When a client tasked Mark Schwartz with developing a new folder, he went back to school. He handed students disposable cameras to document how they used similar products.
From that, Product Development Technologies Inc. ideated a folder that opened from the top, not the side, so students could retrieve papers out of their backpacks without emptying the contents.
“Having products that are not me-too but really exciting things people want to buy means those customers come back year after year,” says Schwartz, the company’s CEO. “If you don’t constantly come up with new and unique products, eventually you’ll die.”
Smart Business spoke with Schwartz about the innovation process.
Q. What’s the first step of innovation?
The first part is research and strategy, and that’s really at the core of innovation. [It’s] all about: Who’s your target market? What’s your price point? What are the trends? What do users want?
The real key to innovation is getting informed first with all the stakeholders and what the competitors are doing. For example, our employees go to lots of different shows. We really don’t (make) a lot of appliances, but we still go to the appliance show, because it helps us get acclimated with what the latest trends are, what the latest forms are, the latest colors, the latest features. Those innovations can get cross-pollinated into something like a medical device.
By far, the biggest thing is customer research, understanding the needs of the customer.
There’s two ways you do that: There’s the articulated needs and then there’s what we call the unarticulated needs. Articulated is doing research and going out in the field and talking to users about what they like or don’t like about products, bringing in prototypes, getting their reaction. The second part of that is using ethnography tools to spy on them, essentially, and watch people using things. They drive innovation without even knowing it. Someone may fiddle around with a tool, for example, and you’ll realize, ‘Wow, if that had a light on it, that would be really helpful for them.’
In the old days, people did a lot of market research, quantitative stuff, and I really think the trend is going away from that to more direct voice of the customer and ethnography.
Q. How do you determine whether ideas are viable as products?
Everything has to be grounded in reality. We talked about innovations, trends, the needs and desires of users. But the one thing we didn’t touch on is the reality of price points, time to market, budgets. You have to take all that stuff and you have to do a feasibility study to say, ‘We’d really like a 10-inch color display with one week of battery life, but it’s a $50 price point. That means we’ve got to make it for $30.’ Pretty soon, reality sets in and some of the stuff gets tempered a little bit.
But that’s innovation again because now you’ve got to get clever. You’ve got to find ways to make a product that has a good business case behind it financially.
We’ve got about (100) people and there’s a lot of broad expertise. We also do a lot of technology scouting. Last quarter, we had 42 suppliers share with us their road maps, what’s going on with displays, what’s going on with batteries, what’s going on with buttons, what wireless technologies are happening. You’ve really got to tap into all that in order to create the business case.
That’s all part of the strategy. It’s developing the product description before you embark into the development process. Some companies really don’t do that adequately and they find out [changes] well into the engineering process, and then it’s really expensive to change it.
Q. What should be included in an initial product plan?
A typical product description is going to talk about the marketing elements of the product: What’s the price point? Who are the competitors? What might the features be? What’s the go-to-market strategy?
There’s another element of the product description that’s technical — the specs. Does it need to be waterproof? Do you need to drop it from 4 feet or 8 feet or out of an airplane? How does it need to perform? How long does the battery need to last?
Then you need the budget stuff. What’s the time to market? How much tooling can we afford? ...
All those things need to be wrapped into a plan or a product description. All the disciplines get covered for that. Engineering has to do their feasibility. Marketing has to do their feasibility. Research needs to do their research. The CFO has to get involved with budgets.
You’ve got to have a facilitator; that’s usually what we call a product manager. That person helps corral all the disciplines and document what needs to get done.
Q. What advice would you give leaders on innovation?
Take the blinders off. Sometimes companies tend to get a little bit of tunnel vision and they really get zoned in on their vertical without really looking around at neighboring things — neighboring competitors, neighboring technologies, analogous devices — and looking to see if there is an innovation there. We draw inspiration from the auto show every year, because there’s always something innovative that might end up in some other product.
I’m biased, of course, but I also think that companies should, on occasion, outsource. We deal with consumer electronics, public safety, medical, and that cross-pollination of technologies and trends is all really healthy once in awhile to get your blinders off and get you out of tunnel vision.
How to reach: Product Development Technologies Inc., (847) 821-3000 or www.pdt.com
Well, he found what works for him, at least, though he’s quick to say that it’s not the only way to grow a company. Then again, his company has seen 161 percent growth in the last three years, landing at 2009 revenue of $307.6 million.
“If you want to lead the way in an industry, if you want to lead the way over your competition, then … be involved with businesses that carry innovation as a core competency,” says Faulkner, president and CEO of Pelican Products Inc.
Innovation is certainly core at Pelican, a Los Angeles-based designer and manufacturer of advanced lighting systems and virtually indestructible cases — and at other companies that Faulkner has led, including the Americas Operations Group at Microsoft and Nimbus CD International.
A commitment to perpetual ideation and improvement has secured Pelican’s place as the flashlight provider for the Los Angeles Police Department. Pelican’s customized solutions for each of its end markets also make it the go-to protector for everything from electronic devices to helicopter blades and the mission-critical military and medical equipment in between.
But it’s not just about having cool ideas for solving customer problems or being the first in your field to jump on a new technology.
“While we’re innovative and we pride ourselves on being innovative, most of our innovation turns to commercial success, as well,” Faulkner says. “We don’t just innovate for the sake of it. We do it very much with a goal of growing our business from it.”
Here’s how Faulkner brings all the pieces of innovation together to drive growth.
Create an idea culture
For innovation to be at your company’s core, it must be a constant part of your culture.
“I don’t think you can have a meeting every Monday morning and say, ‘Let’s be entrepreneurial. Here’s your hour to be innovative,’” Faulkner says. “It’s about building that into the culture. We have formal presentations, but people here are thinking of things all the time.”
The key is having an open environment where employees can share their ideas. Pelican has what they call a Blue Sky committee. Every month, representatives from each discipline in the company — from finance, R&D and sales to marketing and manufacturing — come together as a sounding board. Anyone in the company can bring ideas to them, whether as a sketch, a sample or simply a concept.
“They may be traveling with a customer. They may be looking at our products in use with an end market. They may like some other idea they’ve seen that’s an offshoot,” Faulkner says. “They’ll come back to us and say, ‘I really think we should be doing this,’ and we take it very seriously. No idea is stupid; no idea is out of bounds.”
Ideas don’t have to follow a tightly prescribed track. It’s not just products that come out of the Blue Sky. For example, someone once suggested a leasing option for cost-restricted clients who use several cases.
Because each product launch could cost Pelican millions of dollars, it has to be smart about which ideas to pursue.
Sometimes, that’s fairly simple.
“There are some easy ones where a customer comes to us and we can categorically recognize the commercial impact of a particular idea,” Faulkner says. “For those, they’re sort of no-brainers. There’s significantly less risk for us to take on. … To the extent the idea is coming from a customer or, like in the case of the police light, there’s a known large order at the end of the rainbow, then that’s a pretty straightforward call.”
Obviously, those aren’t the only calls you’ll make. Some require more background work, like conducting market research and running calculations.
Pelican’s assessment starts with a look at related technologies and products that already exist in the marketplace.
“We would do an assessment then to whether we think we could bring something better than what’s out there,” Faulkner says. “To the extent that we can build a better mousetrap for a particular market, we might talk to some customers. We might go and do some market research on who’s buying the sort of products that are out there. We would try and gauge the size of the market. Obviously, with the cost of bringing this stuff to market, you want to make sure there’s a scale of markets that you can be successful in.”
Pelican’s fastest-growing product line — remote area lighting — didn’t come from a customer with a guarantee of orders. It came from a good idea within the organization.
Of course, you won’t win every time, but that’s the reality of taking risks for the sake of innovation. The key is giving all ideas a chance, which encourages the flow to continue.
“When you’re doing lots of innovation, it comes with the territory that not everything you do will be a success every time,” Faulkner says. “And you know, that’s OK.”
Set the direction
To make initial idea-gathering easier — and more likely to reap success — your forum shouldn’t be a free-for-all. For innovation to propel your company in the right direction, that direction must be clear before ideas start flowing.
“First of all, I think it’s fair to say that everybody’s familiar with the company’s strategy,” Faulkner says. “If somebody said, ‘Let’s start making ice cream,’ it wouldn’t be approved — and, frankly, people wouldn’t come to the forum with the idea that we should start making ice cream.
“I don’t want to make it sound like there’s not any organization around this forum. … There’s a direction the ship is going, and to that end, people come to this forum with ideas on helping that ship continue down its course or go down it quicker. It is very much a controlled environment where we only want ideas that fit the guidelines of where the company is going.”
So how does Faulkner get 1,294 employees, headed the same way? He doesn’t — at least not by himself.
“You’re not going to have (1,300) people thinking the same way. You’re not going to get consensus around (1,300) people,” he says. “Certainly, my role and the (role of) people around me is to set strategy and set direction and make sure we’re following that. Thereafter, it’s communicating everybody’s role in that strategy, and I think it’s a case of turning that strategy into an execution plan. That’s where everybody really needs to buy in.”
In other words, the broad strategy you set may not be immediately relevant to each front-line employee. But it will click when employees see specific glimpses of their role in that strategy.
After the strategy leaves Faulkner’s desk, managers hone it into specific plans for their respective departments, tailoring each person’s responsibilities through a series of manager meetings, staff meetings and employee meetings.
“You can actually go to any department within Pelican today and people will tell you what the next three months are going to look like and the next nine months, what they’re expected to be working on, what they’re expected to deliver, the budget they’re expected to work within and what performance they’re expected to deliver on,” he says. “We may change that slightly against conditions, but for the most part, 90 percent of everybody’s job is well-planned.”
At the same time, the overall strategy stays forefront through posters, brochures and communication so employees can tie their zoomed-in view to the bigger picture.
“You know your role individually and collectively as a department and collectively as a team,” says Faulkner, who addresses the entire work force twice a year to reiterate the strategy and discuss future plans.
Here’s how that trickle-down process might look in action. Let’s say an employee tells the Blue Sky committee about a military tool case that’s failing in the field. Whether the idea ends up working or not, what’s important is that the employee understands the responsibility of success rests on the entire team, not one individual.
“We all buy in to a project,” Faulkner says. “So if it isn’t successful, we all are part of that decision. Therefore, nobody’s singled out as having made a mistake. It’s very much a team-recognized thing. That way, nobody’s really frightened to bring anything out there.
“If we’re successful, then everybody’s bought in to it and we all own it. And if we’re not successful, we all own it. So there’s not this culture of worrying about failure too much.”
If Pelican decides to design the military tool case, then the teams take over. The sales team puts together a plan to sell that case around the world. The manufacturing team lays out a strategy for making cases to satisfy the sales. The marketing department determines how to promote the product. Human resources designs a strategy for hiring people to match the expected growth.
“If you think about it, it fits like a jigsaw, really,” Faulkner says. “You take a picture of something and you cut it all down to where everybody’s got their part to play in the success of that product. Any one of them not doing their part would see the failure in that particular product launch.”
Fine-tune the machine
In this scenario, you’re the puzzle master, making sure all of the pieces come together at the right time.
“The challenge is you’ve got all these moving parts,” Faulkner says. “Make sure that all those moving parts are moving individually but also moving collectively. That’s my biggest challenge … we run this place like a finely tuned engine. We can’t have any cylinders not firing because that affects the performance of the whole engine.”
By monitoring progress and holding employees accountable, you can bring all the pieces together.
“As it relates to design on new products, my comment there is that we all own it so we’re accountable as a team,” Faulkner says. “When it comes down to execution of the strategy, that’s where we all own pieces. That’s where, you know, the marketing department has a number of disciplines it has to deliver on within an amount of time and within a budget and within a group of people.”
Faulkner conducts monthly reviews to make sure each department pulls its weight. He measures each department’s performance against timelines, budgets and other resources. While the focus is on current progress, it’s also a time to review the success or failure of certain activities and to check your pace toward future goals.
Keep track of progress consistently so the goal stays in front of you. Give yourself time to adjust your path instead of realizing too late that you missed a target.
“We try to be proactive, not reactive,” Faulkner says. “To the extent a department is failing in its objectives within the timeline, then, frankly, we watch … enough to where we would know that beforehand. We try not to have any retroactive action items; we try to have preventative action items.”
Multiple deadlines — like timelines, budgets and other expectations — keep the pressure on employees to perform. But you counterbalance that with some flexibility when it comes to external obstacles. If you’re willing to work with employees to make adjustments when they hit roadblocks, then they’ll be more willing to bring you problems directly and help you address them up front.
“We obviously would not want to see every project in every department all the time moved and changed and delayed,” Faulkner says. “So I wouldn’t tell you that there’s no pressure on people to deliver; there certainly is. But to the extent that there’s something beyond somebody’s control that is impacting us, then obviously we would be understanding of that and re-plan accordingly.”
For example, safety specifications for lights recently changed. Pelican couldn’t control how long it took the outside agency to inspect and certify its products. So Pelican had to push back the release date.
Then, after an idea turns into a product and launches successfully, the cycle starts over again. While Pelican does pause to celebrate success, it’s much more focused on recognizing what could be done better. Improving existing products is as much a part of innovation as developing new ones.
“It’s all about tuning that engine, and (after) you tune one area, you’ve got to go around and tune the other areas,” Faulkner says. “And then when you finish tuning them, you’re going back to the area that you started on.”
How to reach: Pelican Products Inc., (800) 473-5422 or www.pelican.com
On any given morning, Tom Richmond might see one of his products featured on the “Today Show.”
At the July 20 Smart Business Live luncheon, Richmond discussed The Little Tikes Co.’s continued innovation — even though it doesn’t come naturally to him.
“I always thought people must go up on a mountain and smoke something and come back with some great idea,” says Richmond, company general manager, who also serves as executive vice president for MGA Entertainment Inc., Little Tikes’ parent company. “How can there be a process associated with that? But actually there is, and it’s amazing.”
That process begins in the marketing department with consumer research, which becomes a script of marketplace hotspots for designers to follow. A panel of senior executives and end-users review designs, which are then refined through prototypes.
The key through that is maintaining an open environment where innovation is shared across the organization.
“My job is really to provide an equal playing field, to provide an environment where everyone can express their opinions, can give their ideas,” Richmond says. “So part of it is creating the vision. The second part of it is really communicating that vision so everyone understands what are we trying to do — so giving everyone the script that we’re playing to and then encouraging an open dialogue where the whole organization can bring in ideas.”
You establish that environment from the top with your response to ideas. Richmond doesn’t dwell on negatives and lets employees champion their own ideas.
“One of the lessons I’ve learned over the years is not to derail someone’s project for what’s wrong with it but to have them express explicitly what they think is right about it,” he says. “Many times during the process of having to explain yourself, it enlightens you, and you figure out, ‘Maybe I can see this from the other person’s perspective. Maybe it doesn’t do everything I thought it was supposed to do.’ That’s a growing experience and that creates further development.”
When you look at consensus the way Richmond does, in terms of “convincing the naysayers that maybe this thing has some validity to it,” having employees sell their ideas not only reveals weaknesses but also strengthens positives as they bring colleagues on board.
Focus on high points as you polish ideas into products.
“What are the key features in this?” Richmond asks. “How are we going to refine it? What’s really resonating with the consumer? What are the key issues that we need to go back to either our supply community or manufacturing or our plant to figure out ways to do things differently, marrying our capital structure with what we’re creating?”
When a better resulting product is the goal, conversations become more constructive.
“It’s having an open environment where people feel comfortable and able to express their opinion in a noncombative way,” Richmond says. “‘OK, you think my product is terrible? Fine. What would you do?’ Part of my job is trying to create that environment where that open dialogue exists.”
When you respond openly to ideas, it opens the doors to innovation. Then, ideas could come from an employee in sourcing who invites designers on a field trip to see how aerospace technology could translate into your industry.
“When we talk about … ingenuity and being innovative, to me it’s really the whole organization,” Richmond says. “It’s not a small group of creative people that just go away and think of stuff. It’s really a whole organization working together, bringing all of their life experiences and business experiences together to put the maximum thinking into that product."
Many Little Tikes products don’t come solely from internal innovation. A lot of ideas — if only tweaks to finished products — are contributions from people whom Tom Richmond doesn’t even employ.
“Ideas can come from anywhere,” says Richmond, the general manager. “Many times … it’s just people coming up with ideas who are actually using the product.”
By the time consumers test an idea, it probably has your organization’s nod already. Now, it rides on external feedback.
“The main filters are the experience of bringing (ideas) out to the environment and the folks that are going to be using or playing with our products and looking at how that reception is,” Richmond says. “There are many times when our whole organization’s behind a product … and it goes nowhere. There are other products that are kind of ho-hum … and they sell out.”
The challenge is embracing external input without discouraging internal ideas.
“You have to have some injection of external thinking, but then how do you break the internal barriers?” Richmond asks, referencing partnerships, internships and consultancies. “Really promote the fact that when you’re bringing in external resources and external thinking, this isn’t to your detriment. It’s for your benefit. These people are here to help, not to criticize. … If they see something you didn’t see, it’s only going to make you a better person.”
How to reach: The Little Tikes Co., (800) 748-2204 or www.littletikes.com
“The demands for your time are probably double the time — at least — that you have,” says the president and CEO of Children’s Hospital of Orange County. “The demands for your time and your energy, they just seem to exponentially grow year after year.”
Lately, Cripe has been busier than ever as she repositions CHOC from a community children’s hospital to a nationally recognized children’s hospital. The new vision has brought big changes, like building a new hospital and affiliating with UC Irvine.
However, she recognizes that her 2,432 employees face the same time pressures. Her job is to keep them focused on the right things.
“The things you talk to people about are the things they pay the most attention to,” Cripe says. “If we’re focusing and talking about something, I’m certain that people are paying attention to it. And if I don’t, there are many other things to fill that time slot.”
To get everyone concentrating on the same vision, Cripe learned she had to refine the organization’s focus and communicate it relentlessly. It took a lot of effort to reach all of the employees across a 238-bed main facility in the city of Orange, a hospital-within-a-hospital in Mission Viejo and 12 other clinics. It required a clear plan laying out the steps to becoming the kind of children’s hospital CHOC aspired to be.
“If you’re trying to move your company, you need to have a plan, and then you have to have tools to deploy the plan,” Cripe says. “You need to be able to develop the plan, communicate the plan and explain to everybody that works there what their role is in achieving the plan.”
Create an involved plan
Half a dozen years into her CHOC tenure, Cripe stepped into her current position with a bigger vision for the company. She knew she couldn’t get there — or get others to follow — without a plan.
She started by evaluating what propelled other hospitals to CHOC’s desired position by benchmarking the top players in the field, as determined by top 10 criteria-ranked lists in several publications.
“We studied the key attributes of those children’s hospitals, and we came up with 11 to 13 different core attributes that they all had,” Cripe says. “For example, they all had academic affiliations with universities. They all had robust fundraising efforts and endowments.”
The critical step, then, is mapping your position in comparison to those and analyzing why gaps exist. For example, the hospitals with large endowments had been around for a hundred years in comparison to CHOC’s 45 years — which made sense, considering how endowments grow over time.
That analysis can be too much for one person, especially someone close to the organization. Cripe recommends external help.
“There’s a time and a purpose for a consultant,” she says. “Sometimes it’s really hard to hold the mirror up and be painfully honest with yourself about where you are. If you’re really serious about transforming your company, having someone from the outside that has relevant expertise coming in and helping you hold up a mirror and debating the truths that you have [is important].”
Those analyzed attributes became a pool to pull priorities and eventually evolved into CHOC’s strategic plan.
“It was clear, when we looked at all the things that were on the list, so many of them tied back to the need for an academic affiliation,” Cripe says. “So that was the strategic initiative that we pursued first. Typically, there’s either a chronology or there’s some sort of foundational piece that needs to get done, and then the different elements build upon that.
“The first ranking was: What’s the most important thing to advance this institution? And then: What is the timeline, and then, what pieces fall after that?”
Remember, when prioritizing, that you can’t do everything.
“Every company has dozens — if not hundreds or thousands — of demands for their time and resources,” Cripe says. “A word of caution is for leadership to be reasonable and set realistic expectations. … We were trying to take on too much at one time, and over the years, we’ve learned to discipline ourselves from trying to tackle 10 things at a time to two or three so that we do them and do them well.”
Keep employees informed
Because your plans don’t only affect you, don’t forget about your employees while you’re planning. Involve them in the process through constant communication.
“If people aren’t involved on the ground floor with helping to develop that plan … it certainly reduces the likelihood that they’re going to buy in and support what you’re doing,” Cripe says.
She tries to reach as many employees in as many ways as possible — from focus groups and electronic surveys to town-hall meetings.
“You truly cannot spend enough time or too much time designing communication systems,” she says. “Every channel’s important. You can’t just send out a company newsletter or give a big talk. It’s an endless job of engaging and communicating with your stakeholders.”
Like any other part of your plan, lay out a communication strategy up front.
“We try to think of every communication channel possible for a particular initiative,” says Cripe, who works closely with her public relations department to select appropriate methods. “You have to be realistic; you can’t do 15 different things every single time. We prioritize: Where do we want focus groups? Where do we want departmental meetings? Where do we want town-hall meetings? [We] think through the importance of what we’re doing and the best way to get that word out.”
Regardless of the avenue, the goal is fostering buy-in. Specifically, employees in a certain department need to understand why an initiative affecting them has been delayed.
“Most people tend to think what they’re working on is the most important thing,” Cripe says. “But it might not be, at the time, the most important thing for the organization. Helping them understand why we have to make decisions to delay or defer is also important.”
You may not get agreement from everyone — but you don’t have to. Cripe has found that when employees understand decisions, extreme dissension is rare.
“If you bring people along and they have knowledge of what you’re trying to do and what the circumstances are and the limitations, while they might not completely agree … they’ll at least understand why you’re pursuing the different strategic initiates in a particular order,” she says. “Understand that people don’t have the same information that senior leadership has. They don’t have access to the broad band of what the company is facing. If you help them get some insight into what all the demands are and the strategic direction, they understand, and they want to do their part to help you.”
Make messages relevant
Just as a single communication method doesn’t reach everyone, one message doesn’t fit all, either.
“One of the biggest challenges for a chief executive officer is to translate that vision into something that every employee can relate to personally,” Cripe says. “I tend to get very excited about our vision and can talk about it and it’s crystal clear to me, but then I need to think about, if I were a nurse, what’s that vision mean to me personally and how do I contribute to it?”
To some extent, you can tailor your message by putting yourself in employees’ shoes.
“You need to think about the person receiving the message, how you make it meaningful to them,” she says. “Think about, for the gentleman cleaning the room, what does that mean to him? Then craft the message specific to, ‘OK, to be a great children’s hospital, one of the things is that we want really clean patient rooms,’ and get it down to a clear picture.
“People need clarity: Exactly what does that mean to me and what do you want me to do? Develop a communication plan to help that individual understand their role. It can’t just be broad and generic. You need to think about the audience and what you need them to do.”
But it’s rare you’ll have specific knowledge of each department. Even if you did, it’s difficult to step back from your own understanding of the vision. Recognize those limitations — and the importance of delegation.
“Our job is to be clear about the vision and then to get the right people in the room to start to translate that down throughout the organization,” Cripe says. “I long ago realized that there’s no way that one person, no matter how good a CEO might be, can do all of that himself or herself and do it well.”
Cripe requires other leaders in the organization — from senior leaders to front-line supervisors — to develop their own offshoot of the vision for their teams, complete with specific goals, objectives, metrics, timelines and communication strategies.
“You literally need to get down to the individual level, and one of the best ways to do that is to involve all of your management,” Cripe says. “Ask your departmental managers to develop their own little strategic plan for their department (that) ties into the company’s vision and how they’re going to contribute.”
Department heads have several resources available for assistance, like access to CHOC’s strategic planning department.
CHOC even set up management training on setting and measuring realistic goals. For example, the program covered the balance between ambition and achievement.
“(Goals) shouldn’t be so ambitious that there’s no chance that they’re going to be achieved, because that’s demoralizing in the end,” Cripe says. “You need to work with your management team on, realistically, given everything a department’s working on, ‘What rate of improvement should we be aspiring to achieve?’”
The program also trained them to set reasonable timelines.
“You can set a really aggressive timeline, but that might sacrifice buy-in,” Cripe says. “The manager has to weigh the pros and cons of the timeline versus the depth and penetration of a particular goal.”
Offering those tools enables consistency, but checks and balances ensure it. The vice presidents of each department review the mini-visions so no one veers from the ultimate company mission to “nurture, advance and protect the health and well-being of children,” or the vision to “achieve national recognition as a premier children’s hospital.”
Hold employees accountable
Once you’ve established the companywide plan, as well as departmental contributions, hold people accountable to it.
“Starting with management, you’ve really got to link the accountability piece to performance evaluation and compensation,” says Cripe, explaining that part of managers’ compensation is base pay and part depends on achieving the strategic plan. “There’s just complete integrity and continuity in clearly articulating … what their job is and what they need to do to be successful.”
In addition to compensation, reporting results to everyone is crucial for maintaining alignment to the vision. Department managers at CHOC regularly address employees about where they’re meeting goals and where they’re not.
If a department falls off track, involve its employees in designing the correction. To do that, they need visibility.
“You’ve got to have a structure so that people can see clearly their progress and identify when they’re not meeting their targets,” Cripe says. “We’ll ask a manager, ‘OK, you’re not on target. What is your plan to mitigate?’ Sometimes they need different resources; sometimes it’s just a timing issue. But look specifically [at] why and what can we do to get back on track.
“If people are tracking their goals, they’re aware that they’re not hitting them. [If] they think through why, you can get back on track. What’s difficult is if you wait till the end of the year and you go, ‘Oh my gosh, we didn’t make it.’”
On the other hand, if they are meeting goals, don’t let it go unnoticed.
“The human touch and engagement is, honestly, the single most important thing we can do — stopping and thanking people and being specific, not just, ‘Hey, thanks for doing such a great job,’ but, ‘Thank you, John. I heard yesterday that you were working with a family and they needed (something) and you were able to provide it.’ People really want to know that you know what they’re doing and how they’re helping.”
By creating, clearly communicating and following up on her plan to vault CHOC to national status, Cripe has kept employees focused on the vision. Over the past decade, it has become one of the fastest-growing freestanding children’s hospitals in California. It has also been ranked the 17th-busiest children’s hospital in the nation, with admissions increasing 130 percent since 1998.
“I think people genuinely want to do a good job,” Cripe says. “If you’re clear on what you need them to do and everything is linked back so there isn’t any mixed messaging or lack of clarification, it works well.”
How to reach: Children’s Hospital of Orange County, (714) 997-3000 or www.choc.org
Neal Schore sees cool things every day. As founder, president and CEO of Triton Media Group LLC, new trends and technologies often cross his desk.
He heard about a couple of guys, for example, who imagined controlling what came out of the radio via remote. There was also the idea to let radio audiences view a station’s playlist online and instantly download the song they just heard.
Sometimes, cool catches Schore’s attention. Triton Media Group partnered with those guys who formed a company called Jelli to give national radio audiences control over content. And one of the many digital products and services Triton supplies to the media industry is a TuneGenie music discovery platform, which lets listeners view play-lists and browse in-depth song information from a station’s homepage.
But Schore doesn’t get carried away by ideas that sound intriguing.
“The transition between cool and engagement with an audience and then monetizing that cool is where we’ve spent a lot of time,” says Schore, who leads about 550 employees. “We don’t get hung up in cool. We get enthusiastic about what works.” With more than 18 years of media experience, Schore has learned how to qualify trends and ideas that catch his attention and validate the business case behind them. He does that at an accelerated pace to keep Triton, which had 2009 revenue of about $225 million, ahead of the curve.
“We’ve spent a lot of time and investment against where we think the market is going, and that’s allowed us to not only be innovative and leaders but also made us very relevant and turnkey to our clients,” Schore says. “So they’ve grown to trust us because we’re effectively delivering against their needs in advance of them understanding their needs themselves.”Keep the market’s pulse
Innovation starts with an awareness of what’s happening in the marketplace around you, because you’ll pull from that pool of trends and ideas.
Schore stays in touch with the expected sources, such as advisers and media thought leaders. But he also reaches out to people at competing firms.
“I’ve struck a great relationship with a significant network of individuals that provide the ability to share information without sharing confidential information, so it’s more market-driven,” he says. “That helps me keep the pulse.”
To steer clear of confidential information, keep these conversations high level and reserve details for your talks with advisers. Schore doesn’t head in with a list of specific issues he wants to discuss. He approaches competing colleagues with only the broader industry in mind.
“It’s typically more open dialogue as opposed to a particular question or a series of questions,” he says. “Inside the industry, similar companies … have similar ebbs and flows. So we’ll, from time to time, just talk about market conditions and we’ll talk about more macroeconomic trends and variables that specifically affect our industry.”
Of course, your own instinct is a good control for these conversations. If you wouldn’t be comfortable sharing certain information about your company with a competitor, don’t ask the competitor to divulge it, either.
Schore also spends a lot of time talking with customers, both by himself and with his management team.
“Ask them specific questions about how their business is doing and what their needs are,” he says. “It’s a lot of time listening and understanding our customer needs, not just for today but also their growth needs and their expectations for us. … Usually it’s some of the more innovative clients themselves that are asking for things and helping us make sure we’re in front of the market.
“Our customers have come to expect us to be innovators and leaders so we spend time with them monthly to assure we understand the leadership and the innovation that they’re thinking about so we can incorporate it into our ultimate product offerings.”
From observing the marketplace and talking with clients, for example, Schore realized that many of them were looking within streaming audio to server-side targeting for future revenue growth. Triton was already a majority shareholder in StreamTheWorld, a company that provided it. So in June, it acquired the remaining shares.
“Not owning StreamTheWorld (or) being able to integrate all the technology to then provide the turnkey solution … would have offset the opportunity to help our clients enhance their technology and expand their revenue,” Schore says. “And when our clients’ revenue grows, our revenue grows. We are partners in the revenue-expansion opportunity.”
Checking out the marketplace isn’t all conversation. You also have to dig for the data to back up what people say. Where possible, find metrics to illustrate how certain companies or even products are performing. That will help solidify which areas of your industry are thriving, pointing toward your opportunity.Look inside your company
While you’re examining your market, don’t overlook your internal resources.
Consider the perspectives of your front-line employees. Because they often face customers directly, they can be valuable vehicles for customer feedback.
“Spending time with employees and the individuals on the front lines of what we do is a great resource to hear what’s happening in the marketplace,” Schore says. “As our employee base has grown, it’s harder to spend the same amount of time with the employees. We now have offices in 21 locations so it’s impossible to be in more than one place at a time.”
To compensate, if you can’t physically get in front of your employees, pick up the phone, shoot out an e-mail or set up group meetings when you do visit other locations to compound the feedback.
Schore asks employees what clients have been requesting to learn where needs lie. He also asks what they hear in terms of timing. If a customer needs a future product, for example, Schore wants to know when it is needed to help determine if Triton can meet needs when they arise.
Looking inside your company can also point back to market trends. You can’t always get information on revenue especially by product line from your competitors, but you can see which offerings are successful for you. So it’s important to monitor internal trends, as well.
Also, any time you acquire a company, you bring on a new group of experts and a set of different marketplace perspectives. For example, Triton acquired Dial Global, a large network radio player, in November 2007. After spending time with its management team and learning more about that segment of the industry, Schore recognized the growth potential there.
He began seeking another network radio company to bolster Triton’s position in the field, leading to the acquisition of Jones Media Group in June 2008. Ultimately, he merged the two additions to form Triton Radio Networks.
Talking with your employees is not only an avenue for their ideas; it’s also a way to stay aware of the everyday duties they face. That can reveal their capability for handling new opportunities you may pursue.
“It’s always a delicate balance of not wanting to push our company too hard and too fast with very ambitious and very specific growth goals, while at the same time always leading and innovating,” Schore says. “So our management team does a great job of collaborating on expectations to be forward thinking while managing the expectations of the current day-to-day needs of the business.”
The easiest way to maintain that balance is to separate your work force into day-to-day operations and teams tuned to the future.
“We have a team of people that’s just focused on that growth,” he says. “Their job is to look at trends, to look at new opportunities and different emerging technology. … It’s then their job to bubble up the parts that they think would add value to Triton.”
To help them define that value and to keep their suggestions aligned with the overall direction of the company Schore requires those employees to do their homework. That consists of three questions: Will it work? How will it work? And what is the revenue model?
“We have the courage to be entrepreneurial while we have the discipline to be good operators,” Schore says. “That’s the balance.”Turn to the future
It takes more than three simple questions to determine whether an idea becomes reality at Triton.
“We’re a company built on forward thinking,” Schore says. “When we sit as a management team and forecast where the market is moving, … I use information that I gather as some data points that help us consider how to continue leading the way forward.”
In those meetings, the key is to keep your eyes turned toward the future.
“Instead of using tunnel vision for our industry, we really put on our forward-looking goggles,” Schore says. “If we can project technology trends and the needs of our clients, then it assures that our content, our technology, our resources and our employees are focused not just on the blocking and tackling of the day-to-day needs but also on the future needs of our clients.”
That projection involves determining an idea’s relevance and revenue opportunity for clients. When you do that, you’ll also narrow the field of opportunities to pursue, because you can’t be everything to everyone. Of the several hundred opportunities Triton investigates annually, it acts upon about a dozen.
“We tell clients no when we don’t believe that there’s a monetization opportunity for what it is they’re asking for,” Schore says. “If what they’re thinking is a good idea or growth opportunity, if we don’t believe that that will actually recognize the revenue or the growth that they’re projecting, we will share with them why we don’t believe so.”
To evaluate the revenue potential, run the idea by other clients to gauge the appeal across a larger audience.
If wide adoption seems likely, thanks to the support Triton receives as a portfolio company of Oaktree Capital Management LP and Black Canyon Capital, Schore has access to the resources necessary to provide the service. That may mean hiring more people or acquiring another company. But he’ll only do things that keep Triton ahead of the pack.
“If the revenue opportunity is starting to really take off and we’re not in that particular space or vertical, then chances are we weren’t in front of it,” he says. “If the marketplace maturity is in advance of our launching, then chances are we’re not going to launch it or acquire it. So we’re very focused on making sure we’re bringing technology and services to the marketplace that are ahead of the curve.”
That’s why it’s so important to stay in constant touch with the marketplace. If you realize a competitor releases that next best thing you were considering, it may not be worth your effort to recreate it only to compete for a market. Instead, focus on the next thing in your pipeline.
“We use the revenue stream or the marketplace needs as an indicator,” Schore says. “What we want to have happen is in advance of (clients) asking for it or when they do ask for it, we need to be able to have the solution to deploy.”
In the end, you’re always taking a risk when you pursue new opportunities, especially when you’re trying to stay ahead of trends. The better you can balance an understanding of both your business and the marketplace you operate in, the better your odds for success.
“There’s always risk in anything you do,” Schore says. “The most well-established business can launch a new product line and that product line could fail. But if they don’t try, then they’ll be stymied by lack of courage or lack of innovation.
“We are not renegade. We’re very calculated and we’re very deliberate, but we’re calculated and deliberate in a very fast-moving way against a set of data that we often get: great information or feedback from our clients and employees.”
How to reach: Triton Media Group LLC, (818) 528-8860 or www.tritonmedianetworks.com
He’s concerned about little things that might go ignored like melting ice cubes creating slick spots conducive to slips.
“A lot of this is about awareness so that, over time, you begin to think that way,” Ledin says. “It is a 24/7 issue, and it does impact everybody. Much of our training is not just about things you need to do when you are on a construction site. … It’s really a lifestyle issue.”
Commitment to that lifestyle starts at the top. Leadership’s commitment manifests through a communicated safety policy and, more so, through tangible investments.
One of those investments is in a full-time position of the health and safety discipline manager, held by Tom Sexton. He’s in charge of making sure commitment doesn’t stop with management but extends to the 800 associates.
Safety orientation begins on an employee’s first day then continues, whether through a computer-based driving course or weekly communications about safety topics for work and home.
Sexton rallies constant employee participation by weaving safety into every process.
“A priority is No. 1 today, but … when you put safety as a value, it stays right there with you,” he says. “You’ve really got to put that into your other systems. Everybody has a standalone safety program, but we work that safety program into our process.”
Each project begins with a safety component to plan precautions through every step. By kickoff time, employees have communicated with the client about their specific safety requirements and hazards unique to the worksite. Often, clients will even conduct their own safety orientations.
“The empowerment (employees) have there is through training what their knowledge is for a situation,” Sexton says. “That might be specific training for the work they’re doing or specific training from where they’re doing the work.”
But you can’t train for every condition. They’re often unpredictable.
“One of the pitfalls we come into is when they’re sent out to do a project and the site conditions have changed,” Sexton says. “These guys go out and feel the responsibility to get the job done and they’re going to do it whether weather conditions have changed or there’s an upset condition at the client facility.”
So while specifics are important, the crucial aspect of safety training is general awareness and flexibility.
“The safety policy is you’re allowed to stop [working],” Sexton says. “Don’t put yourself in what you feel is a position of jeopardy.”
He encourages employees to call him, the project manager or the client if they don’t feel safe in unexpected conditions, to work out a compromise.
“Some of this is a matter of changing tasks or the order of tasks or the way we do tasks,” he says. “If we had planned to go out on a site at 7:00 in the morning … and if there was an ice storm the night before and the facility had a history of slips, trips and falls on icy surfaces, maybe what we’d do is change our tasks around. We’d … go out at 10:00 after the sun had come up or the salt trucks had come out.”
That awareness has kept Middough below the average Occupational Safety and Health Act Total Recordable Injury Rate since 1999. In 2009, it only logged one recordable OSHA injury, making the program more than worthwhile.
“When somebody comes to work, you owe them the ability to go home in the same shape they came to work without stitches in their finger or a back injury or a lost limb,” Sexton says.
Make safety relevant
Middough Inc. President and CEO Ronald R. Ledin vividly remembers an employee getting his tie caught in a paper shredder. He was embarrassed, but he wore his spaghetti-strand tie for weeks.
“Those are the kind of stories that you think, ‘Well, that’s never going to happen to me,’” Ledin says.
To make safety real and relevant beyond the workplace, employees at Middough take turns presenting safety topics to kick off meetings.
“It’s not just management that’s preaching the gospel,” Ledin says. “They have to go online and research these topics. The best part is they are telling little anecdotal stories about experiences they’ve had personally. … It’s pretty laughable, but people remember that.”
Middough associates also receive weekly communications about other topics that surpass the office, like fireworks safety around July 4th.
“When you reach out to employees with that kind of language and activity, then they really understand that you are interested in their best interest as a lifestyle, not just, ‘Well, we don’t want you to get hurt on the job because it’s really going to cost us money or you’re a liability or a bad statistic,’ which is a much more limited motive,” Ledin says. When employees feel that you care about them, they’ll care about each other and the job they’re doing.
“If for no other reason, I would do it for the employee relations aspect,” Ledin says.
“One of the things we learned very early on in providing legal plans was that we needed to do everything possible to make it easy to access the lawyer and that people needed basically hand-holding to get through the process,” says Brooks, CEO of Hyatt Legal Plans, a MetLife company.
With about 100 employees, Hyatt Legal Plans offers affordable legal access to more than 5 million group legal plan members and addresses a common disconnect.
Recent studies from the American Bar Association show that seven out of 10 U.S. households encountered a legal issue in the past year. But one-third of all households, when faced with those problems, didn’t hire a lawyer usually citing expense as the reason.
Group legal plans can bridge that gap and can also benefit your business.
Smart Business spoke to Brooks about giving your benefits package the edge with a group legal plan.What is a group legal plan?
A group legal plan is a way to get affordable access to legal care.
People are afraid of lawyers, they don’t like lawyers, they’re intimidated by the process, and most importantly, they really don’t know how to find a lawyer or at least find the right lawyer who can help them with their type of problem.
First and foremost, what a group legal plan does is solve that problem. Namely, we find the lawyer for you. A large part of our business is to understand what a legal plan member’s needs are and match them to the law firm on our panel that can help them and that can help them conveniently. We find a lawyer who not only will do good legal work but who will treat them well.
That’s part one the access that a group legal plan provides. But I also mentioned affordable. One of the key reasons people don’t seek advice from the legal profession is their fear of the cost. A group legal plan is a way for people essentially to purchase legal services at a rate that they could never do on their own because they can harness the group purchasing power through a group employee benefit.
Typically, our programs would be $200 a year or less, and for that, you could easily obtain hundreds of dollars of legal services if you need them. A common plan might be one that’s $18 a month and that would be collected through payroll deduction. And then the employee can use the legal plan really without limitation. We’ve gotten rid of pretty much all of the red tape you can think of we have no waiting periods, no deductibles, no co-payments, no limits on usage, no claim forms. Basically if you’re in a legal plan, any benefit that is covered under the plan you can use as often as you want and it’s covered completely from beginning to end, no matter how long it takes.What differentiates a group legal plan from an attorney referral network?
The key difference is that in a group legal plan, you have somebody who has prequalified all the law firms on the panel and can ensure that they’re the right lawyers for you to go see, No. 1, and No. 2, can also ensure that they provide excellent service to you.
In contrast, referral networks are typically … a vehicle for lawyers to advertise. Those attorneys have not qualified to be on that list at all, other than paying money to be on it. There’s no selection process, there’s no qualification, and most importantly, there’s no supervision. You go to whatever lawyer you find on the list and you’re on your own.
When you call our client service center, you get a real person. There’s no phone trees or ‘Push 1 for this; push 2 for that.’ The phone is answered, on average, in less than five seconds. So we do everything we can to make the experience of dealing with a legal problem one that’s hassle-free and easy.
They’ll start with a description of how the plan works and they’ll just ask a few questions about the nature of their matter and then also get some information about where they live and work in terms of what law firms will be convenient for them to go to. Then they’ll help them select a law firm to call from our panel of providers.
After we answer whatever questions they may have about things like, ‘What’s covered? What services will be provided? What’s the background of the lawyer?’ the last thing we always tell them is, ‘My name is Bill. If you have any problems whatsoever, just call me right back.’ And that’s important.
About one in 1,000 do call back with some kind of a concern or problem. That’s a very important feedback loop for us first of all, to solve the problem that anybody may encounter. Then secondly, that’s a terrific quality control for us in terms of the lawyers on the panel.
That would be a good example of the radical difference between a legal plan and a simple referral network. In the rare occasion that you might encounter some concern, you have somebody on your side that’s going to fix it right away and someone who has quite a bit of leverage over the lawyers.How should I decide whether a group legal plan is right for my company?
Any employer and any employee group can benefit from a group legal plan. The legal plan benefit is very broad in terms of its appeal, so there’s really no profile or particular demographic of employees that can benefit from it.
Two of our biggest sponsors are JPMorgan Chase and Target. JPMorgan Chase, I think it would be fair to say, has a typically higher income employee base than Target. And, yet, both of them have very popular and successful legal plan offerings. What does vary a little bit is what people use the legal plan for. The higher income groups might use the plan more for buying and selling homes, getting wills, doing estate planning. The lower income groups might be using the legal plan more for debt problems, advice on leases, things of that nature.
While the nature of the legal issues being addressed might vary from one employer group to another, the usage rates do not really vary much. In the end, there’s something in there for everybody.
But whether or not they should offer a group legal plan is dependent upon the state of development of their benefit program, generally. Companies once upon a time had only employer-paid benefits, and then they began to shift some of that cost to employees. Then they looked for what other options could they offer since they had the infrastructure for their benefit program set up in terms of how enrollment works and all the communications materials and so on. Then it made sense to offer employees as many choices as they can. That’s when things like auto and home insurance and legal plans and critical illness really started to take off.
For any employer who has an established employee benefit program, especially one that includes options for employee-paid benefits, they should have a legal plan.
In contrast, smaller employers might not really have much in the way of employee benefits. They’ll have life insurance and health insurance and maybe disability insurance and probably employer-paid. They probably need to pay more attention to their benefit program generally and have it evolve to offering not just legal plans but lots of voluntary benefits: critical illness insurance, auto insurance, home insurance, dental insurance.How can a group legal plan benefit my business?
In terms of your benefit package being something that attracts and reta ins the best employees, you don’t really gain much competitive value from the basic core benefits since all employers are offering them. It’s the employers that do more than offer just life insurance and health insurance that really add value to their benefits program in terms of attracting and retaining the best employees.
There’s also a lot of evidence lately that employers are now talking a lot about how having a benefit like a legal plan improves employee productivity. One finding was that 84 percent of employers now report that employee productivity is a very important benefits objective.
So there’s been much more focus recently on that aspect, from the employer’s point of view, that I’m going to offer this legal plan not just because I don’t have to pay for it, No. 1, so that’s nice. The employee pays for it. It makes my benefit program more competitive, so that’s nice. But now they’re also talking about if people have easy, affordable access to help, they’re more productive at work. In these economic times, this seems to be really coming into focus.
Years ago when we were selling legal plans to employers, we’d say, ‘If your people had access to legal care, they’d be less distracted. They would miss less work because they wouldn’t have to take time off to go see a lawyer or go find a lawyer or be worried about their foreclosure or their divorce if they knew they had somebody helping them out.’ I think it’s finally starting to hit home to employers.
How to reach: Hyatt Legal Plans, (800) 423-0300 or www.legalplans.com
“I jokingly say, … ‘If you take 1,000 24-year-olds and put them in a small enough room, the culture creates itself,’” says Waggoner, the CEO. “It’s a joke, but there’s also truth to that.”
The truth is Generation Y is strongly represented at Echo, (NASDAQ: ECHO), a provider of technology-enabled transportation and supply chain management services.
Waggoner, who previously founded SelecTrans LLC and served as CEO of USF Bestway, always felt like the young guy in the business. But when he stepped into Echo in December 2006, he realized the millennials there had their own way of doing things.
“I came from the world of command and control, hierarchy, corporate structure and work charts — how many stripes are on your sleeve,” he says. “That doesn’t work here. At Echo, our culture is largely defined by the millennial generation.
“People don’t really care what your title is or how long you’ve been around. It’s more like, ‘I’ve got a job to do; how are you going to help me do it?’ and, ‘These are the problems we’re facing; how are you going to help me deal with them?’”
Basically, he learned that his more than 1,000 employees are full of ideas for getting results. He just needs to create an open environment for those and then stay out of the way.
Those fresh perspectives have grown Echo’s revenue from $95.5 million in 2007 to $259.6 million in 2009. But that’s not all.
“I’ve grown as a result of being around a lot of people that thought differently about things than I did,” Waggoner says. “I came into the company with the idea that I was going to teach them a thing or two about the industry. More than that happening, I’ve learned a lot about what I didn’t know. You’ve got to be open-minded about the potential for better ways of doing things that might be foreign to your experience pattern.”
Create an open environment
For the most part, Waggoner’s focus is external and strategic. He deals with investors, customers, suppliers and other forces that affect Echo’s position in the marketplace.
But what happens inside, happens on employees’ turf.
“Whether it’s a dress policy or processes and procedures internally, the best things bubble up from within,” he says. “I may be part of the approval process. I may have power of veto. But I don’t see it as my job to sit around and design how the company operates.
“You get the power of ‘two heads are better than one’ times a thousand, and the best decisions come from that. My role is to create an environment where smart people can come up with good solutions and get out of the way.”
The key to creating that is providing pathways for ideas to come out as well as a culture that encourages openness.
“Everybody wants to be heard,” Waggoner says. “People that are deep into a process and doing it every day have a much different feel for it than somebody sketching it out on a whiteboard. … You’ve got to create an avenue for those ideas to bubble up to where they can take action.”
Echo’s avenues include the basics, like a suggestion inbox where employees can e-mail ideas. Waggoner personally responds to each one. If the issue doesn’t fall into an area of his involvement, he’ll forward it to the appropriate person and ask that he or she follow up.
He also created an independent committee — separate from management — as Echo Connect. The group is sort of like a mediator between the front line and the boardroom.
“I gave them basically three guidelines,” Waggoner says. “I said, ‘Whatever you do, it has to be good for employees, shareholders and customers. You can’t be overbalanced in the direction of employees, and yet, you guys are an employee advocate committee. Your job is to hear what the employees have to say, bring it to the executive group and also be willing to take the feedback from the executive group to the employees in a way that it’s credible because it’s coming from their peers.’”
Waggoner selected a chair for the group, then stepped aside. He didn’t care who other members were as long as they knew they had access to him to vet ideas.
While Echo Connect is one means of getting suggestions from employees to management, people don’t have to be on the committee — or jump through any hoops at all — to score a meeting with the CEO.
“I grew up in a world of hierarchy, and my new goal in life is to not have hierarchy,” Waggoner says. “You’ll always have some amount of hierarchy, so you’ve got to be willing to ignore it a little bit — which means walking around talking to people, having them feel free to walk in your office.
“People shouldn’t feel like they have to absolutely follow the chain of command. If somebody wants to come tell Doug Waggoner a great idea that they have, they should know that they can do that without any fear of retribution or political disfavor.”
To make employees comfortable with approaching him directly, Waggoner reaches out to smaller groups by hosting monthly lunches with five to 20 employees.
“I use half of the meeting to give them an update on the company, and then I use half the meeting to essentially interview them,” he says. “It’s a very nonthreatening environment; they’ve always got me outnumbered. I just simply drill down on some area and I ask, ‘What’s going on in the marketplace? How could we attack it better?’”
Even then, some employees will feel intimidated broaching ideas with you. Many will open up in their functional teams, but Waggoner uses anonymity as a catchall.
“Some people are prone to speak up and some are not, so you have to try to draw things out of people,” he says. “When there’s anonymity, people will say what they think. So we do periodic employee surveys to take a pulse of everything from, ‘How’s our culture working?’ to ‘How can we serve our customers better?’”
Regardless of what avenues you set up, the way you respond to ideas will determine how open the environment is.
“You can’t shoot people for taking a position or speaking their mind or even being critical,” Waggoner says. “If people recognize that you’re not going to overreact to things based on emotions and opinions, then they bring things forward.”
Dig into ideas
To keep a constant flow of ideas, Waggoner encourages them all. But not all transpire into something workable, so you need a way to evaluate them.
The first step is categorizing ideas into buckets. The big one at Echo is technology; then there are also sales, marketing and general business process ideas. Then, prioritize within each bucket.
“There’s a financial aspect,” Waggoner says. “So you’ve got to say, ‘What is it going to cost us to build this idea? What’s the return? Is it a nice-to-have or is it a need-to-have or is it a strategic needle-mover?’”
Just because something isn’t absolutely necessary, bursting with ROI or strategic in nature, doesn’t mean it c
an’t jump to the top of your priorities. Waggoner breaks ideas down into major projects and quick fixes. The latter can still make a difference, so consider, for example, how much value a quick fix could add.
“Making a user interface on a computer screen easier to navigate doesn’t mean a lot of money for the company, but it might be an aggravation to a thousand people that click on it a hundred times a day,” he says. “Oftentimes, those things can be done in a few man-hours of IT time. When you make a change like that, you’re bringing relief to an entire organization and it doesn’t cost a lot.”
If debate alone isn’t enough to distinguish good ideas, Waggoner pauses the process to gather data.
For example, Echo has been dipping its toe into an e-commerce initiative for several months. They’ve been debating who’s in the market for the product and whether the economics make sense. But the real clincher comes from reviewing actual data.
“We’re looking at very rich metrics: What’s the cost per click, what’s the cost per acquisition, what percentage of customers return and do business with us in the month following registration?” he says. “It becomes pretty mathematical. We had various opinions on whether we should go forward on this or not, but any reasonable person that sees the data, including me, I had to say, ‘I didn’t think this was as good as it’s turning out to be, and I stand corrected. We should invest more money in this.’”
In any case, the further along an idea moves, the more research it requires. Echo’s formal IT prioritization process offers a good glimpse into that. Waggoner can see which ideas make sense strategically, but because he doesn’t know the specifics, he sends good ideas to an IT business analyst.
The analyst, in turn, bounces ideas off of a group of “power users,” or key customers. If they seem to form a consensus, then the analyst specs out the project.
Next, it goes into a queue, where it gets weekly consideration from an IT steering committee, composed of the executives, some business analysts and some IT people.
“We review all of the IT projects from large to small, and we review the available resources,” Waggoner says. “Some things might keep getting pushed out, and things that have a high value-to-cost ratio might get slipped ahead. We’re just continuously reprioritizing as things come up.”
Whatever your decision on an idea, explain it to the employee who originally suggested it.
“Whether you do it or don’t, you’ve got to get back to the employee and tell them, ‘Yes, we’re going to go forward with this,’ or, ‘No, and here’s why,’” Waggoner says. “As long as they were heard, I think they’re happy to be in the inner circle of why decisions are made … and they’re encouraged to come back next time they have an idea.”
Visibly monitor projects
Sometimes, Waggoner apologizes to employees for putting them through so much change — but it’s an indicator of Echo’s agility.
“We’re willing to make adjustments quickly,” he says. “We’re not mired down in hierarchy. We try something; if it doesn’t work, we stop doing it and we try something else.”
Your work is never done. Once an idea is activated — and you’ve given credit to the employee who suggested it, of course — continue monitoring to make sure it achieves expectations.
Waggoner watches for red flags in three areas.
“You do it with the intention that it’s going to make things better, right? That’s the thesis going in,” he says. “What you look for is, A.) Do service levels decline? Does our cost-per-transaction increase? Then finally, does our contribution margin deteriorate? The amount of revenue that falls to the bottom line that’s associated with this process or business unit, if that’s deteriorating, then it was probably a bad idea. As long as we could tie the cause and the effect together, we would stop doing it.”
Waggoner tracks those and other metrics that define each project’s success. Plasma screens throughout the floor display stats in real time — contributing to the Wall Street intensity visitors feel. Overall company performance is monitored in two-hour intervals against five-day, 30-day and 60-day averages. He also measures the performance of sales and operations — both on team and individual levels — to hold everyone accountable to a project’s success.
“Transparency and visibility make everybody accountable so you don’t really have to manage people,” Waggoner says. “When I’m a salesperson and my up-to-the-minute performance is up on a screen where all my peers can see it, nobody has to tell me to work. It’s kind of like playing a football game and looking up at the scoreboard; you know if you can toast or if you’re going to have to work a little harder.”
By balancing those tight operations with an environment open to ideas, Waggoner welcomes Generation-Y innovation.
“I would say, culturally, we’re very laissez faire,” he says. “But operationally, we’re very intense and we’re very data-driven and we’re very metric-driven. That’s the yin and yang of the thing that allows us to be this way.”
How to reach: Echo Global Logistics Inc., (800) 354-7993 or http://www.echo.com/
It’s all in the name of innovation.
The topic of Open Innovation also brought a hundred of Northeast Ohio’s leaders together recently at the Baldwin-Wallace Center for Innovation and Growth. The panelists – Hlavin, president of Thogus Products Co.; Waite, president of Menasha Packaging Co. LLC; and Jackie Hutter, founder and principal of The Hutter Group LLC – shared how critical innovation is to keeping companies on top.
“Even a brown box can be innovative when you think about supply chain, how you bring it to market,” Waite says.
But that can only happen if you provide an atmosphere where your employees’ innovation can thrive.
“I have to make sure I give them freedom and latitude, and make sure I don’t shut them down,” says Waite, who personally answers his own phone calls. “I can shut that down by a wrong word, a wrong tone in a meeting. I tell my managers, ‘Try to have an open mind every day you come to work – how can you do it better and make it better?’”
While he’s open to ideas, Waite also points back to the process it takes for one to become reality.
“I always first say to them, ‘Have you talked to the people at your local level first?’” he says. “No. 1, that respects the people at the local level. It also points in a direction for a process, that I’m not going to be the one that has all the answers, even though I’m president of the company.”
When ideas bubble through that process, Waite runs them through some filters. Ideas must meet some criteria in terms of functionality, market, “runnability,” cost and sustainability. To make sure he sees issues from all sides, he runs suggestions through various departments to understand how each step of the process looks.
At Thogus, innovation is all about visibility. New employees are trained on identifying areas for improvement by watching a video of how the shop floor is set up or how a certain job is processed. Then they’re asked to identify: Why is this inefficient? What’s good? What’s bad?
“As they see what the problem is, the ah-ha light comes on,” says Hlavin, who revamped his shop floor with employee input.
To maintain that open environment after orientation, employees will be able to use an iPad at each machine to access YouTube videos of Thogus’s processes and leave comments.
They can also jot ideas on the office walls, most of which Hlavin has coated in dry erase paint. That way, even if an idea isn’t acted on, it’s visible.
“If you want to keep an open innovative culture, you have to see the ideas,” Hlavin says. “They may not have a great idea today, but that idea – two, three years from now – becomes pertinent.”
Hutter, who refers to herself as a “recovering patent attorney,” recommends looking even further outside of your organization for ideas – to patents.
“When you file a patent, you have to open your kimono and tell people what you’re interested in,” Hutter says. “You have to reveal to the outside world your business interests, research investments, corporate investments, core competencies and missing competencies.”
Though patents today are usually perceived as legal rights to your intellectual property, they were originally developed to spur innovation by disclosing information about other people’s inventions.
“It’s better for innovation if you know what other innovators have done,” Hutter says. “Innovation begets innovation.”
Patents reveal the innovator’s core competencies as well as weaknesses, she explains. You can look through those documented skill sets for opportunities where you could complement their weak spots. Patents can also illustrate how others have tried solving certain problems, keeping you from reinventing the wheel.
“Patents broadly disclose technology but narrowly claim the product,” Hutter says. “So you can start R&D on the 30-yard line instead of the end zone.”
But you have to remind yourself that it’s not just for innovation’s sake. Hutter encourages her clients to understand the difference between something that’s merely patentable and something that the consumer actually cares about.
“In a business sense, the reason you have an invention is because the consumer had a problem,” Hutter says.
Interested in more innovation? Smart Business spoke with a couple of other leaders who attended the forum. See how they're innovating their companies.
Mark Woodward is trading in-your-face sales pitches for a few extra finger exercises. That’s why, when you visit the website of E2open Inc., you’ll go three clicks in before you even see a product name.
Right away, though, you’ll learn about the broader problems E2open aims to solve with its cloud-based supply chain management solutions that enable visibility, collaboration and control across large trading partner networks.
“Where many companies fall down is … [they] get really hung up with the details of their products and get enamored with the widget they’ve created,” says Woodward, president and CEO. “They go out and they try to sell the widget, as opposed to the business benefits of what that widget does for you. Where companies go from being marginally successful to really successful is when they change the focus from the product they’re selling to the problems that they’re solving.”
By getting his 300 employees into that mindset, Woodward led E2open to record revenue in fiscal 2010, up 20 percent from fiscal 2009.
Smart Business spoke with Woodward about shifting your focus from vitamins to aspirin.
What are the keys to growing a company?
One is just focus. You need to understand what it is you’re going to do and also be pretty focused on what you’re not going to do.
Something that we’ve done at E2open really well is understanding what the value proposition is for the customer, making sure that they understand the benefit. Before we go launching a lot of time and effort and resources behind pursuing an opportunity, we really put a lot of time and effort into qualifying that opportunity and making sure there is a business case. Make sure that you’re focusing your limited resources on the opportunities that are the highest probability to close.
A lot of people get really hung up on putting a little too much emphasis behind having a really fancy growth strategy. But if you’re really focused on growth, it’s really understanding the market you’re in, who you’re selling to, what your value proposition is and then just putting all your resources behind making that happen.
How do you gain an understanding of the marketplace?
It’s through analysts, basic research and then talking to your customers.
Sometimes companies get caught up in thinking they know better and they know the problems that need to be solved without really doing very good market research or without talking to their customers enough. It’s really important to understand not what you think your customers want but really knowing that by having those conversations with your customers.
We’ll just start off with very open-ended questions like, ‘What are your problems?’ Not even asking about our particular area but just very high-level, top-of-mind: ‘What are you thinking about? What keeps you up at night? What are your greatest challenges?’
And then, based on that, start to bore in and even ask, ‘What vendors do you look to for solving those kinds of problems?’ As you get answers, get a little more specific. Customers are usually very open to telling you about other vendors they’re working with or problems that no one has solved for them yet. That can actually help in your product strategy, as well. I’ve learned about a number of really interesting new areas, things that we didn’t even get from analysts, just purely off of customers telling us about shortcomings they had with other vendors. So the customers give you a more real-world perspective, not just the marketing spin that the analysts are hearing.
How do you position yourself to meet those needs?
You have to be careful so it’s not looked at as the sales guy looking for a sale. It’s multiple meetings with different people. That highest level meeting might be with myself or a chief technology officer or possibly head of marketing; basically, you’re just in there information-gathering.
Then if you think there’s specific opportunity for the company, you’ll follow up maybe myself, but probably with the head of worldwide sales where we start to bring in people that are more on the solution side of the business.
Customers don’t mind you selling to them if you have a solution. But there does need to be a separation between the process of information-gathering for purposes that are not specifically related to a sales process, and then the sales process itself.
How do you decide which needs you’re capable of meeting?
I would bring it back to [the executive staff] and say, ‘Here’s what we have found,’ and just open discussion up to the whole group, which will typically then lead to some assignments of tasks. We’re going to say, ‘OK, we need to now go prove out these two things. So you, vice president of marketing, go talk to XYZ analysts and ask their opinion on this. And you, head of my deployment services, go talk to three other customers and tell them what our point of view is on this and get their feedback on that.’
Then, based on that, we may make the determination, ‘OK, we now need to make a change in our product strategy,’ or, ‘In the upcoming releases of our products, we need to start moving in this kind of a direction,’ or, ‘We should go look at an acquisition in this particular area because it would take us way too long to develop ourselves into that space.’
What makes an opportunity attractive?
One way that I put it I’ve thought about it this way for a long time is, ‘Are you selling aspirin or are you selling vitamins? Is this something that really fixes a pain, or is it something that just makes somebody feel a little bit better?’ That’s an acid test for me.
I want to be selling aspirin, not vitamins, because when people don’t have money, you can do without your vitamins. But if you’ve got a really bad headache, you’re going to pay a lot of money for those aspirin. So that’s a way that I look at these kinds of things: ‘Are we truly solving a problem where our customers feel real pain, where they have a real need that they are going to pay money for? What is the business case justification for that customer?’
If you can’t find that business case, no matter how great you think it is, they’re not going to buy it.
Understand … the pain points and then what that means in terms of dollars. So you have this problem where you don’t have visibility into your inventory on the customer side. What does that mean to you?
‘Well, that means that we have to ship an extra $10 million in products and put them in these different locations just to make sure that we don’t run out. But if we had visibility, that would allow us to put the inventory there only when we needed it. Then instead of having $10 million in inventory, we could have $1 million in inventory.’
So if I could solve that problem for you and I could save you $10 million a year, it’s almost like you don’t even have to ask the question, ‘If I could save you $10 million dollars a year, would you pay me $1 million?’ It’s obvious.
How do you prioritize opportunities?
Sometimes we will create a matrix. … First prioritizing pain points of the customer low, medium, high, in terms of … how important of a problem is this to solve.
Then understand what is it that we’re good at and are we already talking to the people that we would sell that to. Then it’s understanding: What is your capability in terms of product distribution? At least for us, we want to be selling more stuff to the same buyer. We don’t want to have to have a different sales force or a whole different sales process or whole different set of relationships to sell something else. So it’s understanding: Who is the buyer, and is it the same person that we’re already talking to?
And then what would it take for us to get this thing to market? What’s the level of effort?
You’re going to have to go put all those things together, and you get input from everybody. You’ll be getting input from marketing, from sales, from R&D and from our chief technology officer, and just go through this vetting process.
You need to tell people outright that you want their honest, complete, unfiltered feedback. And then when you get it, you can’t smack them for doing it. You’ve got to make them feel like there’s a safe environment to do that. Once people give open and honest feedback, you’ve got to make them feel good about that input. It doesn’t mean you’re going to use it.
Hopefully, you ultimately get to a point in conversation where you have general consensus. But if you don’t, everyone can understand at some point a decision’s going to be made. … Then we have to move forward and execute.
How to reach: E2open Inc., (650) 645-6500 or www.e2open.com