Inventing Your Way Out of a Recession
Using research and development to thrive during economic downturns.
For the past decade, I’ve had a “mad scientist” vision of creating two inventions for our industry: a time machine and an anti-gravity machine. We all could use the time machine to satisfy customers who want their prints yesterday, or to travel to the future to see if that six-figure piece of equipment we plan to buy will be obsolete in six months. And, because we are all painfully aware that trouble (among other things) flows downhill, we could use the anti-gravity machine to reverse the flow and deliver it back to those who created it in the first place. If any of you would like to collaborate on these inventions, I am taking on investment partners.
If you’ve been around our industry for any amount of time, you know that R&D projects can take many forms. Yes, they can be as grand as inventing a time machine or “the next big thing.” But they can also be as simple as combining existing materials and processes in a slightly different way to create something unique.
As with many other companies, we responded to the recent recession with cost cutting, downsizing, and eliminating expenses for almost everything that wasn’t essential. One category, however, was not only spared our accountant’s red pen, but enjoyed a dramatically increased budget in 2010: research and development.
Now, even in boom times, embarking on an R&D project is fraught with risk. And an inventive initiative is certainly more difficult to justify in a recession. But I would argue that a downturn is the perfect time to “invent your way out” of an economic downturn.
Many risks, no assurances
There is always the danger that embarking on an R&D project might cause you to “take your eye off the ball.” Your company probably has a portfolio of products and services that make up the bulk of your business. Our company, for instance, has become good at performing specific processes and procedures; and because we know what we’re doing, this allows us to find a comfort zone. But by spending time and money on inventing or developing new products and services, it’s easy to take your focus off what you do best. Your core business might suffer from diverting your attention at the very time when it’s needed most. And it’s not just your time that gets diverted – cash flow that could be spent on things like inventory, equipment maintenance, increased staff, or raises, may also be siphoned into an R&D effort.
A second risk: There are no guarantees. Just because you have good ideas and good intentions, doesn’t mean you will ever make a dime attempting to fulfill them. So, after all the money and time is gone, the potential remains that you will get nothing in return.
A third risk: A failed new product can damage your company’s reputation. When you work within your comfort zone and only do things you absolutely know will succeed, you minimize your risk. By succumbing to the temptation to follow your wild imagination – or that of your clients’– you can be taken into uncharted territory where the risk of failure looms large. I can personally attest to the unfortunate consequences of being too cavalier about selling products that were imagined to be a big success.
Finally, consider: You have spent the time and money to develop a product or method that gives you a competitive advantage. But all of this does little good if a competitor can simply copy what you’re doing. This is the fourth risk, and it gets us into to the legal world of trade secrets, patents, copyrights, and trademarks. To protect your intellectual property you must draft the proper non-compete and non-disclosure contracts with your employees and colleagues, and file the applicable patent/copyright/trademark documents with the government. This process is time consuming and expensive, and even when this is done – and every “i” is dotted and every “t” is crossed – your contracts and filings are only as good as your willingness to pay attorneys to enforce them.
Reorganization, off-the-shelf, alliances, and more
To pursue R&D without sacrifices to your core business takes organization. When two ambitious R&D projects threatened to disrupt our business, the principals of our company chose to reorganize. One of my partners took over my role as company president and CEO so I could refocus some of my time. And, our production manager stepped up to general manager while other managers worked to better define their (and others’) roles in a manner consistent with all of our strengths and weaknesses. We’ve all delegated more, with a better outcome, and we’re all working harder and smarter.
There are ways to tame R&D’s HR and financial burdens on your company. One is to develop a new product or service by starting simple and avoiding significant in-house development costs. Some of our most successful creations have involved developing products using Commercial Off-the-Shelf (COTS) materials.
COTS components can be combined or configured for a specific use. Our company’s most successful COTS developments have come from customer requests and have led to some really good runs of being the exclusive producer of specific products – all of which translates into a competitive advantage, with higher sales and better margins. Developing some of our most successful products has been as simple as taking a common base adhesive-backed vinyl and using an overlaminate not normally associated with that product. Another product combined a French tent fabric with a tweaked liquid overlaminate. In these instances, the whole became greater than the sum of its parts. Keep in mind that trial-and-error and field testing are the research components to developing COTS-based products. You must do sufficient testing to ensure that these products, when combined, will live up to the customer’s reasonable performance expectations.
It’s also important to remember that, just because an R&D project is beyond your financial or technical capabilities, doesn’t mean it's impossible. You simply need to find a strategic ally or partner for the project. Recently, our company was challenged to come up with a printed architectural glass. It needed to be a tempered safety glass with the image encapsulated, and it had to be viewed equally well from both sides and in either back- or front-lighting conditions. When an extensive search could not find a product that met these performance parameters, we realized it had to be developed. I had an idea how to do it, but it was beyond our company’s capability. After more than a month of phone calls and a failed attempt, I found a perfect ally in the owner of a glass company in Southern California. As a result, within two months of starting the project, our newly-developed Dual View glass was being installed in three Texas restaurants. Neither company could have created this on our own, but together we had just what was needed. And, by sharing the cost and effort, it didn’t place too big a burden on either of our companies. Because we’re first to market, our margin for Dual View glass is better than any of our core products. Best of all, our client is happy and his loyalty and confidence has been rewarded.
Such strategic alliances have been central to our other R&D projects, as well. For instance, manufacturers have formulated liquid laminates and inks for us. Also, our partners have shared the cost of developing products and protecting the intellectual property rights, provided the sales and marketing efforts, and conducted the field-testing. We have recently developed two technologies with a partner that, other than prototypes, we will not manufacture.
By the way: Past failures have taught me to be more cautious about selling untested products. I also occasionally say “no.” And we now require customers to take responsibility if they insist on us creating and providing them with new and cutting-edge developments.
Inventing amazing things
Is it worth the time, cost, and risk to invent your own future? Absolutely! But if you choose to go this route, keep in mind there are two worlds at play. The first is rational and can be under your control. It involves you and your team’s imagination, planning, timing, method, and implementation. The second world is intangible: luck. Most days, I would rather be lucky than good.
Although our own shop’s accomplishments have been modest, R&D has resulted in the greatest satisfaction, commercial success, and fun we’ve had in this business. I look at the developmental pioneers of our industry and recognize they have set a great example. Their ingenuity has ultimately benefited all of us. With a touch of creativity, planning, teamwork, effort, timing, and luck, amazing things can be invented.