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Where Do Great Ideas Come From?

To hear these Inc 500 all-stars tell it, it's not from books or market research; it's from keeping your eyes and ears open.

For Kenny Kramm, it was the anguish of watching his infant daughter struggle to swallow the vile-tasting medicine she needed to stay alive. For Bob Perini, it was seeing earthy-looking water flow from his home's faucets. Mike Pratt just got fed up with trying to cram his duffel bag into the boxy little lockers at his gym.

The common thread: all faced situations they simply couldn't stand. They couldn't find existing solutions, so they invented their own. Then, after much tinkering and some false starts, they launched businesses selling what they'd created. And judging by their companies' presence on this year's list of America's fastest-growing private businesses, they've done well at it.

But despite that old saw about the single Chinese phrase that translates as both crisis and opportunity, trauma and frustration aren't the only stimuli for concepts that grow into Inc 500 businesses. Sometimes it's a quiet epiphany: Jerry Handsaker's plan took shape during a holiday boating excursion with friends. Sometimes it's a course correction: Mike Robson initially sold parts for automated teller machines but switched to servicing them after noticing one bank's dilapidated equipment. And sometimes it's just plain serendipity: Deborah Weidenhamer launched her auction company after a chat with an elderly stranger on a commuter flight.

From your kids

Kenny Kramm borrowed a page from Mary Poppins, the fictional nanny who trills that "a spoonful of sugar helps the medicine go down." Except in Kramm's case, it was a spoonful of banana that made his youngest daughter's bitter antiseizure medication more palatable -- and ultimately prompted Kramm to start a company that manufactures flavorings that disguise the nasty taste of many medicines.

The story of FlavorX (#295) dates to 1992, when Kramm's daughter Hadley, a premature newborn, developed cerebral palsy and a seizure disorder that required her to take liquid phenobarbital four times a day. Frequently, Hadley either spat out or threw up the medicine, leaving her parents uncertain about how much she'd absorbed. When it wasn't enough, she continued suffering seizures. "We were ending up in the emergency room on a weekly basis," Kramm recalls. So Kramm, then working in his parents' suburban Washington, D.C., pharmacy, began experimenting with harmless additives intended to sweeten Hadley's experience without diluting her drugs. He hit the jackpot with a banana mixture. In the 10 years since then, Hadley has never had a medication-related hospital visit.

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FlavorX offers more than 40 choices -- bubble-gum, root beer, and licorice, among others -- for "taking the 'yuck' out of medicine."

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Kramm figured, correctly, that he couldn't be the only parent facing the daily medicine struggle. He began concocting other recipes to improve the taste of many frequently prescribed liquids, pills, and even powdered medications, and incorporated his company in 1995.

The company, based in Bethesda, Md., reported revenues of $1.8 million last year and, Kramm says, is on track for $5 million in sales this year, thanks to distribution agreements with Kroger, Winn-Dixie, and other major drugstore and pharmacy chains. He has expanded his offerings to vet clinics -- apparently, dogs and cats don't like foul-flavored drugs any more than people do -- and is now adding flavors to some popular over-the-counter medications as well.

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57 ^% of the Inc 500 CEOs surveyed got the original idea for their business by spotting an opportunity in the industry they worked in.

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From questioning authority

A decade ago officials in Bob Perini's Maryland community told residents not to worry about the muddy-looking water that occasionally flowed from their faucets. It was, officials said, a harmless by-product caused by back-flushing pipes to wash dirt, grit, and other sediments out of an aging water system. Perini says, incredulously, "They'd say, 'It's perfectly OK to drink -- but you might not want to do your laundry in it.'"

Although Perini acknowledges that the brown water "isn't necessarily going to kill you," he didn't want his three kids -- then all younger than six -- drinking it. Besides, he says, at its best the town water had an unpleasant chemical taste and odor. At first the family switched to springwater but was disappointed with the brand-to-brand inconsistency in taste. And Perini wasn't convinced it was any cleaner than tap water. Furthermore, he didn't have much faith in low-cost home-filtering systems.

Then he thought back to his first postcollege job as a mechanical engineer working on an oil rig 1,200 miles off the coast of Louisiana, where he'd drunk water that his company purified on-site to save the expense of shipping it from the mainland. He knew he'd have to spend too much to build a similar system for his home -- but the investment might be cost-effective if he built a business around it.