The cost of innovation Featured

9:46am EDT July 22, 2002

Again in 1999, Spiral Brush has endured the costs required to successfully deliver hundreds of innovations for customers looking for modifications, reapplications and new solutions for their technical processes.

For 60 years, innovations have given this Stow supplier the agility to be profitable in new, growing and flat markets. It has become one of a growing number of companies which has cultivated a brisk business with innovations for customers looking for solutions that lower their costs.

According to Spiral’s president, Cliff Heaton, to pursue a strategy of not investing in innovations would cause it to be locked out of these markets — ultimately a strategy for going out of business.

This year, with 65 percent of Spiral’s sales coming from innovations, the cost of innovation will be well worth its weight in profit and brand gains. When it comes to assessing the cost of innovation, Heaton is all too happy to be an innovative supplier in an over-populated field of order takers.

As with any part of your business, there are two kinds of costs to consider in innovation: Those that result in revenue and brand gains, and those that result in revenue and brand losses. Assessing the costs of innovation always implies a 360-degree perspective — considering the cost of concept, development, production, marketing, sales, service and continuous improvement.

Two key questions to consider when assessing the potentials of any innovation are:

  • Do your customers have problems and needs that go beyond what they can find in your catalog or brochure?

  • What will innovation cost compared to the potential costs of not innovating?

When it is clear that your markets will reward innovations over shelf solutions and catalog options, your aim is to keep the costs of innovation down. Four strategies to consider include:

  • Accelerate your learning cycle by partnering with customers for more field than lab testing.

  • Involve end users and content experts as early and as concurrently in the development process as possible.

  • Resist assuming that new materials applicable to innovations do not exist; get closer to suppliers who can partner in innovations with you.

  • Build innovation into your brand in order to decrease the costs of marketing and selling new offerings. The more known for innovation you are, the less you’ll need to spend to attract attention to and confidence in your innovations.

Don’t forget about trends in your markets. In Spiral’s case, Heaton says, “As the world moves more toward order takers, you cannot afford not to innovate.”

He resists the lure of “grocery store” margins (typically around 1 percent) that come from dependence on catalog and shelf sales. Experience tells him that there is gold in them thar innovation hills of higher margin altitudes. At Spiral, the margins and profits of innovation far exceed those of their catalog business.

Wisdom in his company means eagerly taking on the costs of strategies required for a thriving business.

The lessons of companies like Spiral Brush point to the importance of always looking at innovation costs in relation to their potential for gains. At Spiral, the cost of innovation is the cost of success.

Jack Ricchiuto (ricchiuto@msn.com) is a Cleveland-based management consultant.