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I would like to begin my letter to you by sharing another letter one that I received via e-mail over Becton Dickinson's intranet:

Clateo,

I know how much you are personally committed to the transformation of the company and the desire we all have to move ourselves from a good company to a great company. I have been thinking a great deal about how we can release the energy within our people and believe that we are rapidly approaching a key time in our history.…

…I believe we need to look very carefully at ourselves and make hard decisions in areas where we have problems… it is time to be true to our values and take personal responsibility to bring about change. In my opinion, we need to have a dedicated team to make this happen.…

These are my personal feelings. I wished to share them with you as we all work towards our ultimate goal.

Very best regards,

Graham

This is one of roughly 100 e-mail letters I receive from Becton Dickinson associates during a typical week. Thoughtful people who make a sincere effort to share a point of view deserve a response, so I personally answer most of them. The e-mail I have shared with you is from Graham Walker, who is one of our managers in the United Kingdom.

Transformation is Crucial
What is it that makes letters like this so extraordinary? Instead of being the recipient I could just as easily have been the sender. In other words, the message is coming back. Most of the letters I receive every day confirm in our employees' own words how deeply and fundamentally our company transformation is taking hold. We are not engaged in an empty exercise emanating from headquarters; rather, it is to use Graham's phrase "the energy within our people" driving a dynamic new Becton Dickinson.

At the same time, it needs to be said that our transformation is not one of happenstance. Indeed, it has been carefully conceived and is being implemented so as to meet specific objectives. As this Annual Report seeks to communicate, at Becton Dickinson we are "growing by design." Before discussing highlights of the past year, let me review the underlying rationale for the systemic changes within the company.

Increasing Relevance
Approaching its centennial year in 1997, Becton Dickinson was a very good and highly successful enterprise, producing quality products used the world over in an industry of noble purpose human health care. Nevertheless, we felt as though we could become a great company the kind of company that outperforms its peers year after year and is relevant to people around the world because of the way it touches their lives. Thus, we set out to frame a vision of greatness and identify the means of obtaining it. We challenged ourselves to become the organization most known worldwide for eliminating suffering and death from disease. We envisioned a Becton Dickinson logo that would be as universally recognized as the symbol of the Red Cross, and a corporation that was among the best performing in the world. These visionary statements all sharpen our focus on increasing our relevance to the health care marketplace as we achieve our purpose: "Helping all people live healthy lives."

Aspiring to Greatness
In reality, achieving these objectives will be the labor of decades. We acknowledged as much by establishing interim goals to catapult us out of the gate. As our first milestone, we chose the year 2002 and articulated a set of five-year aspirations.

Our performance goals are ambitious: to double our revenue while maintaining 15 percent annual earnings growth; to increase sales from new products and businesses to 25 percent of our total revenues; and to improve total quality, as defined by our customers, by 20 percent a year. Also, we want to double the number of people touched by our products and services throughout the world, and make major contributions to the advancement of health care.

Our strategy for reaching our five-year revenue goal is to grow by new product development, global expansion and acquisitions. On top of this we have to totally transform the company's culture. We have to change how we make decisions and how we manage in order to become a much less hierarchical, more adaptive and empowered organization, where many more initiatives start and flourish through collaboration across businesses, geography and functions.

A year ago, I reported to you that we were making good progress on all fronts. We opened manufacturing plants in China and India. We made acquisitions that meshed well with our strategic direction. We enhanced Becton Dickinson leadership in core businesses, while expediting our product pipeline for the innovative products of tomorrow. We established a "one-company" business unit Becton Dickinson Healthcare Systems, giving major health care providers a single point of contact for all our businesses. And, we fostered a one-company culture based on empowerment, teamwork and entrepreneurial spirit.

1998 Accomplishments
Building on our momentum, we have accelerated the pace this year. Moreover, this was the first year that we could really see and feel tangible results reaching across all parts of the company. Let me summarize just a few accomplishments:

We quickened the pace of new product introductions and entered new business alliances in pursuit of our year 2002 goal of $1 billion in revenues spawned by internally generated innovation. New products that address the trend toward increased self-health care include our hemoglobin A1C testing system and ASSURE brand home blood pressure monitors and ear thermometers. In our consumer products business, we are greatly expanding the retail presence of our ACE and BAUER & BLACK lines of elastic support products, which have been joined this year by TRU-FIT sports medicine products, a company we acquired early in the year. In our diagnostics business, we introduced the new BDProbeTec ET in Europe and plan to launch this important DNA probe technology in the U.S. in early 1999.

Of perhaps even greater significance, through synergies created by our one-company initiative we formed wholly new businesses. An example is the business that was created by bringing together pieces of three separate businesses flow cytometry, molecular biology and tissue culture labware. We believe this opportunity will unleash hidden opportunities in our diagnostic business. In addition, we also believe we have a real opportunity to broaden significantly our line of medical supplies and devices with advanced protection features, and as a company we are making a long-term commitment to that goal by forming a company-wide organization to lead our efforts.

We advanced our growth-through-acquisition plans by purchasing the medical device division of The BOC Group (MDD). In addition to being an excellent strategic fit, this move substantially increases our European infusion therapy revenues. We also purchased the Boston-based consulting firm, Concepts in Healthcare, Inc., giving our Consulting and Services Group a strong entry into the health care service business. In an expansion of our Asian presence, we purchased Boin Medica, the leading South Korean medical device manufacturer. Also in our medical segment, we acquired Visitec ophthalmic surgical products as well as TRU-FIT, referred to earlier. Crossing the borders between our medical and diagnostic segments, we sought to take advantage of what we believe is an excellent business opportunity as well as a real need for improved medication management through our acquisition of the Intellicode Division of MedPlus. In all, these acquisitions, along with those completed late in fiscal 1997, are expected to generate more than $350 million in annual revenues.

We are developing and implementing a single platform to provide integrated, real-time business information throughout the company, as well as to provide customers with a single point of contact with Becton Dickinson. This fundamental redesign of our business systems, internally named "Genesis," is based on SAP software and will propel us to the level of "best practices" in inventory management, procurement, manufacturing, finance, human resources, and data storage and retrieval.

Leading this effort is a separate project management group staffed by more than 100 multidisciplinary Becton Dickinson associates. Genesis is also a model for a new way of behaving, where associates work together freely in an open environment, exercise greater creativity, make fast decisions and meet aggressive timetables. The planning phase for Genesis was completed in February 1998 with initial implementation set for early 1999.

Do these accomplishments fit with our purpose of "Helping all people live healthy lives?" Absolutely because they will accelerate our ability to consistently develop and deliver the kinds of solutions that make a difference in people's lives. But what speaks most profoundly to our transformation is the way in which we are going about it.

Driving Growth and Transformation
We modified the company's management structure toward the end of the year in a way that I believe increases our ability to achieve our five-year goals. In this redesign, we created two new executive vice presidencies reporting to me. Gary Cohen, who had been president of our Worldwide Sample Collection Business and Becton Dickinson Europe, was named to one of the executive vice president positions, while Ed Ludwig, who had been our chief financial officer, was named to the other. Ken Weisshaar, who had been president of Becton Dickinson Worldwide Consumer Health Care, was appointed our chief financial officer. Gary and Ed will have the responsibility to drive our company's transformation and overcome artificial boundaries. They are working together to exploit greater synergy among our businesses; free up resources that are now tied up in redundant facilities, systems or organizations; and continue to drive top line revenue growth.

But, company transformation is not the job of two or three people. We have a team of 15 top managers who are leading the charge. They represent about two-thirds of our extended leadership team, which numbers 22 in total including seven regional presidents (two each in Latin America, Europe and Asia, and one in Canada).

Before I close, you may be wondering whether we acted on Graham Walker's suggestion that we assemble a dedicated team of people with the ability to communicate the vision throughout Becton Dickinson and serve as a catalyst for change. I was happy to tell Graham that we had already done just that. We identified about 40 very accomplished people in different jobs and geographies to partner with me and the leadership team. We are looking forward to hearing their ideas, just as I continue to value e-mail exchanges with my Becton Dickinson colleagues.

I find these communications to be as enlightening as those occasions when I put on a headset and become a Becton Dickinson service representative taking calls from the field. You can't get too close to the customer.

Clateo Castellini

Clateo Castellini
Chairman of the Board,
President and Chief Executive Officer




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