Quest Diagnostics Incorporated (DGX) Earnings Call Transcript & Summary

[Audio Gap] a good 20 years and have had a friendship -- a cordial relationship with Hunter Muller and have done probably dozens of these summits over the last 10 years, most of them in person, but last March, April, we started the virtual summits, and they've been quite good and quite well attended. Gabrielle, would you like to introduce yourself?

Yes. Gabrielle Wolfson, CIDO for Quest Diagnostics. I've been with the company for almost 2 years. And I spent a large part of my career in health care, pharma as well as med devices. Prior to Quest, I was at Xerox. So quite a diverse type of exposure. And by the way, I do part of the [ CIM ] organization also for almost 20 years. It's a great forum. Looking forward to our discussion.

Thank you. Kevin?

Hey, everybody. Great to be here. I'm Kevin Fleet, Vice President of Advisory Services at Informatica. If you're not familiar with Informatica, we're the leader in enterprise cloud data management solutions. I've been with Informatica for just going on 10 years. Prior to that, spent over a decade at Pfizer Pharmaceuticals, leading global data management and essentially being the Chief Data Officer at Pfizer before we have that cool tagline that everybody uses now. But it's great to be here, and I've been involved with a lot of clients across lots of industries in my tenure with Informatica and hope to share some of that experience with you all today.

Thank you. Thank you. Richard?

Richard Entrup, Managing Director at Verizon, I've been in a group called Enterprise Innovation and 5G Solutions. We are in the business group of Verizon. So we're supporting Fortune 500 clients like yourselves. Prior to Verizon, I was the Global CIO at Christie's Auction House. Before that, I've had spent in many industries like health care, legal. I've been in entertainment and media several times as well. So lots of various sector experience as a CIO and CTO level. And I've also been a [ CIM ] member of almost every chapter in the New York metropolitan area. So happy to be here.

Great. Thank you. I guess, Michelle is not joining us. We'll carry on. Our topic is really about digital transformation. And what I'd like to do is ask each one of you for your definition of what a digital transformation means in your particular company and what your role is in either driving it or supporting it. Can we start with Gabrielle?

Sure. So I'll give you a perspective from Quest Diagnostics' point of view, but also from a health care point of view. So digital transformation has changed tremendously over the past few months. We started the year with a particular road map and focused on our progression over the next 2 to 3 years in expanding the touch points with our customers, redefining the way we were interacting or are interacting with our patients and providers and so forth. And during COVID, our definitions have changed dramatically. So everything that was at the road map with the horizon of 2 to 3 years has been place immediately. And in addition to that, the definition of digital changed as well. So from a scope perspective as well as the nature of interactions that technologies provides nowadays across the board. When you talk about managing testing, the development of testing, when I talk about data as a key platform and enabler in everything we do, those are some implications that are very -- have very big impact across the board. From a customer perspective, the need to have those touchless experiences as you go through a patient service center or the experiences around testing per se and COVID, but not just COVID, because COVID, even though we've done [ rate ] is not everything. Going to the cycles of scheduling and tracking the physician, registering and just all those points of contact need to be seamless, need to be just really improved to a large extent, redefined. Mobile and the way people use technologies has accelerated tremendously as well, socially and in a virtual workplace. In the health care industry, the way we interact across the board, across all the elements that come together has called for just a large tighter integration between those touch points. We had to look at the end for answer than the individual areas of opportunities. So talking about the art of the [ possible ] and talking about -- thinking I said that and imagining just a new way of enabling those interactions and access to services across the board. We took a lot of collaboration across the board, not just internally within the company, across all the functions they have to come together, but also with business partners as Google and Apple and as we envision and contemplates the health path, for example, solutions that bring people back to work. It took a different level of collaboration with our partners as Verizon or Amazon and Google and just enabling, for example, drone delivery of key processing at home, those were -- that was something that was envisioned the technology of the future. And all of a sudden, they need to be [indiscernible] of the past and contribute in a very different way to those interactions was upon us. So a lot of exciting opportunities. The world of digital is driving innovation, thinking out of the box, collaboration, different type of interaction at all levels.

Great. It sounds like a lot going on. Thank you for sharing that. Kevin, in your world, talk to us about what digital transformation means. And obviously, what the role of data and analytics plays, and maybe you can give us a couple of examples.

Certainly. Yes. So it's interesting, right? So as digital transformation has really come to the forefront, I think what's happened in organizations is they've realized that data or the need for data is really what is driving digital transformation. And certainly from Informatica standpoint, that's what we see. When I speak with clients, they've typically uncovered the fact that they don't have a good handle on all the data that is in their enterprise, and they need to, if they want to leverage it. And... [Audio Gap]

[Audio Gap] frictionless, quick easy self-service experience. And I think that is the epitome of a digital transformation, the outcome of it should be. But a lot of companies now have been forced to really look at it now, unfortunately, reactively as a result of COVID because they're businesses that shifted to virtual. And there is no brick-and-mortar to do anything. So those that have really worked much further on in their digital transformation journeys, maturity-wise, have fared quite well, and others are now catching up. But the opportunity still exists for the CIO to be at the table, presenting these potential business outcomes and how technology now more than ever has the opportunity to really not just be a back-office support for financial and county system, but really be at the forefront of driving new revenue streams, new opportunities and supporting the client experience. So it could not be a more exciting time for technologists.

Great. Agree. I'd like to explore with you how you set up in a corporation a digital transformation team? So if, for example, Gabrielle, you lead it for Quest, who are your partners? And where does the CEO sit?

Digital transformation, it's not just the same [indiscernible] of the day. It's not just a discrete type of effort. That -- that's a mindset, it just has a very deep roots across the environment vision. And the CEO and the entire executive team used to be on board. So that's an overall type of organic [ reinvestment ] in my end. But practically speaking, driving transformation can be a full-time job. It can be on the side effort that's going on in addition to the day-to-day job that we have in keeping that business going. I just need to have a full-time type of engagements. It was to actually engage across the board. It is not an IP or a technology-driven effort, this is a entire enterprise efforts. It's the common [indiscernible] that's very deep, and it is transformational by its nature because it changes the way the organization interacts across every function and every level. So to be successful in digital transformation, you have to start in a way that business, the objective, that's really not just the starting point, but that business view and focus needs to be considered at every step of the way. So it doesn't start in a technology and it doesn't end with the technology. We start with a business, it continues with the business in mind and it ends with delivering business value. For very -- every company takes a different approach to enabling digital transformation. We just actually have a transformation office based on the dynamically -- dynamic team type of structure where depending on the areas we're working on, we are bringing together teams and resources across the company, across every function. These initiatives are not project level. They are again, transformational, they're targeting a particular business area and the CEO and the executive engagement is there, full-fledged, and it remains engaged throughout the entire [ position ] throughout the reassessment of the strategy, of the approaches. And we are all looking at agile volatility from many perspectives. And from that point of view, you need that continuous focus on rear jumping, on learning the -- delivering by leveraging what makes sense and [ lease ] type of opportunities that we have in our technology or business from a business innovation perspective.

I was reading an article by Forbes dated December of last year, and they commented that 70% of companies have a digital strategy in place or are working on one. Also, 70% of digital transformations fail, most often due to resistance from employees. So Kevin, will you think about those statistics? Do they seem right to you? And how are we going to turn around this employee buy-in that seems to have not happened universally up until now?

Right. Well, so I sort of smile when you gave those stats because I think it sounds incredibly accurate. I think really what we're dealing with here is a -- is typically a change management issue. Much of what Gabrielle said, I completely agree. It's about change management and the overlooked piece of cultural impact and the culture of an organization. If we're making these broad assumptions that these systems and solutions that we're implementing can be used across an enterprise. And to do that, you have to have alignment, you have to have people taking off their individual paths of their silo that they own in the business and be thinking more broadly, and those are cultural changes that are really required. And I can't tell you how many times I'm brought in to a client and their problem is not the technology, right? We're a software provider. And you would think they'd come and say, we've got problems with the technology and the software, but it's really not that. The problem that they typically have is business adoption, business buy-in, business readiness, understanding of the business value and why these solutions have been implemented. And so, so much of, I think, what we do, we get focus on the technology side of providing a solution, and we need to keep in mind that we're dealing with people and organizations that have natural tendencies. And these are things that have been around forever, and we've got to deal with them head on and really confront the cultural impacts, the change management impacts. And running things from a programmatic standpoint is not a technology solution, but rather, it's something that's done hand-in-hand with the business.

Thank you. Yes. Richard, I'd like to ask your opinion. If we were talking 2 to 3 years from now, what innovations would you be talking about with me that your company is driving? We certainly understand 5G is huge. What -- where is it heading? And will there be some new products and services that you anticipate being big as well and will change the way we operate?

Absolutely. Great question for Verizon. I mean, obviously, 5G, we're betting the [ farm in ] 5G, right, with the capital investments in the neighborhood of $17 billion this year, and the infrastructure to support it. It is the biggest thing. But 5G is connectivity, right? It's a means to an end. What will happen on top of 5G. If you look at the current emerging technologies that are looking back 5 years at AI, machine learning and IoT and cloud-native and AR/VR and all that goes with that, they've been on a hockey stick trajectory over the last 5 years. But they've been very limited to all of them. And they've been limited by -- because they've been bound by either compute and/or storage or capacities and other hardware restrictions. If you look at those technologies 5 years out and look back to today, they will continue on even larger steeper curve because of the fact that 5G will enable them that much more. So I think you're going to get a flywheel effect between AI machine learning and IoT and cloud and AR/VR, thanks to 5G, thanks to edge computing, which will support and enable those emerging technologies to create entirely new things in our work and our life that we can't even vision today. And I think it's going to be a very dramatic and impactful change on business and society. And it is the art of the possible, quite frankly. So we conduct these sessions with our clients all the time in a lab setting with some business challenges presented and then we explore how 5G and edge computing and all the other emerging technologies I mentioned could potentially support, enable and expedite those things in supporting their business strategy. So the term digital transformation, I just want to add this point, I really have stopped using it and I really think it is business transformation. Everything is digital, everything will continue to be digital, there is no opposite to that. It's analog, I guess. But I think it's definitely business transformation. And I think the CIO and CTO is at the forefront of driving it potentially if they have the right relationships internally. Without that, they will not be successful.

Okay. So looking ahead in the future, what industry do we think will continue to be the leaders and why?

Well, let's agree on who the leaders are first, I guess. Financial services has traditionally led the charge with data and AI going back, right, and modeling and machine learning and leveraging that for their business. I think the laggers historically has been like health care and legal and some others because of funding and budgeting and opportunity. I think media and entertainment is now at the forefront, definitely. But I think every sector has the same opportunity, right? With the right players at the table and the right vision and executive award support, I think the technology that are available to them to really transform their businesses are readily available. But as Kevin put it, the technology is not the challenge. It's process, it's controls, it's legacy long-tenured folks on the inside that don't want change. So that internal communication strategy is key to success, in my experience, and could not be overemphasized. And the other point, I think, is also key that hasn't been mentioned is cybersecurity. As all this new technology proliferates and become much more pervasive as we move forward, cyber is going to become a really serious, even more serious than it is already as there's more and more devices out there, not just our phones and watches, but everything is Internet-connected, Internet of everything, if you will. Cyber is going to become a real issue as we're witnessing now just through COVID alone with the opportunities that are presenting themselves for the bad actors. So...

I've been reading that health care will continue to emerge, and we're going to see more and more interesting breakout technology. Gabrielle, what do you foresee? If your digital transformation goes well in 2 to 3 years, what might we see from Quest Diagnostics that we're not seeing today?

So I just want to start with a comment, that is the industry that will be [indiscernible] because I see a tremendous opportunity in health care. And it's true that financial services has been leading the path for a long time. But health care is coming strong [indiscernible] time because this year, all those opportunities, and it actually always needs to connect in a different way to access, to provide access to health care in very different way. It's going to propel the companies in the health care industry to just [indiscernible]. So with that in mind, I mean, I think that it all starts with data. And I have to say that, I mean, from CIO's perspective, [ we're stronger ]. I mean I think data is at the center of everything. Because it just provides the access to insights through the different types of innovation that would be driven from [ now ], when in health care, especially now if I talk about genetic molecular testing. And when you talk about linking those insights to amortization of cycle testing and means to address that precision diagnostics, there is just a huge area of opportunity there that's transformational in nature and just really going to move the needle in health care. And the other piece -- the other area, huge area of focus for us is going to be in the way we engage our patients and our customers and provided access to services, connect all the different players from the plan to health care systems to all the other aspects in the health care industry. That seamless digital connectivity to enable services, new services, new ways of contributing to the population health.

Thank you. Kevin, from a data and analytics point of view, what would you -- how would you project in a couple of years -- who will be the leaders, who will be left behind?

Yes. I think the leaders will be those who have taken the next step in understanding the value of their data because we heard about today, it's this enabler. It's all these things that we want to do, whether it's AI and machine learning or advanced analytics and digital transformation. I think the organizations that take that next step and actually put a dollar figure around the data that they have and the information that they have as an asset. And you'll begin to see companies putting that data on the value of it on their balance sheets. And I think those are the companies that will then begin or will continue to invest at the appropriate levels for the value of what that data is. And I think that will be a big change that we're going to see coming up.

Before COVID, we hardly knew about contact tracing. And now we're always hearing about it. Who would like to talk about the implications for our society regarding that, and privacy and tracking our behaviors and our travel? Is it good for society, or is it not? What are we going to do about this as consumers, as individual?

I feel like any of these technologies that could sort of be used for good or for evil, right? I mean this is one of those where you certainly could use this technology for good. If there was a level of comfort with the security of that information and the privacy that goes with it.

I think there's an interesting documentary from Netflix right now that's out there on this point, called The Social Dilemma. If you all haven't seen it, I highly recommend it.

It's good, I've seen it.

Not to bash my friends in social media. I've been with social media for a very long time myself personally. But the data can be used for good or bad, as Kevin mentioned. In the case of health care, it will only ever be for good, right? Entertainment media, ad sales, they tend to -- that's how they make money in the media and broadcasting business, it's a currency, in advertising. So it's an interesting opportunity, but I think it will be both, but for sure, the tracking and the tracing is already happening, quite frankly, it will just continue [indiscernible]

You will automatically be moved the main session after 60 seconds. [Operator Instructions]

I think it's just going to happen even more and more, which again, cyber becomes that much more important to track who has access to that data, which will become even more critical.

Great. Time is up, [ can't ] follow it, very, very fast. Thank you to Kevin, Gabrielle and Richard for your thoughts, your insights, your sharing your experiences. I think we've -- hopefully, we've learned some things today. I have. Appreciate your time, and it was great to be here.

Thanks, Beverly.

Thank you.

Thank you.

Bye-Bye.