Some of the best ideas are those offered by employees to employers. And some of the best companies are born when those employers say no.
Inc 500 Opportunities
Heating polymer-based coatings in a Cleveland suburb back in 1988, Carol Latham hit upon a startling truth. The future -- at least the future of keeping computer parts cool -- really was plastics.
A staff chemist at British Petroleum (BP), Latham was convinced that polymers could help solve one of the biggest problems that computer makers face: how to dissipate heat that's produced by components. Working out of BP's research lab in Warrensville Heights, Ohio, Latham had discovered that as heat conductors plastic- or polymer-based compounds compared favorably with ceramics, the focus of most of her colleagues' energy. And she had the data to prove it. "I was getting 8 to 10 times higher thermal conductivity numbers than any polymers cited in the scientific literature," she recalls.
The chemist believed she was onto something. Something lucrative. Something big. But Latham's bosses didn't share her excitement. Her appeal for funds to launch a commercial venture under the aegis of BP went nowhere. "To get a large company to make a decision is very, very difficult," says Latham, who left BP in 1989 to start her own company, Thermagon Inc. "Basically, I was held in limbo."
Over the past five years, the Cleveland-based Thermagon has seen revenues from its polymer-based products grow at a rate of 746%. That puts Latham's company -- whose customers include Motorola, Sun Microsystems, and Dell -- at #385 on this year's Inc 500 list. As for British Petroleum, last year, in the wake of its 1998 megamerger with Amoco, it brought in $148 billion in revenues. The company, with more than 100,000 employees worldwide, isn't exactly hurting for extra business. Yet it did let a promising new technology (not to mention a profitable little sideline) slip away.
Of course, that kind of thing happens all the time. At least half a dozen companies on this year's Inc 500 -- including the four profiled here -- were founded by employees whose day-to-day exposure to particular markets, materials, or methodologies inspired ideas for new businesses. And all of the company founders broke out as entrepreneurs only after being told "thanks, but no thanks" by their employers.
Such rejection is hard to figure, given that so many companies big and small routinely encourage staffers to flood suggestion boxes with proposals for products and services. But Stanford Business School professor George Foster, an expert on innovation, notes that there are many reasons a business might not jump on a potentially hot new idea. For example, management may be too worried about quarterly performance to gamble on a longer-term investment. Or the person pitching the new venture may have offended a key decision maker or work in a division that lacks real clout. "Corporate politics can kill a great idea," says Foster.
There are also sound reasons for leaving tempting paths unexplored. A young growing company may simply lack the management and financial resources to back a new venture. Or the plan may stray too far from its core business. "Oftentimes, it's not a good idea for the company, but it's a fantastic idea for the entrepreneur," says Ian MacMillan, who heads Wharton Business School's center for entrepreneurs.
In Latham's case, bad timing may also have been an issue. In 1987, BP had just become sole owner of Sohio. Oil stocks were sagging industrywide. Struggling to integrate Sohio and ride out the price slump, BP's management chose to concentrate on the company's core oil business. As a result, capital that might have once been available for projects like Latham's grew scarce. "When oil prices slumped, there wasn't cash to fund all those kinds of businesses," recalls Don Anthony, vice-president of BP America's research and development at the time. "The emphasis was to refocus."
Still, Latham tried. Lab results in hand, she brought the idea for developing polymer-based materials first to her higher-ups in the R&D group. They were noncommittal at best. Next she tried to pique the interest of BP's business units which, she figured, would be quick to pounce on a promising new product. She sent pitches to top executives at Carborundum Co., which was then BP's ceramics subsidiary, and to decision makers in BP Chemicals' marketing group. She even snagged audiences with a few. But no one bit. "I wanted to turn this into a business," says Latham. "And BP perceived that it was just some little thing that might be kind of useful."
Latham believes it didn't help that she was a 50-year-old woman with a bachelor's degree, whereas many of her colleagues had doctorates. "I had no credibility," she says. Fred Pesa, a former research director with the R&D group at BP, contends that the higher hurdle was stiff competition for funding new projects. And the payoff from Latham's discovery was unlikely to be huge -- at least by BP's standards. "They were funding core businesses or ones that had the potential to be material" to revenues, says Pesa. "Even a $20-million business unrelated to BP's core interests would have been viewed as pretty small."
Today Latham oversees 120 employees and 12 products. That wouldn't have happened if she had remained a bright employee whose good idea was turned into a reality by someone else.
Resigned to BP's cold shoulder, Latham, in late 1989, decided to launch a business on her own. She had no funding and nothing yet to sell. But the entrepreneur, a divorced mother with three children, was convinced that her basic concept was solid. And she was sure she could develop that concept into an actual product.
