The Innovation Factor: Inside the Idea Mill

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TO SERVE AND PROTECT: John Rock is building a fortress of patents.

The prop master's approach sat so well with Augustine that over the years he hired half a dozen more crew members from the Guthrie and other local performance organizations. (A few also came with experience building interactive exhibits for the Science Museum of Minnesota.) Today the R&D staff is more or less equally divided between former prop builders and engineers, both mechanical and biomedical. "Someone has a flash of inspiration about something they can do that's different," says Augustine, "but then a lot of the real innovation happens during prototyping, as the builder plays around with the specifics. We want people who can just start building whatever they can think of. A lot of engineers can't go into a workshop and not cut their fingers off."

Computer modeling and other sophisticated technologies are brought in later in the development process, after a viable prototype has emerged. The most expensive tool in Augustine's R&D shop is a $35,000 mill that uses digital data to forge parts. But Arnold much prefers the 25-year-old Bridgeport mill he bought for $2,000 at a secondhand machinery shop. The Bridgeport must be operated by hand but is fast and easy to use. And although the parts it produces are rough, rough is fine, Arnold says. "As long as it works the way it's going to work in the real world, you don't need all the spit and shine," he adds.

"We're not against computers here," explains Augustine. "We understand computers. We use computers. We're just not convinced that computers work better, faster, or cheaper."

Better, cheaper, and especially faster assumed greater importance for the company eight years ago, when Augustine decided to diversify. Up until 1994 the company had focused exclusively on the warming blanket, furiously devising new features and fortifying its wall of patents. But Augustine assumed that a public offering was in his future, and "the risks are too high for a single-product company," he says. So he began to make changes. On a marketing level, he repositioned the company around the idea of innovation, jettisoning the old logo (the letter A surrounded by two parabolas that resemble lungs) and substituting a graphically slick lightbulb. He also promoted the name Augustine Medical over the product brand Bair Hugger, which was far better known in hospital procurement departments.

More substantively, the company began developing new products, including Warm-Up, the heated, tent-like wound therapy; the airway device; blood- and fluid-warming instruments that don't rely on a hot- water bath (the industry norm); and others that are still under wraps. Since the culture of experimentation was already well established, the CEO made no major changes in staffing or organization. "We're just doing what we've been doing, only more of it," says Augustine.

But there was one area that Augustine felt needed bolstering: intellectual-property management. In the eight years before 1995, Augustine Medical filed 27 U.S. patent applications; in the seven years from 1995 through 2001, the number of applications increased to 129. The new product lines made the company's patent portfolio substantially more complex and meant that more research was required every time it set out to prove it was doing something new. For Augustine Medical, patent management was becoming a core competency. Fortunately, Augustine had someone more than competent to handle it.

Patents

Inside John Rock's office, it looks as if a Kinko's exploded. More than a dozen piles of paper, some a foot high, cascade into one another, obscuring his expansive desktop. There are more papers on the floor, loose and in folders, as well as piles of books and magazines. Two patent-award plaques -- still in their plastic sheaths -- lean against one wall. The bookcases are packed with fusty-sounding journals: Intellectual Property Today, Law Technology News, the British Journal of Anaesthesia. "There's rhyme and reason to it all," insists Rock, who arrived at Augustine not from a law firm but from Juilliard, the Spoleto Festival, and the Minnesota Opera. "It's a library of information. I love my office."

Originally hired to do R&D, Rock had his first exposure to intellectual-property law in the mid 1990s, when Augustine Medical sued competitors for infringing its patents on Bair Hugger. Augustine had been a firm believer in patents from day one ("If you can't protect it, you shouldn't make it," he says) and had written most of the company's early claims himself, with help from an outside lawyer. Unfortunately, those first filings were flawed; the company won its case in federal district court but lost on appeal a year later. Despite that outcome, Rock, who attended the entire trial, was hooked. "It was like cramming three years of law school into two weeks," he says. "I was fascinated by the strategy behind it -- the way you have to write a patent now on a technology that's not fully developed that you're going to have to defend 10 years down the road. It's like three-dimensional chess."

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Leigh Buchanan

Leigh Buchanan is an editor at large for Inc. Magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture, and she contributes Inc.'s capsule book reviews, "A Skimmer's Guide to the Latest Business Books."

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