Since founding BrainLAB in 1989 at the age of 22, Stefan Vilsmeier has served as its CEO and has been the driving force behind the company's innovation and customer focus. A self-taught computer programmer, Vilsmeier at 17 years old wrote a best-seller among computer geeks on 3-D graphics and parlayed the proceeds to start up a company focusing from the start on neuro-navigation and radiotherapy.

BrainLAB today is the market leader in both these categories, continually evolving software integrated into hardware to drive medical treatments that are more precise, less invasive, and less expensive than traditional methods.

With hospitals in Asia, North America and South Africa as some of its first customers, BrainLAB has been an international company from the very beginning. Today, BrainLAB AG generates more than 50% of its revenues in the U.S. and has strategic partnerships with some of the world's leading healthcare companies.

Vilsmeier's entrepreneurial success has been crowned by many recognitions and awards, including being named among the Global Leaders for Tomorrow by the World Economic Forum and the World Entrepreneur of the Year in 2002 by Ernst & Young.

BB&T met with Vilsmeier in his office in the Munich suburb of Feldkirchen, where the company runs its global operations and produces all products.

BB&T: For a world-class entrepreneur, things are starting to look quite corporate here at your new headquarters.

Vilsmeier: These offices are meant to be more a reflection of the continuing growth and solidity of the company. But as you interact with the group, I don't think you will find we are becoming too corporate in our culture.

We try to hire people who are passionate for success, not always people who have long CVs, but who have shown passion. Our customers tell us we really have people willing to break through walls to get something done. Sometimes management's job is to make sure they don't go through any outside walls. But we seek passionate and energetic people, people willing to ask stupid questions, and then give them systematically access to our customers. Everybody in the company, even human resource and accounting, have regular encounters with the customers.

BB&T: BrainLAB's unique selling proposition is offering an open platform to integrate software on any provider's hardware platform. Yet the new Novalis Tx radiotherapy suite joins BrainLAB software and hardware with a linear accelerator from Varian with the whole package color-coordinated. Is this a departure?

Vilsmeier: On one hand, we have always maintained an open platform by integrating our technology with any number of manufacturers. Yet at the same time we also have established preferred partnerships in certain areas based on the fact that they were faster to develop specific interfaces. For example in orthopedics we work closely with DePuy on products, in microscopes we are often working closely with Karl Zeiss.

We have been marketing a dedicated linear accelerator from Varian for over a decade under the name Novalis as a turnkey system for radiosurgery. This application was originally positioned against the Gamma Knife, the strongest brand in neurosurgery. But over a five- to six-year period we have overtaken the Gamma Knife in terms of sales of new units, with the exception of replacement business.

We have always worked somewhat closer with Varian than other manufacturers, with a relationship that goes back to signing a first contract in March 1996. While we felt we had better technology for radiosurgery, we knew that the beam-shaping and the multi-leaf collimator was the next important step. Since Varian was the leader in multi-leaf technology, we licensed their technology, miniaturized it and then sold it as a detachable micro multi-leaf collimator device for linear accelerators.

The collimator can shape the radiation beam to exactly conform to the shape of the tumor using a set of tungsten leaves driven by a motor. Rather than using square or circular beams that also penetrate healthy tissue, with the multi-leaf we can exactly shape the beam to match any shape of the tumor from a particular angle. Varian had developed a set of tungsten leaves shaping these leaves in 1 cm increments. In our center, we brought it down to 3 mm, giving a finer resolution much more suited for brain therapy in particular.

This product improvement helped BrainLAB become in just two years the market leader in radiation therapies. I could not really tell you who follows us right now because basically their market share for linear accelerator surgery for the brain is insignificant.

Stereotactic radiosurgery used to be a very well-defined area because it was a more precise way to treat brain tumors. We challenged this business and in doing so, other practice areas have adopted this new precision as well for tumors of the spine, the lung and internal organs. We started in a niche and suddenly find ourselves competing in the mainstream market. The special technique for treating sensitive brain tumors has now become the main way to treat all tumors.

Two years ago, the technology we developed to create the Novalis TX was highly complementary to the Varian Trilogy Tx technology. Today we are sometimes competing, as the overlap became bigger and bigger and as we developed treatments outside the brain for lung and spine. We signed a new contract with Varian 14 months ago, essentially taking the best from Varian and the best from BrainLAB and combining it in one new super machine we are co-selling.

In last 12 months we have sold almost 60 units, typically at around $4 million per unit. We have sold more than all other competitors in this field put together, as far as the numbers I have seen. This device is the best instrument for brain surgeons but it is no longer limited to this application and is proving far more versatile. The efficiency and the patient throughput is so high that you can treat about the same number of patients that before required two distinct machines. This makes it a much more attractive value proposition for customers because the price is significantly less than the price for the two separate units that were required.

BB&T: There is a pattern here where BrainLAB enters a niche market selling software and ends up owning the category with a device. Recently you began selling BrainSUITE, an entire operating room where you entered that space with navigation software.

Vilsmeier: Today we are the market leader for image-guided surgery, but this gives us a responsibility as well to work with customers to develop the technology further.

Here we ran into the fundamental dilemma of neurosurgery that while it is now more precise and less invasive than traditional surgeries, the problem is that as you are ressecting a tumor, other objects in the brain are shifting around such that at the end of the procedure you can never be quite sure you have completely ressected all the tumor. Sometimes it is simply not possible to visually distinguish tumor tissue from healthy tissue.

If MRI can see the tumor but you can not, then what is the next step? Clearly it is to bring imaging into the surgical procedure.

A similar situation presents itself if you look at orthopedic surgery or spine surgery. From a patient's point of view you want to be sure everything is just correct before the surgeon closes you up. in the case of children's hospitals, the concern is all the more dramatic. You do not want to go back and tell parents that you need to operate a second time because of an oversight or that you missed part of the tumor.

A study at the University of Erlangen-Nuremberg for brain tumors showed that among 47 patients, more than one-third required additional surgery for segments of tumors that were missed. If a hospital only does 100 cases in a year, then in that given year, the reduction in rehabilitation and in intensive care costs for 35 patients would easily hit $1.5 million per year.

We propose that adding an MRI or CT scanner in an operating room becomes an incremental business with a strong value proposition to the hospital. When a hospital looks at amortizing the system over a period of time, the costs begin to look minimal. And then if you factor in the cost of doing additional surgeries the argument is clear.

BB&T: Does the cost argument work as well in Europe, where some countries are struggling to even buy ultrasound for their hospitals, let alone an MRI dedicated to surgery?

Vilsmeier: The market that responded to our proposal first was Asia-Pacific. You have only to look at the number of BrainSUITEs in India alone, where we have three or four being installed. The same is true for other markets in the region. Because they have the same pressures to work with limited resources as Europe, which for them also can include a limited number of qualified physicians available. These surgeons, then, need to be as efficient as possible and hospitals are going to leap frog the western world through better technology.

The U.S. is the next strongest region, adopting the technology because certain hospitals have charitable foundations supporting this change. And the U.S. is a very competitive environment, where for the leading centers having the BrainSUITE makes them the new standard and giving a competitive edge.

Where there are projects for building a new surgical wing, the cost of adding a state-of-the-art operating room that you know will meet your needs for more than 10 years becomes almost insignificant within the overall construction costs.

You are right, however, that it is more difficult in Europe. We have sold the first European BrainSUITE in the UK. It takes more time and it is tougher. In some areas where there is an established capital equipment budget or where there are investors, such as with the private hospital chains, there is opportunity.

We have developed a number of different flavors for how BrainSUITE can be incorporated. If there are plans for a new hospital wing, and the hospital is also planning to have an MRI suite somewhere, we can design an operating room with a diagnostic suite on the other side of a sliding door so patients can be wheeled to the MRI, or in the case of the CT, which is lighter, it can be mounted on wheels and rolled into the diagnostic room.

We did not invent putting an MRI in an operating room. But we made it work on a technical level. The MRI will disturb every device in the OR, and every device in the OR disturbs the MRI. We make it work, and we make it all work in the clinical workflow, which requires a lot of integration. There are up to 100 different devices centrally controlled by our software in the OR.

BB&T: It sounds like BrainLAB is a software company that ends up selling hardware. The MRI and CT manufacturers must love you for this new BrainSUITE.

Vilsmeier: For us it is neither about software or hardware, but integration that leads to less-invasive surgeries and better patient outcomes. One of the challenges of healthcare the way we see it is that there is an explosion of medical data, and hospitals are investing a fortune into generating even more and more data. Far different from 30 years ago, when all you had for a given patient was one X-ray.

Today there is a higher and higher resolution of anatomical data, metabolic data, functional data, genetic data, etc. It is getting to the point where no physician has the time to look at all the different images being taken. And this is only going to grow another five-fold in the next five years.

The opportunity is to use intelligent software to integrate these different sources of data and filter it so that we turn data into information. Taking thousands of scanner slices and gigabytes of information and creating one or two displays that immediately provide the right information at the right point in time to make a decision, this is what we seek in image enrichment and image display.

Look at nerve fiber tracking, for example. We did not invent fiber tracking. But the way we combined it and merged it with all the other pieces of information in the iPlan software now renders what was already there makes an impactful decision that results in better surgery. We are using data that is there in a way that results in relevance for better treatment.

This is also true for our automatic segmentation of different structures on scans that yield better 3-D representations. On Digital Lightbox, the metabolic information can be merged with functional information and overlaid with anatomical information so that you have all the information on one single display, and then make that display interactive so that surgeons have better ways of making decisions. The overall challenge is how to filter this data explosion and the exponentially growing amount of data into useful information.

The third element that I believe is an opportunity for BrainLAB is where there are more and more complex treatments requiring more and different subspecialties to work together. Today we have neurologists, oncologists, neurosurgeons and radiotherapists trying to work together to create a treatment. Hospitals have working groups called tumor boards that get together to discuss indications that put many people at the same moment in the same room. Yet there is not an infrastructure that would be supporting and facilitating such a collaborative approach.

iPlan and Digital Lightbox support this kind of collaboration, and even collaborations at different times, in different places and even across distances. They create flexibility in how the team members want to approach the task, enabling all the different stakeholders for a given treatment to be brought together. Within hospital groups, it creates a far greater integration of patient services.

Right now the strongest synergies within hospitals groups are within administration and billing. But this does not assure that a patient receives the same access to medical expertise independent of which hospital within the group that they enter the system. With planning solutions shared on a server, we create the possibility for experts at large facilities to mirror remotely on a Digital Lightbox the images captured and being displayed simultaneously on a Digital Lightbox at a smaller satellite center.

BB&T: Digital Lightbox was launched this past summer and you apparently have great expectations for this product.

Vilsmeier: This is the product that excites me the most right now. It is an interdisciplinary kiosk that brings medical information to life in the hands of the surgeon. It's like one gigantic iPhone that with the tip of the finger a surgeon can scroll through slices, zoom into an image.

It is a little annoying now when people say to me, "Oh this works just like the iPhone!" Because I want to tell them the iPhone works like DL. We were the first to develop software for the touch screen format, but that is water under the bridge now. In fact, the story behind Digital Lightbox started when I went to see the movie Minority Report. I bought the DVD and gave it to my R&D team and told them this is what I want for the medical field, that screen with Tom Cruise manipulating the images. I said here is a million euros, here is the DVD, you have 18 months. And that is what they did. I left them alone and they came back with this product. We actually showed it before Apple showed their iPhone, but never mind now.

If you look at PACS (picture archiving and communications systems) in hospitals, the radiologists now select images for the surgeons, but the surgeons think they are worse off than before when they had the original film. The film they could put up and look through it, but now the surgeon is stuck with whatever has been selected by radiology.

Digital Lightbox puts the control back in the hands of the surgeons. They not only can look at the data but bring it alive by manipulating it with a finger. Surgeons are already very tactile people. And they also can stand together in front of an image on the Digital Lightbox and discuss a case, change the views, the reconstruction of the image, can add data like measurements and notes. They can fuse images, measurements, function and angles.

So if I think of what BrainLAB does with data integration, it is all in there. Different data from different sources but also integrating people from different subspecialties. They an also bring up the iPlan software, can connect over the internet with other surgeons at different locations and collaborate on a treatment plan. The feedback has been absolutely phenomenal. Every neurosurgeon and subspecialist wants to have one.

BB&T: The connections are limited right now by the number of surgeons who actually have a Digital Lightbox, much like the original fax machine distribution at the beginning. Where do you see this going?

Vilsmeier: In neurosurgery, we will quickly have the critical mass to support a network among surgeons. In Europe and North America you have surgeons fighting over patients today. In India and elsewhere they have the opposite condition. This suggests the possibility of creating an E-Bay for medical knowledge, something we are gradually moving toward. In radiology that already exists, where people read others images for a fee.

In neurology it is more the case of bringing in consultations for treatment planning that can then be delivered somewhere else. Right now to assure the patient the best medical care you need to have the patient, the expert, the data about the patient and the treatment planning workstation all in the same place at the same time. Our vision is to separate these elements. The patient could arrive at a location where there is a physician who may not be expert in the condition being presented but who can interface with the expert knowledge required. The physician then can translate the planned treatment for the patient and discuss where there are the appropriate devices nearby that can implement the treatment that has been planned. We want to use the infrastructure that is already in place, and then use all the equipment, the data and the expert knowledge more efficiently.

BB&T: Is BrainLAB going to continue growing organically into this role or do you see acquisitions on the horizon?

Vilsmeier: We definitely see an acquisition as being on the agenda, compared to several years ago when the company was exclusively dedicated to navigation and radiotherapies. Now our scope and the definition of what we do is broader. We are using software to provide better treatment but looking at the range of integration that we do, the definition of that integration is increasingly more than the standardization of treatments and becoming the possibility to create a consistency and access to state of the art technology treatments.

With this broader definition of what we do, there are a lot more complementary technologies and businesses that would be a good fit for BrainLAB. Also the critical mass and infrastructure we have built on the distribution side enables us to to look to marketing other devices such as OR equipment or other software pieces that are used by surgeons. These are the kinds of activities we are considering.

BB&T: You have traditionally grown out of niche markets, but increasingly you are finding yourself facing mainstream competitors, you said. This is especially true as you move into orthopedic navigation.

Vilsmeier: Image-guided orthopedic navigation did not quite exist when we started, so it was a niche. We were, in effect, the first to move. Where in neuro we fought from zero market share to the leading market share, in orthopedics we made the decision we wanted to lead the market from Day One. Other competitors who entered the space were affiliated exclusively with one implant company. It did not matter how good or bad the system was because the navigation was recommended by the sales force of that implant company and they were more or less limited to that market.

Look at Stryker, for example. They have their own image-guided system, but they can only sell it to Stryker customers. So we decided to be the Switzerland of image-guided surgery in orthopedics, working with all the different companies, with the exception of Stryker. We have been able to sell to a much broader market in this way.

The market has changed a little bit now, however. Zimmer, for example, bought its own image-guided business, though they have not, from what we have seen in the field, done much with it. Many other companies also have got their own image guidance system, even if their smaller share of the market tends to cripple the ability to gain adoption for any one of these dedicated systems. Still, the trend challenges our strategy to be the Switzerland of companies.

Fortunately we have always worked closely with DePuy, and this has given us a comfortable market access. We also hold the advantage of having a universal platform that we can sell to hospitals. Though we can continue to claim to lead the market, many companies have gotten into the bad habit of funding image guided system for their customers, which has devalued the technology.

In the short term, we have limited growth expectations for the system because it is difficult to move from the early adopters to the broader market. That always is a challenging step. Yet the systems are easier to use and has been shown to be time-neutral, not extending the surgical time. We are trying to further cut the learning curve and make it easier, which will help with what we believe will eventually be a mass adoption.

There are new and emerging surgical procedures that will be hard to if not impossible to do without image guidance, resurfacing being one of them. And there are other opportunities that really play our way.