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TheStreet Open House

Stryker Corporation - Shareholder/Analyst Call

This slide is what I'm going to refer to as a transition slide. Escalating costs driving evolution not only in health care but within Stryker. This data comes from the Center for Medicare & Medicaid. In 1980, $235 billion was spent, and a slice of the pie where Stryker contributed or participated was other medical durables representing 6%. Fast forward 29 years later, right in the midst of the deep macroeconomic dive, that pie had increased in revenue spent 10x. Now as a company, we've participated in medical durables. Our slice went to 3%. But on an absolute dollar basis, clearly, the slice of the pie is bigger. And frankly, our customers live in the middle of that circle. They don't care that we only operate in the 3% of the pie. They have to rationalize the spend all the way around that pie. So rather, in 2009, sticking our head in the sand, we said, "How do we help our customers address this expansive growth in spending in health care? And what can we do as a company to reposition ourself?" So I put this chart up here to give you a bit of the impetus for some of the changes that we have made in the company over the prevailing years. And more of that we'll talk about today.

So back in 2009, as we sat around and said, "How do we reposition the company, very successful company? We don't want to ignore our past but no, we have to change for the future," a couple of the key items that came in our agenda. The first 2 really fall into Lonny Carpenter's world: quality and operational efficiency, highly decentralized company. Multiple plants, multiple quality systems, both internal evaluation and external evaluation via the FDA. So that is not going to carry us forward.

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