On January 21, 2020, Gaurav Agarwal was appointed CEO of Vyaire Medical (Vyaire), a global medical-device company fully dedicated to respiratory care.
Within weeks of taking the new leadership role, the COVID-19 outbreak became a global pandemic and orders for ventilators and associated components increased at an exponential pace, forcing Agarwal to confront the biggest challenge of his career. McKinsey’s Ajay Gupta, senior partner emeritus, spoke with Agarwal about how he responded to the crisis. Edited excerpts of Agarwal’s comments appear below.
I was excited to join Vyaire because it’s a pure-play respiratory company, which I have experience in from my time with GE, and because I saw an opportunity to deliver real innovation, a core passion for me. Within days of being in the job, the phone rang. It was our international team, saying we needed to do something different in terms of supply. COVID-19 cases were running rampant in parts of China, where we have a large ventilator presence, and they were asking to place orders which were of a greater magnitude than what we would ever expect.
My first action was to start pulling the supply chain to redirect resources. Soon, I got another call to say our Italian team in Milan was completely overwhelmed with requests for orders, followed by our Spanish team in Madrid. It quickly became clear that the COVID-19 outbreak was becoming a global concern and that it was going to hijack my agenda for the next several months, maybe even the whole year.
I lived in China during the SARS epidemic in 2003 and also ran a respiratory business at GE during the swine-flu pandemic of 2009, so I understood the potential for the outbreak to become global very quickly. Our chief medical officer did an epidemiological risk assessment, and I read through case reports coming out of China. We got on the phone with the executive leadership team and said we need to manufacture five times the number of acute ventilators that we would normally contemplate. There was pin-drop silence at the end of the phone line. Then one of our supply-chain leaders said, “That’s absolutely nuts! It just can’t be done.” Little did we know that was just the start.
We started to get calls from customers placing large orders across the US, and we realized we needed to be even bolder in our preparations. As a respiratory-focused company with one of the largest installed bases of critical-case ventilators in the world, we knew that we played a vital role in the response to COVID-19. We could not afford to be limited in our thinking. This was a moral and ethical calling.
“As a respiratory-focused company with one of the largest installed bases of critical-case ventilators in the world, we knew that we played a vital role in the response to COVID-19.”
We got the company on a war footing and put in place what we now call the “Bold Vyaire Plan,” to increase our production rate from our initial projection of five times more to a target of up to 20 times more units. It was clear we didn’t have the capacity to build ventilators on an industrial scale, so achieving this plan would require innovative thinking. We’re not in the business of selling millions of mobile phones a day; between us and our competitors, we each make between 10,000 and 20,000 units a year. We needed a production system that would make that many units in three weeks.
Our plan also focused on how we could best ensure our ventilators were delivered immediately to the bedside. From the start, our mantra was simple: we will follow the disease and go where the clinical need—the human need—is the greatest. So initially, we diverted all of our production to China, and then shifted to Europe, and then to New York and New Jersey and other US states where the clinical need was the greatest. In areas of Latin America and Southeast Asia, there’s still a mismatch between clinical need and the ability of some health systems to be able to meet it. We had many tough discussions with customers and aimed to be open and transparent with them about all the constraints of time and units. Customers did not like it at first but ultimately they understood it.
Choosing a partner
We were not the only ones that recognized the disconnect between demand and capacity. I personally received calls from global leaders of big and small companies, including major automotive manufacturers and tech companies. They all wanted to help.
The medical-device industry is highly regulated. You have a few hundred components that all need to be managed at super-high levels of quality control. The closest analogy, as I learned when I worked at GE Healthcare, is aerospace. I did some work across functions with people at GE Aircraft Engines (now called GE Aviation) and found they spoke the same language.
We ended up forming a strategic partnership with Spirit AeroSystems in Wichita, Kansas. It was a critical decision for us. I quickly connected with (president and CEO) Tom Gentile, and he immediately said, “How can we help? What can we do?” Since the COVID-19 pandemic had reduced the demand for air travel, they had not only the capacity and a highly trained workforce but also a rigorous quality-management system already in place. I thought we would need to work together for six or nine months, and I felt the timelines aligned, given the long cycle times.
The ventilators we supplied throughout the COVID-19 pandemic are capable of noninvasive ventilation as well as the highest levels of invasive ventilation. When patients are so sick that they need to be on ventilation, you want to give options to the clinicians treating those patients. Many patients need to move from noninvasive to invasive ventilation; you have to be able to precisely scale the ventilation that each patient needs. It’s a complicated process, and to deliver high-quality care, clinicians need highly sophisticated machinery. We measure the components we use in our vents in millimeters, even nanometers in some cases. That’s a level of tolerance that some potential partners in other areas of manufacturing simply couldn’t meet.
Managing the ramp-up
Our ramp-up was global. We increased production by ten times in our Brazil factory and our operations in Southeast Asia. The ventilator we built with Spirit was crucial to delivering on our US commitment and went through the biggest ramp-up. One of our primary manufacturing facilities is in California, and one key decision we made was to close down production there, even though we had been able to quadruple capacity, to enable everyone to singularly focus on the Spirit ramp-up in Wichita. We had to cut the cord. It reminds me of what is often said about my favorite breakfast of eggs and bacon: the chicken was engaged, but the pig was committed. I think closing production in California made both the Spirit and Vyaire teams more committed to ensuring the success of our partnership.
As we set out to build a production line in Kansas, there were four potential issues that we needed to solve for. First, acquiring parts. We produce half a dozen types of ventilators. Each has 500 parts, of which 50 are bespoke to that particular ventilator. We had to acquire that many parts from a supply chain that is not used to producing at such a high rate within a few short months. Second, procuring all the test fixtures. To give an example, some of the test fixtures had 200 individual parts, and we needed to add 60 times more test fixtures. Because of the critical nature of ventilators, they’re tested at every step of the way. So there is not only a final assembly, but subassembly and sub-subassembly. A ventilator may go through 15 to 20 different pass/fail tests before it makes it to final assembly. So we needed to solve for that as well.
“People react to crises differently. Some believe you have to hunker down because there’s enough going on. To me, crises are the perfect time to make change.”
The third issue we needed to solve for was finding people—specifically, 700 to 1,000 people with the right level of qualifications who had trained in quality-management systems similar to ours. And then the fourth issue was sheer production space at scale. We needed a place to manage a lot of processes.
We’re not just manufacturing for a pandemic. We are living it. We curtailed travel and had people work from home, but you can’t do that on a production line. We made sure that PPE [personal protective equipment] was available to everyone, and we maintained physical distancing in our factories and did a deep cleaning between shifts. We provided dedicated transport in some cases for employees who needed that. We also added a 20 percent premium to employees’ pay that continues today.
Even so, there’s a lot of anxiety for those essential employees, both in the factory and in the field. I just had to make sure that we led from the front, that our leadership was in front of our people, talking to them about their rights and our priority to put safety first. When we had a reported case, we would take down the shift—or even the whole day—do a deep cleaning, and ensure that people understood the health protocols.
Innovating on a legacy brand
Vyaire’s constituent companies invented the mechanical ventilator as we know it. This is one of the few medical devices I’ve been responsible for that I don’t want to ever use. You never want to be on a ventilator. Ventilator access and availability is a topic of discussion now because of certain factors emerging simultaneously. Hospital capital budgets haven’t prioritized ventilators in the past decade or so. They simply didn’t make it high enough on the procurements lists when compared with other sophisticated medical equipment. Now that we’re living through a pandemic of a novel coronavirus that we have a limited understanding of, we’re seeing an unleashing of pent-up demand and a reprioritization of vents by both governments and hospitals and health systems.
In addition to making ventilators, we also have a respiratory diagnostics business. Of patients diagnosed with COVID-19, only a small portion end up hospitalized, and a small portion of those end up on ventilators. But a significant number of patients seem to end up with chronic lung injury or chronic cardiopulmonary injury. That’s abnormal for a respiratory disease. So how do you diagnose it? How do you understand it? These are questions that will form our approach to innovation and business as the pandemic recedes.
Leading during a time of uncertainty and change
People react to crises differently. Some believe you have to hunker down because there’s enough going on. To me, crises are the perfect time to make change, and even accelerate some of those changes. I came in with a vision to innovate and expand access, and the COVID-19 pandemic hasn’t changed that.
What I love about medical devices is the enormous capability to deliver a better way of healthcare to so many people across the world. It is this combination, this amalgam, of man, machine, and software coming together to deliver a capability.
I’ve had the opportunity to manage a lot of turnarounds and also some crises. I was brought in to be a peacetime CEO with some change management, but I had to become a wartime CEO. One unique aspect of leading during the current crisis is that I have nothing else to worry about. I don’t have monitors to sell, or diagnostic-imaging equipment, or pharmaceuticals, or anything else. I have only one thing to do, which is to take a singular focus on respiratory care.
The way you win in medical devices is by focus and innovation. I think about how we can make our products available to the hundreds of millions of people who need them but don’t have them. Healthcare disparities are tremendous in respiratory care. You still have to balance the need of the hour to what you believe you and your team can really deliver.