Keeper Of The Flame

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Next, he turned to the stove. Innovation, too, had to be institutionalized, and manufacturing processes adapted to handle ever-more sophisticated products. Traditionally, Vermont Castings had had a short design and process engineering cycle: Syme would get an idea and they'd all bounce it around, moving it to the line as fast as they could. They'd work out the problems there, refining the concept or changing the design, making decisions so far downstream that there was no chance to hit an introduction deadline.

So they changed the system, hoping to speed the process without losing its spirit. A stove started in the advanced development group, four brainstormers including Syme, Ferguson from R&D, Abrain from marketing, and Jiggs Blackburn from design engineering. They met off site, away from ringing telephones, working as if they were a subcontractor reporting to Vermont Castings as a client. Their mandate was freeform: formulate a concept and assign objectives, without bogging down in how to make the product. Then the stove was handed off quickly to process design. There the system was opened up, and slowed down to allow designers, builders, and marketers to have their full say as the stove moved from master patterns to design tooling to assembly procedure.

So far, the new system has brought mixed blessings. In the past 18 months the company has introduced three new stoves, each more technologically advanced, each moving from concept to shipping carton in less than 12 months. Even with tighter manufacturing tolerances, there were fewer processing problems. Actual production has been more efficient, too, thanks to input from the floor: with the Resolute Acclaim, for example, suggestions from the line boosted the hourly assembly rate from 5 or 6 stoves per hour to 15. But those gains have had their cost. Three new products in 18 months have pushed scrap rates up. Yield, targeted at 90% to 95%, fluctuates between 50% and 60%.

It's a cost Dillon doesn't want to pay. But he has no choice. The product is sacred.

"It's a cop-out to say the standards are too tough," Dillon insists. "There's nothing magic about finishing; it's just a question of controlling the variables." Rather than lowering standards, they will have to introduce formalized process-control monitors to track specific problems proactively, correcting them before parts start hitting the scrap bin.

In the end, of course, that would not be enough to let the company grow. Even if the new system had worked perfectly, it was leading it toward a dead end.

Pursuing the grail of technological and design innovation is, truly, a rare and unusual thing. And creating institutionalized operational excellence is a tribute to any leader. But it doesn't do any good to build the best stove in the world if it is a better stove than people want to buy.

Vermont Castings' state-of-the-art product owned the high end of the market, but it had left a huge hole behind and gained a new competitor, Consolidated Dutchwest Inc. (CDW), a Plymouth, Mass.-based marketer that manufactured at its foundry in Taiwan.

It was almost déjà vu -- only this time the hot stove company was CDW, twice named to the Inc. 500, a six-year-old company with $18.5 million in sales and a 1,637% five-year growth climb. CDW had had to listen to the market: unlike Syme and Howell, who caught the industry wave just before it swelled, CDW's founders had started when the industry was cresting. They had made a basic heater to fill a basic need, stressing value for dollar, then worked their way up as the market matured, selling through a carefully positioned catalog and dedicated company stores strategically dotted over the East Coast and Midwest. CDW would never make the best stove in the world, but Syme feared it might soon be making the best-selling one.

"The cost of competition with them would have been horrendous," Syme says, "and they might have eaten my lunch." So he bought the company and changed the course of Vermont Castings' history.

The April 1988 acquisition made manufacturing sense: by moving production to Vermont, Syme would finally solve the problem of absorbing unused foundry capacity. It made marketing sense: besides giving Vermont Castings the customer access to mail-order image building, it gave their dealers a mid-range line, basic heat at half the price, a product for the customer who wanted a pick-up truck, not a Mercedes. It made strategic sense, too, putting Vermont Castings within range of $50 million in sales, claiming 15% of the stoves sold worldwide and 20% of the dollars.

But it has brought the company new problems as well. It will have to learn to manage two different brands in a declining market, keeping each distinct enough that one doesn't cannibalize the other. And that will be the easy part. It will be more important, and more difficult, to combine CDW's "find a need and fill it" orientation with Vermont Castings' long-standing commitment to the sacredness of the product.

First, though, Vermont Castings will have to figure out how to build two different kinds of stoves. How do you set a lower-quality standard after a 14-year obsession with the best? "Do we suddenly turn the low-end line into

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