Welcome to the jungle

We’ve discussed the differences between animal and human health, but what are the similarities that you wanted investors to know?
In digital health, precision medicine and analytics, the animal health ecosystem is seeing incredible innovation, just as in human health. But unlike in human health, you’re not dealing as much with governments, insurers and other intermediaries. We’re able to work directly with the clinics – veterinarians, our customers – to develop the diagnostics that improve their outcomes. The same goes for livestock, where farms have an enormous amount of data, and we’re helping them integrate it with health information to boost productivity.

So, we come back to communication.
Yes. One of the lessons we learned at the beginning is that you cannot be “cheap” in communicating externally. You always need to spend time with investors, but this is especially true after a spinoff, because the reasons for them to continue investing in your business may have changed.

What other communications tactics were important?
Repetition is key. Investors hear from lots of different people. They see lots of presentations. I needed to ensure that they heard what we were saying, even if I felt like a broken record by the third time … and the fourth time. Also, personal delivery: I needed to make sure I showed the same level of engagement, enthusiasm and understanding of the audience in the first meeting of the day or the last.

That brings us to Bill Ackman. He was one of those investors who watched you take the company public, and afterwards, wanted you to do more.
Bill Ackman called me and said, “I want to tell you that I bought a little more than 8 percent of your company, and it will be in the news tomorrow.” I told him that since we would be holding an investor meeting the following week, I hoped he’d attend and learn more about our company. And that began a series of discussions.

How did those go?
They went well. We met with Pershing Square [the hedge fund led by Bill Ackman] to discuss their investment thesis and their areas of focus. And, through these conversations, they expressed interest in a board seat. I discussed this request with our board, which ultimately agreed to incorporate two new directors: one from Pershing Square and one independent director.

And where do things stand today?
After about 18 months, Pershing Square saw good progress with its investment and decided to sell its stake in Zoetis, and resign their board seat.

You employed a dialogue-based approach, different than the public fights we often see in activist challenges. Why?
When you are approached by an activist, you always have options. The board and I agreed that, given the distraction and cost to our business of a public fight, it was not the right choice for Zoetis at the time.

In addition to the board seats, what other changes did you make?
We implemented what we called an operational efficiency initiative, which was the next phase of evolving our business following the spinoff. We wanted to make sure that we would continue growing faster than the market, as we did in Zoetis’ first two years as a standalone company. That required us to be much more efficient, by eliminating complexity in our company.

Did you develop this business plan at Pershing Square’s urging?
No. It was already under way, because we understood it was something we needed to do following the spinoff of our business. We did inform them of it, of course. We also presented the completed plan to our board, including the two new directors. The board approved it unanimously.

You took some major actions, including reducing your workforce by 20 percent. Was everything on the table?
No. One of Pershing Square’s theses was there were opportunities to reduce R&D efforts. This may have been based on their understanding of human health, where that could make sense. Once they saw our return on R&D investment, our productivity, they understood the need to continue it.

Culture seems to be a challenge every CEO wrestles with. Have you?
From the beginning, we involved 2,000 colleagues to help us translate our core values into simple, practical language that would resonate with them.

Take “Run It Like You Own It,” which is one of our core beliefs. Coming from a larger organization, where it was harder to move the needle on the overall business, we realized we now had the opportunity to explain to colleagues that this was truly their business. What would have been insignificant changes at Pfizer had real, lasting impact on our business.

While you’re much smaller than Pfizer, Zoetis is still a large, global corporation. How do you retain the agility that helped drive the decision to spin off?
It requires challenging our organization – every day – to find simpler ways to operate. There can be no compromise when it comes to safety and risk, but what are we doing just because we’ve always done it? What can we do differently, more simply? These are the questions we need to answer, and the answers need to come from the bottom up, because it’s the employees dealing with these processes who know their true value. And, if we decide we need to maintain a certain level of complexity internally, I ask that we not translate it to our customers.

It’s a never-ending process, because any organization tends to build complexity over time. A key lesson from the spinoff, and the hard work we did to meet our targets after the spinoff, is that it forced us to become the unified company we are proud to be today.

Juan Ramón Alaix is CEO of Zoetis as well as a member of the company’s board of directors. He has spent more than two decades in the pharma industry. Prior to Zoetis, Alaix served as President of Pfizer Animal Health. He is a native of Spain.

Raul Damas is a Partner based in Brunswick's New York office. He specializes in public affairs, crisis management, and reputation issues, with a focus on the healthcare industry.