Ellex Medical Lasers Ltd

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“You can't make great products without great people”

Ellex Medical Lasers Limited (Ellex) started business as a small private company in 1985. With financial support from a Federal Government IR&D grant, Ellex commenced the development of a medical laser based on defence technology. The company is based in the centre of Adelaide and employs around 140 people, approximately 60 of whom work in production (two shifts) and an additional 20 in research and development and engineering.

The company manufactures ophthalmic lasers used to treat cataract, retina degeneration and glaucoma conditions which can lead to blindness. It also produces imaging technology and ultrasound products and supplies a range of third-party medical devices. Today (2014) Ellex sells around 1000 systems a year to over 100 different countries. Its two main products are, first, a cataract surgery laser which is rated number one in the world, and second, a glaucoma surgery laser ranked joint first in the world. Furthermore, after ten years of research, the company is currently in the final stages of developing a world-first laser therapy, Retinal Rejuvenation Therapy (2RT™), for the treatment of early age-related macular degeneration (AMD), leading the market by over five years. Mr Victor Previn, Chairman, Ellex, highlighted some essential ingredients that have contributed to the success of the company:

“Research is essential for our business, without research we couldn't develop new products... as a small batch manufacturer, producing the utmost in quality, it is essential that we control every aspect of production and so we manufacture virtually all the components that go into our products ourselves, here in Adelaide.”

Mr Victor Previn – Chairman, Ellex

Selling directly to a global market

When Ellex was first established, it relied heavily upon producing systems for some of the world's largest ophthalmic companies that dominated the market at that time. Mr Previn, Chairman, Ellex, recalled how around 90 per cent of revenue was generated from just one channel partner. Operating as an OEM Supplier (Original Equipment Manufacturer) meant that Ellex had no direct channel to market, or access to the premium market sale price, and was reliant upon a single company for their own survival. Ellex set about trying to reverse this trend by foregoing exclusivity contracts with these major suppliers and generating its own channel to market. The company now produces and markets its own branded products for direct sale through satellite offices in the United States, Japan, Germany, France and Australia, as well as a network of distribution partners in more than 100 countries. Victor claimed that:

“Our major channel partners didn't like it very much at the time but we stuck to our guns and it worked out... Too many companies fall into the trap of putting all their eggs in one basket and being squeezed”.

At the time of writing (2014), Ellex had completely reversed the trend and over 90 per cent of its revenue was generated through direct sales (to doctors) and less than 10 per cent to any one company (with no OEM arrangements). Victor claimed that this did not represent a reduction in sales to the major suppliers, but rather it was the result of the expansion of sales through Ellex's direct channel to the global market.

Vertical integration to ensure the highest quality

The intricate nature of the products manufactured by Ellex means that there has always been a strong focus on ensuring the highest possible quality to the customer. Mr Richard Stone, Business Development Manager, Ellex, claimed that:

“Ellex is known for its technological excellence and superior quality. At all times, we maintain the highest quality standards through product development and manufacturing, and strive to provide unmatched levels of clinical expertise and support to our customers”.

The way Ellex ensures such high levels of quality is by undertaking as much of the production process as possible in-house. This can be described as a form of vertical integration and is one of the main reasons for locating production in Adelaide where, according to Victor, there is a supply of 'highly educated and highly conscientious people... who are very passionate about what they do and about quality”. As such the company produces and assembles the majority of the components for each product in-house in Adelaide. This is particularly the case for the high value added components. The desire to oversee and ensure quality production as the company expands into new product markets has resulted in the acquisition and integration of other companies into Ellex, as opposed to subcontracting from them. For example, Ellex previously acquired an ultrasound systems and probes company.

Product innovation and diversification

Ellex initially manufactured just a single laser product (for cataract surgery), however, the company believed that over-reliance upon this single revenue stream could leave it vulnerable to changes in global demand. This has increasingly become the case as lifestyle and societal changes are resulting in the development of new eye diseases. As such, Ellex designed and manufactured a second laser to treat any type of glaucoma or pressure disorder by actually forcing tissue regeneration in the eye. The company is also in the final stages of developing a third laser, a Retinal Rejuvenation Therapy product for the treatment of age-related macular degeneration (AMD). Ellex now also produces an ultra-sound probe and has expanded into selling third party instruments used in eye surgery, generating an additional income stream to complement its main business activity of making lasers.

Victor, the Chairman of Ellex Medical Lasers, emphasised that innovation and research and development is at the heart of the business and is essential to their success As such, Ellex has a team of 20 product development engineers, headed up by Victor himself, who are developing the next generation of products. Furthermore, Ellex works closely with ophthalmic research departments at a number of Universities and has received a range of grants from government agencies for research and development.

Stringent screening of new employees

Ellex operates a ‘flexible firm' model using a ‘core' of highly trained permanent employees and a ‘periphery' of casual labour used to meet the changing demands for its products. Richard, the Business Development Manager, claimed that they were:

“Very selective about the people they employ, even the casual workers”.

As such Ellex works closely with a labour hire company and has developed a range of strict tests and screening processes. Richard admitted that while they use casual labour to respond to fluctuations in demand, they also use casual contracts as a means of screening employees for potential permanent positions. He claimed that even casual workers require a lot of training and so if demand allowed it, the employee is enthusiastic, focussed on quality and fits in well, then it is in Ellex's interest to make them permanent. At the time of writing (2014) demand was high and Ellex was about to add an additional shift, transforming the company into a 24 hours operation.

Teamwork and the “cross-fertilisation” of ideas

Ellex has implemented team working in three very different ways. First, members of each manufacturing team are arranged into dedicated product cells where they work together to produce a whole product. According to Mr Richard Stone, Business Development Manager, Ellex, this gives team members a sense of ownership over their product cell, and in turn, focuses their efforts towards working together cooperatively and ensuring the high quality of the products they produce.

The second way in which Ellex uses teamwork extends beyond the conventional organisation of work processes within cells. The company organises daily morning meetings where cells come together to ‘discuss and debate' key issues and priorities to ensure that everyone's needs are met. Finally, Ellex believes strongly in the wider benefits generated through the ‘cross-fertilisation' of ideas and multi-disciplined teams at all levels of the organisation. Mr Victor Previn, Chairman, Ellex, claimed that they practice a ‘multi-disciplinary approach' throughout the company and that:

“You can tell when you walk into a good company because you can't tell the difference between the technicians, the engineers and the sales guys because they all speak the same language … the more you can cross-fertilise the different disciplines the better”.

Ellex encourages employees to learn how other parts of the business work by seconding them to other teams. Research and development engineers worked with the Global Service Team to better understand what customers wanted and the Global Sales and Marketing Team worked with production and engineering cells to better understand the products that they were selling.

Employee involvement and upward communication

Ellex tries hard to create a workplace environment that encourages employees to communicate with management and make improvement suggestions in areas such as efficiency, productivity, safety and the wider production process. Mr Victor Previn, Chairman, Ellex, gave the following example:

“Employees continue to drive improvements in our production processes. The engineers can only go so far in designing a product. Ultimately, the production team needs to embrace the product and make it and they are in the best position to develop the jigs and fixtures and all the methodology associated with making a quality product”.

Mr Richard Stone, Business Development Manager, Ellex, claimed that this is encouraged in a number of different ways. First, Ellex tries to create a workplace culture that reflects openness and informality, making communication with management easy and non-threatening. To do this Ellex has maintained a very flat hierarchical structure with very few levels of management from the shopfloor to the CEO. Whilst all levels of management stress that their ‘door is always open' for employees, daily team meetings provide the most effective channel for regular employee involvement. A member of the production team confirmed this by stating that:

“It is very, very open and anyone that has got an idea is able to raise it in the morning team meeting … alternatively, you can go to your supervisor, a manager or the process engineer or the development engineer, they are all really approachable”.

Rewarding employees for acquiring skills

Ellex has systems in place to monitor and reward employee performance. All employees undergo an annual performance review with their immediate supervisor and a competency review with the training coordinator. Good performance is linked to employee development opportunities and financial remuneration, however, performance is not linked to output. Ellex's wider business model focuses on innovation and quality, as such they seek to reward employee performance that enhances these wider organisational goals.

Skills acquisition, through workplace training, is seen as the key performance indicator for Ellex and most likely to contribute to wider organisational objectives.

There are three overarching reasons why Ellex places great emphasis upon training; first, the technologies used in the production process and the tasks expected of employees require specific skills; second, because of the nature of the product being used in precision eye surgery, quality at each stage of the production process is monitored and is traceable back to an individual employee. Strict regulations mean that the employees are required to have the correct training and fully understand the correct procedures. Finally, having a workforce that is skilled to undertake a range of different roles (cross-trained/multi-skilled) generates greater flexibility within the workforce allowing the company to respond to changes in product demand. Mr Richard Stone, Business Development Manager, Ellex, explained this in more detail:

“We have different product ranges and global demand for products can fluctuate widely, and when we have people who are cross-trained we can move them quickly and efficiently between areas or onto different product ranges … rather than bring in new people and train them up from scratch. It does give us that flexibility to be able to adapt to market demand”.

Ellex employs a dedicated training coordinator who administers an extensive training matrix to ensure multi-discipline training and cross-fertilisation across the workplace.

Opportunities to develop and the impact on job tenure

Mr Richard Stone, Business Development Manager, Ellex, commented that, as recently as 2007, Ellex had relatively high labour turnover for the industry as a whole. However, at the time of writing (2014) the company had managed to reverse this trend and now had “very low turnover on the factory floor and in office-based roles”. Mr Stone explained that this was not achieved by increasing wages, but rather by nurturing and developing talent within the organisation. This starts at the recruitment stage, working with an employment agency to develop screening processes and psychometric testing to ensure that the right people are hired in the first place.

A dedicated HR specialist and training coordinator ensures that employees are given a wide range of training and the opportunity to develop skills in different areas around the workplace. Highly skilled, enthusiastic and high performing employees are then identified and rewarded through promotion and given further opportunities to develop. Furthermore, Ellex has a formal policy of, where possible, filling vacant and more senior positions from within. Mr Stone gave the example of an enthusiastic production operator who demonstrated a potential to develop and so was offered a role as a process engineer. This individual excelled in the role and, at the time of writing (2014), Ellex had just sent him to California (USA) for three months to learn new production processes from a recent acquisition and to transfer the technology to Ellex's Adelaide site. Mr Victor Previn, Chairman, Ellex, confirmed that:

“Most of our supervisors have come through that process: all our supervisors were operators, our manufacturing manager was a supervisor … These people personify developmental opportunities that exist and it makes others feel secure and that they have a future with the company”.

Ellex Medical Lasers Ltd

“You can't make great products without great people”

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