Stephen DeFalco arrived at MDS Inc. less than two years ago with the goal of waking up the tired Canadian life sciences and medical services icon. Mr. DeFalco, 46, is the model of the modern corporate leader -- MIT-trained engineer, MBA, ex-McKinsey consultant, and with a rising career at four U.S. companies. But an interview tells a richer story of a striving immigrant family that also spawned a comic book writer who was at one time the creative mind behind Spider-Man. With MDS taking shape as a pure life sciences company, Stephen DeFalco talks of growing up, career turns and the Canadian corporate world.
Where are you from?
I was born in Long Island. My dad was a butcher, a second-generation Italian-American, and I was one of seven kids.
What do the kids do now?
They are an eclectic and scattered group. My sister is a pharmacist, one brother is a fireman, there is a factory worker and a mechanic. And my oldest brother Tommy was the editor-in-chief of Marvel comics for 10 years.
What role did your parents play in your careers?
If you raise just two kids, you spend a lot of time trying to preprogram them in what they're going to do. But if you raise seven, you're just trying to put food on the table and keep them out of trouble. They'll pick their own path. My parents were terrifically encouraging but they couldn't help me pick a path.
The hardest job of my life was working at my dad's butcher shop. . . . I'd work 10 hours, and never sit down. It was tough work because, you know, it was a family business.
So what happened with the comic book guy?
If you're from an immigrant family, your parents are always telling you to be a doctor or lawyer because those are the jobs they know. So when Tommy, who was a fantastic math student, said he was going to major in English and write comic books, my parents said "Awww."
But he had a passion for it. He was one of few guys who knew at 16 exactly what he was going to do.
And the parents were fiercely opposed?
That's interesting. When Tommy came out of college, he took a while trying to break into the comics industry; he was writing freelance, couldn't find a job and lived at home. He went to my father and said he wanted to work in the store and help pay for college but my father said, "No, you keep at it."
Do you see lessons in that?
Now Tom has a place on the shore of Long Island, gets up in the morning, makes a cappuccino, and he just writes and he loves it. I tell my own kids to be passionate. You work an awful lot of hours so you should do something you really love. If you do something you love, you will be successful.
While he was writing comics, you were going from MBA school to consulting for McKinsey. Did you plan to become a CEO?
I realized when I was doing my masters in management that I liked general managing and I thought that I wanted one day to be a CEO. McKinsey was the right step. For me, it is a finishing school. The MBA teaches you theory but you have to solve real problems to figure out how to get it done.
How did you know when it was time to leave McKinsey?
In the first four years at McKinsey, you're learning how to solve the problems and make things happen and those are good skills to last all your life. But then they start grooming you to be partner and I didn't find that fun. It was about setting up studies and publishing in the Harvard Business Review, and I'm a practical, get-things-done guy.
Your last U.S. job was running a cutting-edge life sciences startup called U.S. Genomics? Why leave that for MDS?
I was having a good time, I didn't intend to leave, but a recruiter called. The truth is there are 10 very prestigious life sciences companies of much scale in the world, and they replace their CEO once every 10 years, and half the time they recruit internally. So when you get the call, you've got to take the call.
How do you like the Canadian business scene?
There are things that connect business worldwide -- globalization, competition, customer service, technology -- and I find they work the same in every country of the world. But the nuances are different.
The large institutions are more dominant here on the stock exchange. A few big pools of investors own a lot of companies in Canada; there is a less fragmented shareholder base. The good part is you get to meet with [major shareholders]and talk with them. You could walk down Bay Street and, within two blocks, run into a couple of them.
And I was surprised by the profile of MDS in the media. A billion-dollar technology-based company in Boston would be begging the Boston Globe to come out and do an article on them.
I found I was deluged with media attention, which I was a little unprepared for.
Why is that the case?
One factor is the public face of MDS's medical lab business, which made it a consumer story. And MDS was such a romantic story for so long, that when it lost its way there was emotional disappointment.
Also, there was the issue of bringing me in as an outside CEO -- the transition every company makes from the founders to the next generation. We had great founders and they left a lot of good in their legacy. I didn't really have a sense of that before.
I thought Toronto was a really big city, which it is, but it is a big small town. I'm going tonight to a charity event and I will run into a few shareholders, I'm sure. When I will go to my kids' school for a play, I run into shareholders. It's an intimate community.
That puts you under a big microscope.
We were more news than we should have been, so I hope we're news now because we are successfully executing and we've got the momentum. It's better to be news than not news.
Does it reflect the fact we don't have a life science industry of any scale in Canada?
Yes, it does. The New York Stock Exchange may be about 10 times the size of the Toronto Stock Exchange, but the key point is that the health and life sciences industry is 13 per cent of the NYSE and only 1 per cent of Toronto. The difference in market capitalization is 126 times. So MDS does stand out in this economy.
That is why a lot of times people don't understand MDS -- because there is nothing comparable. Everyone understands Falconbridge, Inco and CIBC. There are a lot of financial institutions and resources companies on the exchange in Canada. But as for life sciences, people say "What's a mass spectrometer?"
What is wrong with Canada that we are still primarily a resources economy?
I see a lot of great technology in Canada, and I see a high willingness for global companies to have operations here. It's attractive because of quality of work force, technology and the business environment, but for some reason it hasn't bred as many global companies headquartered here.
But our industry is pretty concentrated worldwide. Even in the U.S., the life sciences industry is in Boston, New Jersey and San Francisco. It is not in the U.K. generally -- but it is in London and it is in Zurich. There are pockets and it seems those pockets are generally tied to very strong academic institutions.
You drive around the suburbs of Boston and you find all these new companies that were spun out of Harvard and MIT. You think of those two as colleges and they do teach but they are huge research institutions. . . . Canada doesn't have that structure. Higher education in Canada in more geared to educating students than to private research.
How long will you spend at MDS?
I think we have the platform [for the company]and we have a lot of great things to do. We have a good 10-year run here and I'm exactly where I want to be.
Stephen DeFalco
Title: President and CEO, MDS Inc.
Born: Feb. 28, 1961
Education:
Bachelors degree, mechanical engineering, MIT
Masters in computer engineering, Syracuse U.
Masters of management (equivalent to MBA), MIT
Career highlights:
Started career at IBM
Joined McKinsey & Co., worked in Denmark
Strategy v-p., United Technologies
President, PerkinElmer Instruments
2003: CEO of U.S. Genomics
July, 2005: joined MDS