job. There are many mechanisms in place that help the customs and FDA authorities to stop wild card imports. Still stuff gets through - gray imports, unregistered medical devices - sure. People who want to cheat the system will always try it and yes, some people will get away with it. The thing is you never want to get caught by the FDA. The FDA is a very effective agency.

What do you say to a laboratory owner who says my chances of being inspected are so low why should I bother to comply?

Take your chances.

We want to comply. In our company we want to comply with FDA regulations whether we believe that we get away with not complying or not. First of all it’s because I believe the rational behind the FDA regulations is worth complying with in the first place. The regulations in the 500 series of the medical act, they are not dumb. They are not written by pencil pushers who just want to create bureaucratic burdens. They have one purpose only and the purpose is one we should all embrace - to make medical devices for the good of the public.  For example, if the one flawed apple gets caught and it makes huge national waves, what interest is there overall for the dental industry because one or two think they can get away with it and not get caught? It’s in the interest of the industry to be clean and to have the welfare of the patient at heart. It’s the patient at the end of the day who pays everybody’s bill. The ethical way to do business is not to jeopardize it in the first place. The FDA regulations help us not to jeopardize patient welfare, so why not follow them?

Any standards of operations in regards to regulation that you and other manufacturers use that could be applicable to a dental laboratory?

You have to have a quality handbook where you describe your processes. I think a laboratory should have a similar handbook describing their processes. Itís not rocket science. Just write down what you do and try to stick with it. Verify it so that in case something goes wrong you have a better chance to rectify with a corrective action and prevent a further occurrence. The so-called CAPA process is something I would recommend to any laboratory. Corrective action and preventative action - so that you analyze the problem as it occurs and you address the individual problem to fix it. Let’s say the crown was bad so you fixed the problem by doing a free of charge remake for the patient. Then the next question is why did this go wrong and you ask for the root cause in order to be able to prevent a reoccurrence of the incident in the future. That immediately translates into an efficiency drive in your organization. It results in happier customers and more business.

Do you ever see a day when there are international standards for dental prosthetics?

No. I think that individual countries will always try to do their own individual legislation. We have as far as products are concerned a number of international (laws) that warrant product quality. Education and standards of care are still very close to an individual government. I don’t see that there will be a major drive in our industry, the dental industry, for harmonization on that part. We are also much too small. Pharmaceutical and medical industries, that’s a different story, but dental is so small on a global basis that most of the effort would not warrant the benefit.

Correct me if I’m wrong on this but I’ve been told that just as with any customer markets that there are different price structures for U.S. and non-U.S. markets - the emerging markets. Is that true and, if so, are U.S. laboratories subsidizing manufacturer’s forays into the emerging markets?

That’s a very good question. It’s global economics - different markets have different prices in any industry. They don’t necessarily have different prices for the same products. Certain products might be modified for different markets. As an example packaging or raw materials might be different. In some emerging markets different prices apply, because in the U.S. there is a bulk advantage. I think that demand in emerging markets these days subsidize the established markets because of increased demand from emerging market for similar products actually creates additional volume here. The volume benefits result in process volumes that make it possible to stay in production with certain products or make certain production viable in the United States.

Can you give me any kind of example?

Let’s say you are in a typical situation where you have a commodity that needs to have a high volume to be competitive in the market, but the price is already rock bottom. Anything that you export to a third country lowers your overhead costs per product unit and makes this product viable for continued manufacturing in the United States. If, for example, you need 100,000 tons a year of a product A, but the domestic market today only takes 50,000 tons you would lose this production in the United States. By creating additional demand overseas you can keep production of this product here.

What would you say to people who say that’s a lot of poppycock?

I’d say face the realities of the marketplace. Are you for example paying the same price for products made by a laboratory in China? Is your income level the same as in China? The reality is there are differences in buying power and there are differences in demand. What are you telling somebody in the United States who wants to buy Volkswagen? Should he pay the price that is paid in Germany or China for it? Germans may pay 20 percent more, Chinese sometimes 30% more, for the same Volkswagen with a leaner or similar spec. The marketplace in America is extremely competitive so to compete you have to have certain price levels. Taxes play a big role. In the European community where there are no import duties anymore, you have less costs in bringing the product to market. Where you have a common regulatory process, you have less costs. In China you have import duties on imported products. You have a high income tax on foreigners. Different regimes create different pricing. The question really is, are we competitive in the United States? I think yes our productivity is very high. Our knowledge base is good. We have a client base in the patients who can afford our level of pricing.

I heard there was a six week or six month stoppage in alloy shipments. What happened and can you tell me what you’re doing to strengthen relationships with affected customers?

That’s news to me and absolutely not the case. We are in a competitive environment and we like to talk about one another. What happened was in July of last year we moved our production for alloys from our New York facility to our new state-of-the-art campus down in Arizona where the Heraeus Group has a facility that encompasses not only the dental manufacturing side but also encompasses other interests that we have, such as magnetic storage, medical devices for pace makers and so on. Of course during the move of a production facility there are always hiccups. We had an emergency stock, but at the same time we pushed sales so, yes, we had some minor hiccups. We worked with our customers through that by replacing some alloys with better alloys at the same price as the alloy that they ordered. We were not out of stock for six weeks or six months. The customers that know us know that we are there for them when it rains and when the sun shines. We try to work through partnerships and partners support each other.

Does that philosophy work whether it’s between a manufacturer and a laboratory or a laboratory and a dentist?

Ideally, we are a triangle supporting the patient. In all fairness, a dentist without a laboratory is nothing in crown and bridge. A laboratory without a manufacturer that backs it up also can’t survive. We are in this together and we are a supply chain. We have to work as partners in this supply chain.

What can associations do to make tradeshows more valuable for manufacturers?

I think there should be first of all enough time for the audience to visit. If tradeshows are reduced to the 15-minute coffee break between programs, it definitely isn’t worthwhile to be there. If a tradeshow is seen as something where there is really the ability to exchange ideas and exchange offers than this is worthwhile. A good example is the CDA in California on the dentist side. A good show on the laboratory side is the NADL events for example.

What do you do when you’re not working? Are you ever not working?

Everyone in business today whether you’re a laboratory owner, a publisher or in my line of business, realizes the demands are growing. Right now I’m still trying to settle into my new environment here after five years in China and coming back to the states - having to reorganize ourselves with house and kids and schools and everything is still the main challenge when I’m not working.

How old are your kids?

The ones with us are 15 and three. Hopefully, there will be change when the boat is back out on the lake where we live and we can be out there and paddle and sail a bit. That would be good. When it comes to traveling, going to Australia is one of our best past times. Sitting on the beach and reading and doing nothing.

What do you like to read?

Right now I’m very much into books that deal with the mutiny on the (HMS) Bounty. On the other hand, I am just reading the book by Kantor on confidence, which is one of the leadership themes that are of interest to me. The question is how to lead an organization to success is something that is of course of interest to me beyond it’s application to everyday life. Just the general reflection on how to get the best results.

Was getting your present position a career defining moment?

I think from my very, very personal point of view this is always the job I wanted to take. It’s just an exciting marketplace. To be in the United States in dental is just really exciting. It’s a lot of fun. There are a lot of good people in this industry. I enjoy being in the United States.

When I was a general manager in Australia I always had my mind already on the United States. So when I finally left Australia, I made it to vice president of Jelenko. That was something that was a qualitative change in my life. Coming to the United States, working for Jelenko as vice president and being responsible for the international business and manufacturing side here in Armonk was quite something. It only intensified my desire to come back here one day and lead this organization.

On the other hand, when the opportunity came to go to China I think that was more of a challenge than anything I can see here today because China is such a different animal. It’s a different culture and a different legal and economic environment. It’s growing so fast and the language barrier there was much more different. My wife is from America, so coming back to America was almost like coming home. I knew the area I’m living in here now.

Is it important as a leader to be involved in community groups?

I think it’s absolutely mandatory that you give back something to the community that supports you and your business. It’s something that is enormously rewarding. You saw most probably a project in North Korea. Now when I say North Korea to nearly every American friend I have, the hair on their back goes up. The fact is that there is an orphanage in Pyongyang where there are about 80 kids who before we went there hadn’t had any hot water, any sterilized clean water or any hot meals for two years. We raised the funds. We made sure with a Rotarian/UN representative in Pyongyang that a solar oven - a device that collects sunrays and puts them into the cooking chamber therefore you can boil water, cook bread and cook rice - was delivered to this orphanage. We monitor on a constant basis through this UN representative that it’s still there. These kids have a better life than they’ve ever had before. Now this is something that is so rewarding. You can’t measure that with anything else. It has nothing to do with whether it is a communist country or a totalitarian country or a democratic country. It has to do with the fact that there were 80 kids who nobody looked after and we did it for $2,000.

Also, there is Polio Plus. Have you ever seen somebody who was riddled with polio? It’s not a pretty sight. My godmother had polio as a child and she had her life in braces. Rotarians around the world have raised the funds and made it possible that children all over the world, especially in countries that can’t afford it, get the vaccinations free of charge to get rid of this disease for mankind. This will only be the second disease that is eradicated. It’s been a 10-year effort by private citizens of the world. To be part of that effort is enormous. It’s almost as import to me as doing my daily job.

Is there anything you’d like to tell the industry?

This is a great industry and instead of reflecting on the downside we should be really be proud of ourselves. We are a part of an industry that makes people smile. We really make a difference in people’s lives - whether we’re the dentist, the laboratory or the technician at the bench or the manufacturer, the person that stands in our production site in South Bend and does gypsum for a dental laboratory. All of them, each of them in their own stage, contribute to this thing and we should be proud of that.