The Innovation Factor: A Field Guide to Innovation
From motivation to marketing, the best practices of the Innovation 50.
Published August 2002
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Nabisco is the largest maker of cookies and crackers anywhere. Period. Yet this behemoth of the biscuit world couldn't solve its own Fig Newton problem. Customers, it seemed, wanted less fat in their chewy-rich-and-gooey, but Nabisco's fat-free batter stuck stubbornly to the cutting equipment. So Nabisco turned to Foster-Miller, a privately held engineering company in Waltham, Mass. Focusing its formidable inventive powers on the dilemma, Foster-Miller came up with a newfangled noncontact cutting machine to which fat-free batter won't cling. As a result of this small business's ingenuity, the world is a slightly better place. For dieters anyway. Or at least for the ones who like Fig Newtons.
Foster-Miller's approach to inventing products from scratch is just one of the strategies you'll read about in Inc's report on America's most innovative small companies. We asked CHI Research, an intellectual-property consultancy in Haddon Heights, N.J., to compile a list of businesses with under $100 million in revenues that had accumulated 30 or more patents between 1996 and 2001. CHI has been tracking and analyzing patents for decades, and senior policy analyst Diana Hicks says patents are a good -- if not perfect -- gauge of an organization's technological inventiveness. Businesses that spend money on patents, she explains, are protecting earlier investments in research and development, and those investments indicate a commitment to innovation.
The innovators that CHI uncovered for Inc are not your typical small businesses. Many are venture funded. Many are public. And then there's the question of what they actually do all day. The Patent Journal identifies the five industries that have the highest rates of growth in patent activity from 1995 through 2000. Four of the five (telecommunications, semiconductor manufacture, biotech, and pharmaceuticals) are heavily represented on our list.
Such businesses -- with their corporate alliances, healthy research coffers, and rocket-scientist staffs -- may seem alien to a company that makes wine coolers or paper clips. But in interviews with our reporters, the leaders of those companies described many familiar management challenges: Keeping employees engaged. Developing new products while refreshing old ones. Funding the development of unproven ideas. Thinking up stuff.
We asked those leaders how they manage to keep cranking out novel products and features when so many companies stall out after the big bang that created them. Here's what they told us.
Manufacturing: The Upside of Vertical
It's the difference between assembling a puzzle and painting a picture. The puzzler manipulates a prescribed number of variously shaped pieces to reproduce an image devised by someone else. The painter wields the spectrum of colors and an infinite vocabulary of form to create an image that is wholly new. Innovative companies, like great painters, want maximum control of their own palettes. To create truly unprecedented products, they believe, you must also make the components on which those products are based.
Norman Rautiola, for example, is fanatical about building everything himself. His company -- Nartron Corp. -- makes electronic systems for a variety of industries; its innovations include the first electrically powered steering system, the first keyless automobile-entry system, and the first touch-controlled range. All those products, and dozens of others dreamed up by Rautiola and his staff over 30 years, are made from plastic parts and housings and switches and molds and coils that Nartron engineered itself, from its own designs. The company buys a few staples, such as microprocessors, brass, steel, copper, and plastic resin. Otherwise it's all homegrown.
Rautiola's reasoning is simple: The whole is the sum of its parts; ergo, if you create better parts, you get a better whole. "Our parts look different from other people's because we keep adding functionality," says Rautiola. "We optimize the mechanical design of a part that goes into a new product. We optimize the electromagnetic portion. By doing so we optimize the entire product."
Rautiola says that making his own parts also helps control costs and develop employees' technical smarts. That, in turn, allows the company to "run rings" around the competition. "I compete with Texas Instruments," says Rautiola. "I compete with Motorola. But they can't compete with me technically because none of them has those kinds of capabilities under a single roof."
R&D: Divide and Conquer
Products -- like children -- need different things at different points in their development. So innovative companies often divide up their research-and-development efforts by the stages of a technology's life cycle. What does that look like in practice? Capstone Turbine Corp., a maker of power-generating systems, splits the engineers who are working on its products into four groups:
- Maintenance and reliability. "It's unglamorous work, but it is so important," says president and CEO Ake Almgren of the cost-reducing tasks that occupy the existing-products group.
- Functionality. This group creates significant new versions of Capstone's chief technology platforms -- generators that burn various fuels, for example. "Brazil uses a lot of ethanol," says Almgren. "If we decided to target Brazil, these engineers would develop a version that burns ethanol."
- Product management. These engineers concentrate on market research, figuring out what's needed in the market and which new-product designs might be feasible.
- New-product development. At Capstone, this is the group that creates wholly new platforms. One project under way attempts to ease the strain on utility grids during the summer by creating air-conditioning that runs on heat, rather than on electricity. "The goal is to have a less custom solution that maximizes fuel and cost efficiency," says Almgren.
