“See this?” Mal Mixon asks as he picks up a mobile oxygen canister, housed in what could easily pass for a trendy athletic water-bottle carrier.
“You can take this with you outside, and you don’t have to roll around one of those huge oxygen tanks. It helps people live their lives.”
For a seemingly healthy man, A. Malachi Mixon III is extremely preoccupied with products for those with disabilities. It’s an occupational hazard of sorts for the CEO of Invacare Corp., the leading manufacturer and distributor of nonacute health care products such as oxygen tanks and wheelchairs.
As he walks through the Invacare store on the first floor of the company’s Elyria headquarters, it’s easy to see he’s passionate about these products, which range from walkers to state-of-the-art custom wheelchairs.
“You can pick this one up with one hand,” he says.
It’s true. At 15 pounds, the titanium chair is lighter than most bicycles, one reason Invacare is the wheelchair of choice for 75 sponsored wheelchair sports teams around the world.
And if he has his way, gone are the days of 50-pound, avocado green wheelchairs with the turning radius of a ’69 Buick. In their place are sleek, maneuverable chairs and scooters that — as the marketing material states — “Anyone would be proud to be seen in.”
“You can get a chair to match your evening gown,” boasts Mixon.
Chairs come in colors including Deep Blue and Candy Red, with or without handles, and in a number of weights and sizes.
Under Mixon’s direction, Invacare has focused on changing perceptions, changing laws and changing the way consumers pay for health care products. This is, in part, why it has grown from $19.5 million in sales in 1979 to more than $1 billion last year.
However, it’s not only how Mixon runs the company; it’s also how the company is changing the industry that explains Invacare’s success and how he plans to double sales to $2 billion in just three years.
Perceptions
No one wants to think about getting sick, losing mobility and having to rely on a wheelchair.
Of course, there’s an entire population of people who don’t have the luxury of “not thinking” about these things. But for everyone else, it’s difficult and uncomfortable to comprehend the life changes that come with being confined to a wheelchair, bed or oxygen tank.
In 2000, spending on health care in the United States totaled $1.3 trillion or 13 percent of the Gross Domestic Product, the highest among industrialized countries. Most estimates predict that by 2012, the nation’s health care spending will increase to $3.1 trillion, an annual growth rate of more than 7 percent.
The latest report from the U.S. Department of Health and Human Services states that the average life expectancy for men and women who reach the age of 65 is now 81 and 84, respectively. That will bring the percentage of Americans over the age of 65 from 12 percent to 20 percent of the population by 2050.
In the past, wheelchairs and other products were viewed as necessary evils, filling a need with basic efficiency and little thought for those using it. A wheelchair was merely a way to mobilize an individual.
Mixon took Invacare in a much different direction, breaking from the traditional perception of a wheelchair being a necessary evil to one of it being something that can enhance life and facilitate activity.
Design, innovation and patents
Long before handicap spaces were mandatory for businesses and curb cuts were designed into every downtown street, people weren’t always comfortable going out in public, let alone with putting a lot of money into a wheelchair.
That was conventional wisdom in 1979, when Mixon and his partners took over Invacare. Sales were at $19 million, the company employed 350 people, there was no business plan and there were no new products in development. Things had to change.
Mixon understood that in order to dominate the market, Invacare was going to have to effect change. That change would have to come from a mix of factors, including what he refers to as “disruptive technology,” best defined as a new product or service that disrupts an industry and eventually wins most of the market share.
“The jet engine was disruptive technology,” Mixon says.
By 1982, Invacare had developed and commercialized the first computer-controlled wheelchair. A few years later, it acquired a company that specialized in ultra-light sports chairs, becoming the leader in that field.
Since then, it has continued to ramp up product innovation. With a healthy R&D budget — enhanced by inexorable improvement in technology — the company has a rolling three-year product development schedule.
“Customers are never completely happy,” Mixon says. “And if you ask them, they will always want more options. We have to keep improving our products and driving down costs. The objective is to strategically obsolete our own products so that the importers of copycat products have to chase a moving target.”
As with any retail product, the market is competitive with foreign knock-offs — a real threat, even for something as complicated as a motorized, electronic wheelchair.
“We have a patent attorney sit in on every product development meeting,” says Mixon.
The idea is to get products to market quicker, and in the process, slow down the copycats.
“We failed to do that in the early years,” he says. “We failed to protect our intellectual property … they would copy it in China and come in under our price.”
While disruptive technology is a key factor in keeping ahead of copycats, Mixon also focuses Invacare’s efforts on branding and marketing home heath care products. He firmly believes the market will become more consumer-driven as government and private insurance reimbursement change.
Mixon is well aware that this aging generation will not settle for the limited product choices previous generations accepted with little hesitation.
“Aggressive product development and stronger marketing are going to refuel our growth,” he says. “We held back a bit on development in the late 1990s because of reimbursement and a competitive environment, and we may have delayed some innovation in the process.”
Invacare introduced 45 new products in 2002. It is the market leader in six of nine product categories and often second in others. And by driving the market, Mixon can stay on top of consumer needs.
“By the fourth quarter 2003, we want to have 90 percent new product, and we will achieve this,” he says. “We are always wrestling with the next product because every product can be improved. Our job is to make our old products obsolete.”
The Palmer method
It is a sensitive and daunting task to create positive brand awareness with products that traditionally no one wants to think about.
“You have to understand your customer,” says Mixon.
Under his direction, the company has taken “a lifestyle approach” to developing and marketing its products.
“How they feel is just as important as what the product does for them,” he says. “We are not just dealing with home mainstreaming and keeping active. We care about how the chair feels. We are making them wild and different. Our chairs look like Harleys.”
To drive home the lifestyle image, Invacare also designs for sports, ballet, pediatrics, and, in the case of Christopher Reeve, movie roles. It all ties in with the “Yes, you can” tagline that Invacare affixes to its brand.
Mixon points out that Invacare spends significant R&D dollars on products that are lighter and sturdier and allow customers, regardless of their disabilities, to lead as normal a life as possible. This is where Arnold Palmer comes in.
Why use an able-bodied, famous athlete as the spokesman for products targeted at less-mobile and disabled consumers?
“Arnold Palmer represents all the things we stand for,” says Mixon. “He’s world-renowned, highly regarded, known by young and old, and in good health, but at the age we’re identified with.”
Invacare’s identity is essential for the company’s long-term strategy, Mixon point out.
“We want to influence brand choice, we want them to try a different brand … we are a long way from that, but we want to educate the consumer,” he says.
Invacare is banking on the health care products industry moving from a provider-driven necessity to a consumer-driven, brand-sensitive retail product. Thus, Mixon wants to create a strong awareness of its product line, one that will drive consumers to choose and, in some cases, request his products over others.
Mixon realizes this is a long process.
“Building a brand is a journey, not a destination,” he says. “It’s a 10- to 20-year decision. You really never know what’s going to happen, but you hope all the effort creates a halo effect of awareness.”
The new health care consumer
Although sales of its various wheelchair models make up only 50 percent of its overall business (down from 90 percent in the late 1970s), Invacare is still known as a wheelchair company.
Mixon plans to change that by increasing awareness and brand recognition of Invacare’s growing home health care line, which is essential to the overall growth of the company.
“Many consumers don’t know these (other) products exist,” he laments. “We are the only company in our industry working on branding.”
The global market for home health care products is approximately $4.5 billion, with a 5 percent to 7 percent growth rate projected in the United States in the next three years and 23 percent to 25 percent growth in the next 10 years.
“Recent surveys show that approximately 70 percent of adults would rather recover from an accident or illness in their home, while approximately 90 percent of the older population showed a preference for home-based, long-term care,” Mixon says. “Our focus is on the home and what our customer needs at home.”
For Mixon, it’s not enough that internal growth can be achieved simply through overall market growth. Instead, he is driving Invacare into new consumer-focused markets with two new product lines this year.
“We are planning a major introduction into the sleep apnea market,” he says. “It’s a $500 million market and we estimate we can capture 10 percent.”
And a new line of scooters for consumers who do not need full-time mobility assistance will be marketed through medical distributors and to the general public in an attempt to capture some of an estimated $125 million market.
As part of this process, Invacare is changing the way health care product companies are approaching and selling to consumers. Its market was traditionally health care providers and suppliers but is now becoming the end user. The focus is on marketing products more like a retailer and less like a manufacturer.
“Now most of our products are paid for by a third party,” Mixon says. “Our breakdown is about 40 percent paid for by Medicare, 10 percent Medicaid, 40 percent private insurer and 10 percent out-of-pocket, cash.”
While Invacare’s primary customer remains the home medical equipment provider, Mixon is banking on that last 10 percent growing as the company moves from provider-driven sales to consumer-direct sales.
The company is also focusing on reaching the end user, creating distribution networks for its home health care products that include retail drug stores, HMO-based stores, mass merchandisers, direct sales and the Internet.
Invacare’s top 10 customers account for about 13 percent of 2002 net sales, although no single customer accounted for more than 5 percent. Internet sales made up approximately 14 percent of North American sales.
While home health care products are largely recession resistant, they are highly susceptible to the vagaries of government policy. With health care policy and regulations in constant flux, any small ripple of change can have a profound effect on growth and profitability. In fact, Invacare is directly affected by government regulation and reimbursement policies in virtually every country in which it operates.
The company is acutely aware of and involved in any governmental movement involving home health care. After 10 years of lobbying, Congress in 2000 enacted the Benefits Improvement and Protection Act (BIPA), which included annual cost of living adjustments and eventually implemented a consumer choice upgrade, allowing patients to pay for upgrades in minimally medically necessary items.
Many of those issues fall directly in the lap of government. Legislation dictates reimbursement, subsidies and approval of many, if not most, of Invacare’s products. And with Medicare at the forefront of the government’s domestic agenda, Invacare is taking every opportunity to be part of those changes.
Mixon is acutely aware that the changing government regulations and reimbursement policies will continue to dictate a good part of Invacare’s growth patterns, but he remains optimistic.
“We plan to return to double-digit growth. We will be at $2 billion in 2006, half through internal growth and half through acquisition,” he says.
Invacare plans to expand in every direction: new products, new countries and new acquisitions. According to its 2002 annual report, it expects its 2003 acquisition program to bring in $75 million to $100 million in annualized sales.
Foreign acquisitions will certainly be part of the mix, as more than a quarter of Invacare’s sales and earning come from outside the United States.
“A couple of years ago, Europe was a problem we needed to fix,” Mixon says. “Now we see Europe as a major profit generator.”
Involved with a cause
All of this seems to be personal for Mixon. You only have to talk to him a short while to figure out that he’s deeply interested in the rights and advancement of the disabled.
He can talk at great length about making eye contact with someone in a wheelchair, the challenges of seeing a movie or going to a restaurant.
“We’ve become involved with a cause,” he says. “We tried to live the lives of the disabled … previously, there was no sensitivity to their issues.”
His hope is that Invacare will be part of changing all that.
“With technology and innovation, the disabled can do whatever the able-bodied can do,” he says. How to reach: Invacare, (800) 333-6900 or www.invacare.com
