Understanding how to plan and naturally evolve a new product can be an expensive undertaking. At Constructive Consulting, we specialize in developing and marketing successful product introductions designed to maximize your business potential while minimizing the associated risk. A thorough financial understanding of a business is also important to successful product introduction.
Constructive Consulting has created Case Studies that describe actions taken under several situations. The following Case Studies are avialable for your review.
Developing a new business requires understanding the potential market niche, eveloping a business plan, having the products required for the market, and creating sales demand for the business. That business development program is precisely what took place for a Fortune 500 company.
The poured gypsum floor underlayment market was dominated by one major company with a national business and several small regional companies that only offered price as their advantage. The large national company became complacent in supporting their product applicators and also reduced the quality of the products that were offered. Those two factors offered the Fortune 500 company the opportunity to provide solutions to both problems and to develop a profitable business.
The first step taken was to develop a business plan that stated the purpose of the business, how the business could be created, and the potential profits from the business development activity. The Fortune 500 company already had a sales force in place that could provide the sales support to applicators and specifiers in the market. It was decided that products developed for the business would provide a range of physical properties superior to the competition. In addition, the business would develop a product providing the highest compressive strength using gypsum technology and would also add a Portland cement product that could be easily placed in volume by the applicators. Neither of these high-end products existed. The market niche using these types of products was not being fulfilled.
A research program was started to develop all the primary products for the business and the accessory products that would be required. Two basic products were developed that were equal to or better than products present in the residential market. A new high compressive strength gypsum product was developed to serve as an underlayment for high walking traffic areas of commercial construction. In place of developing a Portland cement based product, an innovator was found that had such a product. A private label agreement was completed that provided the cement product.
Before sales could begin, a new network of applicators needed to be developed. The activity demanded securing the highest quality firms and providing the training necessary to apply the products under a tight quality control program. It was known that to reduce business risk, application quality needed to be improved by either providing products that were less applicator sensitive and/or tighting field quality control. Both approaches were implemented in the business.
Sales began immediately after the development of the two basic products. While sales continued with the basic products, research continued to develop the high strength qypsum product and to secure the cement based product. After a period of four years, the business had sales in excess of $ 2 million dollars and was contributing profit to the Fortune 500 company.
The founder of this business left the Fortune 500 company and within 6 months the floor underlayment business was sold to the market leader. The products described in this case study are still being sold in the niche market for which they were designed to serve.
The founder of Constructive Consulting created the business described in this case study. It provides another example of the breadth of experience available from Constructive Consulting.
For over 18 years the founder of Constructive Consulting had been involved in researching and managing a roof insulation business for a Fortune 500 company. During the early 1980’s the business had reached its zenith in sales dollars and market share. By the late 1980’s, the Fortune 500 company had made the decision to reduce sales effort and operate the business as a cash cow. By 1995 the business sales dollars had been reduced to less than 50% of its maximum sales.
Although the Fortune 500 company did not see a fit for the roof insulation business in its move toward global businesses, another company in the roofing business saw the potential and purchased the business. This purchase started the re-generation process.
Many actions were required to transfer the business and make it a profitable operation for the new owner. The most important actions were obtaining manufacturing sites to serve the needs of existing and new applicators of product. The training of all sales people so the business could be integrated and the training of all support staff in order to operate the business were of equal importance. The recreation of a research function to provide new products was an important future action.
With the decision by the Fortune 500 company to reduce investment in the roof insulation business, many manufacturing sites were closed and more were closed shortly after sale of the business. The purchasing company was faced with not only adding new manufacturing sites to meet an expanding business but also to replace closing manufacturing sites in geographical areas where business already existed.
By early 1998, 19 manufacturing sites were in place. These sites replaced those that were closed and also added distribution into geographical areas where business was growing.
Training for the sales organization and the field technical support staff was accomplished by several approaches. A core product-training program was developed and presented to the sales and field technical staff. Included were sales approaches to the market, support literature, videos, and building code information pertinent to the products. A field technical guide was also developed and provided for internal and external use. In addition, regional product managers were hired that were knowledgeable about the products. The group of regional product managers provided daily training and support to the sales organization.
Considerable effort was required to integrate the new business into the customer service, inside technical support, and accounting functions. These activities required personal meetings to transfer knowledge and historic methods of conducting the roof insulation business. All functions are now working smoothly together for the benefit of the customer. The research organization of the purchasing company was required to learn about new materials and a new technology. Today, the research organization is fully involved with the business and has already created a new product which has been introduced to the market. A second product is also in development. In addition, the research organization has built a state-of-the-art wind uplift-testing laboratory to conduct further research into wind loads on building roofs.
The roof insulation business has a forward-looking future. It is based on a demonstrated formula for success with added new features to help insure its success. The business is now growing profitably and with a rate of sales growth of 10% per year. Without the knowledge, direction and positive belief in the business by the founder of Constructive Consulting this growth could not have been achieved.
During 1992, a country club found the mortgage holder making arrangements to foreclose on the Club’s mortgage and its vendors placing the Club on COD or discontinuing their business relations. The Club had three years of losses, increasing accounts payable, and increasing total current liabilities. In addition mortgage payments were late. At this point, the founder of Constructive Consulting was voted in as Treasurer with a mandate from the membership to bring the club back to financial stability.
The first action was to review the previous two years operating expense by each category. Based on this data a yearly and monthly operating budget was established. A monthly operating statement was created that compared current expenses to budget both for the month and year to date. Prior to this point the budgeting process was lacking objectivity and accountability.
Secondly, the Club Manager was given the responsibility for accountability of all expenses incurred by the club. An incentive plan, based on controlling expenses, was developed for each employee so they had a reason to want to control expenses.
The Function Room of the club was an area with potential to bring significant profits to the club if it were managed correctly. The current Function Room manager was released. The Club Manager was given the responsibility to market the Function Room and create new business. The Club Manager's incentive plan reflected the new business direction.
After establishing the financial plan as well as the accounting and management controls, a new bank was secured and the mortgage was refinanced. The refinancing would not have been possible without these controls.
At the end of the second year of control implementation, the Club turned its first profit in 5 years, reduced the accounts payable by 55 % , increased cash on hand by 188 %, increased total current assets by 51 %, and reduced total liabilities by 53 %.
After five years of proper financial and management controls the Club continues to operate profitably. The profit picture has so improved that the Club has been able to start several significant capital improvement programs to better the golf course and maintain the facilities. In 1999, a ten year capital improvement plan and the financing program to fund the plan was approved by the membership. The financing plan is unique in that it reduces the mortgage payment after 5 years and creates an investment program that funds the capital projects during the last five years of the 10 year program.
Without the intervention of the founder of Constructive Consulting, the Club would have not continued to exist. Today it is now it its 72nd year of continuous operation and looking forward to a brighter future.