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Business Observer Friday, Aug. 6, 2010 12 years ago

Keep the Cool

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Not even a highly successful, specialized medical technology company on the Gulf Coast has been spared from some recession woes. A new top executive hopes some transformative moves will pay off.
by: Mark Gordon Managing Editor

REVIEW SUMMARY
Executive. Mike Bernstein, Medical Education Technologies
Industry. Medical, science, education.
Key. New CEO Mike Bernstein is leading a shift in the company from fast sales growth to an operational focus.
By the Numbers. Click here for revenue information about METI.


Mike Bernstein, president of a large health insurance firm before he turned 40, had good reason to be ticked off while he sat on a packed plane flying somewhere over the Midwest a decade ago.


Bernstein's seat on the plane was directly next to the bathroom. He was so close, actually, that the door would open and he could high-five anyone coming and going without taking off his seatbelt. Even the flight attendant had better accommodations, a few of Bernstein's friends on the flight recalled.


Bernstein, then president of Milwaukee-based Cobalt Corp., which counted Blue Cross & Blue Shield United of Wisconsin in its holdings, took the mistaken seat assignment in stride. He even played along when some of his staff on the flight giggled and snapped pictures.


“He handled it so well,” says Terri Bernacchi, a health care industry executive in Milwaukee who has worked for and with Bernstein and was a fellow passenger that night. “He was totally classy about it.”


The story illustrates what many who know Bernstein say about him: He is a leader who values the get-it-done mentality over the bells and whistles — and first-class plane seats — that traditionally come with the corner office. And he is also a leader who can balance humor to diffuse sticky situations with the sharp seriousness needed to run a company with 170 employees and $51 million in sales last year.


The latter situation is where Bernstein, 50, finds himself today.


He is president and CEO of Sarasota-based METI, which manufactures and sells lifelike human patient and surgical simulators for medical training and education. He was named president last year and was promoted to CEO early last month.


The company is one of the crown jewels of the local business community: It sells a unique and innovative globally known product, and, at least until the recession, it posted a stellar record of annual sales growth. At $63 million in 2008 revenues, its peak, METI was one the 15 largest privately held companies in the Sarasota-Bradenton market.


But METI, which stands for Medical Education Technologies Inc., is at a crossroads, just as Bernstein finds his way in his new job. Sales are down nearly 20%, for one, to $51 million in 2009. And the company is overhauling how it makes and where it sells its core products, including its popular iStan simulator that bleeds and breathes.


The theme of the transformation, says Bernstein, is operational excellence over fast and large sales growth. “It's boring but necessary,” says Bernstein, who concedes the recession nudged the company that way, too.


Bernstein takes over METI's day-to-day leadership position from Lou Oberndorf, who founded the company in 1996 with $500,000 in working capital and five employees. Oberndorf sold the business to publicly traded L-3 communications in 2006 and, with the help of private-equity investors that included Bernstein, he bought it back in 2008. (See Business Review, Aug. 13, 2009.)


“It was obvious as hell to me that we should bring Mike on full time,” says Oberndorf, now the chairman of the board at METI. “He's been everything we want him to be.”


Bernstein says one thing he won't be is a clone of Oberndorf, an Air Force pilot and Vietnam veteran who favors disruptive innovation-style thinking and was part gunslinger, part go-getter when he ran METI. “I'm good at taking a mid-career business and institutionalizing it,” says Bernstein. “I've never started anything.”



Business transformation


Still, don't equate Bernstein's lack of being able to put 'company founder' on his resume with a weakness. His former colleagues and current management team say he possesses the 'it' that can make a diverse company like METI go.


“Mike is a great consensus builder,” says Marc Dettmann, the recently retired CEO of the University of Virginia Health Services Foundation, who worked with Bernstein in Wisconsin. “He has a sense [to] see what things can be.”


Bernstein honed that sense from his leadership style: Patient but firm, and calm but clear when he sets strategy, policy and direction.


“My style is to evaluate what works and what's not working,” Bernstein says. “I try not to make abrupt or catastrophic changes.”


One aspect of METI Bernstein analyzed, going back to when he became a minority investor in 2008, was that it had spent the bulk of its existence trying to outdo itself, and its competitors, with new technology-driven products. “We are now unquestionably the leader in this technology,” says Bernstein.


That focus on innovation, however, came somewhat at the expense of other parts of the operation. Says Bernstein: “Manufacturing efficiency was never a top priority for us.”


Putting that at the top of the to-do list was, and remains, a priority for Bernstein. While the C-suite level team assembled by Oberndorf remains in place, Bernstein did hire four mid-level managers for departments including manufacturing, supply chain and customer support. The new hires are experts in waste and error reduction programs, such as lean manufacturing and Six Sigma.


One of the new managers, Everett Tucker, a former manager for GE, set up scorecards for various tasks for each department. Many of the tasks, such as on-time delivery and the closeout of customer service issues, have never been tracked by METI.


“It's transforming the business in a way we've never been transformed,” says Bernstein.



'In love'


The art of a process like that has always fascinated Bernstein. He was born in Philadelphia and moved with his family to Los Angeles when he was a young boy. He stayed in California for school, earning his undergraduate degree from the University of California-Davis and a law degree from the University of the Pacific McGeorge School of Law in 1985.


Bernstein found what he thought would be his calling after law school, as a trial attorney for the defense side of medical malpractice cases. Then, for family reasons, he and his wife moved to Milwaukee in 1987, where he found work as a staff attorney for Blue Cross Blue Shield.


Bernstein's new passion became the support side of the heath care industry. “I fell in love with health insurance,” says Bernstein. “Not many people could say that.”


He left the company for a few years, in 1996, to run the University of Wisconsin Medical Foundation, a diverse physician practice in Milwaukee. He later returned to the parent company of Blue Cross, Cobalt, as its president and chief operating officer. Bernstein had run a few other medical industry companies by 2008, when he began evaluating acquisitions for Robert W. Baird & Co., a Milwaukee-based financial services firm with an equity capital division.


That's how Bernstein discovered METI. Oberndorf, it turns out, had been working with Baird on how to finance a deal to buy the company back. “METI has a pronounced and creative culture,” Bernstein told the Review last year. “It's one of the coolest companies I've ever come across in health care.”


Bernstein is now charged with keeping the company's cool while simultaneously improving manufacturing efficiency and growing sales. He has a few ideas about how to get all those places, in addition to going to a lean manufacturing process.


For example, Bernstein says he'd like to see more sales to international customers. That especially includes Europe and China.


Bernstein also says he'd like to see METI do more for business services that relate to its products. The company took a big step in that direction in June when it closed on a deal to buy Lionis Software, a Hungary-based company that builds software models for audio-video training tools.


Lionis and METI had worked together previously and METI executives knew the company was close to being market-ready with a web-based system that would help medical students work better with the simulators. Bernstein says METI was at least 18 months away from developing a similar product on its own.


Bernstein, finally, is in the middle of another big task: He is still learning all he can about the ins and outs of what makes METI go. It's an ongoing process, he says, that involves a lot more listening than talking.


“I didn't have to learn how to run a business here,” Bernstein says. “But I did have to learn about this business. It's a complicated niche.”



Leadership Lessons


Mike Bernstein has run small, mid-size and large firms in the health care industry, from physician groups to insurance firms to a Sarasota-based manufacturer of computerized mannequins that are used in medical training and education. Bernstein is president and CEO of that firm, METI.


At several of Bernstein's career moves, including METI, he entered organizations already in operations for years. It's a move that presents some unique challenges in executive leadership. Here are Bernstein's tips for navigating those challenges:


• Culture Counts: Corporate culture is “real and quite powerful,” says Bernstein, a phenomenon he discovered in Wisconsin, when he knowingly tried merge two large organizations with dramatically different cultures. “It was a fools errand that sorely tested my patience and nearly broke my spirit,” says Bernstein. “You must study [the culture,] understand it and either work within it or if you wish to change it, do so slowly and incrementally. It can't be changed with brute force.”


• Promote consistency: Bernstein says as a general rule it's vital to adopt the incumbent leadership team. “An experienced leadership team,” he says, “even if not as talented as some of the executives you may have worked with in the past, will get the job done quicker and more successfully than new blood can.”


• Listen well: Bernstein says listening for the long-term is essential, even if you think you know the direction you want to go. “When you are the new guy, everyone else in the company is the keeper of corporate history, some of which is critical to avoiding pitfalls,” says Bernstein. “Maintaining one's intellectual curiosity requires practice when you are so busy that you would rather act on instinct.”


• Be adaptive: The ability to recover from errors and move on quickly is a necessity. “Great leaders recover from mistakes rapidly,” Bernstein says. “I have witnessed CEOs who stay the course despite all evidence that their plan is failing — a total failure of leadership.”

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