The other part of the model is the Danaher Business System, or DBS. Beginning as a homegrown version of the Toyota Production System, DBS has evolved to include a large number of business activities—wherever the principles of efficient process flow can improve performance. Danaher applies DBS to every acquisition in a rigorous and consistent manner, using a unique set of tools for continuous productivity improvement in research and development, go-to-market activities, the plant, supply chain and backroom operations.
Here’s how Danaher CEO Larry Culp describes the process:
When you boil it down, simplicity, focus and repeatability are at the heart of everything. You can see this in the three things that we do with a newly acquired business. First we expose them to as many of our tools of DBS as we possibly can in a very practical way—not in a classroom. We take the leadership team for weeks to see our factories, go into our labs, sit in on management team meetings, to sense and smell the rigor and repeatable discipline…. We then have them do hands-on kaizen work—sometimes in the factory or sometimes in another part of the business—in order to begin to absorb the tools, culture and unifying vocabulary fully.
Second, we insist that within the first 100 days [after an acquisition] we have a shared strategic plan for the business following the very specific blueprint of DBS. Our system tries to keep it simple, often simpler than it ever was before—What game are we playing? What is the context? How can we win against key competitors?... In general, we find that our process increases focus on the core in about 60% of the time versus what it was when we bought the company….
Finally is the human element, where, through this process, we shape the team that can implement the plan.
Danaher’s data shows a consistent ability to improve the margins of acquisitions by applying DBS, often by as much as 5% to 10% of revenues.