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R&D 101 Featured

9:36am EDT July 22, 2002

What does a $420 million company do when it dominates the roofing supply market and can point to the Sydney Opera House and Washington Monument as examples of its products at work?

If you're Beachwood-based Tremco Inc., you try to keep your competitors from knocking you down.

"When you're at the top and everybody's shooting at you and poking at you and prodding you, trying to take a piece of this and a piece of that, you see life from a different window," says Jeffrey Korach, president of Tremco Inc.

Part of his strategy to keep Tremco -- the leading roofing supply company for the construction industry -- on the top of the heap is a strong research and development arm that is constantly working to improve existing products, as well as pioneer new technologies. Where it gets complicated for Tremco is the fact that its products have already proven to be dependable and customers aren't exactly clamoring for something new.

"It's a tenuous battle," says Randall Korach, vice president of Tremco's Sealant/Weatherproofing Division. "We are industry leaders, so everything we do supplants something that we already have. You want to be careful not to rob Peter to pay Paul, so to speak, in developing those new products that may not create any great benefit to the user or yourself in the market."

Despite the market's aversion to change, company executives want the development of new technology to account for 30 percent of revenue within three years and executives say it's played a role in the company's $100 million growth since 1997.

Here's how Tremco handles R&D in an industry that often is more partial to a product that's tried and true.

Seek different opinions

From the top office, it is nearly impossible to figure out what is going on in the trenches. Nevertheless, when Jeffrey Korach became president of Tremco, the responsibility for R&D fell squarely on his shoulders.

When RPM Inc. purchased the company in 1997, he decided to shift those duties to the vice presidents who head each of the companies five divisions.

"We had to intimately involve the divisions in the R&D process because they are the ones that really understand what's going on from a marketing point of view," he explains. "It gets a little bit insulated by the time it gets to my level and doesn't have the degree of attention and proper focus that is necessary."

Set a budget

Each year's research and development budget is hashed out during the company's annual budgeting process. The heads of each division must submit a proposal justifying their financial requests and an outline of how they plan to use the money during the next 12 months.

Meanwhile, past R&D allowances are reviewed to gauge the success of prior investments.

"We spend at least 50 percent of our R&D resources on new technologies, vanguard technologies, change the game types of technologies," says Randall Korach. "The rest of our resources are spent on things like raw material substitutions and processing optimization."

Study the market

Reinventing the wheel isn't on Randall Korach's mind. Instead, he looks for segments of the major market in which he believes Tremco could beef up its presence and underserved niche markets the company could aggressively pursue.

For example, he focused on improving Tremco's reputation in the silicon sealant industry, an area of the market in which the company had lagged for more than a decade. So far, the efforts have yielded impressive results.

"We launched an extremely comprehensive and competitive line of silicon sealants to go gain share and we've been doing that with remarkable success over the past 12 months," he says. "We're seeing 100 percent year to year increases since our product launch."

Evaluate your progress

The risk associated with any R&D effort is spending time and money on a product customers won't respond to. Although the benefits of a successful effort can spur growth, Randall Korach says any R&D campaign must be well researched, then monitored regularly to make sure it fits the characteristics of the market and the needs of the company.

"The opportunities are endless," he says. "We do significant analysis to determine where our best chances for success are, the best opportunities for our capital, and we make strategic decisions on a daily, weekly, monthly and yearly basis." How to reach: Tremco Inc., (216) 292-5000

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.