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Cast Your Net On The Brightest Ideas
By: Brittany Glenn
Issue: 2009jun
At some point, the game changed. You don’t know exactly when it happened. All you know is there was a definite then, and there is a definitive now. And the two pictures are vastly different.
Today, you have to be bigger, faster, stronger—with a unique edge—to succeed in the business world.
Meanwhile, you’re working harder—for less money. Competition has increased dramatically now that once-viable industries—the savings and loan, real estate and pharmaceutical markets—have imploded.
Cash is king. It comes and goes much less frequently these days. You know that just because you’re busy helping clients doesn’t mean there will be money in the bank in the next 30, 60 or even 120 days.
On top of the crash-and-burn economy, federal regulations and state laws are affecting your business operation too. The Consumer Product Safety Improvement Act (CPSIA) of 2008, the PhRMA code revisions and subsequent state laws, Prop 65, EPA regulations, the Federal Hazardous Substances Act—they all add to the pressure.
As a March 2009 BusinessWeek magazine story put it: “There is no more normal.”
“[Innovation] is a survival technique, and I think it should be used more often. We tend to be order-takers during good economic times,” says Kevin Lipomi, vice president of Buffalo, New York-based supplier Apple Imprints Apparel Inc. (UPIC: APPL0003). “It’s a lot harder now to generate more business. The dollars are few and far between.”
So, what should you do? Take your cue from savvy companies that meet challenges head-on by developing powerful innovations that make their companies stand out.
Why Innovate?
In the book Innovation Tournaments: Creating and Selecting Exceptional Opportunities (Harvard Business School Press, 2009) due in bookstores this month, authors Christian Terwiesch and Karl T. Ulrich define innovation as “a new match between a need and a solution. The novelty can be in the solution or the need—or in a new marriage of an existing need and an existing solution. In addition to achieving a new match between a need and a solution, successful innovation creates value.”
In the promotional products industry, suppliers and distributors large and small look to innovation in their products and processes as key to staying at the front of the pack. “In today’s economic environment, it’s simply not enough to have innovative products. Innovation has to extend much farther, and it has to offer more far-reaching benefits,” says Christopher Duffy, MAS, senior vice president of marketing for Union, Illinois-based supplier BAG MAKERS, Inc. (UPIC: BAGMAKRS). “Our innovation in this economy is focused on two key words—service and flexibility. The things we’re doing here are helping our customers carry this innovation to their own customers, and help them succeed.”
Innovating now is key to building strength for the long term says David Woods, MAS, CEO of Neenah, Wisconsin-based distributor franchise firm Adventures in Advertising (UPIC: ADVINADV). “Innovation and continued investment are critical in times like these. Companies that execute bold strategies now will be the ultimate winners. Our primary focus is on helping AIA owners continue to build their businesses and to come out of this challenging economy in growth mode,” he says.
We asked eight executives how their companies have created innovative solutions to differentiate themselves and gain a competitive advantage. Their ideas can be organized, in no particular order, into six categories—technology, products, delivery, service, people and process.
1. Technology
What started as a potentially damaging legislative development—the CPSIA—helped Norwood develop a positive means of differentiating itself from other suppliers by positioning ahead of the product safety curve. Norwood now not only tests all of its divisions’ products, provides test reports and posts certificates of compliance on its website and product boxes, but it also developed a web-based Safety Search™ tool that promotional consultants can use 24/7/365 to search for safety test results on products.
“We continue to focus on … ongoing updates to our website of faster and easier selling solutions including virtual iCatalogs, promotions blog, super advanced search, Norwood Connect software, expansion of product and services into the Canadian market and even more personalized services for our distributors through our advanced promotional partnership programs,” says James Simone, CAS, SVP/chief marketing officer for Indianapolis-based supplier Norwood Promotional Products (UPIC: NORWOOD). “Innovation is directly tied to our current and future success.”
Salt Lake City-based supplier SnugZ/USA (UPIC: SNUGZUSA) is also capitalizing on web technology to differentiate itself. The company implemented a video-conferencing service, via Skype, to help distributors on sales calls and includes the link on its home page.
“SnugZ Skype enables us to attend distributors’ meetings without even leaving our desks,” says Charley Johnson, CAS, SnugZ vice president of sales and marketing. “It’s a free and easy way to ensure the value of your meeting while saving money.”
2. Products
Many of today’s leading consumer companies—such as Procter & Gamble—are embracing out-of-the-box thinking by practicing open innovation, a process whereby companies develop products and processes through collaboration with other companies and customers.
In the promotional products industry, two suppliers—Apple Imprints Apparel, a small, 27-year-old screenprinting company, and Falcon Headwear, a 20-plus-year-old Conroe, Texas-based company—are using open innovation and product bundling to differentiate themselves and provide customer value. Inspired by the retail world’s use of product bundling, Lipomi approached Falcon Headwear about the idea of an attractively priced cap and t-shirt promotion called Cap-N-Tee Combo. The bundled piece can be ordered from either supplier.
“Innovative ideas are perceived as having high value, and this will cause end customers to rethink their businesses,” says Jim Farris, executive vice president of Falcon Headwear (UPIC: FALC0005). “Remember, if we are rethinking our businesses, they are, too.”
“It’s clear that some product categories are more vulnerable than others, and so we’re looking carefully at what’s going on out there,” says Duffy. He explains the company is thoughtfully analyzing input from customers, determining what makes sense for the company, planning carefully and avoiding any overt knee-jerk reactions.
For some suppliers, a broader base of products is the answer. Largo, Florida-based supplier Corvest SPV, LLC—parent company of Adva-Lite (UPIC: ADVALITE), Toppers (UPIC: TOPPERS) and It’s All Greek to Me (UPIC: GREEK)—introduced 300 new products this year. But the company is also narrowing its focus on its top-selling products through a new, deep-inventory program called Stock Stars. The supplier invested significant resources in the program, which includes the company’s top 25 items.
“We decided to concentrate on our high-velocity products, so our customers will always know they are available,” says Robert P. Conway, Corvest CEO. The investment has paid off, Conway says. “We’re very satisfied with the program.”
Rather than introducing more products, SnugZ is finding more ways to move products—the latest is its program where distributors set their own pricing for a variety of lanyards. The program has been marketed simply through e-blasts with the headline, “Tell Us What You Want To Pay.” Four days after the program debuted, 15 orders for more than 10,000 pieces had been received. Johnson says the company first tried a promotion offering EQP less 30 percent for a month and saw virtually no orders. “At SnugZ we like to be the first at tryng new stuff, stuff people think is crazy. We came up with ‘Tell Us What You Want To Pay,’” he says. “So far, results are great.” He expects the program to run through the third quarter of 2009.
3. Delivery
As the pace of our world increases, so does the need for speed. Suppliers understand that promotional consultants’ clients often don’t get their act together until the last minute and then, of course, they want a speedy turnaround.
To help meet this demand, many suppliers have initiated rush services and implemented new processes to accelerate production timetables. One example is Norwood, which has implemented a no-cost, 24-hour production time turnaround on more than 400 of its products across all of the company’s divisions.
Corvest also offers a one-day rush service, Rapid Response, on all Corvest items at catalog quantities and prices with a one-color screen or pad print for an added fee of $50. Not to be outdone, BAG MAKERS now provides a Boomerang five-day production-cycle service, reducing its production schedule by 30 percent. Apple Imprints Apparel also offers a 24-hour rush service, which Lipomi refers to as “a 24-hour quick flip. What we’re trying to do is get the last-minute orders,” Lipomi says. “We do about 10 percent of our business that way now.”
Lou Nicolaides, director of marketing for City of Industry, California-based Sweda Company, LLC (UPIC: SWEDA), adds, “We’re intensifying our focus on our range of services, such as our 24-hour service, no-freight service, online order status and no-repeat setups,” he says.
4. Service
“Customer feedback is telling us that service is what they need most now to differentiate themselves,” says Duffy. “So many suppliers have taken the price-cut approach and so there isn’t much more room there to give. It has now become a matter of adding some other value to the sales equation.” As one example, Duffy says BAG MAKERS has modified its self-promotion program to help distributors better promote themselves. And to have more impact, the company is giving more flexibility and autonomy to their customer service and order management teams. “The staff has a far greater ability to quickly respond to customer needs in order to help that customer close an order,” he adds.
5. People
As the ranks of the unemployed continue to grow and companies continue to reduce overhead by slashing jobs, remaining employees are all the more critical to a company’s success. Therefore, techniques for managing talent and improving customer relationships are hot topics in today’s business world. Smart companies are focusing on improving relationships—not just with their customers, but also with their employees.
“The next big thing is people, not products,” says SnugZ’s Johnson. He believes what differentiates SnugZ from other companies is how it treats customers and employees. “What employees want is transparency,” Johnson says. “If we’re doing badly, they know. If we’re doing good, they know. We post the sales numbers every single day.”
SnugZ employs a young crew—the average age of a customer-service team member is 23 years old and for a sales-team member, 25. Johnson believes this is an advantage since it allows employees to view the promotional products industry from a flexible perspective.
“We give our employees an opportunity to move up, and because of that, their loyalty is through the roof,” Johnson says. “People support what they help create.”
Has SnugZ taken a hit as a result of the economy? “We’re flat,” Johnson admits. “But, from what I hear, flat is the new up.”
Norwood’s Simone agrees that talent development is essential. “Getting the right people in the right positions is crucial,” he says. “Having great people with great relationships builds trust and collaboration within the organization.”
BAG MAKERS is taking the human element a step further by giving more flexibility and autonomy to its customer service and order management teams, Duffy says. “The staff has a far greater ability to quickly respond to customer needs in order to help that customer close an order,” he adds.
At a time when companies are cutting jobs, Conway says Corvest has actually increased its sales force by more than 30 percent. “We built a large inside sales organization to focus on the vast majority of our customer pool comprised of smaller distributors,” he says, explaining the company’s outside salespeople were only getting to the top 200 to 400 customers over the course of a year and anyone else was coming in through third-party contact such as the website and direct mail.
The investment in human capital has paid off, Conway adds. “We’re very excited about the results. We actually show no decline in business coming from the smaller customers who frankly do most of the buying in this industry.”
6. Process
Many of the companies we spoke to took a hard look at their execution strategies in an effort to increase bottom-line business value.
“In many ways it’s very difficult to distinguish one company from another as it relates to the basic product line. Execution is a critical element of business success,” says Conway. “You must have product available and be able to deliver it in a timely way. There’s very little margin for error in this industry.”
Companies both small and large are smart to invest in streamlining their processes. “We just purchased a new direct-to-screen machine—an investment of $75,000—to make our processes faster and more innovative for our clients,” says Apple Imprint Apparel’s Lipomi. “This new equipment will reduce our screen costs and save our clients $5 to $6 on set-up costs,” he says, adding that the company will recoup its investment in about a year. And because of the many innovative strategies Apple Imprints Apparel has implemented, the supplier is very optimistic about the future. “We’re projecting 50-percent growth for 2009,” Lipomi says.
AIA recently implemented a new sales system called SOAR, which stands for segmentation, organization, auto-pilot marketing and replenishment. SOAR components include a new CRM program, account profiling, enhanced multi-level and multi-channel marketing offerings as well as new prospecting, retention and referral programs.
“The SOAR program allows AIA owners to strengthen their relationships with customers,” Woods says. “A year ago AIA had many different services and offerings, but without one cohesive system to bring them together. Now, we’ve fused marketing and technology, integrating new and existing programs into a system that is being received very positively by our franchise owners and affiliates.”
AIA has also developed a new operating platform called ISIS. It features a streamlined order process, flexible reporting capabilities, CRM synthesis and product integration combined with a new program interface making order management a user-friendly experience.
Sweda has focused on internal innovation, as well. “We’ve made a huge investment in the way we process orders, handle customer service, manage customer needs and optimize systems, quality and processes,” Nicolaides says.
“Our new systems and facilities have allowed us to make it easier and more profitable to do business with Sweda than ever before,” Nicolaides says. “We have made a major push to enhance our overall quality assurance program.”
Simone says Norwood also focuses on an additional element that’s imperative to success: getting lean. “Being lean is not just for our manufacturing operations but for every department to help us simplify, measure and improve what we do to best service our business model and mission statement,” he explains.
Future Tense
What’s in store for the promotional products industry as the economic meltdown continues to unfold?
“There are an awful lot of suppliers and distributors who think there’s going to be a shakeout as a result of the recession,” says Corvest’s Conway. “And that would create opportunities for companies that can perform.”
He also believes there may be a higher purpose in going through an economic downturn. “Now, this one is very severe—more so than anybody would like,” he adds. “But businesses and industries come out of economic downturns much healthier.”
However, Conway follows this pronouncement with a caveat. “I do think this industry will go through some consolidation,” he says. “I think this economic period will cause many smaller and mid-size companies to disappear, or be acquired and consolidated into larger suppliers and distributors. Overall, I think this will be healthy.”
Does Corvest have its eye on any particular entity? Conway remains mum. However, he does say he believes there will “absolutely” be merger and acquisition activity in the industry’s future.
“In challenging times, weak companies go out of business and strong companies become even stronger,” AIA’s Woods says. “Companies that execute bold strategies now will be the ultimate winners.”
Johnson takes an even more philosophical view of the industry’s outlook. “Everything has hit rock bottom,” he says. “Now we just need to grow back in a different way—a better way.”
“It’s gonna be good,” Johnson says of the future, and you get the feeling that his prediction—somehow, some way—is right on the money.
Brittany Glenn is a Dallas-based freelance writer and frequent contributor to PPB.
Test Your Innovation Quotient
What’s your IQ? We’re talking about your innovation, not intelligence, quotient. Ask yourself and your executive staff members the following key questions to determine your level of innovation savvy.
• Do you routinely evaluate your market position and use this evaluation to identify gaps that become the target for future innovations?
• Do you use measures for the probability of success? How are these probabilities computed?
• Are you able to spot weak opportunities early on, or do your opportunities tend to linger, regardless of their prospects, once they have started development?
• Do you routinely evaluate your technology and use this evaluation to identify gaps that become the target for future innovations?
• What are the biggest uncertainties in your industry? How well-prepared are you in each of the resulting scenarios?
• Do you explicitly search for opportunities that could help you hedge a weak position?
• How can you ensure that the solutions you are developing will result in value creation?
Questions excerpted from Innovation Tournaments: Creating and Selecting Exceptional Opportunities by Christian Terwiesch and Karl T. Ulrich (Harvard Business Press, June 2009). Reprinted with permission.
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