Minnesota Technology Magazine - Summer 2005
The Age of Innovation
Want your company to grow-or simply survive-in today's economy?
Get ready to change.
BY MARY LAHR SCHIER | PHOTOGRAPHS BY GARY BISTRAM
By any measure, “innovation” has gotten a lot of press in recent years.
And with good reason—relatively recent developments such as the Internet, antibiotics,
and rocket and jet propulsion have fundamentally changed the world. And an array of
new technologies—fuel cells, nanotechnology, wireless, among others—promise to
bring even wilder changes in the years ahead.
Still, it’s not always easy to define what constitutes innovation. Ask people about it
and you often get a long list of what it is not.
It is not creativity. “Everybody is creative in some way,” says Kate Rubin, president of
the Minnesota High Tech Association, “but that’s not being innovative.”
The Disruptors |
|
Maple Plain-based Protomold is shaking up its industry. More>> |
It’s not a selling point or a marketing strategy. “Our customers don’t really care if we
are an innovative company,” says Brad Cleveland, president and CEO of the Protomold
Co. Inc., a Maple Plain-based rapid injection molding firm that is reshaping its industry.
“They only care that we get the parts to them on time.”
It’s also not continuous improvement—though such efforts can be innovative. And it’s not necessarily the development of new products or services.
It’s not just a buzzword either. Many observers believe
that innovation is the basis on which the economy will grow
in the future. Several factors are driving the need for manufacturing
and technology companies to innovate: growing
competition from China, India, and other low-cost manufacturers
of any product that even smells of commodity;
rapid scientific developments in such areas as biotechnology,
nanotechnology, and global communication; shorter
product development cycles; and larger markets outside the
United States; to name only a few. “Companies are in different
stages,” says Robert Mars III, president of the Minnesota
Precision Manufacturers Association (MPMA), which
represents about 250 component manufacturers and their
suppliers. “Some of our members are in shock over the
amount of business they have lost to China. So they either
have to get out of the business or figure out how to stay in.
They have no choice but to innovate.”
Saddled with huge investments in older equipment, some MPMA members feel that “they have to change the rotation of the earth,” Mars adds.
They might not be that far off. While the nature of innovation
requires companies to rethink basic business principles,
it also can create huge opportunities, says Rubin. She
cites the example of GrameenPhone, a company that began
selling inexpensive cell phones in Bangladesh during the late
1990s. “Normally, you’d be thinking, ‘How can I keep the
price as high as possible to make lots of money?’” she says.
In GrameenPhone’s case, however, the company has made
only a few cents on each phone, but as the first supplier in a
relatively untapped marketplace, it has sold millions of them.
“One of the biggest barriers emerges with people thinking
that innovation is just a buzzword, and that it’s going to
go away,” says Rubin. “Business owners have to accept that
it’s real and it is how they are going to stay in business.”
While innovation can be managed and encouraged, companies
need to focus on what kinds of value they are seeking
from their innovations, says Carol Pletcher, innovation officer
at Cargill Inc., the Minnetonka-based agribusiness giant.
“Creativity is about ideas. Innovation is about value,” she
notes. “People need to understand that innovation is about
getting to value creation and value capture.”
MAKE MORE BETS
Joel Ronning, president of Digital River, an Eden Prairiebased e-commerce provider whose client list includes firms such as Symantec, Motorola, 3M, and Staples.com, says companies that want to be successful in an innovation economy must “run much faster, make more bets, and make them quickly.”
|
"Since 2001, we have invested hundreds of thousands of dollars in developing software to allow us to do what we do quicker and in a more automated fashion." |
Making better and faster
bets requires an abundance of
information and a disciplined
process for sifting through
opportunities. At Digital River,
executives have developed a
grid system that allows them
to analyze opportunities. That
strategic analysis matrix takes
into account a variety of factors
related to a new idea or
market, such as the effort
involved, the cost of the investment,
the probability of success,
the potential revenue
from the opportunity, and the
level of risk.
“We have our managers get together, present ideas and vote on projects,” says Ronning. He notes that the system is not perfect or perfectly scientific— some of the assessments are simply numeric rankings based on educated guesses—but “it has been successful enough of the time that we are satisfied it works. It has been a good tool to pick out ideas that don’t have merit.”
Ronning adds that there’s another benefit: not wasting time on a bad idea frees up time for other innovations.
The Survivor |
|
Duluth-based Thralow has rebounded nicely from its own dot-com bust. More>> |
Dan Thralow, owner of Duluth-based Thralow Inc., also believes in the power of information and the clarity it provides for decision makers. Thralow’s company is the parent firm of 25 specialty Internet stores, including Telescopes. com, Binoculars.com, Pans.com, and Peepers.com (which sells sunglasses). A former bricks and mortar retailer, Thralow began selling sunglasses over the Web in 1996. For most traditional retailers, marketing is as much guesswork as science, Thralow says. Did a customer buy because of a print ad or a billboard? With the Internet, retailers “know exactly how many eyeballs they have got, how many times [a customer] picked up an item, and how long it took them to buy,” says Thralow. “You know your customers and what they want, and it’s not emotional. That’s the real Holy Grail of it.”
The Internet allows Thralow and about 30 of his employees to operate each of the Web sites and their call center phone lines with the efficiencies of a discount store and the appearance of a boutique. However, as Internet use has grown, so have customer expectations and competition, requiring more innovation.
UPGRADE, UPGRADE, UPGRADE
Thralow, like other innovative firms, invests continually in technology— and shares the information it produces with employees. “Since 2001, we have invested hundreds of thousands of dollars in developing software to allow us to do what we do quicker and in a more automated fashion,” Thralow says.
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"Innovation can be managed and encouraged, but companies need to focus on what kinds of value they are seeking from innovations. " |
The company has pumped some of that money into a unified database
that allows employees to keep track of every aspect of the business:
sales, inventory, customer lists, order tracking, invoices, and demographic
information. All information is available to all employees, and
any employee can make a change to any Web site at any time. So, if a
call center worker discovers a price was listed incorrectly on a site, he
or she can make an immediate edit. The firm has also developed specialties
among its call center employees—if a call comes from the telescope
Web site, it’s routed to the premier telescope expert on duty.
Harnessing more employees to be innovators is part of Cargill’s strategy, as well, says Pletcher. The company has created a system of internal rewards for employees who have made innovations, no matter what the area. “Cost-cutting measures are not as glamorous as new product development,” she says, “but they have just as much value.”
Ronning of Digital River believes innovation can also be—to some degree—bought. “There was a lot of innovation in the 1990s because there was a lot of investment; I think there is a correlation between investment and innovation,” he says, adding that while capital markets may remain tight for awhile, he believes that investment can accelerate future innovations.
A Digital World |
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Digital River is running around the globe. More>> |
At the same time, innovation also attracts investment.
Protomold, for example, received a $2.5 million
infusion of equity capital this summer to expand
its Maple Plain plant and open a new plant in England.
Fred Zimmerman, professor of manufacturing at
the University of St. Thomas and author of several
books on manufacturing, believes that innovation is
not something magical or new, but rather the result
of good business practices and “character traits” as
much as money, technology, or incentive programs.
“I think there is a relationship between the concept of stewardship and the degree to which companies adapt,” he says. “Good innovation stems from character traits—companies that are going to invest in what the customer wants done, not lavish offices or other things.”
Mary Lahr Schier is a Northfield-based writer.
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