Prescription For Change - InformationWeek

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12:05 PM

Prescription For Change

Owens & Minor's Smith is helping medicine catch up with technology

When Craig Smith had surgery three years ago, he saw firsthand how nurses scrambled to put together all the necessary surgical and medical materials. He knew there had to be a better way. As president and chief operating officer at the nation's largest health-care products distributor, he was in a good position to help find one.

When your goal is saving lives, not just increasing revenue, investments in business technology take on a whole new perspective. Despite significant strides over the past few years, the health-care industry is still about 20 years behind the times, says Smith, who's been president of Owens & Minor Inc. since 1999 and chief operating officer since 1995. It's time to play catch-up.

Young doctors are becoming much more savvy about technology, Smith says.

Photo of Craig Smith by D.A. Peterson
"There's a huge push at the senior level in hospitals to automate and streamline as much as possible," Smith says. "There's a real opportunity to have better internal customer satisfaction with patient safety, and there's a huge opportunity in process savings versus product savings."

The 52-year-old executive, who just recently started using a BlackBerry device, also sees a sea change in physicians today. "As they come out of medical school, they're much more technologically advanced."

All of this bodes well for an industry that's increasingly looking to business technology to reduce medical errors, comply with regulatory demands, deal with nursing shortages, and cope with rising pharmaceutical costs.

Owens & Minor is staking its growth on making tools available to help automate processes "from the bedside all the way back to the manufacturer," Smith says. As the No. 1 business-technology innovator on the 2001 and 2003 InformationWeek 500 lists, Owens & Minor knows a bit about optimizing business processes. "Customers are looking to us for help integrating or upgrading systems and materials management," Smith says.

That means operating more like a technology vendor and outsourcing provider than a traditional products distributor. In addition to offering real-time order information and inventory and warehousing services, the company's vision includes offering third-party logistics services that enable it to package products from multiple sources--even its competitors--for its hospital customers. So when the products arrive at a hospital's loading dock, they're ready for use. For nurses, that means no more fumbling around to put surgery packs or other materials together.

It's all part of a transformation that will see technology playing an even bigger role over the next three to five years. Owens & Minor is actively investigating technologies such as radio-frequency identification tags, Smith says. He sees tremendous benefit in hospitals using the tags on everything from IVs to hospital beds to help hospital staff keep track of equipment. "We're headstrong into RFID. It will have a significant impact on our business," Smith says.

The key for Owens & Minor with any new technology initiative, though, is making sure whatever tools it builds will be applicable to 80% of its customer base. It's dangerous to get too far ahead of customers in an industry that's still behind the times, Smith says. Owens & Minor gets about a penny on every dollar for the products it provides to hospitals. "We don't have millions for R&D. We need ROI for everything we invest in." Judging from its performance on the InformationWeek 500, it seems Owens & Minor's business-technology investments are paying off.

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