Innovation. It's the latest buzzword. And it carries a heavy load: Innovation is the quasi-magical element that's supposed to protect what's left of U.S. economic hegemony in a fast-globalizing world. But what, exactly, does innovation mean to smaller companies? And what if your industry is one that doesn't, at first glance, have many opportunities to innovate? What if your company sells, say, tea?
Those might seem like tough questions, but in 1999 the brother-and-sister team of Ahmed and Reem Rahim tackled them with gusto. Ahmed, who had co-owned and run two teahouses in Prague, and Reem, a biomedical engineer turned artist, saw an opportunity. Their Oakland-(Calif.) startup, Numi Tea, would import teas and combine them into unusual all-natural blends. That may not sound earth-shattering, but in the world of tea, where even high-end brands are often sprayed with artificial flavorings, it was a major shift. And a successful one. Six years later, Numi has grown to 25 employees and $7 million in sales.
In 2005, the Rahims were ready with another idea: flowering teas. The teas are hand-picked in China, paired with flowers, and hand-sewn into rosettes that unfold into a flower shape as the tea steeps. Numi even sells clear teapots designed to highlight the teas. "We thought this would be a product that showed Numi was a premium brand," says Reem. But it has turned out to be much more than that. The flowering tea has been selling briskly at upscale retailers such as Whole Foods Market (WFMI), jumping from 9% of Numi's sales to 26% during the last holiday season.
Now, Numi is preparing for its next "first." In March it will begin selling a line of liquid iced tea concentrates flavored not with additives but with real dried fruit.
Numi is doing what growth demands: realizing that, increasingly, success comes not from being cheaper than your competitors but from being distinct. To ensure that their company can thrive in such an environment, the siblings are building a culture in which creating new products and services is the rule, not the exception.
That culture, of course, starts with employees. To create an innovative culture at your company, you'll need to encourage each of your staff members to come up with the next big idea and act on it. And to implement small changes that can make a big difference, such as devising a new way to bill vendors or a more efficient product design. Then you'll want to give new ideas room to grow. Do that, and you'll go a long way toward kick-starting innovation at your company. "There is nothing wrong with a sudden brilliant idea," says John Pipino, who directs technology strategy for innovation strategy firm Doblin in Chicago. "But innovation is also about hard work and good discipline -- choosing the right number of innovations offered at the right pace to the right group of customers."
While entrepreneurs face some of the same challenges in building an innovative company as the CEO of an industry giant might, other obstacles are unique to smaller shops. Employees used to following the dictates of a company founder may have trouble changing their habits. Or staffers may be so busy that they have little inclination to think about strategy. So as a business grows, it can actually become more difficult to innovate. "Something funny happens when you grow beyond 50 people," says Dev Patnaik, a principal at consultancy Jump Associates in San Mateo, Calif. Because of the management demands on entrepreneurs' time, "it becomes harder to know the customer." Worse, says Patnaik, "You've already milked the big idea that got you this far."
TILLING THE SOIL
When it comes to innovation, employees are taking their cues from you. "Company leaders have to be the ones pushing for innovation by accepting failure and promoting learning through experimentation," says Jeneanne Rae, co-founder of Peer Insight, a consultancy in Alexandria, Va., that focuses on innovation in services.
That may mean inviting all employees to contribute ideas or adding a measurement for innovation to your performance appraisals, says Alain Rostain, founder of Creative Advantage in New York. A good first step is to designate an employee or committee to collect and vet ideas from all staffers. Pipino agrees: "At small companies, there's often nobody for ideas to stick to."
Creating such a group was the opening move in "Benovation," the innovation push at Benjamin Obdyke, a maker of roof vents and other building parts in Horsham, Pa. The 30-employee, $30 million company formed its Innovation Creation Team early in 2004. "We're laying the groundwork for a creative culture that should feed future growth," says George Caruso, a business development specialist and member of the team.
Benjamin Obdyke hired Creative Advantage to help get its initiative under way. Bringing in specialists can certainly be a boon, but keep in mind that costs can easily run into the tens of thousands of dollars. Caruso asked his consultants to help the company develop a strategy to change its culture and to lead creativity workshops for the staff. The company also purchased "idea-management software" from Imaginatik. Employees use it to post ideas and comment on one another's suggestions. The package includes a personality test that employees use to find out more about their style and to determine whether they're a "creative," "inquisitor," "helper," or "doer." "There's creativity in every style," says Caruso, "and doing the test helped employees understand that we don't just want the crazy idea people. People who build on ideas and find innovative ways to carry them out are also needed." In all, the company spent $30,000 on consultants, conferences, training workshops, and software.
The team has set a 2006 goal of saving $100,000 and generating $200,000 in new revenue from employee ideas submitted to the intranet site it launched in November. The site tracks employee participation, and while the company hasn't worked out the details yet, it will reward employees who contribute ideas and comments. Already the process has led to dozens of concepts now being explored by the team, including six for new products. Another plus: The company's seven outside salespeople are adding their input. "It has been a great channel for them that they didn't have before," Caruso says, adding that one of their product ideas and several marketing concepts are being developed. "People from all departments are participating," says Caruso. "The neat thing about it is it gives everyone a voice."
DIGGING FOR IDEAS
Kathryn From decided that her company could be innovative without spending big bucks on outside consultants. "I believe we can learn from companies in other industries and apply their lessons to our company," she says. "We can do this stuff in guerrilla ways." The CEO of Bravado Designs, a Toronto maker of nursing bras, had taken the 25-employee company through some difficult times, facing mounting competition and pricing pressure. In 2004, with the company on stable footing, From began to think seriously about innovation. Bravado had started in 1992 with "The Original Nursing Bra," which still accounts for most of the $5 million company's sales. Although grateful for that success, From admits that "it was troublesome to me that 85% of our sales come from one line."
To spark new ideas, she began attending conferences and reading books about management and innovation, as did her management team. They started meeting every three months away from the office to discuss ideas, strategy, and books. "We recently read Good to Great by Jim Collins and spent half a day talking about how we can use it," says From.
She takes care to solicit ideas and feedback from all her employees, particularly those on the front lines. "The people who are on the phone with customers know most what we need," she says. "And our staff is really into it."
Once you get your staff on board, it's time to look outward, at your customers. The exact role of customer research is one that's hotly debated: Some say it's imperative to give customers what they want, while others say customers can't possibly anticipate the innovations that are possible in your field. But Tom Kelley, general manager of design firm IDEO in Palo Alto, Calif., suggests checking in with customers early and often. "Our biggest single source of inspiration is watching consumers," he says.
Bravado's From spends plenty of time in stores that sell her bras. "I'll visit customer after customer, watching them operate, and you see what they need," she says. Those visits have led to new colors, including a leopard-print bra that From says doesn't sell much "but shows we are a company that is fun and quirky." More important, it gets her product prominently displayed.
This spring the company will begin selling a nursing bra with a polyester-cotton lining called Bravado CottonFlex, which feels as soft as cotton yet retains the flexibility of polyester. More new styles are planned for later this year. And From is exploring related areas such as baby clothes.
Successful innovations don't have to be as dramatic as a new line of business or a home-run product. Experts advise companies to look beyond products and think of new methods of doing business itself. "Products are important, but there are other types of innovation, from how you leverage your relationships with other firms to how you get your offerings to market," says Pipino.
At Bravado, one of From's most daunting challenges has been her retailers' inability to stock much inventory. Women who need nursing bras often purchase several at a time, and stores sometimes run out. After a recent conference in which leaders of large companies were talking about distribution, she decided to check into offering her customers some sort of financing arrangement so that they could carry more of her inventory. Says From: "We're looking at ways to be innovative not just in our products but in how we approach the business."
As Numi Tea grows, the Rahims are working to keep its creative spirit alive. The company's 25,000-square-foot offices are painted in subtle colors inspired by the teas, with employees choosing shades for their offices. Staffers are regularly invited to submit ideas for new products -- the new iced tea line evolved from a suggestion made by a sales rep. A small committee vets each idea. When an idea is selected, the committee presents a timeline to the entire staff to get everyone excited about the launch.
As Ahmed Rahim fiddles with blends for new products, Numi holds "cuppings," in which all employees taste new teas in progress and offer suggestions. Reem sends e-mails asking for potential names for new teas as well as ideas for packaging. One recent e-mail solicited recipes for foods made with the tea, and two workers' recipes will appear on some boxes. "Allowing people to bring ideas to the table and feeding on them lets that creative spark flow throughout the company," says Reem, adding that the innovative spirit extends beyond products. "Employees take more responsibility for solving problems and find better ways to do their jobs," says Reem, noting that one manager is constantly refining the company's distribution system.
That doesn't mean Reem approves every idea."You have to set boundaries," she says. "You have to be able to explain to people why an idea doesn't work for the company. I tell them everything has to go back to our core value of making all-natural products and our core competency of making premium products. We are not a food company or a car company." But she doesn't rule out that one day her innovative company may evolve into something entirely new. Maybe it will just take the right idea.
By Diane Brady