From Local To Global: Smart Management Lessons to Grow Your Business provides business owners and executives with invaluable lessons learned based on the hands-on experience of a successful business leader. It offers knowledge and wisdom that will help managers navigate the challenging environment that they face in today's global economy. Covering a wide range of topics, including strategic growth, new product development, supply chain management, marketing, people, customers, international partnerships and selling your business - this book demonstrates how a leader can use intelligence, knowledge, passion and capability to build high performing teams that can achieve remarkable results.
From Local to Global
Smart Management Lessons to Grow Your BusinessBy EVAN J. SEGALAuthorHouse
Copyright © 2012 Evan J. Segal
All right reserved.ISBN: 978-1-4685-6353-5Contents
Acknowledgments......................................................viiIntroduction.........................................................ixChapter 1: New-Product Development...................................1Chapter 2: Strategic Growth..........................................18Chapter 3: People: Building a Great Organization.....................31Chapter 4: Climbing the Ladder.......................................44Chapter 5: International Partnerships................................61Chapter 6: Marketing: Romancing the Hose!............................73Chapter 7: Customers.................................................88Chapter 8: Supply-Chain Management...................................101Chapter 9: International Market Access...............................113Chapter 10: Selling the Business.....................................127
Chapter One
New-Product Development New products are engines to growth and profitability. Exceptional performance in Product Development is the result of a disciplined, systematic approach based on best practices. —Robert G. Cooper
New products are often a critical part of a company's success. For Dormont, it was the invention of the stainless steel gas-appliance connector that fundamentally changed the future direction of our business. This innovation dramatically changed how gas appliances are installed in two industries—residential plumbing and commercial food service. In many ways, these inventions impact all of us—whether it is through the use of gas appliances in our homes or whenever we eat in a restaurant. As I embarked on my leadership role at Dormont, my challenge was twofold. First, we needed to capitalize on our potential for significant growth in the gas-connector market. Second, we needed to build a new-product-development team that could create innovative new products that would help support the future growth of the company.
I began by studying new-product-development processes that were being successfully used by industry leaders. After a thorough review, we decided to focus on a concept called a stage-gate process. In its basic form, a stage-gate system is a conceptual and operational plan for moving a new-product project from idea to launch. Stage-gate divides the process into distinct stages separated by management-decision gates. The company sets up cross-functional teams that need to successfully complete a set of related activities in each stage prior to receiving management approval to proceed to the next stage of product development. (If you are interested in learning more, in the appendix there is a list of references about stage-gate and other business processes mentioned throughout the book.)
Another important tool that we used to support our new-product development was voice of the customer (VOC), a term used to describe the process of capturing a customer's requirements. It typically consists of both qualitative and quantitative research steps. Our team would work with our customers to produce a detailed set of customer wants and needs and then prioritize them in terms of relative importance and satisfaction with current alternatives. These were used as the key input for new-product definition and the setting of detailed design specifications.
We began building our NPD team by successfully hiring a group of talented engineering and marketing professionals who brought a great deal of knowledge, ideas, and enthusiasm. We were most successful when it involved an extension of our current products and other product extensions developed collaboratively with our supply chain.
The Invention of the Stainless Steel Gas Connector
Dormont was selling a line of flexible metal connectors that were used to attach residential gas appliances. These were flexible metal tubes that were made from brass in small sizes (three-eighths inch and one-half inch diameter) and in lengths ranging from twelve inches through seventy-two inches. It was easier to install a gas appliance with a flexible line (vs. hard pipe) as the connection could be attached to the gas supply at the wall and then the appliance could be pushed back into the space. The best examples would be a gas range in a kitchen or a gas dryer in a laundry room. Dormont began to purchase gas connectors and valves and sold them with our line of small Crescent water heaters. This arrangement generated additional sales and commissions, which made the Dormont line more attractive to manufacturers' reps.
After a few years, the number of brass gas connector returns that Dormont sold began to increase. These products were used in residential kitchens and laundry rooms, areas where household cleaners containing ammonia were stored. The brass tubing was susceptible to corrosion from the ammonia, and this created pinholes in the thin-walled tubing. Eventually, the brass gas-connector manufacturers began to coat the flexible lines with a gray epoxy coating to protect against the corrosion.
As a result of the issues with the brass gas connectors, my father (Jerry) began to think about a better solution. Was there a superior product that couldperformthesamefunctionalityandnotbeatriskbecauseofcorrosion? From the many custom pipe fabrication jobs that Dormont produced, Jerry had learned a great deal about metals that were effective in corrosive conditions. He wanted to design a product that would integrate a metal that was malleable enough to be fabricated into a corrugated, thin-wall tube and could also withstand the attack of corrosive chemicals found in the home. He knew that stainless steel would be an ideal option. Building on the current product designs, he worked with one of our strategic suppliers to design and develop the first stainless steel gas-appliance connector.
In addition to the product design, he had to address issues related to American National Standard (ANSI Z21.24) for residential gas connectors. This was a national standard that was adopted under the auspices of the American National Standards Institute. ANSI had delegated the creation and administration of standards related to gas appliances and accessories to the Z21 Committee. This committee in turn created the Gas Appliance Connector Subcommittee, whose members included brass gas-appliance connector manufacturers, code officials, and individuals from various gas utilities. In addition to performance tests, the standard included a design restriction in the materials section that allowed for only brass or aluminum as metals that could be used in the design of a gas connector. Put another way, it limited the ability of innovative people to create a superior product that might use a different metal. In fact, the existing manufacturers had a vested interest in maintaining the status quo.
After Jerry joined the subcommittee, he submitted proposed amendments that would allow stainless steel to be used in the design of a gas connector. These proposals met great resistance, and numerous objections were raised. These manufacturers had been required to coat their brass gas connectors and were concerned that a stainless steel gas connector might negatively impact their market share. Jerry hired several technical experts, including metallurgists and chemical engineers, to prove the ability of stainless steel to be safe in the conditions found in a residential environment. They developed several performance tests that could be added to the Z21.24 standard, which addressed the concerns of the subcommittee and allow for a stainless steel gas connector. After two years of diligence and hard work, Jerry was finally able to convince a majority of the subcommittee members to vote for an amendment that would allow for the option of stainless steel to be used in the design of the product.
Based on the superior strength and corrosion protection of the stainless steel, Jerry developed a brand name for the product—Supr-Safe®. Dormont introduced this new product into the marketplace—the very first flexible stainless steel gas connector. This unique innovation would fundamentally change the way gas appliances were installed throughout North America.
The Quick-Disconnect Gas Connector
As Dormont began to make inroads into the residential market, more and more people began to hear about this new stainless steel gas connector. As the news spread, it created many interesting opportunities. The most important came from the McDonald's Corporation, an event that dramatically changed the future of Dormont. McDonald's had a large number of restaurants around the country. They were also starting to expand internationally and had established a position as the leading quick-service company in the world. One of their most important concerns was the safety and sanitation of their kitchens. The kitchen design incorporated a number of large gas appliances, including gas griddles (for hamburgers) and gas fryers (for fries, chicken, fish). These were large, heavy, stationary pieces of equipment that were mounted on fixed legs. It was difficult to move this equipment, and therein lay the problem. A portion of the grease that was generated in the cooking process was projected on the walls and the floors around and behind the equipment. This created a fire hazard, as it was possible for the grease to catch on fire. It was also a sanitary concern, as the buildup of grease could attract insects and rodents.
A senior engineer from McDonald's called my father and explained the situation. Their goal was to be able to mount the equipment on casters (wheels) so that it could be moved away from the wall and the area around the equipment could be cleaned. This would help address the safety and sanitation problems. It would also be easier to service and repair the equipment if it could be easily moved. The technical challenge was that these high-capacity commercial gas appliances were currently installed with hard piping. Building on the concept of flexibility and the strength of a stainless steel product, could Jerry design a product that would solve this problem?
Jerry immediately began to brainstorm on how to address the unique and challenging conditions of this application. The first step was the stainless steel tubing—he knew that they would need larger diameters that could meet the energy requirements of the equipment. He determined that they could indeed utilize the larger sizes required to meet the higher BTU requirements of commercial cooking equipment. In order to provide the additional tensile strength to protect the tubing as the heavy pieces of equipment were being moved, Jerry decided to add a sheathing of woven stainless steel wire over the tubing. This concept was used in larger industrial stainless steel hoses and would add an important structural element to the design. Jerry also wanted to prevent the braid and tubing from becoming a place where grease could collect and build up, so he worked with a supplier to design a plastic coating that could be applied over the top of the assembly. The smooth coating could be easily wiped down and cleaned, adding to the sanitary features of the product design.
Jerry had to address the issue of the gas connection. How could a flexible gas connector be easily connected (and disconnected) without tools? Jerry thought of the industrial quick-disconnect assemblies that were used in factories and other applications. He met with one of the leading manufacturers of the quick-disconnect assemblies and began to work with them on a design that would work in a natural gas application. One of the challenges was that the seals and o-rings had to be changed due to the functional requirements of natural and LP gas. Since the initial volumes were going to be small and there were no guarantees, Jerry had to convince the quick-disconnect manufacturer to proceed with this design. They eventually agreed and developed prototypes for testing and approval.
This was a great example of an innovative, collaborative design process to address a specific customer's application. Jerry went back to McDonald's to review the design concepts, and they were excited about the impact that this product could have on their kitchen operations. The ability to make heavy-duty commercial cooking equipment "movable" addressed the sanitation, fire-safety, and serviceability issues.
Once the design started to come together, the next step was to determine how to address the standards issue. Since this was a new product (and application), there was no applicable standard. Jerry drafted a new ANSI Standard for "movable gas connectors." This proposed new standard was then submitted to the Z21 Gas Connector Subcommittee for consideration. Jerry enlisted the support of McDonald's and several gas utility folks who worked in the food-service industry to vouch for the importance and need for this product. After a few meetings, the new standard was approved. The new ANSI Z21.69 standard for movable gas connectors set the stage for the successful commercialization of the quick-disconnect gas connector.
New Quick-Disconnect Coupling
An important component in the Dormont movable gas connector was the quick-disconnect coupling. Jerry had to convince a manufacturer to modify their standard industrial design to meet the requirements of this application. This arrangement worked well for a number of years, but the manufacturer did not want to make any upgrades or changes that might improve the product. In addition, they began to compete directly with us by selling this new gas quick-disconnect product through their distributors and to our competitors.
As part of our process of upgrading and improving our core products, we began to look for another high-quality quick-disconnect manufacturer who would be willing to develop a new design that would integrate new features for food-service applications. We knew that the upgrades would improve the functionality of our products and help to further differentiate our products from the competition. In addition, we wanted a partner that would not undermine our sales efforts. We would be offering the manufacturer a significant amount of new business in exchange for a collaborative working agreement. We met with the owners of a Pennsylvania-based company and reached an agreement to develop a gas quick-disconnect for our applications.
Our engineering team began to with their folks to design an improved product line. The first phase involved adding two important product features: a push-to-connect design and a thermal shut-off (TSO) feature. We then worked to obtain the required product certifications and approvals. We shifted most of our purchases to this supply partner and developed an annual supply agreement that covered pricing, deliveries, payments terms, material certifications, and product approvals. We also worked with them to ensure a consistent supply based on a Kanban system.
A Kanban is a concept related to lean and just-in-time (JIT) production. The word Kanban is a common Japanese term meaning "billboard." Kanban is a signaling system to trigger action. As its name suggests, Kanban historically uses cards to signal the need for an item. Kanban is part of an approach of receiving the "pull" from the demand. The supply, or production, is determined according to the actual demand of the customers.
Later on we changed the color of the plastic coating to blue in order reinforce the Dormont brand, which was associated with our "Blue Hose." This color differentiation helped customers quickly identify a Dormont quick-disconnect coupling. Building on the success of the relationship, we began to further leverage their technology and capabilities. Some of the initiatives included:
• New Products: We designed several new products for key OEM customers that integrated their smaller quick disconnects with our flexible stainless steel assemblies.
• International Markets: Our supplier provided us with a quick-disconnect coupling from their European operation that we had shipped directly to our UK distributor.
• Value Options: Our supplier developed a lower cost quick-disconnect option that enabled us to compete with competitors who were offering lower prices for products without our design features. There is always a part of the market that wants minimum acceptable quality at the lowest price. Rather than just walk away from this segment, working with our QD supply partner we were able to compete on both the high value-added segment and the price conscious segment.
This supplier was an important part of our success. As you would expect with any relationship, we had our challenges—but we were always able to resolve our differences.
QDV Innovation
An important part of our continued success was our ongoing initiative to improve our product line. We listened to our customers, reviewed the information from returned products, and explored underlying issues related to the installation and use of our gas-connection products. We also were constantly on the lookout for product innovations in related industries and in overseas markets. In addition, our supplier partners were always an important source of new ideas and product innovations.
One area of potential concern in the installation of a movable gas connector was that it was possible for a plumber to incorrectly install a quick-disconnect coupling in a reverse position (in spite of warning labels and arrows on the product). If this occurred, when the component was disconnected and if the gas shut-off valve was also open, it was possible for the gas to flow into the kitchen, usually into the overhead ventilation hood above the equipment. While these conditions were extremely unlikely, we began to explore product ideas that would prevent this potentially hazardous condition.
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Excerpted from From Local to Globalby EVAN J. SEGAL Copyright © 2012 by Evan J. Segal. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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