Big Ideas: “How we can prevent billions of dollars of medical supplies from expiring and going to waste” with Carl Natenstedt, CEO of Z5 Inventory

As a part of my series about “Big Ideas That Might Change The World In The Next Few Years” I had the pleasure of interviewing Carl Natenstedt. An alumnus of UC Santa Barbara, he spent more than twenty years forming companies in the healthcare and supply chain sphere before creating Z5 Inventory, an inventory management […]

As a part of my series about “Big Ideas That Might Change The World In The Next Few Years” I had the pleasure of interviewing Carl Natenstedt. An alumnus of UC Santa Barbara, he spent more than twenty years forming companies in the healthcare and supply chain sphere before creating Z5 Inventory, an inventory management solution dedicated to eliminating product expiration and waste in hospitals nationwide. He lives in Austin, TX with his wife Anne and possibly too many sons and/or dogs.

Thank you so much for joining us! Can you tell us a story about what brought you to this specific career path? 
For me, wanting to be an entrepreneur started as a kid. I watched my dad start an entrepreneurial business during very formative years. I saw him build it up as I grew up, and in high school, I saw it fail.

Understanding what that meant to the employees, the community, and of course, my father motivated me. It piqued my interest in startups and small business, but it also made me realize that, if I wanted to start a business, I had to do it the right way.

So I got all the necessary training. I got a degree in finance, became a certified public accountant, and did ten years in the public accounting sphere. In 1999 I knew a guy who knew a guy who happened to be a billionaire. He was looking to form an incubator for new businesses with big ideas.

We had lunch on a Friday. I pitched him a tech-based healthcare supply chain business, and by the end of the dinner, we had a dozen ideas for the name of the company sketched out on a napkin. At the bottom of the napkin, he wrote a figure. $2 Million. He gave me the weekend to think about starting my own business. On Monday, I accepted the offer, and within two weeks I was moving my family across California basically on nothing more than a promise. It ultimately worked out, and after I sold that company, I had the bug.

I had the bug bad.

I wanted to do it again and again and again. And I have. My ventures keep tying back to my first one — almost all in healthcare and technology and the supply chain. And, I would guess, once I get my current company, Z5 Inventory, as big as I can possibly make it, I’ll go out and find that next small idea that I can help make big.

Can you share the most interesting story that happened to you since you began your career?
Here’s two.

The most invigorating, positive moment of my career was the end of that first investor lunch when a billionaire told me, “I’ll make you the CEO of your own company and give you $2 Million to create this from the ground up.” I almost couldn’t believe it, because it was this cliché, movie situation. All written on the back of a napkin.

That first company eventually received a $20 million term sheet from SoftBank — the biggest investor in tech companies in the world — that valued us at $100 million. I was having a dinner party with a bunch of friends at my house to celebrate. The market crashed that day. During dinner, the SoftBank partner called and told me they were pulling the term sheet. That, coupled with the crash, forced me to reduce my staff from forty to ten. That was incredibly hard. But we reevaluated what we wanted to offer as a company, and ultimately we came out stronger for it.

Can you tell us about your “Big Idea That Might Change The World”?

There are thousands of hospitals in this country — even without counting smaller facilities, like standalone emergency rooms and doctors’ offices — and if you go to the dumpsters out back, you will find piles of medical and surgical supplies that have been thrown out due to expiration. It adds up to a waste of $5 Billion every year.

Z5 Inventory’s mission is to put that product to use — moving supplies between hospitals within the same system, selling product from one hospital that doesn’t use it to another that will and donating the rest of the excess to charitable causes. Z5 uses predictive analysis and machine learning to anticipate product consumption so that we can eliminate product waste in healthcare. 
We’re creating a real mindset change within the industry. We need to convince people that throwing all these medical supplies away isn’t normal or even necessary. Providers can turn that loss into savings. And more and more of them are doing just that every day.

How do you think this will change the world?
Imagine turning a $5 Billion annual loss into savings. The amount that could be done with that money is astounding. With these savings, hospitals can reduce their costs and reinvest in their communities. And as for these new, perfectly good medical supplies, we can keep them out of landfills and, even if we can’t find a destination for them in hospitals, we can get them to those in need. 
Z5 Inventory facilitates the donation of product to our hospitals’ charitable partners and our own. We’re proud to work with groups like Project C.U.R.E. and Cherish Uganda to provide life-saving medical and surgical supplies to communities that wouldn’t otherwise have access to them. Every time I’m struggling to get a hospital to make this positive change, I remember that a child affected by HIV in Uganda could have been helped today by what we’re doing, and it makes me fight twice as hard.

Keeping “Black Mirror” and the “Law of Unintended Consequences” in mind, can you see any potential drawbacks about this idea that people should think more deeply about?
We’re probably not in a position to cause some kind of global apocalypse, but it’s possible that, through changing the way that healthcare looks at procurement and its supply chain, we might eliminate a particular role from the workforce. Right now you’ve got relatively low-income workers in hospitals counting product and triggering orders. Our predictive analysis could render that job unnecessary. Is that bad? Not necessarily, because it makes the industry more efficient and benefits society. But it’s bad at that moment for that guy or girl who’s getting laid off because they became obsolete.

Was there a “tipping point” that led you to this idea? Can you tell us that story?
In the course of my prior companies and jobs, I visited lots of hospitals around the country, touring the facilities, and I was constantly blown away by the amount of excess product hidden in every cubbyhole and desk drawer.

Every single operating room is loaded with product. One, in particular, that was the worst I’ve ever seen — totally disorganized and piled to the gills with boxes and boxes of stuff that was expiring or expired — was managed by a procurement person who had been at the hospital for over 50 years. She was never going to change her methods because she’d been doing the same thing for so long. And the other people who’d been in healthcare much less time than she didn’t have any motivation to change, either.

It was going to take someone on the outside sick to their stomach at that continuous visual reminder of consumption waste. Nobody else was offering a solution, so I set out to make it. And Z5 Inventory was born.

What do you need to lead this idea to widespread adoption?
We need the industry as a whole to be open to new ideas. As a general rule that’s not healthcare, especially the healthcare supply chain. There’s a lot of momentum against change if that’s even possible.

We need the healthcare culture to believe that change is for the better. 
And there are a lot of offerings for change competing for time and attention — so many that it’s hard to cut through all the clutter and get ours to the top of the list. Everybody’s trying to find a budget for AI that helps fight cancer while they’re throwing a million dollars’ worth of product in the dumpsters out back.

The change we’re trying to make is pretty small, really, but it makes a difference.

Oh, and while we’re at it, we’ll take more capital. You always need money.

What are your “5 Things I Wish Someone Told Me Before I Started” and why? 
1. It takes a long time to implement change in healthcare. These are long, long change cycles. A prominent client of ours who’s just now coming around to the idea, we first approached them almost 5 years ago. That’s how long it takes to convince the industry that a solution is to their benefit.
2. It’s more challenging to raise capital for a less glitzy solution. Inventory management isn’t a sexy idea. It’s not creating a social media network or giving everybody electric scooters they can leave anywhere when they’re done. It’s kind of boring. And investors are looking for something with a bit more glamour. So we have to work harder to shock them with our value proposition.
3. Manufacturing works against anything it sees as a threat. The makers and distributors of medical supplies have actively worked to undermine our kind of progress because the status quo benefits them. These companies have a lot of resources — boots on the ground and voices in the ear — , but we’ve got enough determination to show them the old ways of doing business can’t last. 
4. Always have a mindset of “how can that be done better.” It doesn’t matter where you are in business. If you’re looking for ways to improve, you’ll discover micro-benefits — like a way to get more time to yourself in your day — and macro-benefits — like that next big idea that might change the world. 
5. You’ll never wish you were more of a bastard. Treat everyone you encounter with respect, and they’ll respect you and your business. Even more than respect — compassion goes a long way.

The future of work is a common theme. What can one do to “future proof” their career?
In some form or another, given a few years, this company where I am now and the company where you are now won’t be here. Prepare for that all the time.

Continuously learn. Don’t stop taking in information just because you finished college. Learn both in structured education, like taking classes or getting a certification, but also through your own methods. Listen to podcasts, read books, and keep up on the industry — and outside — blogs. 
Evolve your understanding of what business is. If I only had the skills I had when I left college, I wouldn’t be successful. Be open to new jobs and challenges. One way to un-future-proof your career is only ever staying where you are and doing what’s comfortable. Do whatever you can to take on new tasks and find the next skill you can tackle.

And network, network, network. Learn how to do it, and turn to be a great relationship-maker into a requirement of your job.

Based on the future trends in your industry, if you had a million dollars, what would you invest in?
Other than the Z5 Inventory?

What I would like to see built is a better health plan. A better way of doing insurance in whatever government, private, or other forms that take. The model for insurance is getting more broken every day — increasing the cost to employers, decreasing benefits to employees, constantly changing deductibles. I could go on. There’s got to be a better way, and if somebody presented it to me, I would invest immediately.

Which principles or philosophies have guided your life? Your career?
First and foremost, the Golden Rule. It can seem stupid, but it works. 
People you work with, people who work for you, your customers — treat them with respect, friendship, and integrity, and they’ll do the same for you.

Everyone has some contribution to the team. Find what those are and bring them out in people. Recognize the importance of that skill, whether it’s something you personally value and are good at or not. You need someone to manage payroll and somebody to move product in a warehouse, even if those aren’t your passions. Invest in your people, and they’ll turn around and invest in your customers’ relationships with your company.

Can you share with our readers what you think are the most important “success habits” or “success mindsets”?
You need to believe that time is your most precious commodity. That’s your greatest shortage. It’s not money or good ideas. There’re only so many hours you can dedicate to your work. Once you have that in mind, you have to be really judicious about prioritizing your activities, so you don’t get sucked into doing something that gets you nothing. Maximize your productivity and how you use your time.

Some very well known VCs read this column. If you had 60 seconds to make a pitch to a VC, what would you say? 
If you invest in Z5, you can be a part of solving a $5 Billion annual problem and making the healthcare industry a lot more successful. At the same time, you’re benefiting humanity. What’s better than that?

How can our readers follow you on social media?
Find Z5 Inventory on LinkedIn, Twitter, and Facebook. 
(If Google+ is still around when this article is published, you can find us, there, too. If not, RIP.)

Thank you so much for joining us. This was very inspirational.

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