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Yes, even small companies can innovate

By Marc Compeau, Forbes
May 08, 2008 11:08 IST
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Coming up with new ways to boost sales or to slash costs doesn't have to mean investing millions of dollars in research or fancy computer systems. Innovation is about thinking hard about your company and how to improve it. Today. Now.

But what if yours is a small business in a traditional niche like retail? My answer: So what? Mom and Pops can innovate. I know they can because I've seen it.

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Take Fleet Feet, the Carrboro, N.C.-based specialty sneaker store my wife loves. How to innovate in a business as mundane as selling shoes? Says President Jeff Phillips: "It's all about finding the right fit."

At Fleet, that means using a proprietary, seven-step fitting process that traces back to the chain's launch in 1993. (Fleet now has 83 locations.)The Fit Intensive Training process is resource-intensive--from interviewing and measuring to selection and even after-purchase care.

Matt Werder, marketing manager of the Syracuse, NY, location, says it is not uncommon to spend an hour with a customer in order to find the perfect fit. That's a significant investment when the average sale is just $80.

"We begin with a customer interview to really understand them," says Werder. "To do the job right we need to know their injury history, their exercise routine and their experience with footwear."

That level of service also requires lots of training. "Each store has a manual, but franchisees also add their own information," he adds. "The manual is huge, but it is really important that everyone understands how to do the job right."

Surely Fleet jacks its prices to offset that investment in time and training? "We don't run big sales on old shoes like big boxes do," says Werder. "At the same time, we don't mark up beyond [our competitors' prices]. We depend on repeat business because of our high level of customer service."

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The result: Fleet claims that revenues have grown at a 16 per cent annual clip for the last two years (the company won't release an absolute dollar figure). That's impressive considering that the athletic footwear market has grown in the low single digits for the past several years, according to the NPD Group, a market research shop.

Joel and Theresa Salatin brought innovation to one of the oldest businesses around: farming. Since 1961, the Salatins have married their respect for nature with rudimentary-but-clever technology at their 550-acre farm, called Polyface, in Virginia's Shenandoah Valley. "We let the chickens fully express their chickeness and the pigs express their pigness" says Joel. "The results of our methods are superior to any technologically advanced farming techniques."

Those methods include moving chickens around the farm in an "eggmobile." This airy-bottomed, chicken-coop-on-wheels follows behind a tractor, allowing the chickens to graze on nutrient-packed cow dung. Simple and effective.

But being innovative can have as much to do with marketing and pricing as gadgetry, especially for smaller companies. Farms, typically larger operations, that use hormones, preservatives, additives and insecticides to maximize yield now account for 45 per cent of all US agricultural production, according to the U.S. Department of Agriculture.

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Joel's strategy: Take a more natural approach and charge through the nose for it. Some of Polyface's products sell for two or three times typical grocery store prices.

It's working. Polyface now serves about 400 "farm gate" customers (people who literally pull up to the gate), 20 restaurants, 10 retailers and 1,400 families in 19 drop points for buyer clubs--oh, and the Chipotle chain just went 100 per cent Polyface pork in all of its Charlottsville, N.C., locations (about 350 pounds a week). And by being the producer, marketer and distributor (what business-school types call vertical integration), the Salatins save roughly 50 cents of every dollar usually spent on middlemen.

Even the proprietor of my local stop-and-shop understands the need to innovate. Chip Giordano, owner of Chip's Place in Hannawa Falls, N.Y., bought the store after years of working in the grocery industry for big chains and distributors. Tired of working hard to make others rich, Chip took a risk and bought a neighborhood convenience store.

The problem: While the location catered nicely to the summer cottage crowd, the locals still weren't buying enough beer and cheese curd. "I had to think of something different, something that would make people travel to my little place," says Chip.

Then he had the kind of epiphany that would make IBM's "Innovation Man" proud. Chip knew that his most expensive inventory item was fresh meat. Though he didn't move a lot of meat, he did know a thing or two about how to flavor it. "I literally reached into that dark cooler, flipped the light switch on, grabbed some pork tenderloins and threw together a marinade," he recalls.

The rest is local lore. It is well-known for miles that Chip's Place has the best meat in upstate New York. When friends visit our house, a visit to Chip's is required, almost as much for the great stories as for the sweet bourbon steaks, the Caribbean pork tenderloin or the Italian Parmesan chicken breast.

By convenience-store standards, Chip is a hero. Back when he first reached into that cooler, the store was pulling in roughly $1,000 a day in sales, most of it in gas; today, his average take is $4,500, and only 30 per cent comes from gas. (Last year the average convenience store grabbed 80 per cent of revenues from the pump, according to the National Association of Convenience Stores.) Says Chip: "We average about a 35 per cent markup on the meat, and that category is just ahead of packaged beverages as our top seller."

Better yet, Chip has expanded his customer base--internationally. "We have lots of Canadians that travel down this way for hockey tournaments in the winter," he says. "We have a guy from Buffalo that comes up four times a year with coolers and orders from his golf buddies." Chip's proudest accomplishment: "I have a meat-delivery guy that drops off every week and takes home the same meat he brought me the week before, only marinated; I give him a little break on the price."

See what a little innovation can do?

Marc Compeau is the director of innovation and entrepreneurship at Clarkson University.

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Marc Compeau, Forbes
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