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The Innovation Factor: Inside the Idea Mill

The spoils of Augustine's war against stasis can be seen in operating rooms around the world. The company's first product, the Bair Hugger surgical warming blanket, owns 85% of the market it invented. And Warm-Up -- a heated, pup-tent-like unit that's a novel treatment for chronic wounds (like pressure ulcers) -- is rapidly gaining traction. "It's only once in a great while that products come out that take patient care into another dimension," says Jonathan Benumof, a professor of anesthesiology at the University of California, San Diego, School of Medicine. "Bair Hugger and Warm-Up are at that level."

Augustine has convinced customers that he makes innovative products. More important for the company's future, he has also infected his staff with his obsession. The patent awards that sweep across one lobby wall are engraved with names of inventors from marketing as well as from R&D; a sales rep recently dreamed up a design innovation while lounging on the beach in Hawaii and faxed it in from a napkin. Employees treat their boss like an ambulatory suggestion box, constantly waylaying him in the hall with ideas large and small. "There's a genuine excitement when Scott makes his rounds; everyone wants to have something new to show him," says John Rock, the company's director of intellectual property.

Having made new products his uncontested priority ("Think it, build it, test it" is the founder's mantra), Augustine has built innovation into the very structure of the organization. Its geography fosters new ideas. Its R&D lab renders them in tangible form -- fast. And its intellectual-property expert not only protects the company's ideas but also mines the ideas of others for new opportunities. "Innovating is the best way to grow a business. It's certainly the most fun," says Augustine. "What we have created here is a platform for doing that."

Places

Augustine can trace to childhood his enthusiasm for building things -- in some cases over and over again. (The airway device that was supposed to go on the market in three months actually took four years to develop and passed through some 300 iterations in the process.) The son of missionaries, the CEO spent his youth in the Tanzanian bush, more than 200 miles from any city large enough to deserve the name. "If we needed a water heater, it was a barrel sitting outside over a wood fire with a pipe," recalls Augustine, who at 48 is tall and fit, with close-cropped gray hair. "For power we had a diesel engine hooked to a generator, and every year we had to tear it down and overhaul it. I made my own toys. Living that way, you get confident that you can build stuff. Trying something new isn't scary."

After a stint in the navy, Augustine -- armed with a medical degree -- settled in Kansas City, where he worked as an anesthesiologist. But he soon became frustrated with the shortcomings of the operating room. What bothered him most was the inability to control patients' temperatures during surgery. "I was wheeling them into the recovery room cold, and I said, 'Why?'" he explains. Techniques such as warming either intravenous fluids or the air patients breathe worked poorly. Warming the room itself, the medical literature suggested, was the only effective remedy, but "the surgeons won't let you do that," says Augustine. "So I thought, 'What if we created a cocoon of moving warm air around the patient -- a kind of personal little room?'" That cocoon took shape on Augustine's workbench as an inflatable blanket riddled with holes that allow warm air to pass across a patient's body. In 1987, with the help of his father, he launched Augustine Medical in his garage.

"The Garage Startup," reads a plaque outside Augustine's office, and the historic photos beneath it -- a younger, mustachioed Augustine grinning in front of the manufacturing machine he built from scratch, the entrepreneur and his father dragging the machine onto a trailer -- attest to his enduring fascination with the archetypal birthplace of American ingenuity. "I'm a huge believer in garages," says Augustine. And in some ways Augustine Medical, housed in a featureless industrial park outside of Minneapolis, resembles a mammoth garage business, where most of the machinery is designed and built in-house, and where an engineer might be working on a new kind of chemical warming pack with the help of muffin tins and a $20 coffee grinder. New-product teams, which Augustine likens to start-ups, are often sequestered in separate buildings, isolated from the company's daily affairs. "In a garage, it's two or three people working in a 30-by-30 room, and you don't send memos and you don't schedule meetings -- you just talk," says Augustine. "All the bullshit that exists when a company gets bigger doesn't exist. It's a very efficient way to start a business."