MEGARA makes innovation pay

Running a small manufacturing firm in Australian typically requires working with small orders, small projects. When that market is also subject to global competition, the result is a ceaseless need to innovate, across all aspects of the business.

Witness the plastics manufacturer Megara, a 35 year old family company based in the Melbourne suburb of Bayswater. The company mostly undertakes one time project work, according to the chief operating officer, Tom Debney. He describes Megara as "not a large company but a very clever company" that has created a solid and unusual niche in the market producing recycled plastics. "You deal with most companies and they sell something to someone and then it is repeated 20 or 30 times. Its the classic "business-to-business." This is business-to-business but on a project basis."

The company tends only to have small product runs. "(In most places) when you are talking about the packaging industry, a million units is interesting, whereas in Australia 5,000 -10,000 units is a good job. So you have got to be able to change over quickly. Part of the innovation is playing with the equipment and playing with your changeovers to make them as rapid as possible because that is where your money is."

Faced with the firm's need continually to re-invent itself and to derive profitable returns from small, one off, projects, the emphasis has shifted to developing a disciplined approach to innovation. Debney says the company has a long standing culture of innovation, especially in its design and research and development, but there have been problems with the execution of ideas.

To correct this, Debney applied the Wave method, measuring innovation across the whole firm. A rigorous analysis, comparisons and the identification of priorities was undertaken, exposing shortcomings that, while not especially surprising, had not been addressed in a disciplined fashion. Once dealt with, sales increased almost immediately by over $2 million, a 10 percent increase.

Debney says the conversion rate with innovations has improved sharply. "We are not putting products to market and wasting time on products that aren't going to bring results. So even in areas like design we are now getting much better results because we are spending time on things which would make some kind of reward."

The key metric is time: how long and with how many resources it takes to get from the initial idea through to the placement of a converted order. It is not just the invention of new products. Many of the best gains are coming from innovation in the sales system. "I am getting four out of five instead of one and a half to two," says Debney. "That is crucial, especially with the kind of competition we face, which is intense. Your business is limited by either production or sales. In my case the business is limited by sales. It helps to concentrate leads."

Using an innovation support system, such as WAVE, inevitably means developing a more participative style of management. "The managers run out of ideas after about five or six, so it has got to come from outside," says Debney.

Subtlety in the human relations is also required. "It is mainly the creative people who get upset by an idea being knocked back. We had some wonderful things that no-one is ever going to buy. But that's life."

Debney says he tries to make sure that anyone who tries to innovate is rewarded. Sometimes these rewards are monetary, but recognition is usually the more powerful motivator. "If someone can see one of their products in the market place you have a look at the joy on their faces. You show the guys in the factory the improvement they have made and you don't actually often have to throw money. We often have a barbecue to say thank you. When management comes out and says thank you, even discussing it further, it often brings another idea."