In 1973, Betty Morris founded Shrinky Dinks. In the 1980s, they became ubiquitous. And now, the entrepreneur has finally found a way to really profit from them.
Betty Morris had followed the instructions in the crafts book to the letter, rinsing the plastic lid of a potato-salad container, then sketching a flower on it with a permanent marker. But now the book was telling her to place the lid on a cookie sheet and bake it. "I figured if you put something plastic in the oven, it would catch on fire or melt all over the place," Morris recalls. Either way, the project hardly seemed suitable for her son's Cub Scout troop.
But inside the oven, something magical happened. The lid curled at the edges, then thickened and contracted. A few minutes later, the surprised Scout leader drew out a tiny plastic charm, about the size of her thumb. There has to be a market for this, Morris thought. And so it was that on a warm afternoon in Brookfield, Wis., in 1973, Shrinky Dinks were born.
Shrinky Dinks -- for those who neither were children nor had children in the '70s and '80s -- are created by drawing, tracing, or stamping pictures on pieces of specially treated plastic and then heating them. After one to three minutes in the oven, the plastic shapes shrink into tiny, colorful tchotchkes. Kids loved them. At the peak of their popularity, in 1982 and '83, Morris and her partners sold more than 3 million Shrinky Dinks kits.
But by the late 1990s, Morris was back where she had started. A series of troubled relationships with marketing and distribution partners had left the Shrinky Dinks brand, well...shrunken. The toy had virtually disappeared from the market. And yet Morris, who never let go of the trademark, still believed in Shrinky Dinks. At the age of 57, she wanted to bring the toy back. "It was a successful name for all those years," she says. "The only reason it wasn't successful now was that it had been mishandled. I thought, 'I can fix that."
A career in the toy industry was the last thing Morris intended that afternoon in her kitchen with the Scouts. All she wanted was to entertain a gaggle of eight-year-olds. But charmed by the incredible shrinking plastic, she and another mother, Kathryn Bloomberg, decided to invest $1,200 in 1,000 pounds of 8- by 10-inch sheets of plastic. The two women formed a partnership, K&B Innovations, and began assembling kits, dubbing their invention "Shrinky Dinks." After the toy debuted at a booth in a local mall, 16 stores approached K&B about carrying the product. Within months, sales climbed to $50,000. "Companies came out of the woodwork wanting to negotiate some kind of licensing agreement with us," says Morris.
With no connections in the toy industry, Morris felt the best option was to go the licensing route. "We knew zero-zippy when we started and weren't sure we could make it work," she says. So K&B Innovations began a series of relationships with large marketing partners that held exclusive licenses to create Shrinky Dinks products and distribute them to retailers. K&B, in return, was guaranteed somewhere between $100,000 and $150,000 a year in royalties; the amount rose with the product's sales.
At first, the arrangement worked perfectly. In fact, K&B's first partner, M.W. Kasch Co., a large Midwestern toy distributor, created an entire division around Shrinky Dinks. Morris and Bloomberg came up with ideas; M.W. Kasch put them in stores; and the two companies split the profits 50-50. Wholesale revenue hit $3.24 million.
But in 1980, M.W. Kasch hit a sticky patch and sold the rights to market Shrinky Dinks to another manufacturer -- which had little interest in soliciting ideas from K&B Innovations. The arrangement proved highly frustrating to Morris, who missed the creative input and felt the brand was being mismanaged. Several years later, the contract was sold to Milton Bradley. Unfortunately, according to Morris, the toy giant lost sight of Shrinky Dinks after acquiring Parker Brothers in 1993. So she let that contract lapse and turned to another licensee, only to see it go out of business in 1997. "So there I was," says Morris, "with the worldwide rights and no one to sell them. Do I try to negotiate one last royalty contract to keep the money coming in? Do I trust someone else to rebuild the brand? Or do I do something else entirely?"
Morris opted for the last of these. Determined to see the toy reemerge in as many creative, high-quality iterations as possible, she dismissed the idea of signing with a single licensee, preferring to seek numerous partners that would produce a variety of applications.
But many companies won't agree to royalty arrangements without the promise of exclusivity, and licensing fees alone weren't enough. So Morris became a plastic manufacturer. Here's how it works: At a cost of about $100,000, K&B set up a small manufacturing facility near Milwaukee. When companies approach K&B with ideas for Shrinky Dinks, they sign a licensing contract that gives them the right to use the name but stipulates that they buy all their plastic from Morris. K&B charges no additional licensing fees and collects no royalties. "The advantage is that the products these people are making take on a whole variety of forms because everyone is looking for a different niche," says Morris.
Morris has signed up 12 licensees that make Shrinky Dinks books, jewelry, even an oven to cook the plastic in. When she has an idea herself, she either approaches someone she thinks can make it happen or has K&B take on the project. K&B also sells plastic straight to hobby and craft stores. Perhaps most important, Shrinky Dinks ads are back on TV.
Morris admits it's a pretty big challenge to master manufacturing at an age when many people are contemplating retirement. But as a licenser, K&B never made more than a few hundred thousand a year. As a manufacturer, it's already at $2.6 million and growing. Morris doesn't expect the company to get much bigger. And that's fine with her. "I want the brand to be very visible," she says, "but I don't want it to be diluted." Ultimately, she hopes to sell K&B -- including the Shrinky Dinks trademark -- and retire. After that? "I'll probably do a lot of toy design," she says.
Andrew J. Sherman
McDermott, Will & Emery, a Washington, D.C., law firm
Morris has what it takes to compete: an established brand; a simple but fun line of products; a manufacturing and distribution channel that she (now) controls; and the persistence to survive challenges. She has taken steps to control her own fate and protect and leverage her brands and intellectual property. Given Morris's stage in life and the demands that come into play when you shift from a licensor to a manufacturer, she needs to focus on building her infrastructure and a team that is less dependent on her as an individual and can handle some of the heavy lifting involved in building a real company. Hey, where are those Cub Scouts when you really need them?
Schylling Toys Inc., a specialty toy manufacturer in Rowley, Mass.
I like that K&B Innovations is managing its expectations not by thinking "big" but rather, "broad." Morris's strategy of spreading the brand through smaller deals will seed the market for future growth. Furthermore, her decision to stand in as the manufacturer of the raw materials is brilliant. If at some point her key partners decide to move on, she can pick up the pieces because -- as the manufacturer -- she is at the top of the food chain. There are always lots of middlemen or distributors to sell your product.
Author of The Inventor's Bible
When you consider that fewer than 1% of inventions make it to market, let alone stay there, it's hard to argue that Morris hasn't done the right thing. She delegated the production and distribution of her product to others; she took calculated risks; and she never lost sight of her core values or passion for her product. As long as Morris maintains Shrinky Dinks' values, I am sure she'll do fine. As to her other decisions -- about whether to sell the rights, to keep her relationships exclusive, to continue as a cottage industry -- there is no one correct answer. She has the freedom to base her choices on where she wants to spend her time and how the numbers crunch.