Interview with Accuray's Founder, Dr. John Adler

Dr John Adler recently left Accuray's (ARAY) Board of Directors. Below is his departure letter and a personal interview:

Friends and colleagues,

Many of you have asked why I withdrew from the Accuray board, and more recently, even stopped consulting for the company. Because of our friendship and your close involvement with Accuray, I know that I owe you an explanation, but until now my previous board status prevented me from saying much of anything.

The decision to leave Accuray stemmed from the fact that my vision for both the future of The CyberKnife technology and how business should be conducted increasingly diverged from management. My several year effort to serve as a constructive contrarian voice on the board and within the company at large was so unwelcome (by the CEO) that I was twice issued threatening letters by Accuray-paid lawyers, demanding silence and including allegations of defamation. As my voice was muted, I felt constructively terminated from providing any meaningful company leadership.

As the founder, visionary, and passionate spokesman for Accuray, I have felt deflated by this turn of events. But I am hardly the first company founder to be rebuffed, as so beautifully described in the above video excerpted from Steve Jobs’s 2005 Stanford commencement speech: Short: http://www.youtube.com/watch?v=kRt4VUv90Gw, Long: http://www.youtube.com/watch?v=UF8uR6Z6KLc

The realization that even an innovative business genius like him once felt “rejected” by “his” company, does provide solace.

Despite past events, I love what I do and remain energized by the possibility of helping to shape the still emerging field of radiosurgery. Even if our baby, the CyberKnife, is to date THE BEST radiosurgical instrument, I am convinced the future will bring yet better technology and even cooler clinical applications for precision radiation, and with this will come the potential to impact unimaginable types of disease and numbers of patients. However, if I am to be part of this future, I must find or create a partner who shares my enthusiasm for the field of radiosurgery and values my input. As I seek to make this transition, I urge you, no matter what, to remind yourself of my primary purpose. Thank you for your past and continued support.

Matthew Rafat's Interview with Dr. John Adler:

1. You recently left Accuray’s (ARAY) Board of Directors. Did you feel your departure was voluntary or involuntary? Without repeating statements you’ve published elsewhere, please explain.

For all intents and purposes my position at Accuray was “constructively terminated” over the past few years and I ceased to have any meaningful leadership role within the company or on the board of directors. For a long time I tried to be a constructive contrarian voice but Accuray’s current culture tends to mistake disagreement for disloyalty, and when coming from me, criticism was interpreted as merely the whining of a never-satisfied founder. Painful or not, it was time for me to move on and seek out or create a partner who valued my leadership and was genuinely interested in my vision for radiosurgery’s future.

2. When you first founded Accuray, what were your aspirations for the company and for CyberKnife?

At its inception, I dreamed Accuray could dominate the field of radiosurgery, especially the now rapidly emerging field of extracranial radiosurgery. A lot of my dream has come to fruition; a broad range of clinical applications, as first enabled by the CyberKnife, are now becoming ever more accepted. Hopefully someday it will be widely acknowledged that the formation of Accuray proved a decisive moment in this incipient, but very real, surgical revolution.

3. What do you believe are the main reasons CyberKnife has not experienced more widespread adoption within the medical community? How do you think Accuray could improve CyberKnife’s prospects?

Revolutions rarely happen in an instant, but rather take time for ideas to be understood and accepted. This is especially true in surgery. Today it seems unbelievable, but most of the leading hospitals in the 1800s resisted Joseph Lister’s advice for surgeons to wash their hands and sterilize their instruments before operating. Ideas and technology are not enough in themselves. For Accuray to effect meaningful change, the entire culture and eco-system of surgery and radiation therapy need to change in part, a process that involves longer term clinical outcome studies, training, government regulations, product design, the control of hospital budgets, professional and hospital re-imbursement, and more. Meanwhile, with a CyberKnife, we are talking about a very expensive product that crosses current medical specialty lines and requires the construction of a dedicated treatment facility. Moreover, one should not be surprised to realize that physician egos play a huge role at every level. Thrust in the middle of this incredibly complex and turbulent marketplace, Accuray has accomplished a lot over the life of the company. To my way of thinking it is unrealistic to have expected appreciably more success at this stage. Unfortunately expectations for Accuray were allowed to get way ahead of reality the past few years and this has engendered the current disappointment among investors with Accuray’s performance. However, I cannot emphasize enough that given the complexity of the radiosurgery marketplace, this is not a sprint but a marathon. Accuray is fortunate to have a head start because the CyberKnife is such an outstanding product. With the above understanding, it is important to build a business and company culture designed for the long haul.

It would be glib of me to suggest a few simple strategies and imply that they would miraculously transform Accuray’s prospects. It is going to be a long drawn out battle for market share over a decade or more, and to pretend otherwise is disingenuous. However this very realization in itself can help to guide corporate strategy. For example, developing the right long term allies is so critical; ultimately, salesmen don’t sell CyberKnifes, but one set of doctors, typically, but not always in academia, sells to another set of doctors. Moreover, a long drawn out battle implies being very mindful of your cash position. Meanwhile, one should avoid the frequent temptations of losing focus on your core product and customer base. Accuray’s success will be determined by literally thousands of decisions as it navigates the still undefined radiosurgery eco-system. Improving Accuray’s prospects will require a nuanced understanding of this emerging marketplace and deft hand on the leadership tiller. Management and board composition should have the requisite skills and background to make this happen. If Accuray is to succeed in its mission, it is not going to be enough for the board of directors to merely ensure that financial statements are clean.

4. Accuray may believe the medical data relating to CyberKnife patients isn’t yet sufficient to gain FDA approval. Without FDA approval, however, CyberKnife may not experience widespread adoption. This Catch-22 results because so many facilities rely on FDA approval prior to buying and using complex medical equipment. If Accuray’s current Board of Directors were to say that you are being impatient, and there is nothing they can do until CyberKnife has at least fourteen total years of post-operation medical data before FDA approval, what would be your response?

I don’t know that any response is required because I have never been at odds with the Accuray board over this general issue. However, it is important to point out that the CyberKnife has been cleared by the FDA for a broad range of clinical applications. Instead the issue to which you allude is not FDA clearance but governmental and private health insurance reimbursement. In this regard, for many years now I have tried to emphasize, and drive within Accuray, the organizational structures which can help CyberKnife users demonstrate through clinical outcome studies the benefits of radiosurgery for a range of clinical applications. So practically speaking I am among the converted. Moreover, if you are going to demonstrate clinical benefit at 5 years, it is going to take at least five years to produce credible research papers…there is no other way around it and you sometimes have to be patient. However, for many clinical applications, one can still make a compelling argument for CyberKnife radiosurgery today by cleverly utilizing shorter term data, as well as studies created by competitors.

5. In many cases, a company’s founder will cede control and guidance of his or her company in order to promote the company’s growth. eBay (EBAY) is one successful example of a founder accepting a more business-savvy CEO in order to maximize shareholder value. Why is your departure from Accuray different from the usual tensions between founders and less technically-knowledgeable but more business-savvy executives?

When a company transitions from a start-up to a more financially driven enterprise there may come a time when it makes sense for a company to bring in a “professional” CEO. Sometimes a so-called “business-savy” CEO can also burnish company image just prior to an IPO; eBay and Google (GOOG) being cases in point. But then if the CEO is smart, he should step aside and get out of the way! The greatest technology companies are routinely guided for years and years by their founders…HP, Intel, Oracle, Apple, Amazon and Microsoft all come to mind. Eric Schmidt may be the CEO of Google but it is widely understood that his job is to execute the vision of Google’s founders. Meanwhile, the loss of the founders can doom a leading-edge technology company as so aptly illustrated by what happened to Apple after Steve Jobs was fired. The more murky the future, and the greater the need for continued product innovation, the more important it is to keep the founder directing company vision. However, in the event that it becomes necessary to replace the founder, the onus should be on the board of directors to ensure beyond all reasonable doubt that they have the right man or woman! And if a new CEO is brought in who doesn’t measure up, the board should ‘fess up and either promptly recruit a replacement or bring the founder back to take charge.

For Accuray much of the future depends not on making elaborate business deals or driving down the cost of goods (although both of these can be useful objectives), but rather successfully navigating the myriad pitfalls of product development and clinical research. If Accuray is to reap the long term success for which it was once positioned, company leadership, including the board, should have a nuanced view of the most complex medical marketplace imaginable. This emerging radiosurgical marketplace is going to require non-stop innovation, especially in product design and changing the medical eco-system in which radiosurgery resides. If you look at Silicon Valley’s most successful companies, which tend to depend on continuous innovation, the founding team stayed engaged for a very long time.

6. What do you feel Accuray is doing well?

Up until now The Cyberknife continues to be the best overall dedicated radiosurgery system in the medical marketplace. Moreover, Accuray, in conjunction with the not-for-profit CyberKnife Society, which it once helped to create, has been instrumental in working with users to generate vital outcome studies demonstrating radiosurgery’s clinical benefits. In doing so, the CyberKnife has established itself as the gold standard to date for many if not most radiosurgical applications. Once upon a time Accuray was unique in the radiation field for its ability to attract a broad cross section of surgeons. In addition, the company was very successful in getting differentiated technical re-imbursement for CyberKnife radiosurgery. The above is particularly laudable when one is reminded that Intuitive Surgery, arguably the most successful capital equipment medical device company in Silicon Valley over the past decade, has neither conclusive outcome data to support the utilization of its Da Vinci device nor is there special re-imbursement for using its surgical products; so far the Da Vinci is merely an intrinsically cool and rather expensive surgical gizmo. Despite Accuray’s many shortcomings and Intuitive Surgical’s lionization, it is notable that CyberKnife radiosurgery is miles ahead of the Da Vinci concept for surgery when measured by clinical validation and cost effectiveness.

7. What do you feel Accuray is doing poorly?

In planning for unrealistic growth, Accuray scaled operations prematurely and needlessly burned through a lot of cash, and at the same time, communication with investors deteriorated terribly. Of note, since the arrival of CFO Derek Bertocci’s, both of the above issues have improved. However, the company has tragically lost touch with what was once a credible and very unique base of surgical users. The CyberKnife product is increasingly becoming bloated and overly expensive. In parallel, internal company processes have the complexity of a company 10 times the size, which is not a good thing for a company so dependent on rapid innovation. Many CyberKnife features were poorly conceived and in the process of development, robbed engineering talent from more important projects. Rather than envision and drive new clinical applications for radiosurgery, Accuray has chosen to spend a lot of energy and focus backtracking into the traditional radiation oncology market, long dominated by Varian and others. Internally, dissenting opinions are frowned upon, and the Accuray board has virtually no background in any of the medical or technical fields that are relevant to company business. For many years now Accuray has done a very poor job of selling to major US academic centers, which represent vital hubs of clinical research going forward. Moreover, because it’s under represented at major medical centers, Accuray lacks political clout within major medical societies and the government. In belatedly following my mother’s admonition “to not say anything, if you can’t say something nice,” I will stop here.

8. What are your favorite memories during your time with Accuray?

I loved my years as CEO between 1999 and 2000. Going into the company, I was a complete neophyte in the business world, and had so much to learn. Although these were very challenging years from the standpoint of hiring (the competition from technology companies was fierce) and at the same time the ensuing economic downturn was ferocious (making fund raising incredibly tough), during this period the business was finally righted after 5 years of repeated near death experiences. We turned the business around by simply focusing on the product, creating the right team and aggressively selling.

9. Your son, John “Trip” Adler, is an accomplished gentleman in his own right. Please tell us more about him and his company, Scribd.com. What would people be surprised to know about Trip?

Although a very young CEO, Trip has been incredibly successful with Scribd, the company he founded 3 years ago at age 22. If Trip wasn’t my son, I’d be very jealous! However, the nature of Scribd and its business is almost the diametric opposite of Accuray. For those interested in knowing how different I suggest they listen to a podcast at:

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2333

The world might be surprised to know that Trip is an incredibly talented Jazz saxophone player. I wish he played more often.

[Disclosure: I (the interviewer) own shares of Accuray (ARAY).]